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Note 6 - Segment Reporting
 9 Months Ended
Sep. 30, 2016
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]
6
. Segment Reporting
 
Effective i
n the second quarter of 2016, the Company changed its segment reporting from one reportable segment to two reportable segments - Domestic and International - as a result of the recent Pramac acquisition and the ongoing strategy to expand the business internationally. The Domestic segment includes the legacy Generac business and the impact of acquisitions that are based in the United States, all of which have revenues that are substantially derived from the U.S. and Canada. The International segment includes the Ottomotores, Tower Light and Pramac acquisitions, all of which have revenues that are substantially derived from outside of the U.S. and Canada. Both reportable segments design and manufacture a wide range of engine powered products. The Company has multiple operating segments, which it aggregates into the two reportable segments, based on materially similar economic characteristics, products, production processes, classes of customers and distribution methods.
 
     
Net Sales
  
     
Three Months Ended September 30,
    
Nine Months Ended September 30,
  
Reportable Segments
  
2016
    
2015
    
2016
    
2015
  
Domestic
   $ 299,095     $ 332,213     $ 833,831     $ 877,942  
International
     74,026       27,078       193,201       81,527  
Total net sales
   $ 373,121     $ 359,291     $ 1,027,032     $ 959,469  
 
The Company's product offerings consist primarily of power
generation equipment and other engine powered products geared for varying end customer uses. Residential products and commercial & industrial products are each a class of products based on similar power output and end customer usage. The breakout of net sales between residential, commercial & industrial, and other products by product class is as follows:
 
     
Net Sales
  
     
Three Months Ended September 30,
    
Nine Months Ended September 30,
  
Product Classes
  
2016
    
2015
    
2016
    
2015
  
Residential products
   $ 192,856     $ 184,968     $ 533,572     $ 475,268  
Commercial & industrial products
     149,676       148,234       409,396       416,577  
Other
     30,589       26,089       84,064       67,624  
Total net sales
   $ 373,121     $ 359,291     $ 1,027,032     $ 959,469  
 
Management
evaluates the performance of its segments based primarily on Adjusted EBITDA, and therefore is reconciled to Income before provision for income taxes below. The computation of Adjusted EBITDA is based on the definition that is contained in the Company’s credit agreements.
 
     
Adjusted EBITDA
  
     
Three Months Ended September 30,
    
Nine Months Ended September 30,
  
     
2016
    
2015
    
2016
    
2015
  
Domestic
   $ 69,309     $ 77,117     $ 173,521     $ 180,018  
International
     3,527       4,055       13,050       10,714  
Total adjusted EBITDA
   $ 72,836     $ 81,172     $ 186,571     $ 190,732  
                                   
 
Interest expense
     (11,299 )     (10,210 )     (33,714 )     (32,241 )
 
Depreciation and amortization
     (14,900 )     (10,597 )     (41,343 )     (29,760 )
 
Non-cash write-down and other adjustments (1)
     1,093       (2,115 )     (1,689 )     (4,091 )
 
Non-cash share-based compensation expense (2)
     (2,419 )     (1,799 )     (7,805 )     (6,889 )
 
Loss on extinguishment of debt (3)
     -       -       -       (4,795 )
 
Loss on change in contractual interest rate (4)
     (2,957 )     (2,381 )     (2,957 )     (2,381 )
 
Transaction costs and credit facility fees (5)
     (739 )     (317 )     (1,499 )     (999 )
 
Business optimization expenses (6)
     (58 )     (5 )     (7,164 )     (1,743 )
 
Other
     (31 )     (494 )     (79 )     (404 )
Income before provision for income taxes
   $ 41,526     $ 53,254     $ 90,321     $ 107,429  
 
 
(1)
Includes gains/losses on disposal of assets, unrealized mark-to-market adjustments on commodity contracts,
foreign currency gains/losses and certain purchase accounting related adjustments.
 
(2)
Represents share-based compensation expense to account for stock options, restricted stock and other stock awards over their respective vesting periods.
 
(3)
Represents the write-off of original issue discount and capitalized debt issuance costs due to voluntary debt prepayments.
 
(4)
For the three and nine months ended September 30, 2016, represents a non-cash loss relating to the continued 25 basis point increase in borrowing costs as a result of the credit agreement leverage ratio remaining above 3.0 times based on current projections. For the three and nine months ended September 30, 2015, represents a non-cash loss relating to a 25 basis point increase in borrowing costs as a result of the credit agreement leverage ratio rising above 3.0 effective third quarter 2015 and remaining above 3.0 times based on projections at the time.
 
(5)
Represents transaction costs incurred directly in connection with any investment, as defined in our credit agreement; equity issuance, debt issuance or refinancing; together with certain fees relating to our senior secured credit facilities.
 
(6)
Represents charges relating to business optimization and restructuring costs.
 
T
he Company’s sales in the United States represented approximately 77% and 88% of total sales for the three months ended September 30, 2016 and 2015, respectively, and represented approximately 78% and 86% of total sales for the nine months ended September 30, 2016 and 2015, respectively. Approximately 86% and 93% of the Company’s identifiable long-lived assets are located in the United States at September 30, 2016 and December 31, 2015, respectively.