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Note 6 - Segment Reporting | 12 Months Ended
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Dec. 31, 2016
Notes to Financial Statements |
Segment Reporting Disclosure [Text Block] |
6. | Segment Reporting
Effective in 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 power generation equipment and other 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. All segment information has been retrospectively applied to all periods presented to reflect the new reportable segment structure.
|  | Net Sales |
|  | Year Ended December 31, |
Reportable Segments |  | 2016 |  |  | 2015 |  |  | 2014 |
Domestic |  | $ | 1,173,559 |  |  | $ | 1,204,589 |  |  | $ | 1,343,367 |
International |  |  | 270,894 |  |  |  | 112,710 |  |  |  | 117,552 |
Total |  | $ | 1,444,453 |  |  | $ | 1,317,299 |  |  | $ | 1,460,919 |
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 similar class of products based on similar power output and end customer. The breakout of net sales between residential, commercial & industrial, and other products by product class is as follows:
|  | Net Sales |
|  | Year Ended December 31, |
Product Classes |  | 2016 |  |  | 2015 |  |  | 2014 |
Residential products |  | $ | 772,436 |  |  | $ | 673,764 |  |  | $ | 722,206 |
Commercial & industrial products |  |  | 557,532 |  |  |  | 548,440 |  |  |  | 652,216 |
Other |  |  | 114,485 |  |  |  | 95,095 |  |  |  | 86,497 |
Total |  | $ | 1,444,453 |  |  | $ | 1,317,299 |  |  | $ | 1,460,919 |
Management evaluates the performance of its segments based primarily on Adjusted EBITDA, which 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 |
|  | Year Ended December 31, |
|  | 2016 |  |  | 2015 |  |  | 2014 |
Domestic |  | $ | 261,428 |  |  | $ | 254,882 |  |  | $ | 322,769 |
International |  |  | 16,959 |  |  |  | 15,934 |  |  |  | 14,514 |
Total adjusted EBITDA |  | $ | 278,387 |  |  | $ | 270,816 |  |  | $ | 337,283 |
Interest expense |  |  | (44,568 | ) |  |  | (42,843 | ) |  |  | (47,215 | )
Depreciation and amortization |  |  | (54,418 | ) |  |  | (40,333 | ) |  |  | (34,730 | )
Non-cash write-down and other adjustments (1) |  |  | (357 | ) |  |  | (3,892 | ) |  |  | 3,853 |
Non-cash share-based compensation expense (2) |  |  | (9,493 | ) |  |  | (8,241 | ) |  |  | (12,612 | )
Tradename and goodwill impairment (3) |  |  | - |  |  |  | (40,687 | ) |  |  | - |
Loss on extinguishment of debt (4) |  |  | (574 | ) |  |  | (4,795 | ) |  |  | (2,084 | )
Gain (loss) on change in contractual interest rate (5) |  |  | (2,957 | ) |  |  | (2,381 | ) |  |  | 16,014 |
Transaction costs and credit facility fees (6) |  |  | (2,442 | ) |  |  | (2,249 | ) |  |  | (1,851 | )
Business optimization expenses (7) |  |  | (7,316 | ) |  |  | (1,947 | ) |  |  | - |
Other |  |  | 120 |  |  |  | (465 | ) |  |  | (296 | )
Income before provision for income taxes |  | $ | 156,382 |  |  | $ | 122,983 |  |  | $ | 258,362 |
| (1) | Includes gains/losses on disposal of assets, unrealized mark-to-market adjustments on commodity contracts, and certain foreign currency and 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 2015 impairment of certain tradenames due to a change in brand strategy to transition and consolidate various brands to the Generac® tradename ($36,076) and the impairment of goodwill related to the Ottomotores reporting unit ($4,611).
| (4) | Represents the write-off of original issue discount and capitalized debt issuance costs due to voluntary debt prepayments.
| (5) | For the year ended December 31, 2016, represents a non-cash loss in the third quarter 2016 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 and expected to remain above 3.0 based on current projections. For the year ended December 31, 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 times effective third quarter 2015 and expected to remain above 3.0 times based on projections at the time. For the year ended December 31, 2014 represents a non-cash gain relating to a 25 basis point reduction in borrowing costs as a result of the credit agreement leverage ratio falling below 3.0 times effective second quarter 2014 and expected to remain below 3.0 times based on projections at the time.
| (6) | 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.
| (7) | Represents charges relating to business optimization and restructuring costs.
The following tables summarize additional financial information by reportable segment:
|  | Assets |
|  | Year Ended December 31, |
|  | 2016 |  |  | 2015 |  |  | 2014 |
Domestic |  | $ | 1,521,665 |  |  | $ | 1,605,043 |  |  | $ | 1,672,336 |
International |  |  | 340,019 |  |  |  | 173,592 |  |  |  | 192,083 |
Total |  | $ | 1,861,684 |  |  | $ | 1,778,635 |  |  | $ | 1,864,419 |
|  | Depreciation and Amortization |
|  | Year Ended December 31, |
|  | 2016 |  |  | 2015 |  |  | 2014 |
Domestic |  | $ | 42,346 |  |  | $ | 35,327 |  |  | $ | 29,410 |
International |  |  | 12,072 |  |  |  | 5,006 |  |  |  | 5,320 |
Total |  | $ | 54,418 |  |  | $ | 40,333 |  |  | $ | 34,730 |
|  | Capital Expenditures |
|  | Year Ended December 31, |
|  | 2016 |  |  | 2015 |  |  | 2014 |
Domestic |  | $ | 26,936 |  |  | $ | 29,368 |  |  | $ | 33,976 |
International |  |  | 3,531 |  |  |  | 1,283 |  |  |  | 713 |
Total |  | $ | 30,467 |  |  | $ | 30,651 |  |  | $ | 34,689 |
The Company ’s sales in the United States represent approximately 77%, 85%, and 84% of total sales for the years ended December 31, 2016, 2015 and 2014, respectively. Approximately 87% and 93% of the Company’s identifiable long-lived assets are located in the United States as of December 31, 2016 and 2015, respectively.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8981-108599 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9038-108599 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 33 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8971-108599 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 12 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8595-108599 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8380-108599 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8984-108599 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9031-108599 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9054-108599 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8538-108599 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 29 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8864-108599 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8924-108599 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8906-108599 + Details
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