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Note 6 - Segment Reporting
 6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]
6
. Segment Reporting
 
T
he Company has
two
reportable segments for financial reporting purposes - Domestic and International. 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, Pramac and Motortech 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 adjusted for all periods presented to reflect the current reportable segment structure.
 
   
Net Sales
  
   
Three Months Ended June 30,
    
Six Months Ended June 30,
  
Reportable Segments
  
2017
    
2016
    
2017
    
2016
  
Domestic
   $
305,907
     $
286,720
     $
554,404
     $
534,736
  
International
    
89,469
      
80,656
      
172,786
      
119,175
  
Total net sales
   $
395,376
     $
367,376
     $
727,190
     $
653,911
  
 
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
  
   
Three Months Ended June 30,
    
Six Months Ended June 30,
  
Product Classes
  
2017
    
2016
    
2017
    
2016
  
Residential products
   $
198,117
     $
181,735
     $
352,973
     $
340,716
  
Commercial & industrial products
    
170,755
      
156,730
      
322,198
      
259,720
  
Other
    
26,504
      
28,911
      
52,019
      
53,475
  
Total net sales
   $
395,376
     $
367,376
     $
727,190
     $
653,911
  
 
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
  
   
Three Months Ended June 30,
    
Six Months Ended June 30,
  
   
2017
    
2016
    
2017
    
2016
  
Domestic
   $
64,157
     $
57,352
     $
107,003
     $
104,212
  
International
    
6,034
      
6,574
      
10,846
      
9,523
  
Total adjusted EBITDA
   $
70,191
     $
63,926
     $
117,849
     $
113,735
  
                                 
Interest expense
    
(10,893
 )    
(11,380
 )    
(21,681
 )    
(22,415
 )
Depreciation and amortization
    
(12,986
 )    
(13,650
 )    
(25,583
 )    
(26,443
 )
Non-cash write-down and other adjustments (1)
    
(1,710
 )    
(2,909
 )    
(1,876
 )    
(2,782
 )
Non-cash share-based compensation expense (2)
    
(3,186
 )    
(2,901
 )    
(5,818
 )    
(5,386
 )
Transaction costs and credit facility fees (3)
    
(420
 )    
(237
 )    
(736
 )    
(760
 )
Business optimization expenses (4)
    
(1,346
 )    
-
      
(1,446
 )    
(7,106
 )
Other
    
209
      
15
      
250
      
(48
 )
Income before provision for income taxes
   $
39,859
     $
32,864
     $
60,959
     $
48,795
  
 
 
(
1
)
Includes gains/losses on disposal of assets, unrealized mark-to-market adju
stments 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 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.
 
(
4
)
Represents charges relating to business optimization and restructuring costs.
 
T
he Company’s sales in the United States represented approximately
73%
and
74%
of total sales for the
three
months ended
June 30, 2017
and
2016,
respectively, and represented approximately
72%
and
78%
of total sales for the
six
months ended
June 30, 2017
and
2016,
respectively. Approximately
85%
and
87%
of the Company’s identifiable long-lived assets are located in the United States at
June 30, 2017
and
December 31, 2016,
respectively.