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Note 6 - Segment Reporting
 12 Months Ended
Dec. 31, 2017
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]
6.
Segment Reporting
 
The 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 applied to all periods presented to reflect the current reportable segment structure.
 
   
Net Sale
s
  
   
Year Ended December 31
,
  
Reportable Segment
s
  
201
7
    
201
6
    
201
5
  
Domesti
c
   $
1,296,578
     $
1,173,559
     $
1,204,589
  
Internationa
l
    
375,867
      
270,894
      
112,710
  
Tota
l
   $
1,672,445
     $
1,444,453
     $
1,317,299
  
 
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 by product class between residential, commercial & industrial, and other products is as follows:
 
   
Net Sale
s
  
   
Year Ended December 31
,
  
Product Classe
s
  
201
7
    
201
6
    
201
5
  
Residential product
s
   $
870,410
     $
772,436
     $
673,764
  
Commercial & industrial product
s
    
685,052
      
557,532
      
548,440
  
Othe
r
    
116,983
      
114,485
      
95,095
  
Tota
l
   $
1,672,445
     $
1,444,453
     $
1,317,299
  
 
Management evaluates the performance of its segments based primarily on Adjusted EBITDA
before noncontrolling interests, 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 EBITD
A
  
   
Year Ended December 31
,
  
   
201
7
    
201
6
    
201
5
  
Domesti
c
   $
290,720
     $
261,428
     $
254,882
  
Internationa
l
    
27,010
      
16,959
      
15,934
  
Total adjusted EBITD
A
   $
317,730
     $
278,387
     $
270,816
  
                         
Interest expens
e
    
(42,667
 )    
(44,568
 )    
(42,843
 )
Depreciation and amortizatio
n
    
(51,988
 )    
(54,418
 )    
(40,333
 )
Non-cash write-down and other adjustments (1
)
    
(2,923
 )    
(357
 )    
(3,892
 )
Non-cash share-based compensation expense (2
)
    
(10,205
 )    
(9,493
 )    
(8,241
 )
Tradename and goodwill impairment (3
)
    
-
      
-
      
(40,687
 )
Loss on extinguishment of debt (4
)
    
-
      
(574
 )    
(4,795
 )
Gain (loss) on change in contractual interest rate (5
)
    
-
      
(2,957
 )    
(2,381
 )
Transaction costs and credit facility fees (6
)
    
(2,145
 )    
(2,442
 )    
(2,249
 )
Business optimization expenses (7
)
    
(2,912
 )    
(7,316
 )    
(1,947
 )
Othe
r
    
(202
 )    
120
      
(465
 )
Income before provision for income taxe
s
   $
204,688
     $
156,382
     $
122,983
  
 
 
(
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 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 projections at that time. 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 and expected to remain above
3.0
times based on projections at that time. Following the May
2017
Term Loan amendment, which removed the pricing grid based on leverage ratio achieved, gains or losses on changes in contractual interest rate will
no
longer be recorded in the statements of comprehensive income. Refer to Note
10,
“Credit Agreements,” to the consolidated financial statements in Item
8
of this Annual Report on Form
10
-K for further information on the gains and losses on changes in the contractual interest rate.
 
(
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:
 
   
Asset
s
  
   
Year Ended December 31
,
  
   
201
7
    
201
6
    
201
5
  
Domesti
c
   $
1,606,606
     $
1,521,665
     $
1,605,043
  
Internationa
l
    
413,358
      
340,019
      
173,592
  
Tota
l
   $
2,019,964
     $
1,861,684
     $
1,778,635
  
 
   
Depreciation and Amortizatio
n
  
   
Year Ended December 31
,
  
   
201
7
    
201
6
    
201
5
  
Domesti
c
   $
37,962
     $
42,346
     $
35,327
  
Internationa
l
    
14,026
      
12,072
      
5,006
  
Tota
l
   $
51,988
     $
54,418
     $
40,333
  
 
   
Capital Expenditure
s
  
   
Year Ended December 31
,
  
   
201
7
    
201
6
    
201
5
  
Domesti
c
   $
29,258
     $
26,936
     $
29,368
  
Internationa
l
    
4,003
      
3,531
      
1,283
  
Tota
l
   $
33,261
     $
30,467
     $
30,651
  
 
The Company
’s sales in the United States represent approximately
74%,
77%,
and
85%
of total sales for the years ended
December 31, 2017,
2016
and
2015,
respectively. Approximately
85%
and
87%
of the Company’s identifiable long-lived assets are located in the United States as of
December 31, 2017
and
2016,
respectively.