. 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 and Canada, all of which have revenues that are substantially derived from the U.S. and Canada. The International segment includes the Ottomotores, Tower Light, Pramac, Motortech and Selmec businesses, 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 power 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.

The Company's product offerings consist primarily of power generation equipment and other power products geared for varying end customer uses. Residential products and commercial & industrial (C&I) products are each a similar class of products based on similar power output and end customer. The breakout of net sales between residential, C&I, and other products by reportable segment is as follows:

	Net Sales by Segment
	Three Months Ended March 31, 2019
Product Classes	Domestic		International		Total
Residential products	$	205,181	$	12,649	$	217,830
Commercial & industrial products		122,446		86,678		209,124
Other		31,621		11,778		43,399
Total net sales	$	359,248	$	111,105	$	470,353

	Net Sales by Segment
	Three Months Ended March 31, 2018
Product Classes	Domestic		International		Total
Residential products	$	176,685	$	13,789	$	190,474
Commercial & industrial products		97,771		77,354		175,125
Other		28,220		6,272		34,492
Total net sales	$	302,676	$	97,415	$	400,091

Residential products consist primarily of automatic home standby generators ranging in output from

6kW

60kW,

portable generators, power washers and other outdoor power equipment. These products are sold through independent residential dealers, national and regional retailers, e-commerce merchants, electrical and HVAC wholesalers and outdoor power equipment dealers. The residential products revenue consists of the sale of the product to our distribution partners, which in turn sell or rent the product to the end consumer, including installation and maintenance services. In some cases, residential products are sold direct to the end consumer. Substantially all of the residential products revenues are transferred to the customer at a point in time.

C&I products consist of larger output stationary generators used in various C&I applications and fueled by diesel, natural gas, liquid propane and bi-fuel, with power outputs ranging from

10kW

up to

3,250kW

for single engine sets. Also included in C&I products are mobile generators, light towers, mobile heaters and mobile pumps. These products are sold through industrial distributors and dealers, equipment rental companies and equipment distributors. The C&I products revenue consists of the sale of the product to our distribution partners, which in turn sell or rent the product to the end customer, including installation and maintenance services. In some cases, C&I products are sold direct to the end customer. Substantially all of the C&I products revenues are transferred to the customer at a point in time.

Other products consist primarily of aftermarket service parts and product accessories sold to our dealers, and the amortization of extended warranty deferred revenue. The aftermarket service parts and product accessories are generally transferred to the customer at a point in time, while the extended warranty revenue is recognized over the life of the contract.

In accordance with ASU

2014

09,

Revenue from Contracts with Customers

, extended warranty revenues are reported within net sales in the condensed consolidated statements of comprehensive income. Previously, these amounts were reported net within selling and service expense on the condensed consolidated statements of comprehensive income, in amounts that were

not

material. To report extended warranty in accordance with ASU

2014

09,

the net sales and gross profit amounts for the

first

quarter of

2018

have been revised by

$2,457

and

$1,938,

respectively, from the amounts previously reported in the Company’s

first

quarter

2018

Form

-Q, with an equal offset to selling and service expenses. The revisions impacted the Domestic segment and the Other product class. There was

impact to income from operations, net income or comprehensive income, earnings per share, the condensed consolidated balance sheets, the condensed consolidated statement of stockholders’ equity, or the condensed consolidated statements of cash flows.

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 contained in the Company’s credit agreements.

	Adjusted EBITDA
	Three Months Ended March 31,
	2019			2018
Domestic	$	80,975		$	65,475
International		6,153			6,306
Total adjusted EBITDA	$	87,128		$	71,781

Interest expense		(10,272	)		(10,113	)
Depreciation and amortization		(12,607	)		(11,683	)
Non-cash write-down and other adjustments (1)		1,400			(1,306	)
Non-cash share-based compensation expense (2)		(3,594	)		(3,106	)
Transaction costs and credit facility fees (3)		(1,286	)		(262	)
Business optimization expenses (4)		(169	)		(138	)
Other		154			13
Income before provision for income taxes	$	60,754		$	45,186

(

)

Includes gains/losses on disposal of assets, unrealized mark-to-market adjustments on commodity contracts, and certain foreign currency and purchase accounting related adjustments.

(

)

Represents share-based compensation expense to account for stock options, restricted stock and other stock awards over their respective vesting periods.

(

)

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.

(

)

Represents severance and other non-recurring restructuring charges related to the consolidation of certain of our facilities.

The Company’s sales in the United States represented approximately

72%

and

71%

of total sales for the

three

months ended

March 31, 2019

and

2018,

respectively. Approximately

80%

of the Company’s identifiable long-lived assets were located in the United States at

March 31, 2019

and

December 31, 2018.