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Note 7 - Segment Reporting | 9 Months Ended
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Sep. 30, 2019
Notes to Financial Statements |
Segment Reporting Disclosure [Text Block] | 7. Segment Reporting The Company has tworeportable segments for financial reporting purposes - Domestic and International. The Domestic segment includes the legacy Generac business and the acquisitions that are based in the U.S. 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, distribution methods and regional considerations. 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 September 30, 2019 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 324,096 |  |  | $ | 10,933 |  |  | $ | 335,029 |
Commercial & industrial products |  |  | 133,559 |  |  |  | 81,346 |  |  |  | 214,905 |
Other |  |  | 40,508 |  |  |  | 10,693 |  |  |  | 51,201 |
Total net sales |  | $ | 498,163 |  |  | $ | 102,972 |  |  | $ | 601,135 |
|  | Three Months Ended September 30, 2018 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 300,387 |  |  | $ | 11,531 |  |  | $ | 311,918 |
Commercial & industrial products |  |  | 121,952 |  |  |  | 84,414 |  |  |  | 206,366 |
Other |  |  | 33,793 |  |  |  | 10,311 |  |  |  | 44,104 |
Total net sales |  | $ | 456,132 |  |  | $ | 106,256 |  |  | $ | 562,388 |
|  | Nine Months Ended September 30, 2019 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 784,459 |  |  | $ | 36,774 |  |  | $ | 821,233 |
Commercial & industrial products |  |  | 394,545 |  |  |  | 259,913 |  |  |  | 654,458 |
Other |  |  | 104,344 |  |  |  | 33,369 |  |  |  | 137,713 |
Total net sales |  | $ | 1,283,348 |  |  | $ | 330,056 |  |  | $ | 1,613,404 |
|  | Nine Months Ended September 30, 2018 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 711,203 |  |  | $ | 37,587 |  |  | $ | 748,790 |
Commercial & industrial products |  |  | 340,244 |  |  |  | 256,875 |  |  |  | 597,119 |
Other |  |  | 91,040 |  |  |  | 23,111 |  |  |  | 114,151 |
Total net sales |  | $ | 1,142,487 |  |  | $ | 317,573 |  |  | $ | 1,460,060 |
Residential products consist primarily of automatic home standby generators ranging in output from 6kW to 60kW, portable generators, energy storage solutions, power washers and other outdoor power equipment. These products are sold through independent residential dealers, national and regional retailers, e-commerce merchants, electrical/HVAC/solar 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 power generation 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 three months ended September 30, 2018 have been revised by $2,873 and $2,449, respectively, and the net sales and gross profit amounts for the nine months ended September 30, 2018 have been revised by $7,962 and $6,604, respectively, from the amounts previously reported in the Company’s third quarter 2018 Form 10-Q, with equal offsets to selling and service expenses. The revisions impacted the Domestic segment and the Other product class. There was no impact to income from operations, net income or comprehensive income, earnings per share, the condensed consolidated balance sheets, the condensed consolidated statements 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 September 30, |  |  | Nine Months Ended September 30, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Domestic |  | $ | 121,217 |  |  | $ | 117,108 |  |  | $ | 306,723 |  |  | $ | 273,185 |
International |  |  | 4,736 |  |  |  | 7,366 |  |  |  | 18,244 |  |  |  | 25,300 |
Total adjusted EBITDA |  | $ | 125,953 |  |  | $ | 124,474 |  |  | $ | 324,967 |  |  | $ | 298,485 |
Interest expense |  |  | (10,704 | ) |  |  | (9,824 | ) |  |  | (31,428 | ) |  |  | (30,939 | )
Depreciation and amortization |  |  | (15,494 | ) |  |  | (11,841 | ) |  |  | (42,841 | ) |  |  | (35,124 | )
Non-cash write-down and other adjustments (1) |  |  | (347 | ) |  |  | (900 | ) |  |  | (673 | ) |  |  | (3,522 | )
Non-cash share-based compensation expense (2) |  |  | (3,549 | ) |  |  | (2,919 | ) |  |  | (11,477 | ) |  |  | (9,910 | )
Loss on extinguishment of debt (3) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,332 | )
Transaction costs and credit facility fees (4) |  |  | (358 | ) |  |  | (1,767 | ) |  |  | (2,047 | ) |  |  | (2,470 | )
Business optimization expenses (5) |  |  | (567 | ) |  |  | (583 | ) |  |  | (809 | ) |  |  | (750 | )
Other |  |  | 27 |  |  |  | (46 | ) |  |  | 556 |  |  |  | (45 | )
Income before provision for income taxes |  | $ | 94,961 |  |  | $ | 96,594 |  |  | $ | 236,248 |  |  | $ | 214,393 |
| (1) | Includes certain foreign currency and purchase accounting related adjustments, gains/losses on disposal of assets and unrealized mark-to-market adjustments on commodity contracts.
| (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 non-cash write-off of original issue discount and deferred financing costs due to a voluntary prepayment of Term Loan debt.
| (4) | 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.
| (5) | 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 78% of total sales for the three months ended September 30, 2019 and 2018. The Company’s sales in the United States represented approximately 75% and 74% of total sales for the nine month periods ended September 30, 2019 and 2018, respectively. Approximately 81% and 80% of the Company’s identifiable long-lived assets were located in the United States at September 30, 2019 and December 31, 2018, 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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