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Note 7 - Segment Reporting
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

7.

Segment Reporting

 

The Company has two reportable segments for financial reporting purposes – Domestic and International. The Domestic segment includes the legacy Generac business (excluding its traditional Latin American export operations), and the acquisitions that are based in the U.S. and Canada, all of which have revenues substantially derived from the U.S. and Canada. The International segment includes the legacy Generac business' Latin American export operations, and the Ottomotores, Tower Light, Pramac, Motortech, Selmec, Deep Sea, and Off Grid Energy acquisitions, all of which have revenues substantially derived from outside the U.S and Canada. Both reportable segments design and manufacture a wide range of energy technology solutions 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 and solutions, production processes, classes of customers, distribution methods and regional considerations.

 

The Company's product offerings consist primarily of power generation equipment, energy storage systems, grid service solutions, and other power products geared for varying end customer uses. Residential products and 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

 
  

Year Ended December 31, 2021

 

Product Classes

 

Domestic

  

International

  

Total

 

Residential products

 $2,366,908  $89,857  $2,456,765 

Commercial & industrial products

  556,520   442,478   998,998 

Other

  240,622   40,799   281,421 

Total net sales

 $3,164,050  $573,134  $3,737,184 

 

  

Year Ended December 31, 2020

 

Product Classes

 

Domestic

  

International

  

Total

 

Residential products

 $1,495,383  $61,118  $1,556,501 

Commercial & industrial products

  404,867   296,884   701,751 

Other

  188,558   38,390   226,948 

Total net sales

 $2,088,808  $396,392  $2,485,200 

 

  

Year Ended December 31, 2019

 

Product Classes

 

Domestic

  

International

  

Total

 

Residential products

 $1,086,019  $57,704  $1,143,723 

Commercial & industrial products

  513,482   358,113   871,595 

Other

  143,397   45,621   189,018 

Total net sales

 $1,742,898  $461,438  $2,204,336 

 

Residential products consist primarily of automatic home standby generators ranging in output from 7.5kW to 150kW, portable generators, energy storage systems, energy management solutions, and other outdoor power equipment. These products are predominantly sold through independent residential dealers, national and regional retailers, e-commerce merchants, electrical/HVAC/solar wholesalers, solar installers, 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 C&I applications, with power outputs up to 3,250kW. Also included in C&I products are mobile generators, light towers, mobile energy storage, mobile heaters, mobile pumps, and controllers. These products are sold globally 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 consists primarily of aftermarket service parts and product accessories sold to our customers, the amortization of extended warranty deferred revenue, remote monitoring and grid services subscription revenue, as well as certain installation and maintenance service revenue. The aftermarket service parts and product accessories are generally transferred to the customer at a point in time, while the extended warranty and subscription revenue are recognized over the life of the contract. Other service revenue is recognized when the service is performed.

 

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,

 
  

2021

  

2020

  

2019

 

Domestic

 $795,417  $563,394  $428,667 

International

  66,008   20,379   25,448 

Total adjusted EBITDA

 $861,425  $583,773  $454,115 
             

Interest expense

  (32,953)  (32,991)  (41,544)

Depreciation and amortization

  (92,041)  (68,773)  (60,767)

Non-cash write-down and other adjustments (1)

  3,070   327   (240)

Non-cash share-based compensation expense (2)

  (23,954)  (20,882)  (16,694)

Loss on extinguishment of debt (3)

  (831)  -   (926)

Loss on pension settlement (4)

  -   -   (10,920)

Transaction costs and credit facility fees (5)

  (22,357)  (2,151)  (2,724)

Business optimization and other charges (6)

  (33)  (12,158)  (1,572)

Other

  (800)  (954)  879 

Income before provision for income taxes

 $691,526  $446,191  $319,607 

 

 

(1)

Includes gains/losses on disposals of assets and gains on certain investments, unrealized mark-to-market adjustments on commodity contracts, certain foreign currency related adjustments, and certain purchase accounting 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 non-cash write-off of original issue discount and deferred financing costs due to a voluntary prepayment of Term Loan debt.

 

(4)

Represents pre-tax settlement charges related to the termination of the Company’s domestic pension plan in the fourth quarter of 2019.

 

(5)

Represents transaction costs incurred directly in connection with any investment (including acquisitions), as defined in our credit agreement, equity issuance, debt issuance or refinancing, together with certain fees relating to our senior secured credit facilities.

 

(6)

For the year ended December 31, 2020, represents severance, non-cash asset write-downs, and other charges to address the impact of the COVID-19 pandemic and decline in oil prices.

 

The following tables summarize additional financial information by reportable segment:

 

  

Assets

 
  

Year Ended December 31,

 
  

2021

  

2020

  

2019

 

Domestic

 $3,742,101  $2,659,597  $2,123,251 

International

  1,135,679   575,826   542,418 

Total

 $4,877,780  $3,235,423  $2,665,669 

 

  

Depreciation and Amortization

 
  

Year Ended December 31,

 
  

2021

  

2020

  

2019

 

Domestic

 $66,675  $53,020  $46,145 

International

  25,366   15,753   14,764 

Total

 $92,041  $68,773  $60,909 

 

  

Capital Expenditures

 
  

Year Ended December 31,

 
  

2021

  

2020

  

2019

 

Domestic

 $100,672  $51,867  $36,007 

International

  9,320   10,261   24,795 

Total

 $109,992  $62,128  $60,802 

 

The Company’s sales in the United States represent approximately 82%, 82%, and 75% of total sales for the years ended December 31, 2021, 2020 and 2019, respectively. Approximately 75% and 81% of the Company’s identifiable long-lived assets are located in the United States as of December 31, 2021 and 2020, respectively.