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Note 7 - Segment Reporting
 3 Months Ended
Mar. 31, 2022
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, 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 and services by reportable segment is as follows:

 

  

Net Sales by Segment

 
  

Three Months Ended March 31, 2022

 

Product Classes

 

Domestic

  

International

  

Total

 

Residential products

 $750,327  $26,617  $776,944 

Commercial & industrial products

  145,737   132,991   278,728 

Other

  68,610   11,574   80,184 

Total net sales

 $964,674  $171,182  $1,135,856 

 

  Net Sales by Segment 
  

Three Months Ended March 31, 2021

 

Product Classes

 

Domestic

  

International

  

Total

 

Residential products

 $522,215  $19,934  $542,149 

Commercial & industrial products

  117,879   84,512   202,391 

Other

  52,644   10,250   62,894 

Total net sales

 $692,738  $114,696  $807,434 

 

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 systems, 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 revenue 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 contained in the Company’s credit agreements.

 

  

Adjusted EBITDA

 
  

Three Months Ended March 31,

 
  

2022

  

2021

 

Domestic

 $170,421  $207,073 

International

  25,992   7,121 

Total adjusted EBITDA

 $196,413  $214,194 
         

Interest expense

  (9,554)  (7,723)

Depreciation and amortization

  (38,461)  (18,237)

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

  7,792   3,868 

Non-cash share-based compensation expense (2)

  (8,827)  (5,448)

Transaction costs and credit facility fees (3)

  (989)  (914)

Business optimization and other charges (4)

  (1,159)  (159)

Other

  289   (268)

Income before provision for income taxes

 $145,504  $185,313 

 

 

(1)

Includes gains/losses on disposals of assets and sales of certain investments, unrealized mark-to-market adjustments on commodity contracts, certain foreign currency related adjustments, and certain purchase accounting and contingent consideration 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)

The current year period predominantly represents severance and other non-recurring restructuring charges related to the suspension of operations at certain of our facilities.

 

The Company’s sales in the U.S. represented approximately 83% of total sales for the three months ended March 31, 2022 and 2021. Approximately 76% and 75% of the Company’s identifiable long-lived assets were located in the U.S. at  March 31, 2022 and December 31, 2021, respectively.