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Note 7 - Segment Reporting | 6 Months Ended
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Jun. 30, 2023
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 Company's various international 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, organizational structure, and regional considerations. The Company's product offerings consist primarily of power generation equipment, energy storage systems, energy management devices and solutions, and other power products geared for varying end customer uses. While Residential products and Commercial & Industrial (C&I) products include similar products, they differ based on 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 June 30, 2023 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 468,184 |  |  | $ | 30,403 |  |  | $ | 498,587 |
Commercial & industrial products |  |  | 234,605 |  |  |  | 149,748 |  |  |  | 384,353 |
Other |  |  | 101,750 |  |  |  | 15,730 |  |  |  | 117,480 |
Total net sales |  | $ | 804,539 |  |  | $ | 195,881 |  |  | $ | 1,000,420 |
|  | Net Sales by Segment |
|  | Three Months Ended June 30, 2022 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 860,014 |  |  | $ | 35,999 |  |  | $ | 896,013 |
Commercial & industrial products |  |  | 173,549 |  |  |  | 135,799 |  |  |  | 309,348 |
Other |  |  | 73,868 |  |  |  | 12,162 |  |  |  | 86,030 |
Total net sales |  | $ | 1,107,431 |  |  | $ | 183,960 |  |  | $ | 1,291,391 |
|  | Net Sales by Segment |
|  | Six Months Ended June 30, 2023 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 849,336 |  |  | $ | 68,114 |  |  | $ | 917,450 |
Commercial & industrial products |  |  | 462,729 |  |  |  | 284,614 |  |  |  | 747,343 |
Other |  |  | 196,862 |  |  |  | 26,675 |  |  |  | 223,537 |
Total net sales |  | $ | 1,508,927 |  |  | $ | 379,403 |  |  | $ | 1,888,330 |
|  | Net Sales by Segment |
|  | Six Months Ended June 30, 2022 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 1,610,341 |  |  | $ | 62,616 |  |  | $ | 1,672,957 |
Commercial & industrial products |  |  | 319,286 |  |  |  | 268,791 |  |  |  | 588,077 |
Other |  |  | 142,478 |  |  |  | 23,735 |  |  |  | 166,213 |
Total net sales |  | $ | 2,072,105 |  |  | $ | 355,142 |  |  | $ | 2,427,247 |
Residential products consist primarily of automatic home standby generators ranging in output from 7.5kW to 150kW, portable generators, energy storage systems, energy management devices and 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 they in turn sell or rent 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 product's 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, energy storage systems, mobile heaters, mobile pumps, and related controllers for power generation equipment. 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 they in turn sell or rent 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. The Other product class 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. The following table sets forth total sales by reportable segment and is inclusive of intersegment sales:
|  | Three Months Ended June 30, 2023 |  |  | Three Months Ended June 30, 2022 |
|  | Domestic |  |  | International |  |  | Eliminations |  |  | Total |  |  | Domestic |  |  | International |  |  | Eliminations |  |  | Total |
External net sales |  | $ | 804,539 |  |  | $ | 195,881 |  |  | $ | - |  |  | $ | 1,000,420 |  |  | $ | 1,107,431 |  |  | $ | 183,960 |  |  | $ | - |  |  | $ | 1,291,391 |
Intersegment sales |  |  | 10,713 |  |  |  | 27,842 |  |  |  | (38,555 | ) |  |  | - |  |  |  | 18,987 |  |  |  | 19,334 |  |  |  | (38,321 | ) |  |  | - |
Total sales |  | $ | 815,252 |  |  | $ | 223,723 |  |  | $ | (38,555 | ) |  | $ | 1,000,420 |  |  | $ | 1,126,418 |  |  | $ | 203,294 |  |  | $ | (38,321 | ) |  | $ | 1,291,391 |
|  | Six Months Ended June 30, 2023 |  |  | Six Months Ended June 30, 2022 |
|  | Domestic |  |  | International |  |  | Eliminations |  |  | Total |  |  | Domestic |  |  | International |  |  | Eliminations |  |  | Total |
External net sales |  | $ | 1,508,927 |  |  | $ | 379,403 |  |  | $ | - |  |  | $ | 1,888,330 |  |  | $ | 2,072,105 |  |  | $ | 355,142 |  |  | $ | - |  |  | $ | 2,427,247 |
Intersegment sales |  |  | 26,320 |  |  |  | 60,784 |  |  |  | (87,104 | ) |  |  | - |  |  |  | 29,257 |  |  |  | 33,659 |  |  |  | (62,916 | ) |  |  | - |
Total sales |  | $ | 1,535,247 |  |  | $ | 440,187 |  |  | $ | (87,104 | ) |  | $ | 1,888,330 |  |  | $ | 2,101,362 |  |  | $ | 388,801 |  |  | $ | (62,916 | ) |  | $ | 2,427,247 |
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 defined as net income before noncontrolling interest adjusted for the following items: interest expense, depreciation expense, amortization of intangible assets, income tax expense, certain non-cash gains and losses including purchase accounting and contingent consideration adjustments, share-based compensation expense, losses on extinguishment of debt, certain transaction costs and credit facility fees, business optimization expenses, and certain other specific provisions.
|  | Adjusted EBITDA |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Domestic |  | $ | 103,202 |  |  | $ | 241,928 |  |  | $ | 170,863 |  |  | $ | 412,349 |
International |  |  | 33,343 |  |  |  | 29,534 |  |  |  | 65,757 |  |  |  | 55,526 |
Total adjusted EBITDA |  | $ | 136,545 |  |  | $ | 271,462 |  |  | $ | 236,620 |  |  | $ | 467,875 |
Interest expense |  |  | (25,160 | ) |  |  | (10,235 | ) |  |  | (48,155 | ) |  |  | (19,789 | )
Depreciation and amortization |  |  | (41,247 | ) |  |  | (39,098 | ) |  |  | (81,198 | ) |  |  | (77,559 | )
Non-cash write-down and other adjustments (1) |  |  | 4,152 |  |  |  | (4,607 | ) |  |  | 7,312 |  |  |  | 3,185 |
Non-cash share-based compensation expense (2) |  |  | (10,045 | ) |  |  | (7,735 | ) |  |  | (20,379 | ) |  |  | (16,562 | )
Loss on extinguishment of debt (3) |  |  | - |  |  |  | (3,743 | ) |  |  | - |  |  |  | (3,743 | )
Transaction costs and credit facility fees (4) |  |  | (1,149 | ) |  |  | (1,592 | ) |  |  | (2,240 | ) |  |  | (2,581 | )
Business optimization and other charges (5) |  |  | (1,760 | ) |  |  | (1,590 | ) |  |  | (2,860 | ) |  |  | (2,749 | )
Provision for regulatory charges (6) |  |  | - |  |  |  | - |  |  |  | (5,800 | ) |  |  | - |
Other |  |  | 86 |  |  |  | 601 |  |  |  | 132 |  |  |  | 890 |
Income before provision for income taxes |  | $ | 61,422 |  |  | $ | 203,463 |  |  | $ | 83,432 |  |  | $ | 348,967 |
| (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 the write-off of original issue discount and capitalized debt issuance costs due to voluntary debt prepayment.
| (4) | Represents transaction costs incurred directly in connection with any investment, as defined in our credit agreement, equity issuance or debt issuance or refinancing, together with certain fees relating to our senior secured credit facilities.
| (5) | Represents severance and other restructuring charges.
| (6) | The amount recorded in the first quarter of 2023 represents a provision of $5,800 for a matter with the Consumer Product Safety Commission (CPSC) concerning the imposition of penalty fines for allegedly failing to timely submit a report under the Consumer Product Safety Act (CPSA) in relation to certain portable generators that were subject to a voluntary recall previously announced on July 29, 2021. On May 25, 2023, the Company and the CPSC entered into a final mutual settlement agreement resolving this matter.
The Company’s sales in the U.S. represented approximately 75% and 82% of total sales for the three months ended June 30, 2023 and June 30, 2022, respectively. The Company's sales in the U.S. represented approximately 75% and 82% of total sales for the six months ended June 30, 2023 and June 30, 2022, respectively. Approximately 75% and 77% of the Company’s identifiable long-lived assets were located in the U.S. at June 30, 2023 and December 31, 2022, 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://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 22 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-22 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 15 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-15 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 31 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-31 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 42 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-42 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 40 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-40 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//280/tableOfContent Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 26 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-26 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 34 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-34 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 41 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-41 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-21 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-21 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 + Details
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