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Note 7 - Segment Reporting | 12 Months Ended
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Dec. 31, 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 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 acquisitions not based in the U.S and Canada, 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 & 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 composition of net sales between residential, C&I, and other products & services by reportable segment is as follows:
|  | Net Sales by Segment |
|  | Year Ended December 31, 2023 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 1,945,273 |  |  | $ | 117,656 |  |  | $ | 2,062,929 |
Commercial & industrial products |  |  | 916,118 |  |  |  | 578,681 |  |  |  | 1,494,799 |
Other |  |  | 414,933 |  |  |  | 50,006 |  |  |  | 464,939 |
Total net sales |  | $ | 3,276,324 |  |  | $ | 746,343 |  |  | $ | 4,022,667 |
|  | Year Ended December 31, 2022 |
Product Classes |  | Domestic |  |  | International |  |  | Total |
Residential products |  | $ | 2,782,037 |  |  | $ | 129,834 |  |  | $ | 2,911,871 |
Commercial & industrial products |  |  | 746,172 |  |  |  | 514,565 |  |  | $ | 1,260,737 |
Other |  |  | 339,657 |  |  |  | 52,472 |  |  | $ | 392,129 |
Total net sales |  | $ | 3,867,866 |  |  | $ | 696,871 |  |  | $ | 4,564,737 |
|  | 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 |
Residential products consist primarily of automatic home standby generators ranging in output from 7.5kW to 150kW, portable generators, residential energy storage systems, energy management devices & 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, who 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, C&I energy storage systems, mobile heaters, mobile pumps, and related controllers for power generation equipment. These products are sold globally through industrial distributors and dealers, EPC companies, equipment rental companies, and equipment distributors. The C&I products revenue consists of the sale of the product to our distribution partners, who 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, sometimes based on achievement of milestones. The following tables sets forth total sales by reportable segment and inclusive of intersegment sales:
|  | Year Ended December 31, 2023 |
|  | Domestic |  |  | International |  |  | Eliminations |  |  | Total |
External net sales |  | $ | 3,276,324 |  |  | $ | 746,343 |  |  | $ | - |  |  | $ | 4,022,667 |
Intersegment sales |  |  | 43,937 |  |  |  | 91,552 |  |  |  | (135,489 | ) |  |  | - |
Total sales |  | $ | 3,320,261 |  |  | $ | 837,895 |  |  | $ | (135,489 | ) |  | $ | 4,022,667 |
|  | Year Ended December 31, 2022 |
|  | Domestic |  |  | International |  |  | Eliminations |  |  | Total |
External net sales |  | $ | 3,867,866 |  |  | $ | 696,871 |  |  | $ | - |  |  | $ | 4,564,737 |
Intersegment sales |  |  | 60,731 |  |  |  | 93,699 |  |  |  | (154,430 | ) |  |  | - |
Total sales |  | $ | 3,928,597 |  |  | $ | 790,570 |  |  | $ | (154,430 | ) |  | $ | 4,564,737 |
|  | Year Ended December 31, 2021 |
|  | Domestic |  |  | International |  |  | Eliminations |  |  | Total |
External net sales |  | $ | 3,164,050 |  |  | $ | 573,134 |  |  | $ | - |  |  | $ | 3,737,184 |
Intersegment sales |  |  | 39,339 |  |  |  | 26,123 |  |  |  | (65,462 | ) |  |  | - |
Total sales |  | $ | 3,203,389 |  |  | $ | 599,257 |  |  | $ | (65,462 | ) |  | $ | 3,737,184 |
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 primarily on the definition that is contained in the Company’s credit agreements.
|  | Adjusted EBITDA |
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Domestic |  | $ | 523,337 |  |  | $ | 716,302 |  |  | $ | 795,417 |
International |  |  | 114,522 |  |  |  | 109,065 |  |  |  | 66,008 |
Total adjusted EBITDA |  | $ | 637,859 |  |  | $ | 825,367 |  |  | $ | 861,425 |
Interest expense |  |  | (97,627 | ) |  |  | (54,826 | ) |  |  | (32,953 | )
Depreciation and amortization |  |  | (166,602 | ) |  |  | (156,141 | ) |  |  | (92,041 | )
Non-cash write-down and other adjustments (1) |  |  | 5,953 |  |  |  | 2,091 |  |  |  | 3,070 |
Non-cash share-based compensation expense (2) |  |  | (35,492 | ) |  |  | (29,481 | ) |  |  | (23,954 | )
Loss on extinguishment of debt (3) |  |  | - |  |  |  | (3,743 | ) |  |  | (831 | )
Transaction costs and credit facility fees (4) |  |  | (4,054 | ) |  |  | (5,026 | ) |  |  | (22,357 | )
Business optimization and other charges (5) |  |  | (10,551 | ) |  |  | (4,371 | ) |  |  | (33 | )
Provision for legal, regulatory, and clean energy product charges (6) |  |  | (38,490 | ) |  |  | (65,265 | ) |  |  | - |
Other |  |  | (696 | ) |  |  | (139 | ) |  |  | (800 | )
Income before provision for income taxes |  | $ | 290,300 |  |  | $ | 508,466 |  |  | $ | 691,526 |
| (1) | Includes gains/losses on dispositions of assets other than in the ordinary course of business, gains/losses on 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 non-cash write-off of original issue discount and deferred financing costs due primarily to a voluntary prepayment of 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 restructuring charges related to the consolidation of certain operating facilities and organizational functions.
| (6) | Represents the following significant and unusual charges not indicative of our ongoing operations: • a provision for judgments and legal expenses related to certain patent and other litigation - $28,340 in 2023. • a provision for a matter with the CPSC concerning the imposition of civil fines for allegedly failing to timely submit a report under the CPSA in relation to certain portable generators that were subject to a voluntary recall previously announced on July 29, 2021 - $5,800 in 2023; $10,000 in 2022. • a bad debt provision and additional customer support costs for a clean energy product customer that filed for bankruptcy in 2022 – $4,350 additional customer support costs in 2023; $17,926 bad debt provision in 2022. • a warranty provision to address certain clean energy product warranty-related matters - $37,338 in 2022.
The following tables summarize additional financial information by reportable segment:
|  | Assets |
|  | December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Domestic |  | $ | 3,770,883 |  |  | $ | 4,032,086 |  |  | $ | 3,742,101 |
International |  |  | 1,322,429 |  |  |  | 1,137,376 |  |  |  | 1,135,679 |
Total |  | $ | 5,093,312 |  |  | $ | 5,169,462 |  |  | $ | 4,877,780 |
|  | Depreciation and Amortization |
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Domestic |  | $ | 129,648 |  |  | $ | 123,768 |  |  | $ | 66,675 |
International |  |  | 36,954 |  |  |  | 32,373 |  |  |  | 25,366 |
Total |  | $ | 166,602 |  |  | $ | 156,141 |  |  | $ | 92,041 |
|  | Capital Expenditures |
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Domestic |  | $ | 103,036 |  |  | $ | 69,680 |  |  | $ | 100,672 |
International |  |  | 26,024 |  |  |  | 16,508 |  |  |  | 9,320 |
Total |  | $ | 129,060 |  |  | $ | 86,188 |  |  | $ | 109,992 |
The Company’s sales in the United States represent approximately 77%, 8 0%, and 82% of total sales for the years ended December 31, 2023, 2022 and 2021, respectively. Approximately 74% and 77% of the Company’s identifiable long-lived assets are located in the United States as of December 31, 2023 and 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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