GENERAC HOLDINGS INC. [GNRC] Filings

10-Q 1 gnrc20210930_10q.htm FORM 10-Q gnrc20210930_10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended September 30, 2021

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

Commission File Number 001-34627

GENERAC HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Delaware	20-5654756
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

S45 W29290 Hwy 59, Waukesha, WI	53189
(Address of principal executive offices)	(Zip Code)

(262) 544-4811

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	GNRC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of November 1, 2021, there were 63,089,973 shares of registrant’s common stock outstanding.

Table of Contents

GENERAC HOLDINGS INC.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	1

	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020	2

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020	3

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 6.	Exhibits	30

	Signatures	31

Table of Contents

PART I. FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

Generac Holdings Inc.

Condensed Consolidated Balance Sheets

(U.S. Dollars in Thousands, Except Share and Per Share Data)

(Unaudited)

	*September 30,*			*December 31,*
	*2021*			*2020*
Assets
Current assets:
Cash and cash equivalents	$	423,726		$	655,128
Accounts receivable, less allowance for credit losses		510,670			374,906
Inventories		934,948			603,317
Prepaid expenses and other assets		54,228			36,382
Total current assets		1,923,572			1,669,733

Property and equipment, net		412,706			343,936

Customer lists, net		154,152			49,205
Patents and technology, net		141,952			86,727
Other intangible assets, net		14,703			9,932
Tradenames, net		172,398			146,159
Goodwill		1,174,315			855,228
Deferred income taxes		3,813			1,497
Operating lease and other assets		102,819			73,006
Total assets	$	4,100,430		$	3,235,423

Liabilities and stockholders’ equity
Current liabilities:
Short-term borrowings	$	61,470		$	39,282
Accounts payable		611,181			330,247
Accrued wages and employee benefits		69,882			63,036
Other accrued liabilities		270,536			204,812
Current portion of long-term borrowings and finance lease obligations		4,945			4,147
Total current liabilities		1,018,014			641,524

Long-term borrowings and finance lease obligations		843,426			841,764
Deferred income taxes		175,665			115,769
Operating lease and other long-term liabilities		236,344			179,955
Total liabilities		2,273,449			1,779,012

Redeemable noncontrolling interests		44,704			66,207

Stockholders’ equity:
Common stock, par value $0.01, 500,000,000 shares authorized, 72,335,705 and 72,024,329 shares issued at September 30, 2021 and December 31, 2020, respectively		724			721
Additional paid-in capital		563,162			525,541
Treasury stock, at cost		(358,634	)		(332,164	)
Excess purchase price over predecessor basis		(202,116	)		(202,116	)
Retained earnings		1,834,477			1,432,565
Accumulated other comprehensive loss		(55,541	)		(34,254	)
Stockholders’ equity attributable to Generac Holdings Inc.		1,782,072			1,390,293
Noncontrolling interests		205			(89	)
Total stockholders' equity		1,782,277			1,390,204
Total liabilities and stockholders’ equity	$	4,100,430		$	3,235,423

See notes to condensed consolidated financial statements.

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Generac Holdings Inc.

Condensed Consolidated Statements of Comprehensive Income

(U.S. Dollars in Thousands, Except Share and Per Share Data)

(Unaudited)

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2021*			*2020*			*2021*			*2020*

Net sales	$	942,698		$	701,355		$	2,670,113		$	1,724,118
Costs of goods sold		606,704			425,206			1,672,570			1,066,666
Gross profit		335,994			276,149			997,543			657,452

Operating expenses:
Selling and service		82,242			60,901			229,443			178,566
Research and development		27,165			20,658			74,897			58,762
General and administrative		40,802			31,061			115,311			88,732
Amortization of intangibles		12,206			7,892			32,237			23,340
Total operating expenses		162,415			120,512			451,888			349,400
Income from operations		173,579			155,637			545,655			308,052

Other (expense) income:
Interest expense		(7,980	)		(8,096	)		(23,424	)		(25,081	)
Investment income		165			301			1,012			1,921
Loss on extinguishment of debt		–			–			(831	)		–
Other, net		(400	)		(557	)		2,536			(2,687	)
Total other expense, net		(8,215	)		(8,352	)		(20,707	)		(25,847	)

Income before provision for income taxes		165,364			147,285			524,948			282,205
Provision for income taxes		32,611			32,050			114,341			59,967
Net income		132,753			115,235			410,607			222,238
Net income (loss) attributable to noncontrolling interests		1,183			265			3,008			(3,337	)
Net income attributable to Generac Holdings Inc.	$	131,570		$	114,970		$	407,599		$	225,575

Net income attributable to Generac Holdings Inc. per common share - basic:	$	1.98		$	1.86		$	6.42		$	3.59
Weighted average common shares outstanding - basic:		62,690,437			62,353,473			62,583,957			62,244,872

Net income attributable to Generac Holdings Inc. per common share - diluted:	$	1.93		$	1.82		$	6.27		$	3.51
Weighted average common shares outstanding - diluted:		64,208,116			63,761,380			64,146,281			63,546,132

Comprehensive income attributable to Generac Holdings Inc.	$	113,727		$	123,887		$	386,789		$	187,548

See notes to condensed consolidated financial statements.

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Generac Holdings Inc.

Condensed Consolidated Statements of Stockholders' Equity

(U.S. Dollars in Thousands, Except Share Data)

(Unaudited)

	*Generac Holdings Inc.*
													*Excess Purchase Price*						*Accumulated*
					*Additional*								*Over*						*Other*			*Total*
	*Common Stock*				*Paid-In*		*Treasury Stock*						*Predecessor*			*Retained*			*Comprehensive*			*Stockholders'*			*Noncontrolling*
	*Shares*		*Amount*		*Capital*		*Shares*			*Amount*			*Basis*			*Earnings*			*Income (Loss)*			*Equity*			*Interest*			*Total*
Balance at July 1, 2021		72,252,980	$	723	$	542,893		(9,252,097	)	$	(358,481	)	$	(202,116	)	$	1,710,464		$	(37,583	)	$	1,655,900		$	38		$	1,655,938
Unrealized gain on interest rate swaps, net of tax of $993		–		–		–		–			–			–			–			2,941			2,941			–			2,941
Foreign currency translation adjustment		–		–		–		–			–			–			–			(20,899	)		(20,899	)		(8	)		(20,907	)
Common stock issued under equity incentive plans, net of shares withheld for employee taxes and strike price		52,085		1		2,486		–			–			–			–			–			2,487			–			2,487
Common stock issued for business combination		30,640		–		12,000		–			–			–			–			–			12,000			–			12,000
Net share settlement of restricted stock awards		–		–		–		(397	)		(153	)		–			–			–			(153	)		–			(153	)
Share-based compensation		–		–		5,783		–			–			–			–			–			5,783			–			5,783
Redemption value adjustment		–		–		–		–			–			–			(7,557	)		–			(7,557	)		–			(7,557	)
Net income		–		–		–		–			–			–			131,570			–			131,570			175			131,745

Balance at September 30, 2021		72,335,705	$	724	$	563,162		(9,252,494	)	$	(358,634	)	$	(202,116	)	$	1,834,477		$	(55,541	)	$	1,782,072		$	205		$	1,782,277

	*Generac Holdings Inc.*
													*Excess Purchase Price*						*Accumulated*
					*Additional*								*Over*						*Other*			*Total*
	*Common Stock*				*Paid-In*		*Treasury Stock*						*Predecessor*			*Retained*			*Comprehensive*			*Stockholders'*			*Noncontrolling*
	*Shares*		*Amount*		*Capital*		*Shares*			*Amount*			*Basis*			*Earnings*			*Income (Loss)*			*Equity*			*Interest*			*Total*
Balance at January 1, 2021		72,024,329	$	721	$	525,541		(9,173,731	)	$	(332,164	)	$	(202,116	)	$	1,432,565		$	(34,254	)	$	1,390,293		$	(89	)	$	1,390,204
Unrealized gain on interest rate swaps, net of tax of $5,128		–		–		–		–			–			–			–			15,184			15,184			–			15,184
Foreign currency translation adjustment		–		–		–		–			–			–			–			(36,471	)		(36,471	)		(13	)		(36,484	)
Common stock issued under equity incentive plans, net of shares withheld for employee taxes and strike price		280,736		3		7,417		–			–			–			–			–			7,420			–			7,420
Common stock issued for business combination		30,640		–		12,000		–			–			–			–			–			12,000			–			12,000
Net share settlement of restricted stock awards		–		–		–		(78,763	)		(26,470	)		–			–			–			(26,470	)		–			(26,470	)
Share-based compensation		–		–		18,204		–			–			–			–			–			18,204			–			18,204
Redemption value adjustment		–		–		–		–			–			–			(5,687	)		–			(5,687	)		–			(5,687	)
Net income		–		–		–		–			–			–			407,599			–			407,599			307			407,906

Balance at September 30, 2021		72,335,705	$	724	$	563,162		(9,252,494	)	$	(358,634	)	$	(202,116	)	$	1,834,477		$	(55,541	)	$	1,782,072		$	205		$	1,782,277

See notes to condensed consolidated financial statements.

Table of Contents

Generac Holdings Inc.

Condensed Consolidated Statements of Stockholders' Equity

(U.S. Dollars in Thousands, Except Share Data)

(Unaudited)

	*Generac Holdings Inc.*
													*Excess Purchase Price*					*Accumulated*
					*Additional*								*Over*					*Other*			*Total*
	*Common Stock*				*Paid-In*		*Treasury Stock*						*Predecessor*			*Retained*		*Comprehensive*			*Stockholders'*			*Noncontrolling*
	*Shares*		*Amount*		*Capital*		*Shares*			*Amount*			*Basis*			*Earnings*		*Income (Loss)*			*Equity*			*Interest*			*Total*
Balance at July 1, 2020		71,960,067	$	720	$	512,318		(9,170,162	)	$	(331,415	)	$	(202,116	)	$	1,190,749	$	(72,526	)	$	1,097,730		$	(455	)	$	1,097,275
Unrealized gain on interest rate swaps, net of tax of $339		–		–		–		–			–			–			–		1,003			1,003			–			1,003
Foreign currency translation adjustment		–		–		–		–			–			–			–		9,484			9,484			(25	)		9,459
Common stock issued under equity incentive plans, net of shares withheld for employee taxes and strike price		51,835		–		1,939		–			–			–			–		–			1,939			–			1,939
Net share settlement of restricted stock awards		–		–		–		(572	)		(98	)		–			–		–			(98	)		–			(98	)
Share-based compensation		–		–		4,353		–			–			–			–		–			4,353			–			4,353
Redemption value adjustment		–		–		–		–			–			–			811		–			811			–			811
Net income		–		–		–		–			–			–			114,970		–			114,970			184			115,154

Balance at September 30, 2020		72,011,902	$	720	$	518,610		(9,170,734	)	$	(331,513	)	$	(202,116	)	$	1,306,530	$	(62,039	)	$	1,230,192		$	(296	)	$	1,229,896

	*Generac Holdings Inc.*
													*Excess Purchase Price*						*Accumulated*
					*Additional*								*Over*						*Other*			*Total*
	*Common Stock*				*Paid-In*		*Treasury Stock*						*Predecessor*			*Retained*			*Comprehensive*			*Stockholders'*			*Noncontrolling*
	*Shares*		*Amount*		*Capital*		*Shares*			*Amount*			*Basis*			*Earnings*			*Income (Loss)*			*Equity*			*Interest*			*Total*
Balance at January 1, 2020		71,667,726	$	717	$	498,866		(9,103,013	)	$	(324,551	)	$	(202,116	)	$	1,084,383		$	(24,917	)	$	1,032,382		$	469		$	1,032,851
Accounting standard adoption impact		–		–		–		–			–			–			(1,147	)		–			(1,147	)		–			(1,147	)
Unrealized loss on interest rate swaps, net of tax of ($6,217)		–		–		–		–			–			–			–			(18,406	)		(18,406	)		–			(18,406	)
Foreign currency translation adjustment		–		–		–		–			–			–			–			(18,716	)		(18,716	)		(27	)		(18,743	)
Common stock issued under equity incentive plans, net of shares withheld for employee taxes and strike price		344,176		3		5,417		–			–			–			–			–			5,420			–			5,420
Net share settlement of restricted stock awards		–		–		–		(67,721	)		(6,962	)		–			–			–			(6,962	)		–			(6,962	)
Share-based compensation		–		–		14,327		–			–			–			–			–			14,327			–			14,327
Redemption value adjustment		–		–		–		–			–			–			(2,281	)		–			(2,281	)		–			(2,281	)
Net income		–		–		–		–			–			–			225,575			–			225,575			(738	)		224,837

Balance at September 30, 2020		72,011,902	$	720	$	518,610		(9,170,734	)	$	(331,513	)	$	(202,116	)	$	1,306,530		$	(62,039	)	$	1,230,192		$	(296	)	$	1,229,896

See notes to condensed consolidated financial statements.

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Generac Holdings Inc.

Condensed Consolidated Statements of Cash Flows

(U.S. Dollars in Thousands)

(Unaudited)

	*Nine Months Ended September 30,*
	*2021*			*2020*
Operating activities
Net income	$	410,607		$	222,238
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		30,445			26,747
Amortization of intangible assets		32,237			23,340
Amortization of original issue discount and deferred financing costs		1,941			1,940
Loss on extinguishment of debt		831			–
Deferred income taxes		8,210			15,433
Share-based compensation expense		18,204			14,327
Loss (gain) on disposal of assets		(4,018	)		–
Other, net		(12	)		6,414
Net changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(116,768	)		(85,474	)
Inventories		(322,954	)		(14,604	)
Other assets		(6,874	)		2,543
Accounts payable		269,951			11,624
Accrued wages and employee benefits		4,497			11,793
Other accrued liabilities		49,987			38,211
Excess tax benefits from equity awards		(26,880	)		(6,222	)
Net cash provided by operating activities		349,404			268,310

Investing activities
Proceeds from sale of property and equipment		182			26
Proceeds from sale of investment		4,968			–
Proceeds from beneficial interests in securitization transactions		2,240			1,998
Contribution to equity method investment		(781	)		–
Expenditures for property and equipment		(87,456	)		(33,940	)
Acquisition of businesses, net of cash acquired		(465,926	)		(22,815	)
Net cash used in investing activities		(546,773	)		(54,731	)

Financing activities
Proceeds from short-term borrowings		127,816			198,087
Proceeds from long-term borrowings		50,000			297
Repayments of short-term borrowings		(105,206	)		(210,854	)
Repayments of long-term borrowings and finance lease obligations		(54,889	)		(3,584	)
Payment of contingent acquisition consideration		(3,750	)		(4,000	)
Payment of debt issuance costs		(1,185	)		–
Purchase of additional ownership interest		(27,164	)		–
Taxes paid related to equity awards		(49,569	)		(13,533	)
Proceeds from exercise of stock options		30,502			11,991
Net cash used in financing activities		(33,445	)		(21,596	)

Effect of exchange rate changes on cash and cash equivalents		(588	)		(922	)

Net increase (decrease) in cash and cash equivalents		(231,402	)		191,061
Cash and cash equivalents at beginning of period		655,128			322,883
Cash and cash equivalents at end of period	$	423,726		$	513,944

See notes to condensed consolidated financial statements.

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Generac Holdings Inc.
Notes to Condensed Consolidated Financial Statements

(U.S. Dollars in Thousands, Except Share and Per Share Data)

(Unaudited)

1. Description of Business and Basis of Presentation

Founded in 1959, Generac Holdings Inc. (the Company) is a leading global designer, manufacturer and provider of a wide range of energy technology solutions. The Company provides power generation equipment, energy storage systems, grid service solutions, and other power products serving the residential, commercial and industrial markets. Generac’s power products and solutions are available globally through a broad network of independent dealers, distributors, retailers, e-commerce partners, wholesalers, and equipment rental companies, as well as sold direct to certain end user customers.

Over the years, the Company has executed a number of acquisitions that support its strategic plan (as discussed in Item 1 of the Annual Report on Form 10-K for the year ended December 31, 2020). A summary of acquisitions affecting the reporting periods presented include:

	●	In July 2020, the Company acquired West Coast Energy Systems LLC (Energy Systems), its industrial distributor in northern California. This addition enhances the Company's ability to serve the west coast markets for both commercial & industrial (C&I) and residential products.
	●	In September 2020, the Company acquired Mean Green Products, LLC (Mean Green), founded in 2009 and located in Ross, Ohio. Mean Green is a designer and manufacturer of commercial grade, battery-powered turf care products that provide quiet, zero emissions and reduced maintenance options as compared to traditional commercial mowers.
	●	In October 2020, the Company acquired Enbala Power Networks Inc. (Enbala), founded in 2003 and headquartered in Denver, Colorado. Enbala is one of the leading providers of distributed energy optimization and control software that helps support the operational stability of the world's power grids.
	●	In June 2021, the Company acquired Deep Sea Electronics Limited (Deep Sea), founded in 1975 and headquartered in Hunmanby, United Kingdom. Deep Sea is an industry leading designer and manufacturer of a diverse suite of flexible control solutions focused on the global power generation and transfer switch markets.
	●	In July 2021, the Company acquired Chilicon Power, LLC (Chilicon), a designer and provider of grid-interactive microinverter and monitoring solutions for the solar market. Based in Los Angeles, California, Chilicon's power inversion and monitoring system technologies maximize photovoltaic (solar power) system production, lower installer operational cost, and promote end-user satisfaction.
	●	In September 2021, the Company acquired Apricity Code Corporation (Apricity Code), an advanced engineering and product design company located in Bend, Oregon.
	●	In September 2021, the Company acquired Off Grid Energy Ltd (Off Grid Energy), a designer and manufacturer of industrial-grade mobile energy storage systems. Headquartered in Rugby, United Kingdom, Off Grid Energy offers a diverse range of energy storage solutions that provide cleaner and more flexible energy for industrial and mobile applications.

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries that are consolidated in conformity with U.S. generally accepted accounting principles (GAAP). All intercompany amounts and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet as of September 30, 2021, the condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2021 and 2020, the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 have been prepared by the Company and have not been audited. In the opinion of management, all adjustments (which include only normal recurring adjustments except where disclosed) necessary for the fair presentation of the financial position, results of operation, and cash flows have been made. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2020.

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New Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (FASB) in the form of accounting standard updates (ASUs) to the FASB Accounting Standards Codification (ASC). ASUs issued were assessed and have already been adopted in a prior period or determined to be either not applicable or are not expected to have a material impact on the Company’s consolidated financial statements.

2. Acquisitions

Fiscal 2021 Acquisitions

Acquisition of Deep Sea

On June 1, 2021, the Company acquired Deep Sea for a purchase price, net of cash acquired, of $420,700. Headquartered in Hunmanby, United Kingdom, Deep Sea is an industry leading designer and manufacturer of a diverse suite of flexible control solutions focused on the global power generation and transfer switch markets. The acquisition purchase price was funded solely through cash on hand.

The Company recorded its preliminary purchase price allocation during the second quarter of 2021, and was updated in the third quarter of 2021, based upon its estimates of the fair value of the acquired assets and assumed liabilities at that time. As a result, the Company recorded $434,724 of intangible assets, including $263,287 of goodwill recorded in the International segment, as of the acquisition date. The goodwill ascribed to this acquisition is not deductible for tax purposes. The accompanying condensed consolidated financial statements include the results of Deep Sea from the date of acquisition through September 30, 2021. Pro forma financial information is not presented as the effects of this acquisition are not material to the Company's results of operations or financial position prior to the acquisition date.

Acquisition of Off Grid Energy

On September 1, 2021, the Company acquired Off Grid Energy for a purchase price of $76,553, net of cash acquired and inclusive of estimated contingent consideration of $44,042 that is to be paid in cash upon achievement of certain performance targets at the end of the earnout period. Headquartered in Rugby, United Kingdom, Off Grid Energy is a designer and manufacturer of industrial-grade mobile energy storage systems. The acquisition purchase price was funded through cash on hand.

The Company recorded its preliminary purchase price allocation during the third quarter of 2021 based upon its estimates of the fair value of the acquired assets and assumed liabilities at that time. As a result, the Company recorded $71,935 of intangible assets, including $48,263 of goodwill recorded in the International segment, as of the acquisition date. The goodwill ascribed to this acquisition is deductible for tax purposes. The accompanying condensed consolidated financial statements include the results of Off Grid Energy from the date of acquisition through September 30, 2021. Pro forma financial information is not presented as the effects of this acquisition are not material to the Company's results of operations or financial position prior to the acquisition date.

Other Acquisitions

On July 2, 2021, the Company acquired Chilicon, a designer and provider of grid-interactive microinverter and monitoring solutions for the solar market. Chilicon is based in Los Angeles, California.

On September 1, 2021, the Company acquired Apricity Code, an advanced engineering and product design company located in Bend, Oregon.

The combined fair value of the consideration transferred for these acquisitions consisted of the following:

Cash at closing	$	18,823
Deferred cash payment		6,000
Common stock issued at closing		12,000
Contingent consideration (1)		23,971
Total purchase price	$	60,794

(1)

To be paid in the form of common stock issued upon achievement of certain performance targets at the end of the earnout period.

The Company recorded its preliminary purchase price allocation during the third quarter of 2021 based upon its estimates of the fair value of the acquired assets and assumed liabilities at that time. As a result, the Company recorded $69,776 of intangible assets, including $30,976 of goodwill recorded in the Domestic segment, as of the acquisition date for these acquisitions. The goodwill ascribed to the Chilicon acquisition is not deductible for tax purposes. The goodwill ascribed to the Apricity acquisition is deductible for tax purposes. The accompanying condensed consolidated financial statements include the results of the acquired businesses since the dates of acquisition through September 30, 2021. Pro forma financial information is not presented for these acquisitions as the effects of the acquisitions individually and in the aggregate are not material to the Company's results of operations or financial position prior to the acquisition dates.

Fiscal 2020 Acquisitions

Acquisition of Enbala

On October 7, 2020, the Company acquired Enbala for a purchase price, net of cash acquired, of $41,982. The acquisition purchase price was funded solely through cash on hand.

The Company finalized its purchase price allocation during the third quarter of 2021 based upon its estimates of the fair value of the acquired assets and assumed liabilities at that time. The finalization did not result in material adjustments to the Company's preliminary estimates. As a result, the Company recorded $46,338 of intangible assets, including $27,038 of goodwill recorded in the Domestic segment, as of the acquisition date. A portion of the goodwill ascribed to this acquisition is deductible for tax purposes. The accompanying condensed consolidated financial statements include the results of Enbala from the date of acquisition through September 30, 2021. Pro forma financial information is not presented as the effects of this acquisition or the combined acquisitions are not material to the Company's results of operations or financial position prior to the acquisition date.

Other Acquisitions

On July 1, 2020, the Company acquired Energy Systems, its industrial distributor in northern California.

On September 1, 2020, the Company acquired Mean Green, a designer and manufacturer of commercial grade, battery-powered turf care products.

The combined purchase price for these two acquisitions was $22,958 and was funded solely through cash on hand. The Company finalized its purchase price allocation for these two acquisitions during the third quarter of 2021 based upon its estimates of the fair value of the acquired assets and assumed liabilities at that time. The finalization did not result in material adjustments to the Company's preliminary estimates. The accompanying condensed consolidated financial statements include the results of the acquired businesses since the dates of acquisition through September 30, 2021. Pro forma financial information is not presented for these acquisitions as the effects of the acquisitions individually and in the aggregate are not material to the Company's results of operations or financial position prior to the acquisition dates.

Summary Purchase Price Allocations

The fair values assigned to certain assets acquired and liabilities assumed, as of the acquisition dates, are as follows for the 2021 and 2020 acquisitions:

	2021 Acquisitions
	*Deep Sea*		*All Other*		*2020 Acquisitions*
Accounts receivable	$	9,574	$	13,478	$	5,094
Inventories		9,970		4,522		3,575
Prepaid expenses and other assets		826		1,146		858
Property and equipment		8,838		413		635
Intangible assets		171,437		62,472		26,235
Goodwill		263,287		79,239		40,395
Other assets		3,414		4,750		1,122
Total assets acquired		467,346		166,020		77,914

Accounts payable		8,254		4,066		4,088
Accrued wages and employee benefits		2,106		788		700
Other accrued liabilities		3,641		1,903		2,151
Short-term borrowings		-		833		-
Current portion of long-term debt		-		233		-
Deferred income taxes		32,545		13,981		3,827
Long-term debt		-		1,672		-
Other long-term liabilities		100		5,197		2,208
Net assets acquired	$	420,700	$	137,347	$	64,940

The allocations of the purchase price to identifiable assets for the 2021 acquisitions are based on the preliminary valuations performed to determine the fair value of the net assets as of their respective acquisition dates. The measurement period for the valuation of net assets acquired ends as soon as information on the facts and circumstances that existed as of the acquisition dates becomes available, but not to exceed 12 months following the acquisition date. Adjustments in purchase price allocations may require a change in the amounts allocated to net assets acquired during the periods in which the adjustments are determined.

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3. Redeemable Noncontrolling Interest

On March 1, 2016, the Company acquired a 65% ownership interest in PR Industrial S.r.l. and its subsidiaries (Pramac). The 35% noncontrolling interest in Pramac had an acquisition date fair value of $34,253, and was recorded as a redeemable noncontrolling interest in the condensed consolidated balance sheet, as the noncontrolling interest holder had within its control the right to require the Company to redeem its interest in Pramac. In February 2019, the Company amended its agreement with the noncontrolling interest holder of Pramac, extending the agreement by five years, allowing the Company to exercise its call option rights in partial increments at certain times during the five year period, and providing that the noncontrolling interest holder no longer holds the right to put its shares to the Company until April 1, 2021. The put and call option price is based on a multiple of earnings, subject to a floor and the terms of the acquisition agreement, as amended. In May 2021, the Company exercised its call option rights and paid a purchase price of $27,164 to purchase an additional 15% ownership interest in Pramac, bringing the Company's total ownership interest in Pramac to 80%. The Company still holds its call option right to purchase the remaining 20% ownership interest in partial increments over the next 3 years.

On February 1, 2019, the Company acquired a 51% ownership interest in Captiva. The 49% noncontrolling interest in Captiva had an acquisition date fair value of $3,165, and was recorded as a redeemable noncontrolling interest in the condensed consolidated balance sheet, as the noncontrolling interest holder had within its control the right to require the Company to redeem its interest in Captiva. The noncontrolling interest holder has a put option to sell his interest to the Company any time after five years from the date of acquisition, or earlier upon the occurrence of certain circumstances. Further, the Company has a call option that it may redeem any time after five years from the date of acquisition, or earlier upon the occurrence of certain circumstances. The put and call option price is based on a multiple of earnings, subject to the terms of the acquisition.

For both transactions, the redeemable noncontrolling interest is recorded at the greater of the initial fair value, increased or decreased for the noncontrolling interests’ share of comprehensive income (loss), or the estimated redemption value, with any adjustments to the redemption value impacting retained earnings, but not net income. However, the redemption value adjustments are reflected in the earnings per share calculation, as detailed in Note 13, “Earnings Per Share,” to the condensed consolidated financial statements. The following table presents the changes in the redeemable noncontrolling interest:

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2021*			*2020*			*2021*			*2020*
Balance at beginning of period	$	37,245		$	61,019		$	66,207		$	61,227
Net income		1,007			80			2,700			(2,601	)
Foreign currency translation		(1,105	)		3,257			(2,726	)		2,638
Purchase of additional ownership interest		-			-			(27,164	)		-
Redemption value adjustment		7,557			(811	)		5,687			2,281
Balance at end of period	$	44,704		$	63,545		$	44,704		$	63,545

4. Derivative Instruments and Hedging Activities

The Company records all derivatives in accordance with ASC 815, Derivatives and Hedging, which requires derivative instruments to be reported on the condensed consolidated balance sheets at fair value and establishes criteria for designation and effectiveness of hedging relationships. The Company is exposed to market risk such as changes in commodity prices, foreign currencies and interest rates. The Company does not hold or issue derivative financial instruments for trading purposes.

The Company periodically utilizes commodity derivatives and foreign currency forward purchase and sales contracts in the normal course of business. Because these contracts do not qualify for hedge accounting, the related gains and losses are recorded in the Company’s condensed consolidated statements of comprehensive income. These gains and losses are not material to the Company’s condensed consolidated financial statements.

Interest Rate Swaps

In 2017, the Company entered into twenty interest rate swap agreements, twelve of which were still outstanding as of September 30, 2021. In December 2019, in conjunction with the amendment to its term loan, the Company amended those interest rate swaps to remove the LIBOR floor, which also resulted in minor reductions to the future dated swap fixed rates. In March 2020, the Company entered into three additional interest rate swap agreements, bringing the total outstanding interest rate swaps to fifteen as of September 30, 2021. The Company formally documented all relationships between interest rate hedging instruments and the related hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions. These interest rate swap agreements qualify as cash flow hedges and therefore, the effective portions of their gains or losses are reported as a component of accumulated other comprehensive loss (AOCL) in the condensed consolidated balance sheets. The amount of gains, net of tax, recognized for the three and nine months ended September 30, 2021 were $2,941 and $15,184, respectively. The amount of gains and losses, net of tax, recognized for the three and nine months ended September 30, 2020 were $1,003 and $(18,406), respectively. The cash flows of the swaps are recognized as adjustments to interest expense each period. The ineffective portions of the derivatives’ changes in fair value, if any, are immediately recognized in earnings.

Fair Value

The following table presents the fair value of all of the Company’s derivatives:

	September 30, 2021			December 31, 2020
Commodity contracts	$	32		$	1,386
Foreign currency contracts		23			(154	)
Interest rate swaps		(9,224	)		(29,536	)

The fair values of the commodity contracts and foreign currency contracts are included in prepaid expenses and other current assets, and the fair value of the interest rate swaps is included in other assets, other accrued liabilities and other long-term liabilities in the condensed consolidated balance sheets as of September 30, 2021. The fair value of the commodity contracts is included in prepaid expenses and other current assets, and the fair values of the foreign currency contracts and interest rate swaps are included in other accrued liabilities and other long-term liabilities, respectively, in the condensed consolidated balance sheets as of December 31, 2020. Excluding the impact of credit risk, the fair value of the derivative contracts as of September 30, 2021 and December 31, 2020 is a liability of $9,383 and $28,667, respectively, which represents the amount the Company would pay to exit all of the agreements on those dates.

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5. Fair Value Measurements

ASC 820-10, Fair Value Measurement, defines fair value, establishes a consistent framework for measuring fair value, and expands disclosure for each major asset and liability category measured at fair value on either a recurring basis or nonrecurring basis. ASC 820-10 clarifies that fair value is an exit price, representing the amount that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the pronouncement establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level