Description of Business and

Basis of Presentation

Founded in

1959,

Generac Holdings Inc. (the Company) is a leading global designer and manufacturer of a wide range of power generation equipment and other power products serving the residential, light-commercial and industrial markets. The Company’s power products are available globally through a broad network of independent dealers, distributors, retailers, wholesalers, equipment rental companies, and e-commerce partners, 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

of the Annual Report on Form

-K for the year ended

December 31, 2018).

A summary of acquisitions affecting the reporting periods presented include:

●

June 2018,

the Company acquired Selmec Equipos Industriales, S.A. de C.V. (Selmec), headquartered in Mexico City, Mexico. Selmec is a designer and manufacturer of industrial generators ranging from

10kW

2,750kW.

Selmec offers a market-leading service platform and specialized engineering capabilities, together with robust integration, project management and remote monitoring services.

●

February 2019,

the Company acquired a majority share of Captiva Energy Solutions Private Limited (Captiva). Captiva, founded in

2010

and headquartered in Kolkata, India, specializes in customized industrial generators. Captiva has

seven

sales locations throughout India and has over

100

employees.

●

March 2019,

the Company acquired Neurio Technology Inc. (Neurio), founded in

2005

and headquartered in Vancouver, British Columbia. Neurio is a leading energy data company focused on metering technology and sophisticated analytics to optimize energy use within a home or business.

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 (U.S. GAAP). All intercompany amounts and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet as of

March 31, 2019,

the condensed consolidated statements of comprehensive income for the

three

months ended

March 31, 2019

and

2018,

the condensed consolidated statements of stockholders’ equity for the

three

months ended

March 31, 2019

and

2018,

and the condensed consolidated statements of cash flows for the

three

months ended

March 31, 2019

and

2018

have been prepared by the Company and have

not

been audited. In the opinion of management, all adjustments (which include only normal recurring adjustments) 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 U.S. 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 disclosure normally included in consolidated financial statements prepared in accordance with U.S. 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

-K for the year ended

December 31, 2018.

New Accounting Standards

Not

Yet Adopted

August 2018,

the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU)

2018

15,

Intangibles – Goodwill and Other – Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.

This guidance was issued to address the diversity in practice related to the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. The guidance can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption, and is effective for the Company in

2020.

The Company is currently assessing the impact the adoption of this guidance will have on the Company’s results of operations and financial position.

There are several other new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does

not

believe any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.

Recently Adopted Accounting Standards

January 1, 2019,

the Company adopted ASU

2016

02,

Leases

. This guidance was issued to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities in the balance sheet and by disclosing key information about leasing arrangements. The Company adopted this standard using the modified retrospective approach as of the date of adoption, meaning

prior period balances were impacted by the adoption. Additionally, the Company elected to adopt the standard using the package of practical expedients permitted under the standard’s transition guidance, which allowed the Company to carryforward its historical lease classifications, and embedded lease and initial direct cost assessments. The adoption of the standard had a material impact on the Company’s condensed consolidated balances sheet primarily related to the recognition of right-of-use (ROU) assets and lease liabilities for operating leases. However, the adoption did

not

have a material impact on the condensed consolidated statement of comprehensive income and statement of cash flows. Refer to Note

“Leases,” for further information regarding the Company’s leases.

January 1, 2019,

the Company adopted ASU

2018

02,

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

. This guidance was issued to address the impact of the change in the U.S. federal corporate income tax rate from the

2017

U.S. Tax Cuts and Jobs Act (the “Tax Act”) on items recorded as a component of accumulated other comprehensive income (AOCI). This guidance allows companies to reclassify to retained earnings the stranded tax effects lodged in AOCI as a result of the Tax Act. Upon adoption of the ASU, the Company elected to

not

reclassify the stranded income tax effects from AOCI to retained earnings.