Generac Holdings Inc. (NYSE:GNRC)

The analysis of the current and deferred income tax expenses over the five-year period reveals several notable trends and changes:

Current Income Tax Expense

The current tax expense shows a consistent upward trajectory from 2017 through 2021. Starting at $22,113 thousand in 2017, it more than doubled by 2018 to $46,257 thousand. This increasing pattern continues gradually with values of $48,557 thousand in 2019 and a more pronounced rise to $77,759 thousand in 2020. The trend culminates in a significant jump to $137,067 thousand in 2021. This progression suggests steadily growing taxable income or changes in tax rates, potentially reflecting improved profitability or operational scale.

Deferred Income Tax Expense

The deferred tax expense exhibits a less consistent pattern compared to the current tax. It increases from $18,986 thousand in 2017 to $24,614 thousand in 2018, indicating a buildup of deferred liabilities or recognition of future tax obligations. However, in 2019, the deferred expense declines to $19,520 thousand and remains relatively stable in 2020 at $20,498 thousand. A substantial reversal occurs in 2021, where the deferred tax expense turns negative at -$1,073 thousand. This negative figure may indicate the recognition of deferred tax assets or tax benefits realized, potentially due to changes in tax positions, asset valuations, or timing differences.

Provision for Income Taxes

The overall provision for income taxes, which sums current and deferred components, demonstrates a general increase with occasional fluctuations. It rises from $43,553 thousand in 2017 to $69,856 thousand in 2018, suggesting strengthening profitability. There is a slight decrease in 2019 to $67,299 thousand, followed by an increase to $98,973 thousand in 2020. In 2021, the provision reaches its highest point at $134,957 thousand, consistent with the sharp rise in current tax expense despite the negative deferred tax expense. The data highlights the dominance of current tax expense in driving overall tax provisioning, especially in recent years.

Overall, the financial data indicate a trend of increasing current tax liabilities corresponding to growth or changes in taxable income, while deferred tax expenses display more volatility with a notable negative adjustment in the most recent year. The combination of these factors results in a rising income tax provision, reflecting the company's evolving tax position over the analyzed period.

The analysis of the annual tax-related financial data over the period from the end of 2017 to 2021 reveals several notable trends and changes in the components influencing the effective tax rate.

U.S. Statutory Tax Rate

The U.S. statutory tax rate experienced a significant decline in 2018 from 35% in 2017 to 21%, where it remained stable through 2021. This reduction aligns with tax reforms implemented in the United States during this period.

State Taxes and Credits

State taxes as a percentage consistently hovered around 4.1% to 4.7%, showing slight fluctuations without a clear directional trend. State tax rate differentials were minimal and noted only briefly in 2019 as -1%. State credits exhibited an increasing benefit effect until 2020, with values moving from -0.2% in 2017 to -1.5% in 2020, then slightly receding to -1.1% in 2021.

Research and Development Credits

Research and development credits contributed a modest but consistent reduction in tax rate impact, ranging between -0.8% and -1.4%. The effect was relatively stable over the five-year span, indicating ongoing benefit from such credits.

Share-Based Compensation

Share-based compensation effects on the tax rate fluctuated noticeably, starting at -1.4% in 2017, decreasing to as low as -0.5% in 2018, then rising slightly before a significant increase in impact was observed in 2021 at -3.8%. This suggests a greater recognition of such compensation expenses in later years, heavily influencing tax liabilities.

Other Specific Items

Several specific effects appeared intermittently. Nondeductible U.S. compensation, foreign tax deductions, and foreign deferred tax rate changes emerged only in the later years, impacting the tax rate by small margins (+1.5%, -1.5%, and +1.2% respectively). The category labeled "Other" fluctuated without a clear pattern, varying from -0.9% to +0.5% over the years.

Effective Tax Rate

The effective tax rate before considering the Tax Act impact declined dramatically from 35.2% in 2017 to approximately 21% in the subsequent years, with some fluctuations—reaching as low as 19.5% in 2021. Including the Tax Act impact, which caused a substantial one-time reduction of -13.9% in 2017, the reported effective tax rate was notably reduced that year but stabilized afterwards within the low twenties and slightly decreased in 2021.

In summary, the effective tax rate experienced a marked decrease consistent with legislative changes in the U.S. tax code around 2018. Subsequent years showed relatively stable statutory rates but variable impacts from state taxes, credits, and share-based compensation. The growing influence of share-based compensation and emerging foreign-related tax effects represent areas of increasing relevance to the company’s tax profile. Overall, the company’s effective tax rate was effectively managed, benefiting from tax credits and other adjustments, leading to a downward trend in its overall tax burden through 2021.

The financial data reveals several notable trends over the five-year period ending December 31, 2021.

Current Liabilities and Deferred Revenue

Accrued expenses have increased steadily from $15.1 million in 2017 to $37.8 million in 2021, reflecting rising short-term obligations. Deferred revenue similarly rose from $8.1 million to $27.0 million over the same span, indicating growth in advance payments or contractual liabilities requiring future delivery.

Inventory Trends

Inventories showed a consistent upward trend from $7.9 million in 2017 to $14.9 million in 2021, suggesting either expansion in operations or inventory buildup, which could impact working capital management.

Pension Obligations

Pension obligations dropped sharply from $3.8 million in 2017 to $1.1 million in 2018, after which no data is reported. This may indicate a significant reduction or restructuring of pension liabilities during the period.

Stock-Based Compensation

Stock-based compensation expenses rose steadily, from $5.5 million in 2017 to $10.2 million in 2021, reflecting increased grant activity or higher valuation of awards, which could influence overall compensation costs.

Operating Loss and Credit Carryforwards

These carryforwards increased consistently, nearly tripling from $23.8 million in 2017 to $68.4 million in 2021, potentially representing growing tax assets arising from losses and credits that may be utilized to offset future taxable income.

Bad Debt Expense

Bad debt expense appeared in 2018 at $1.4 million, fluctuated subsequently, but decreased to $1.3 million by 2021, indicating some variance in receivables collectibility.

Other Items

The category labeled "Other" expanded markedly from $1.1 million in 2017 to $12.2 million in 2021, suggesting either increasing miscellaneous expenses or the accrual of additional liabilities.

Deferred Tax Assets and Valuation Allowance

Deferred tax assets before valuation allowance increased steadily from $65.3 million to $171.7 million, indicating recognition of more tax benefits. The valuation allowance decreased in magnitude up to 2019 but then increased again, ending at -$7.9 million in 2021, suggesting ongoing assessment and some uncertainty regarding realizability of deferred tax assets. Net deferred tax assets consequently grew from $58.5 million to $163.9 million over the period.

Goodwill and Intangible Assets

Goodwill and intangible assets carry a significant negative balance, which deepened substantially from -$70.6 million in 2017 to -$328.2 million in 2021, likely due to amortization or impairment charges, reflecting potential reductions in asset value tied to acquisitions or internal development.

Depreciation and Related Expenses

Depreciation expenses fluctuated, increasing from -$22.6 million in 2017 to a peak of -$33.7 million in 2020 before declining to -$21.3 million in 2021, which might reflect changes in asset base or depreciation policies. Debt refinancing costs and prepaid expenses both trended downward over the period.

Deferred Tax Liabilities and Net Position

Deferred tax liabilities increased significantly from -$99.0 million in 2017 to -$354.1 million in 2021, indicating rising future tax obligations. The net deferred tax asset (liability) position worsened substantially, moving from -$40.6 million in 2017 to -$190.2 million in 2021, pointing to an increasingly negative net tax position on the balance sheet.

Overall, the data depict growing liabilities and deferred obligations alongside rising deferred tax assets and substantial intangible asset impairments. The divergence between recognized deferred tax assets and liabilities results in a markedly negative net deferred tax position, highlighting potential tax-related risks. Steady increases in stock-based compensation and accrued expenses suggest escalating operational costs. The large increase in goodwill and intangible asset negatives may warrant further scrutiny regarding asset impairment and valuation practices.

The analysis of deferred tax assets and liabilities over the five-year period reveals notable trends in the company's tax-related financial position.

Deferred Tax Assets

Deferred tax assets experienced fluctuations, beginning at a moderate level in 2017, decreasing significantly in 2018, then recovering somewhat in 2019. A decline was observed again in 2020, followed by a substantial increase in 2021. The final value in 2021 is markedly higher than in previous years, indicating a possible recognition of additional deductible temporary differences or carryforwards.

Deferred Tax Liabilities

Deferred tax liabilities show a consistent upward trend throughout the entire period. Starting at a relatively high base in 2017, the liabilities increased significantly every year, more than quadrupling by 2021. This suggests growing taxable temporary differences, which may reflect increased asset basis differences or other timing differences that will result in future taxable amounts.

Overall, the substantial growth in deferred tax liabilities compared to the relatively smaller and volatile changes in deferred tax assets indicates an expanding net deferred tax liability position. This trend might impact the company's future tax payments and cash flow, highlighting the importance of monitoring underlying temporary differences and their anticipated realization.

An analysis of the financial data over the five-year period reveals several notable trends in the company's reported and adjusted financial position and performance.

Total Assets

Both reported and adjusted total assets show a steadily increasing trend from 2017 through 2021. Reported total assets rose from approximately 2.02 billion US dollars in 2017 to nearly 4.88 billion in 2021. Adjusted total assets closely follow this pattern, increasing from roughly 2.02 billion to about 4.86 billion US dollars in the same period. This demonstrates a consistent expansion in the company’s asset base, with only minor deviations between reported and adjusted figures.

Total Liabilities

Reported total liabilities fluctuated slightly between 2017 and 2019, decreasing from about 1.61 billion in 2018 to 1.57 billion in 2019, before escalating to approximately 2.61 billion in 2021. Adjusted total liabilities reflect a similar trend but consistently remain lower than reported liabilities, indicating that deferred income tax adjustments reduce the overall liability balance. Both reported and adjusted liabilities show significant growth in 2021, which may suggest increased leveraging or obligations during this period.

Stockholders' Equity

Stockholders’ equity attributable to the company increased steadily throughout the period, with an accelerating growth rate towards 2021. Reported equity rose from about 560 million US dollars in 2017 to over 2.21 billion in 2021. Adjusted equity figures are higher than reported at each year-end, starting at approximately 600 million and reaching 2.40 billion in 2021. This consistent upward movement in equity indicates effective retention of earnings and possible capital infusions adjusted for tax effects, bolstering the company’s net worth.

Net Income

The reported net income attributable to the company exhibited continuous growth, starting at 159 million US dollars in 2017 and culminating at 550 million in 2021. Adjusted net income generally exceeds the reported income figures except in 2021, where it is slightly lower. Adjusted net income grew from about 178 million in 2017 to approximately 549 million in 2021. This trend demonstrates improving profitability over the years, with adjustments likely reflecting the impact of deferred income taxes which slightly alter net income figures annually.

Overall, the data indicate sustained growth in assets, equity, and net income, alongside rising liabilities, suggesting ongoing expansion possibly financed through both retained earnings and increased obligations. The adjustments related to deferred income taxes consistently modify the reported figures, typically increasing equity and net income values, with the exceptions noted in the latest period. These adjustments provide a more nuanced view of the company’s financial health over time.

Net Profit Margin

Both reported and adjusted net profit margins exhibit an overall increasing trend from 2017 to 2021. The reported net profit margin rose from 9.53% in 2017 to 14.73% in 2021, peaking at 14.73% in the last period. Similarly, the adjusted net profit margin increased from 10.67% in 2017 to a peak of 14.93% in 2020 before slightly declining to 14.7% in 2021. This indicates improved profitability over the observed timeframe, with minor fluctuations in the adjusted figures.

Total Asset Turnover

The reported and adjusted total asset turnover ratios remained stable at 0.83 from 2017 through 2019, followed by a decrease to 0.77 in 2020 which persisted into 2021. The decline in asset turnover suggests a reduction in the efficiency of asset utilization relative to sales in the latter years.

Financial Leverage

Financial leverage ratios, both reported and adjusted, show a continuous downward trend over the five-year period. Reported financial leverage decreased from 3.61 in 2017 to 2.20 in 2021, while adjusted financial leverage declined from 3.36 to 2.02 over the same period. This trend indicates a consistent reduction in the use of debt or other liabilities relative to equity, which could imply a strengthening equity base or deliberate deleveraging.

Return on Equity (ROE)

Reported ROE peaked at 31.33% in 2018 before declining to approximately 24.87% in 2021. Adjusted ROE followed a similar pattern, reaching 31.61% in 2018 and decreasing to 22.85% by 2021. Despite the reduction, ROE remains at a relatively strong level, though the downward trend warrants attention regarding sustained profitability from shareholders’ perspective.

Return on Assets (ROA)

Both reported and adjusted ROA demonstrate an overall upward trend during the period. Reported ROA increased from 7.89% in 2017 to 11.29% in 2021, while adjusted ROA rose from 8.84% to 11.3%. The improvement in ROA suggests enhanced asset efficiency in generating net income, supporting the observed rise in profit margins and indicating stronger operational performance.

Reported Net Income Attributable to Generac Holdings Inc.

The reported net income showed a consistent upward trend over the five-year period. Starting from $159,386 thousand in 2017, it increased annually, reaching $550,494 thousand by 2021. This represents an overall significant growth in net income, more than tripling during the timeframe.

Adjusted Net Income Attributable to Generac Holdings Inc.

Adjusted net income also exhibited a steadily increasing pattern. Beginning at $178,372 thousand in 2017, it rose each year to peak at $549,421 thousand in 2021. The adjusted figures are slightly higher than reported ones in the earlier years but converge closely by the end of the period, indicating that adjustments have less impact on the reported net income over time.

Reported Net Profit Margin

The reported net profit margin displayed an improving trend from 9.53% in 2017 to 14.73% in 2021. There was a modest increase from 2017 to 2018, a slight dip in 2019, followed by progressive increases in 2020 and 2021. This progression suggests enhanced profitability relative to revenues.

Adjusted Net Profit Margin

Adjusted net profit margin followed a similar trajectory, beginning at 10.67% in 2017 and rising to 14.70% in 2021. The margin peaked in 2020 at 14.93% before slightly declining in 2021. The pattern confirms overall improved efficiency and profitability after accounting for tax-related adjustments, with margins maintaining a close relationship to the reported figures.

Overall Analysis

Both reported and adjusted financial data indicate substantial growth in profitability over the five years. While adjusted figures generally exceed reported values in earlier years, discrepancies narrow toward the end of the period. Profit margins improved consistently, suggesting better operational performance and effective tax adjustments contributing positively to net income outcomes.

The financial data reveals several notable trends in the company's assets and asset turnover ratios over the five-year period ending in 2021.

Total Assets

The reported total assets showed a consistent upward trajectory, increasing from approximately $2.02 billion in 2017 to nearly $4.88 billion in 2021. This represents a significant growth trend, with the most substantial increment occurring between 2020 and 2021. Adjusted total assets mirrored this pattern closely, with values marginally lower than reported figures but following the same upward trend. The steady increase in total assets indicates ongoing investment or acquisition activities and an expansion of the company's asset base during this time frame.

Total Asset Turnover

The reported total asset turnover ratio remained stable at 0.83 for the first three years (2017-2019) but declined to 0.77 in 2020 and remained at that level into 2021. The adjusted total asset turnover ratio followed the exact same pattern. This decrease suggests that while the company's asset base expanded, the efficiency with which those assets generated revenue slightly reduced beginning in 2020 and continued through 2021.

In summary, the company experienced substantial asset growth over the analyzed period, nearly doubling its asset base. However, this growth did not proportionally translate into higher asset turnover, as the ratio declined starting in 2020 and stabilized at a lower level. This could indicate diminishing returns on the expanded asset base or a shift in operational dynamics affecting asset utilization efficiency.

Total Assets

The reported total assets displayed a consistent upward trend over the five-year period, increasing from approximately $2.02 billion in 2017 to nearly $4.88 billion in 2021. The adjusted total assets, which presumably account for deferred tax effects, followed a nearly identical growth pattern, starting at about $2.02 billion and reaching around $4.86 billion in 2021. This denotes substantial expansion in asset base over the timeframe, with the largest year-over-year increase evident between 2020 and 2021.

Stockholders’ Equity Attributable to Generac Holdings Inc.

The stockholders' equity also showed robust growth from 2017 through 2021. Reported equity increased from roughly $560 million to over $2.21 billion, reflecting an almost fourfold growth. Adjusted equity values were consistently higher than reported figures each year, starting from about $600 million and rising to approximately $2.40 billion by 2021. The widening gap between adjusted and reported equity suggests material deferred tax adjustments that enhance the equity base when incorporated.

Financial Leverage

Financial leverage ratios have steadily declined from 2017 to 2021, indicating a reduction in reliance on debt relative to equity. The reported financial leverage ratio decreased from 3.61 to 2.20, while the adjusted leverage ratio showed a similar trend, dropping from 3.36 to 2.02. This decline implies a strengthening equity position relative to liabilities, improving the capital structure’s stability over time. The adjusted leverage figures consistently remain lower than reported ratios, affirming the positive impact of deferred tax adjustments on the leverage profile.

The analyzed financial data indicates a clear growth trajectory in both reported and adjusted net income attributable to the company over the five-year period. Reported net income increased markedly from $159.4 million in 2017 to $550.5 million in 2021. Adjusted net income similarly rose from $178.4 million to $549.4 million, showing consistency between reported and adjusted figures by the end of the period.

Stockholders’ equity attributable to the company also showed significant growth. Reported equity grew from approximately $559.6 million in 2017 to over $2.2 billion in 2021, while adjusted equity rose from about $600.1 million to $2.4 billion. This suggests a strong expansion of the company's equity base, with adjusted figures consistently higher than reported ones, indicating adjustments generally increased equity values.

Regarding profitability, the reported Return on Equity (ROE) started at 28.48% in 2017, peaked at 31.33% in 2018, but demonstrated a general declining trend thereafter, reaching 24.87% in 2021. The adjusted ROE followed a similar pattern, moving from 29.72% in 2017 up to 31.61% in 2018, then gradually declining to 22.85% in 2021. This downward trend in ROE, despite increases in net income and equity, may suggest that equity growth outpaced earnings growth in the latter years, leading to somewhat reduced efficiency in generating returns from equity capital.

Overall, the company exhibited robust financial growth in income and equity, but with a moderating trend in profitability ratios that might warrant further investigation or consideration in strategic planning.

Net Income Trends

Both reported and adjusted net incomes have substantially increased over the five-year period, indicating strong earnings growth. The convergence of reported and adjusted net income values by 2021 highlights alignment in earnings measurement.

Equity Growth

Stockholders' equity saw pronounced expansion, with adjusted equity values consistently exceeding reported figures, suggesting adjustments added value or reflected more conservative assessments in reported numbers.

Return on Equity (ROE) Trends

ROE exhibited a peak in 2018 followed by a general decline to 2021 in both reported and adjusted terms, suggesting diminishing efficiency in utilizing equity base to generate earnings despite increased absolute net income and equity levels.

Net Income Trends

Both reported and adjusted net income attributable to the company have shown a consistent upward trend from 2017 to 2021. Reported net income increased from $159.4 million to $550.5 million, while adjusted net income rose from $178.4 million to $549.4 million over the same period. The growth trajectory is particularly steep between 2020 and 2021, indicating significant improvement in profitability during the most recent year.

Total Assets Trends

Total assets, both reported and adjusted, also exhibit steady growth throughout the five-year span. Reported total assets increased from approximately $2.02 billion in 2017 to about $4.88 billion in 2021. Adjusted total assets show a very similar trend and magnitude, affirming consistent asset base expansion. The growth is notably accelerated between 2020 and 2021, aligning with the income increases observed.

Return on Assets (ROA) Trends

The reported ROA demonstrated gradual improvement from 7.89% in 2017 to 11.29% in 2021. Adjusted ROA, which accounts for income tax adjustments, consistently remained higher than reported ROA but converged closely by 2021, increasing from 8.84% to 11.30%. This suggests that the company’s efficiency in generating profits from assets has improved steadily, with both reported and adjusted measures reflecting enhanced operational performance.

Comparative Analysis of Reported vs. Adjusted Figures

Adjusted figures for net income and total assets remain marginally higher or nearly equivalent compared to reported figures. The differences between reported and adjusted net income narrow significantly over time, indicating that deferred income tax impacts might be stabilizing or becoming less material relative to the company’s earnings. Similarly, adjusted total assets consistently trail very closely to reported total assets, suggesting minimal adjustments in asset reporting after tax considerations.

Overall Insights

The data reveal robust financial growth and improving profitability ratios over the five-year period. The alignment of reported and adjusted data points to consistent financial reporting practices and limited volatility due to tax deferrals. The marked leap in income and asset base during the last year analyzed suggests a period of accelerated growth or a significant business event contributing to enhanced value creation.