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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Generac Holdings Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net operating profit after taxes (NOPAT)¹	641,346)	422,020)	326,014)	316,757)	230,606)
Cost of capital²	12.65%	12.77%	12.21%	11.01%	9.78%
Invested capital³	3,771,373)	2,684,660)	2,246,986)	1,970,846)	1,710,524)

Economic profit⁴	164,153)	79,266)	51,610)	99,799)	63,331)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 641,346 – 12.65% × 3,771,373 = 164,153

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Generac Holdings Inc. economic profit increased from 2019 to 2020 and from 2020 to 2021.

Generac Holdings Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net income attributable to Generac Holdings Inc.	550,494)	350,576)	252,007)	238,257)	159,386)
Deferred income tax expense (benefit)¹	(1,073)	20,498)	19,520)	24,614)	18,986)
Increase (decrease) in allowance for credit losses²	24)	5,033)	2,095)	68)	(837)
Increase (decrease) in deferred revenue related to extended warranties³	21,859)	11,050)	10,398)	10,486)	19,861)
Increase (decrease) in product warranty liability⁴	34,995)	9,902)	7,531)	6,363)	3,727)
Increase (decrease) in equity equivalents⁵	55,805)	46,483)	39,544)	41,531)	41,737)
Interest expense	32,953)	32,991)	41,544)	40,956)	42,667)
Interest expense, operating lease liability⁶	3,720)	2,856)	1,699)	2,090)	—)
Adjusted interest expense	36,673)	35,847)	43,243)	43,046)	42,667)
Tax benefit of interest expense⁷	(7,701)	(7,528)	(9,081)	(9,040)	(14,933)
Adjusted interest expense, after taxes⁸	28,972)	28,319)	34,162)	34,006)	27,734)
Net income (loss) attributable to noncontrolling interest	6,075)	(3,358)	301)	2,963)	1,749)
Net operating profit after taxes (NOPAT)	641,346)	422,020)	326,014)	316,757)	230,606)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for credit losses.

³ Addition of increase (decrease) in deferred revenue related to extended warranties.

⁴ Addition of increase (decrease) in product warranty liability.

⁵ Addition of increase (decrease) in equity equivalents to net income attributable to Generac Holdings Inc..

⁶ 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 103,919 × 3.58% = 3,720

⁷ 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 36,673 × 21.00% = 7,701

⁸ Addition of after taxes interest expense to net income attributable to Generac Holdings Inc..

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Generac Holdings Inc. NOPAT increased from 2019 to 2020 and from 2020 to 2021.

Generac Holdings Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Provision for income taxes	134,957)	98,973)	67,299)	69,856)	43,553)
Less: Deferred income tax expense (benefit)	(1,073)	20,498)	19,520)	24,614)	18,986)
Add: Tax savings from interest expense	7,701)	7,528)	9,081)	9,040)	14,933)
Cash operating taxes	143,731)	86,003)	56,860)	54,282)	39,500)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Generac Holdings Inc. cash operating taxes increased from 2019 to 2020 and from 2020 to 2021.

Generac Holdings Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Short-term borrowings	72,035)	39,282)	58,714)	45,583)	20,602)
Current portion of long-term borrowings and finance lease obligations	5,930)	4,147)	2,383)	1,977)	1,572)
Long-term borrowings and finance lease obligations, excluding current portion	902,091)	841,764)	837,767)	876,396)	906,548)
Operating lease liability¹	103,919)	63,750)	37,009)	41,220)	43,924)
Total reported debt & leases	1,083,975)	948,943)	935,873)	965,176)	972,646)
Stockholders’ equity attributable to Generac Holdings Inc.	2,213,774)	1,390,293)	1,032,382)	760,549)	559,552)
Net deferred tax (assets) liabilities²	190,223)	114,272)	93,395)	71,137)	40,551)
Allowance for credit losses³	12,025)	12,001)	6,968)	4,873)	4,805)
Deferred revenue related to extended warranties⁴	111,647)	89,788)	78,738)	68,340)	50,941)
Product warranty liability⁵	94,213)	59,218)	49,316)	41,785)	35,422)
Equity equivalents⁶	408,108)	275,279)	228,417)	186,135)	131,719)
Accumulated other comprehensive (income) loss, net of tax⁷	54,755)	34,254)	24,917)	23,813)	21,198)
Redeemable noncontrolling interest	58,050)	66,207)	61,227)	61,004)	43,929)
Noncontrolling interests	313)	(89)	469)	712)	279)
Adjusted stockholders’ equity attributable to Generac Holdings Inc.	2,735,000)	1,765,944)	1,347,412)	1,032,213)	756,677)
Construction in progress⁸	(47,602)	(30,227)	(36,299)	(26,543)	(18,799)
Invested capital	3,771,373)	2,684,660)	2,246,986)	1,970,846)	1,710,524)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred revenue related to extended warranties.

⁵ Addition of product warranty liability.

⁶ Addition of equity equivalents to stockholders’ equity attributable to Generac Holdings Inc..

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction in progress.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Generac Holdings Inc. invested capital increased from 2019 to 2020 and from 2020 to 2021.

Generac Holdings Inc., cost of capital calculations

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	18,016,968)	18,016,968)	÷	19,115,749)	=	0.94	0.94	×	13.08%	=	12.33%
Borrowings and finance lease obligation³	994,862)	994,862)	÷	19,115,749)	=	0.05	0.05	×	7.43% × (1 – 21.00%)	=	0.31%
Operating lease liability⁴	103,919)	103,919)	÷	19,115,749)	=	0.01	0.01	×	3.58% × (1 – 21.00%)	=	0.02%
Total:	19,115,749)					1.00					12.65%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Borrowings and finance lease obligation. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	20,935,375)	20,935,375)	÷	21,900,096)	=	0.96	0.96	×	13.08%	=	12.51%
Borrowings and finance lease obligation³	900,971)	900,971)	÷	21,900,096)	=	0.04	0.04	×	7.66% × (1 – 21.00%)	=	0.25%
Operating lease liability⁴	63,750)	63,750)	÷	21,900,096)	=	0.00	0.00	×	4.48% × (1 – 21.00%)	=	0.01%
Total:	21,900,096)					1.00					12.77%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Borrowings and finance lease obligation. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	6,714,121)	6,714,121)	÷	7,670,133)	=	0.88	0.88	×	13.08%	=	11.45%
Borrowings and finance lease obligation³	919,003)	919,003)	÷	7,670,133)	=	0.12	0.12	×	7.83% × (1 – 21.00%)	=	0.74%
Operating lease liability⁴	37,009)	37,009)	÷	7,670,133)	=	0.00	0.00	×	4.59% × (1 – 21.00%)	=	0.02%
Total:	7,670,133)					1.00					12.21%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Borrowings and finance lease obligation. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	3,228,876)	3,228,876)	÷	4,186,010)	=	0.77	0.77	×	13.08%	=	10.09%
Borrowings and finance lease obligation³	915,914)	915,914)	÷	4,186,010)	=	0.22	0.22	×	5.07% × (1 – 21.00%)	=	0.88%
Operating lease liability⁴	41,220)	41,220)	÷	4,186,010)	=	0.01	0.01	×	5.07% × (1 – 21.00%)	=	0.04%
Total:	4,186,010)					1.00					11.01%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

³ Borrowings and finance lease obligation. See details »

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	2,879,448)	2,879,448)	÷	3,852,635)	=	0.75	0.75	×	13.08%	=	9.78%
Borrowings and finance lease obligation³	929,263)	929,263)	÷	3,852,635)	=	0.24	0.24	×	0.00% × (1 – 35.00%)	=	0.00%
Operating lease liability⁴	43,924)	43,924)	÷	3,852,635)	=	0.01	0.01	×	0.00% × (1 – 35.00%)	=	0.00%
Total:	3,852,635)					1.00					9.78%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in thousands

² Equity. See details »

³ Borrowings and finance lease obligation. See details »

⁴ Operating lease liability. See details »

Generac Holdings Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in thousands)
Economic profit¹	164,153)	79,266)	51,610)	99,799)	63,331)
Invested capital²	3,771,373)	2,684,660)	2,246,986)	1,970,846)	1,710,524)
Performance Ratio
Economic spread ratio³	4.35%	2.95%	2.30%	5.06%	3.70%
Benchmarks
Economic Spread Ratio, Competitors⁴
Boeing Co.	-18.38%	-29.94%	-19.77%	—	—
Caterpillar Inc.	1.06%	-5.06%	1.25%	—	—
Eaton Corp. plc	-4.27%	-6.38%	-3.71%	—	—
General Electric Co.	-13.74%	-3.90%	-6.45%	—	—
Honeywell International Inc.	0.31%	-1.12%	3.15%	—	—
Lockheed Martin Corp.	14.32%	17.62%	18.24%	—	—
RTX Corp.	-2.63%	-8.16%	0.34%	—	—

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 164,153 ÷ 3,771,373 = 4.35%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Generac Holdings Inc. economic spread ratio improved from 2019 to 2020 and from 2020 to 2021.

Generac Holdings Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in thousands)
Economic profit¹	164,153)	79,266)	51,610)	99,799)	63,331)

Net sales	3,737,184)	2,485,200)	2,204,336)	2,023,464)	1,672,445)
Add: Increase (decrease) in deferred revenue related to extended warranties	21,859)	11,050)	10,398)	10,486)	19,861)
Adjusted net sales	3,759,043)	2,496,250)	2,214,734)	2,033,950)	1,692,306)
Performance Ratio
Economic profit margin²	4.37%	3.18%	2.33%	4.91%	3.74%
Benchmarks
Economic Profit Margin, Competitors³
Boeing Co.	-14.58%	-24.52%	-9.18%	—	—
Caterpillar Inc.	1.23%	-7.03%	1.36%	—	—
Eaton Corp. plc	-6.41%	-9.79%	-5.11%	—	—
General Electric Co.	-13.86%	-6.23%	-9.59%	—	—
Honeywell International Inc.	0.44%	-1.66%	3.67%	—	—
Lockheed Martin Corp.	6.11%	7.56%	7.83%	—	—
RTX Corp.	-4.68%	-16.67%	0.45%	—	—

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ Economic profit. See details »

² 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × 164,153 ÷ 3,759,043 = 4.37%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Generac Holdings Inc. economic profit margin improved from 2019 to 2020 and from 2020 to 2021.

Generac Holdings Inc. (NYSE:GNRC)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin