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Tariffs and international trade relations. Given our global supply chain and international operations, our business is impacted by tariffs and other changes in U.S. trade policy and international trade relations. For example, starting in the first quarter of 2025, the United States government enacted additional tariffs on goods imported into the U.S. from numerous countries, and certain countries announced tariffs on U.S. goods. Some of these tariffs have been subsequently modified or delayed, and the U.S. government has also stated it is willing to negotiate with respect to the tariffs it has enacted.
Read in the filing ↗ Also in 10-Q of May 5, 2026, 10-Q of Aug 4, 2026, 10-Q of Nov 3, 2026
On February 20, 2026, the U.S. Supreme Court issued a decision invalidating tariffs imposed under the IEEPA and allowing for the recovery of IEEPA tariff amounts previously paid. During the three and six months ended June 30, 2026, we received tariff refunds totaling approximately $61 million. Additionally, we established a tariff refund receivable of approximately $28 million, for which we have deemed receipt probable of occurring. Approximately $71 million of this tariff recovery reduced our second quarter 2026 cost of goods sold with the remainder reflected in inventory.
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On February 20, 2026, the U.S. Supreme Court issued a decision invalidating tariffs imposed under the International Emergency Economic Powers Act (IEEPA) and allowing for the recovery of IEEPA tariff amounts previously paid. During the three and nine months ended September 30, 2026, the Company received Phase I IEEPA tariff refunds totaling approximately $29.7 million and $91.1 million, respectively. Approximately $9.5 million and $80.6 million of the tariff recovery was recorded as a reduction of cost of goods sold in the condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2026, respectively. As of September 30, 2026, all expected Phase I IEEPA tariff refunds have been received, and approximately $10.5 million of the tariff recovery remains in inventory.
Read in the filing ↗ Also in 10-Q of May 5, 2026, 10-Q of Aug 4, 2026, 10-Q of Nov 3, 2026
As disclosed in Part I, Item 1A: Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, our business is subject to risks related to, among other factors, tariffs and other changes in U.S. trade policy and international trade relations. Starting in the first quarter of 2025, the United States government enacted additional tariffs on goods imported into the U.S. from numerous countries (such as China, Vietnam, and India) and certain countries announced tariffs on U.S. goods. Some of these tariffs have been subsequently modified or delayed, and the U.S. government has also stated it is willing to negotiate with respect to the tariffs it has enacted.
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Over time, we have diversified the geographic reach of our global supply chain partners to partially mitigate the impact of certain trade tariffs that have been assessed on imports coming into the United States. We will continue to monitor ongoing developments with new trade tariffs that may be implemented in the future, and take action to offset the impact of those tariffs.
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As disclosed in Part I, Item 1A: Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, the company’s business is subject to risks related to, among other factors, tariffs and other changes in U.S. trade policy and international trade relations. Starting in the first quarter of 2025, the United States government enacted additional tariffs on goods imported into the U.S. from numerous countries (such as China, Vietnam, and Mexico) and certain countries announced tariffs on U.S. goods. Some of these tariffs have been subsequently modified or delayed, and the U.S. government has also stated it is willing to negotiate with respect to the tariffs it has enacted.
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During the three and nine months ended September 30, 2026, the Company received Phase I IEEPA tariff refunds totaling approximately $ 29,700 and $ 91,100, respectively. Approximately $ 9,500 and $ 80,600 of the tariff recovery was recorded as a reduction of cost of goods sold in the condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2026, respectively. Approximately $ 10,500 of the tariff recovery remains in inventory as of September 30, 2026. As of September 30, 2026, all expected Phase I IEEPA tariff refunds have been received.
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We have implemented price increases across many of our product offerings and are currently executing a number of supply chain initiatives to attempt to mitigate the impact of these tariffs on our profitability. Despite our efforts, these tariff actions may negatively impact demand due to higher prices and also result in lower margins for some of our products. Generac will continue to analyze the impact of future tariffs and actions that can be taken to mitigate and/or minimize their effects.
Read in the filing ↗ Also in 10-Q of Nov 4, 2025
Similarly, we have diversified the geographic reach of our global supply chain partners. More recently, we have evolved this global supply chain in order to partially mitigate the impact of certain trade tariffs that have been assessed on imports coming into the United States. This will continue to be a focus in the future as we take actions to offset the impact of these tariffs, and we will continue to monitor ongoing developments with any new trade tariffs that may be implemented.
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We have implemented price increases across many of our product offerings and are executing a number of supply chain initiatives to attempt to mitigate the impact of these tariffs on our profitability. Despite our efforts, these tariff actions and resulting price increases have created inflationary pressures for consumers, negatively impacting demand and margins for certain of our products. As U.S. trade policy continues to evolve, we will continue to evaluate the impact of future tariffs and take actions to mitigate and/or minimize their effects.
Read in the filing ↗ Also in 10-Q of May 5, 2026, 10-Q of Aug 4, 2026, 10-Q of Nov 3, 2026
changes in U.S. trade policy, including the imposition of new or increased tariffs;
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During the three and six months ended June 30, 2026, the Company received tariff refunds totaling approximately $61,400. Additionally, the Company recorded a tariff refund receivable within prepaid expenses and other current assets in the condensed consolidated balance sheets of approximately $27,700 for which the Company has deemed receipt probable to occur. Approximately $71,100 of the tariff recovery was recorded as a reduction of cost of goods sold in the condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2026, and the remainder was recorded in inventories in the condensed consolidated balance sheets.
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Gross profit. Gross profit margin was 41.0% as compared to 39.0% in the prior year period. The increase was primarily driven by tariff refunds, which contributed approximately 2% to gross margin growth during the period, as well as lower tariff rates and favorable price/cost impacts. This increase was partially offset by unfavorable sales mix and higher input costs.
Read in the filing ↗ Also in 10-Q of Aug 4, 2026
the impact on our results of possible fluctuations in interest rates, ● foreign currency exchange rates, commodities, product mix, logistics costs and regulatory tariffs;
Read in the filing ↗ Also in 8-K of Feb 14, 2024
As a result of higher tariff levels, uncertain government policy actions, and a potentially softer global macroeconomic environment, the range of forecasted outcomes for our business has expanded relative to our prior guidance. Due to these factors, the Company is widening its guidance ranges for key financial metrics for the full year 2025. This updated outlook assumes that current tariff levels remain in place for the remainder of the year.
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Our business benefits from free trade agreements, and efforts to withdraw from, or substantially modify such agreements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs, import or export licensing requirements, exchange controls or new barriers to entry, could have a material adverse effect on our results of operations, financial condition or cash flows. The U.S. government has made changes in U.S. trade policy over the past several years. These changes include renegotiating and terminating certain existing bilateral or multi-lateral trade agreements, such as the U.S.-Mexico-Canada Agreement, and initiating tariffs on certain foreign goods from a variety of countries and regions, most notably China, India, or the EU. These changes in U.S. trade policy have resulted in, and may continue to result in, one or more foreign governments adopting responsive trade policies that make it more difficult or costly for us to do business in or import our products or components from those countries. In particular, during 2025, the U.S. imposed new or increased tariffs and other countries, resulting in the imposition of retaliatory tariffs on the U.S., which increased costs in our supply chain. The sales, gross margins, and profitability for each of our segments could be directly impacted by changes in tariffs and trade agreements.
Read in the filing ↗ Also in 10-K of Feb 19, 2025
Broad-based strong shipments and margins exceed expectations during the quarter; increasing low end of full-year margin outlook range given current market and tariff environment
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changes and volatility with respect to the trade policies of various countries, which may result in new or increased tariffs, trade restrictions, or other unfavorable trade actions;
Read in the filing ↗ Also in 10-Q of Nov 4, 2025, 10-K of Feb 18, 2026, 10-Q of May 5, 2026, 8-K of Jul 29, 2026, 10-Q of Aug 4, 2026, 8-K of Oct 28, 2026, 10-Q of Nov 3, 2026
Changes in U.S. trade policy, including the imposition of new or increased tariffs and the resulting consequences, could have an adverse effect on our results of operations.
Read in the filing ↗ Also in 10-K of Feb 18, 2026
The extent and duration of the tariffs and the resulting impact on general economic conditions and on our business, including potential IEEPA tariff refunds, continues to be uncertain. If refunds are received in future periods, they could have a favorable impact on cash flows and results of operations in the period of receipt or realization. However, we cannot reasonably estimate the amount or timing of these refunds, and therefore have not reflected a related receivable as of March 31, 2026.
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Net income, adjusted net income, and adjusted EBITDA all include a ● pre-tax impact of approximately $71 million related to tariff refunds that were recorded during the current year quarter.
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Gross profit margin was 39.9% as compared to 38.3% in the prior year third quarter. The increase was primarily driven by favorable price/cost impacts in the current year quarter, including lower tariff costs, partially offset by unfavorable sales mix.
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Gross profit. Gross profit margin was 39.9% as compared to 38.3% in the prior year third quarter. The increase was primarily driven by favorable price/cost impacts in the current year quarter, including lower tariff costs, partially offset by unfavorable sales mix.
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Gross profit. Gross profit margin was 38.3% as compared to 40.2% in the prior-year third quarter. The decrease in gross margin was primarily due to unfavorable sales mix together with the impact of higher tariffs and lower manufacturing absorption, partially offset by increased price realization.
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The increase in operating cash flows for the nine months ended September 30, 2026 was driven by higher operating earnings, coupled with a larger decrease in working capital in the current year as compared to the prior year, and cash receipts from tariff refunds totaling approximately $91.1 million.
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Gross profit margin was 44.5% as compared to 39.3% in the prior year second quarter. The increase was primarily driven by tariff refunds which contributed approximately 6% to gross margin during the quarter. Additionally, unfavorable sales mix and higher input costs were partially offset by favorable price realization.
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Gross profit. Gross profit margin for the nine months ended September 30, 2025 was 39.0%, as compared to 38.0% in the prior-year comparable period. The increase in gross margin was primarily driven by favorable price realization partially offset by unfavorable sales mix and the impact of higher tariffs.
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Gross profit. Gross profit margin was 38.7% as compared to 39.5% in the prior-year first quarter. The decrease in gross margin was primarily driven by unfavorable sales mix. In addition, higher input costs, including the impact of tariffs and commodities, were more than offset by increased price realization.
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Gross profit. Gross profit margin was 44.5% as compared to 39.3% in the prior year second quarter. The increase was primarily driven by tariff refunds which contributed approximately 6% to gross margin growth during the quarter. Additionally, unfavorable sales mix and higher input costs were partially offset by favorable price realization.
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The increase in operating cash flows for the six months ended June 30, 2026 was driven by higher operating earnings, cash receipts from tariff refunds totaling $61 million, and lower cash tax payments in the current year period. These items were partially offset by a greater use of cash for working capital as compared to the prior year period.
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Adjusted EBITDA for the Residential segment was $554.8 million, or 28.9% of Residential segment total sales, as compared to $418.2 million, or 22.4% of Residential sales, in the prior year. This increase was primarily driven by tariff refunds as well as favorable price/cost impacts, favorable sales mix, and operational efficiencies resulting in lower operating expenses.
Read in the filing ↗ Also in 10-Q of Aug 4, 2026, 10-Q of Aug 4, 2026
● fluctuations in cost, availability, and quality of raw materials, key components and labor required to manufacture our products; ● our dependence on a small number of contract manufacturers and component suppliers, including single-source suppliers; changes and volatility with respect to the trade policies of various ● countries, which may result in new or increased tariffs, trade restrictions, or other unfavorable trade actions;
Read in the filing ↗ Also in 8-K of Apr 30, 2025, 8-K of Oct 29, 2025
Adjusted EBITDA for the segment was $165.8 million, or 17.7% of domestic segment total sales, as compared to $211.6 million, or 20.7% of total sales, in the prior year. This decline was primarily driven by unfavorable sales mix together with the impact of incremental tariffs and operating deleverage on lower sales volumes, partially offset by increased price realization.
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In addition, certain of our products or key components or raw materials have and may continue to be subject to the imposition of higher duties as a result of anti-dumping and countervailing duties applied against them. To the extent such governmental actions, duties or tariffs are applied to such products, it could adversely affect our results of operations, financial condition and business.
Read in the filing ↗ Also in 10-K of Feb 18, 2026
Adjusted EBITDA for the segment was $215.4 million, or 34.7% of Residential segment total sales, as compared to $146.4 million, or 23.1% of Residential sales, in the prior year. This increase was primarily driven by tariff refunds which impacted margins by approximately 9%, as well as favorable sales mix and operational efficiencies resulting in lower operating expenses. 2 2026 Outlook
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Adjusted EBITDA. Adjusted EBITDA for the domestic segment was $165.8 million, or 17.7% of domestic segment total sales, as compared to $211.6 million, or 20.7% of total sales, in the prior year. This decline was primarily driven by unfavorable sales mix together with the impact of incremental tariffs and operating deleverage on lower sales volumes, partially offset by increased price realization.
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Additionally, the Company still expects net income margin, before deducting for non-controlling interests, to be approximately 8.0 to 9.0% for the full-year 2026. The corresponding adjusted EBITDA margin is now expected to be approximately 18.5 to 19.5%, as compared to the previous guidance of 18.0 to 19.0%. This updated guidance does not include the future favorable impact of any potential tariff recovery.
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Cash flow from operations was $121.2 million during the second quarter, as compared to $72.2 million in the prior year. Free cash flow, as defined in the accompanying reconciliation schedules, was $62.9 million as compared to $14.5 million in the second quarter of 2025. This strong increase in free cash flow during the quarter was primarily driven by higher operating earnings, including cash receipts from tariff refunds.
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Adjusted EBITDA. Adjusted EBITDA for the domestic segment in the nine months ended September 30, 2025 was $446.5 million, or 17.1% of domestic segment total sales, as compared to $450.4 million, or 17.5% of total sales, in the prior-year comparable period. This decline was primarily driven by unfavorable sales mix together with the impact of incremental tariffs and higher operating expenses, partially offset by increased price realization.
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● frequency and duration of power outages impacting demand for our products; ● fluctuations in cost, availability, and quality of raw materials, key components and labor required to manufacture our products; ● our dependence on a small number of contract manufacturers and component suppliers, including single-source suppliers; changes and volatility with respect to the trade policies of various ● countries, which may result in new or increased tariffs, trade restrictions, or other unfavorable trade actions;
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The Company is maintaining its full-year 2026 net sales growth guidance of mid-to-high teens percent range as compared to the prior year. ● Adjusted EBITDA margin, before deducting for non-controlling interests, is now expected to be approximately 20.0 to 21.0%, reflecting an approximate 1.5% impact from tariff refunds for the full year 2026. This is an increase from the previous guidance range of 18.5 to 19.5%.
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Adjusted EBITDA. Adjusted EBITDA for the Commercial & Industrial segment, before deducting for noncontrolling interests, was $217.3 million, or 13.4% of C&I total sales, as compared to $142.5 million, or 11.3% of total sales, in the prior year. This increase was primarily driven by tariff refunds as well as the net accretive impact of acquisitions and divestitures and improved operating leverage on higher shipment volumes, partially offset by strategic operating expense investments to support future growth.
Read in the filing ↗ Also in 10-Q of Aug 4, 2026, 10-Q of Aug 4, 2026
Adjusted EBITDA for the segment, before deducting for noncontrolling interests, was $81.5 million, or 14.6% of C&I total sales, as compared to $53.3 million, or 12.4% of total sales, in the prior year. This margin increase was primarily driven by an impact from tariff refunds of approximately 2%, as well as the favorable impact of acquisitions/divestitures and improved operating leverage, offset by an unfavorable sales mix shift and strategic operating expense investments to support future growth.
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Gross profit margin was 38.3% as compared to 40.2% in the prior-year third quarter. The decrease in gross margin was primarily due to unfavorable sales mix together with the impact of higher tariffs and lower manufacturing absorption, partially offset by increased price realization. 1 Operating expenses increased $20.2 million, or 6.7%, as compared to the third quarter of 2024 as a result of certain legal and regulatory charges in the current year, as disclosed in the accompanying Reconciliation Schedules.
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Jagdfeld continued, “While near-term visibility has been impacted by trade policy and macroeconomic uncertainty, we remain confident in our enterprise strategy and believe the secular trends of lower power quality and higher power prices will continue well into the future. As we attempt to mitigate the significant impact of tariffs in the immediate term, we are taking specific actions across the organization through higher pricing, various supply chain initiatives, and other cost reduction efforts over the coming quarters.” 1 Additional First Quarter 2025 Consolidated Highlights
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Commodity, currency, and component price levels are increasingly subject to geopolitical uncertainty, including ongoing regional conflicts, shifts in U.S. and international trade policies, and the potential for new or increased tariffs. These factors, along with increased demand from data centers, have contributed to heightened volatility in commodity prices, particularly for raw materials such as steel, copper, and aluminum. Additionally, geopolitical instability can contribute to significant fluctuations in foreign currency exchange rates which can impact our reported financial performance from our foreign operations and supply chain.
Read in the filing ↗ Also in 10-Q of May 5, 2026, 10-Q of Aug 4, 2026, 10-Q of Nov 3, 2026
Additionally, the Company now expects net income margin, before deducting for non-controlling interests, to be approximately 6.5 to 8.5% for the full-year 2025. The corresponding adjusted EBITDA margin is now expected to be approximately 17.0 to 19.0% compared to our previous guidance range of 18.0 to 19.0%. This updated guidance range considers the potential impact of unfavorable operating leverage on lower shipment volumes, while the estimated impact of higher tariffs is expected to be fully offset by pricing actions and supply chain initiatives.
Read in the filing ↗ Also in 8-K of Jul 29, 2026
Effect of commodity, currency, component price fluctuations, and resource availability. Industry-wide price fluctuations of key commodities, such as steel, copper and aluminum, along with other components we use in our products, as well as changes in labor costs required to produce our products, can have a material impact on our results of operations. Acquisitions in recent years have increased our use of advanced electronic components and battery cells that can fluctuate in terms of pricing and availability. Our international operations, along with our existing global supply chain, expose us to fluctuations in foreign currency exchange rates and regulatory tariffs that can also have a material impact on our results of operations.
Read in the filing ↗ Also in 10-Q of May 5, 2026, 10-Q of Aug 4, 2026, 10-Q of Nov 3, 2026, 10-K of Feb 19, 2025, 10-Q of Aug 5, 2025, 10-Q of Nov 4, 2025
We cannot predict the extent to which the U.S. or other countries will impose new or additional quotas, duties, taxes or other similar restrictions upon the import or export of our products in the future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business. The continuing adoption or expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the economy, which in turn could have a material adverse effect on our business, operating results, and financial condition.
Read in the filing ↗ Also in 10-K of Feb 18, 2026
Given increased visibility to expected full year 2025 net sales, including the second quarter outperformance, and lower than previously anticipated price increases in the second half primarily resulting from lower tariff assumptions, the Company is narrowing its full-year net sales growth guidance range to be 2 to 5% as compared to the prior year. This compares to the previous guidance range of 0 to 7%. 2 Due to the factors above, net income margin, before deducting for non- controlling interests, is now projected to be approximately 7.5 to 8.5% for the full-year 2025 compared to the previous guidance range of 6.5 to 8.5%. The corresponding adjusted EBITDA margin is now expected to be approximately 18.0 to 19.0% compared to the previous guidance range of 17.0 to 19.0%.
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… The prices of those raw materials and components are susceptible to significant fluctuations due to trends in supply and demand, commodity prices, currency rate changes, transportation costs, government regulations and tariffs, price controls, economic conditions and other unforeseen circumstances beyond our control. We have seen such trends significantly impact our business in the past resulting in higher costs and shortages …
Read in the filing ↗ Also in 10-K of Feb 18, 2026