UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 

 

Date of Report (Date of earliest event reported): November 1, 2018

 

Generac Holdings Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		001-34627		20-5654756
(State or other jurisdiction		(Commission		(IRS Employer
of incorporation)		File Number)		Identification No.)

 

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

 

(262) 544-4811

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

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. ☐

 

 

Item 2.02               Results of Operations and Financial Condition

 

On November 1, 2018, Generac Holdings Inc. (the “Company,” “we,” “us” or “our”) issued a press release (the “Press Release”) announcing its financial results for the third quarter ended September 30, 2018. A copy of the Press Release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

The information contained in this Current Report on Form 8-K (including the exhibits) is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information contained in this Current Report on Form 8-K shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.

 

Discussion of Non-GAAP Financial Measures

 

In the Press Release, we present certain financial information, specifically Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Core Sales, which are not in accordance with generally accepted accounting principles (“U.S. GAAP”). We present Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Core Sales in the Press Release because these metrics assist us in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Our management uses Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Core Sales:

 

●

for planning purposes, including the preparation of our annual operating budget and developing and refining our internal projections for future periods;

 

●

to evaluate the effectiveness of our business strategies and as a supplemental tool in evaluating our performance against our budget for each period;

 

●

in communications with our board of directors and investors concerning our financial performance;

 

●

to evaluate prior acquisitions in relation to the existing business; and

 

●

to evaluate comparative net sales performance in prior and future periods.

 

We also use Adjusted EBITDA as a benchmark for the determination of the bonus component of compensation for our senior executives under our management incentive plans.

 

We believe that the disclosure of Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Core Sales offers additional financial metrics which, when coupled with U.S. GAAP results and the reconciliation to U.S. GAAP results, provide a more complete understanding of our results of operations and the factors and trends affecting our business for securities analysts, investors and other interested parties in the evaluation of our company. We believe Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Core Sales are useful to investors for the following reasons:

 

●

Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, Core Sales, and similar non-GAAP measures are widely used by investors to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon financing and accounting methods, book values of assets, tax jurisdictions, capital structures and the methods by which assets were acquired; and

 

●

by comparing our Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and Core Sales in different historical periods, our investors can evaluate our operating performance excluding the impact of certain items.

 

 

Item 9.01               Financial Statements and Exhibits

 

(d)

 

Exhibit No.		Description
99.1		Press Release, dated November 1, 2018.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

	GENERAC HOLDINGS INC.
	Name:	Raj Kanuru
Date: November 1, 2018	Title:	SVP, General Counsel & Secretary

 

 

EXHIBIT INDEX

 

99.1

Press Release, dated November 1, 2018.

 

5

Exhibit 99.1

 

Generac Reports Third Quarter 2018 Results

Strong execution drives record quarterly results; Raising outlook for remainder of 2018

WAUKESHA, WISCONSIN (November 1, 2018) – Generac Holdings Inc. (NYSE: GNRC) (“Generac” or the “Company”), a leading global designer and manufacturer of power generation equipment and other engine powered products, today reported financial results for its third quarter ended September 30, 2018.

 

Third Quarter 2018 Highlights

 

●

Net sales increased 22.7% to $559.5 million during the third quarter of 2018 as compared to $455.8 million in the prior-year third quarter, including $13.4 million of contribution from the Selmec acquisition, which closed on June 1, 2018. Core sales growth, which excludes both the impact of acquisitions and foreign currency, was approximately 20%.

 

●	Gross profit margin improved 110 basis points to 35.4% as compared to 34.3% in the third quarter of 2017.

 

●	Net income attributable to the Company during the third quarter was $75.8 million, or $1.11 per share, as compared to $39.4 million, or $0.63 per share, for the same period of 2017.

 

●	Adjusted net income attributable to the Company, as defined in the accompanying reconciliation schedules, was $89.1 million, or $1.43 per share, as compared to $57.4 million, or $0.92 per share, in the third quarter of 2017.

 

●	Adjusted EBITDA before deducting for non-controlling interests, as defined in the accompanying reconciliation schedules, improved to $124.5 million, or 22.2% of net sales, as compared to $88.4 million, or 19.4% of net sales, in the prior year.

 

●	Cash flow from operations was $59.3 million as compared to $66.3 million in the prior year quarter. Free cash flow, as defined in the accompanying reconciliation schedules, was $47.0 million as compared to $60.4 million in the third quarter of 2017.

 

●	The Company is increasing its full-year 2018 sales growth guidance to approximately 20% with Adjusted EBITDA margins, before deducting for non-controlling interests, of approximately 21.0%.

 

“Our third quarter results were a record for Generac as we experienced broad based growth across all of our end markets,” said Aaron Jagdfeld, President and Chief Executive Officer. “Shipments of residential products were again particularly strong with demand climbing to record levels as disruptions from power outages continued to drive awareness around the home standby category and the need for homeowners to have back-up power. Sales of our C&I mobile and stationary products were also strong during the quarter with rental, telecom, and healthcare verticals experiencing outsized growth. With a healthy backlog entering the fourth quarter, the fundamentals of our business have never been stronger and we remain focused on execution as we further drive shareholder value.”

 

Additional Third Quarter 2018 Consolidated Highlights

 

Residential product sales increased 24.2% to $311.9 million as compared to $251.2 million in the prior year. Recall that the prior year quarter included the impacts from hurricanes Harvey, Irma and Maria. C&I product sales increased 18.7% to $206.4 million as compared to $173.8 million in the prior year, with core sales growth of approximately 15%.

 

Gross profit margin improved 110 basis points to 35.4% as compared to 34.3% in the prior-year third quarter. A significant favorable mix shift towards home standby generator sales drove the majority of this improvement, with price / cost factors being largely neutral to gross margins relative to the prior year.

Operating expenses increased $7.7 million, or 9.2%, as compared to the third quarter of 2017. The increase was primarily driven by higher variable operating expenses given the higher sales volumes, an increase in employee & incentive compensation costs, and recurring operating expenses from the Selmec acquisition. These items were partially offset by lower promotion, marketing and intangible amortization expenses.

 

 

Provision for income taxes for the current year quarter was $20.1 million, or an effective tax rate of 20.8%, as compared to $20.4 million, or 33.9% effective tax rate, for the prior year.

 

Cash flow from operations was $59.3 million as compared to $66.3 million in the prior-year third quarter, and free cash flow was $47.0 million as compared to $60.4 million in the same quarter last year. Higher operating earnings were more than offset by the timing of certain cash flows related to taxes, interest, pensions, capital expenditures and sales of extended warranties.

 

The current year earnings per share calculation of $1.11 includes the impact of a $6.9 million adjustment to increase the value of the redeemable noncontrolling interest for the Pramac acquisition, resulting in an $0.11 reduction in earnings per share. Under U.S. GAAP accounting rules, any adjustments to the redemption value are recorded directly to retained earnings. However, the redemption value adjustments are required to be reflected in the earnings per share calculation as detailed in the accompanying reconciliation schedules.

 

On January 1, 2018, the Company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers, and all related amendments, commonly known as the “new revenue recognition standard”. The full retrospective method was elected under this standard, which requires application to all periods presented. As a result, the prior-year 2017 results have been restated accordingly. However, the adoption of this standard did not have a material impact on the Company’s financial statements.

 

Business Segment Results

 

Domestic Segment

 

Domestic segment sales increased 24.9% to $453.3 million as compared to $362.9 million in the prior-year quarter. The current-year quarter continued to experience strong growth in shipments of home standby generators, C&I mobile products, C&I stationary generators, and service parts, all of which contributed to the year-over-year growth.

 

Adjusted EBITDA for the segment was $117.1 million, or 25.8% of net sales, as compared to $82.8 million in the prior year, or 22.8% of net sales. Adjusted EBITDA margin in the current year benefitted from favorable mix, improved operating leverage, a favorable pricing environment, and focused margin improvement initiatives. These benefits were partially offset by an increase in employee costs and general inflationary pressures.

 

International Segment

 

International segment sales increased 14.3% to $106.3 million as compared to $92.9 million in the prior-year quarter. Core sales growth was approximately 3%, with the Selmec acquisition contributing an additional $13.4 million.

 

Adjusted EBITDA for the segment, before deducting for non-controlling interests, improved to $7.4 million, or 6.9% of net sales, as compared to $5.6 million, or 6.1% of net sales, in the prior year. The improvement was primarily due to increased leverage of fixed operating costs on the higher organic sales volumes and favorable mix.

 

Updated 2018 Outlook

The Company is increasing its prior guidance for revenue growth for full-year 2018, reflecting the favorable end market conditions primarily driven by higher than expected power outage activity experienced during the second half of 2018. Full year net sales are now expected to grow by approximately 19 to 20% over the prior year, which is an increase from the 13 to 14% growth previously expected. Core sales growth is expected to be approximately 16 to 17%, which is an increase from the approximate 10% core growth previously expected.

 

Given the increase in net sales guidance, net income margins, before deducting for non-controlling interests, are now expected to be approximately 12% for the full-year 2018, which is an increase from the 10.5% guidance previously expected. Adjusted EBITDA margins, also before deducting for non-controlling interests, are now expected to be approximately 21% for the year, up from the prior 20.0% guidance.

 

 

Operating and free cash flow generation is expected to remain strong, with the conversion of adjusted net income to free cash flow forecasted to be approximately 80 to 85%.

 

Conference Call and Webcast

 

Generac management will hold a conference call at 9:00 a.m. EDT on Thursday, November 1, 2018 to discuss third quarter 2018 operating results. The conference call can be accessed by dialing (866) 415-3113 (domestic) or +1 (678) 509-7544 (international) and entering passcode 5499586.

 

The conference call will also be webcast simultaneously on Generac's website (http://www.generac.com), under the Investor Relations link. The webcast link will be made available on the Company’s website prior to the start of the call within the Events section of the Investor Relations website.

Following the live webcast, a replay will be available on the Company's website. A telephonic replay will also be available approximately two hours after the call and can be accessed by dialing (855) 859-2056 (domestic) or +1 (404) 537-3406 (international) and entering passcode 5499586. The telephonic replay will be available for 7 days.

 

About Generac

 

Founded in 1959, Generac is a leading designer and manufacturer of a wide range of power generation equipment and other engine powered products.  As a leader in power equipment serving residential, light commercial, and industrial markets, Generac's power products are available globally through a broad network of independent dealers, distributors, retailers, wholesalers and equipment rental companies, as well as sold direct to certain end user customers.

 

Forward-looking Information

 

Certain statements contained in this news release, as well as other information provided from time to time by Generac Holdings Inc. or its employees, may contain forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. Forward-looking statements give Generac's current expectations and projections relating to the Company's financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "forecast," "project," "plan," "intend," "believe," "confident," "may," "should," "can have," "likely," "future," “optimistic” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

 

Any such forward looking statements are not guarantees of performance or results, and involve risks, uncertainties (some of which are beyond the Company's control) and assumptions. Although Generac believes any forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Generac's actual financial results and cause them to differ materially from those anticipated in any forward-looking statements, including:

 

●

frequency and duration of power outages impacting demand for Generac products;

●

availability, cost and quality of raw materials and key components and labor needed in producing Generac products;

●

the impact on our results of possible fluctuations in interest rates, foreign currency exchange rates, commodities, product mix, and regulatory tariffs;

●

the possibility that the expected synergies, efficiencies and cost savings of our acquisitions will not be realized, or will not be realized within the expected time period;

●

the risk that our acquisitions will not be integrated successfully;

●

difficulties Generac may encounter as its business expands globally;

●

Generac's dependence on its distribution network;

●

Generac's ability to invest in, develop or adapt to changing technologies and manufacturing techniques;

●

loss of key management and employees;

●

increase in product and other liability claims or recalls; and

●

changes in environmental, health and safety laws and regulations.

 

 

Should one or more of these risks or uncertainties materialize, Generac's actual results may vary in material respects from those projected in any forward-looking statements. A detailed discussion of these and other factors that may affect future results is contained in Generac's filings with the U.S. Securities and Exchange Commission (“SEC”), particularly in the Risk Factors section of the 2017 Annual Report on Form 10-K and in its periodic reports on Form 10-Q. Stockholders, potential investors and other readers should consider these factors carefully in evaluating the forward-looking statements.

 

Any forward-looking statement made by Generac in this press release speaks only as of the date on which it is made.  Generac undertakes no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

 

Non-GAAP Financial Metrics

 

Core Sales

 

The Company references core sales to further supplement Generac's condensed consolidated financial statements presented in accordance with U.S. GAAP. Core sales excludes the impact of acquisitions and fluctuations in foreign currency translation. Management believes that core sales facilitates easier and more meaningful comparison of net sales performance with prior and future periods.

 

Adjusted EBITDA

 

The computation of adjusted EBITDA attributable to the Company is based on the definition of EBITDA contained in Generac's credit agreement dated as of May 31, 2013, as amended. To supplement the Company's condensed consolidated financial statements presented in accordance with U.S. GAAP, Generac provides a summary to show the computation of adjusted EBITDA, which excludes the impact of non-controlling interests, taking into account certain charges and gains that were recognized during the periods presented.

 

Adjusted Net Income

 

To further supplement Generac's condensed consolidated financial statements presented in accordance with U.S. GAAP, the Company provides a summary to show the computation of adjusted net income attributable to the Company. Adjusted net income attributable to the Company is defined as net income before non-controlling interests and provision for income taxes adjusted for the following items: cash income tax expense, amortization of intangible assets, amortization of deferred financing costs and original issue discount related to the Company's debt, intangible impairment charges, certain transaction costs and other purchase accounting adjustments, losses on extinguishment of debt, business optimization expenses, certain other non-cash gains and losses, and adjusted net income attributable to non-controlling interests.

 

Free Cash Flow

 

In addition, we reference free cash flow to further supplement Generac's condensed consolidated financial statements presented in accordance with U.S. GAAP. Free cash flow is defined as net cash provided by operating activities, plus proceeds from beneficial interests in securitization transactions, less expenditures for property and equipment, and is intended to be a measure of operational cash flow taking into account additional capital expenditure investment into the business.

 

The presentation of this additional information is not meant to be considered in isolation of, or as a substitute for, results prepared in accordance with U.S. GAAP.  Please see our SEC filings for additional discussion of the basis for Generac's reporting of Non-GAAP financial measures, which includes why the Company believes these measures provide useful information to investors and the additional purposes for which management uses the non-GAAP financial information.

 

SOURCE: Generac Holdings Inc.

CONTACT:

York Ragen

Chief Financial Officer
(262) 506-6064
InvestorRelations@generac.com

 

 

Generac Holdings Inc.

Condensed Consolidated Balance Sheets

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

(Unaudited)

 

		September 30,				December 31,
		2018				2017
Assets
Current assets:
Cash and cash equivalents		$	174,001			$	138,472
Accounts receivable, less allowance for doubtful accounts			341,758				279,294
Inventories			496,088				387,049
Prepaid expenses and other assets			28,110				19,741
Total current assets			1,039,957				824,556
Property and equipment, net			243,362				230,380
Customer lists, net			64,585				41,064
Patents, net			32,375				39,617
Other intangible assets, net			3,228				2,401
Tradenames, net			153,585				152,683
Goodwill			769,168				721,523
Deferred income taxes			1,207				3,238
Other assets			25,206				10,502
Total assets		$	2,332,673			$	2,025,964
Liabilities and stockholders’ equity
Current liabilities:
Short-term borrowings		$	35,758			$	20,602
Accounts payable			287,718				233,639
Accrued wages and employee benefits			41,335				27,992
Other accrued liabilities			136,416				112,618
Current portion of long-term borrowings and capital lease obligations			51,886				1,572
Total current liabilities			553,113				396,423
Long-term borrowings and capital lease obligations			859,625				906,548
Deferred income taxes			68,380				41,852
Other long-term liabilities			93,023				82,893
Total liabilities			1,574,141				1,427,716
Redeemable noncontrolling interests			59,897				43,929
Stockholders’ equity:
Common stock, par value $0.01, 500,000,000 shares authorized, 71,105,573 and 70,820,173 shares issued at September 30, 2018 and December 31, 2017, respectively			711				708
Additional paid-in capital			473,886				459,816
Treasury stock, at cost			(321,397	)			(294,005	)
Excess purchase price over predecessor basis			(202,116	)			(202,116	)
Retained earnings			756,636				610,835
Accumulated other comprehensive loss			(9,557	)			(21,198	)
Stockholders’ equity attributable to Generac Holdings, Inc.			698,163				554,040
Noncontrolling interests			472				279
Total stockholders' equity			698,635				554,319
Total liabilities and stockholders’ equity		$	2,332,673			$	2,025,964

 

 

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,
		2018				2017				2018				2017
Net sales		$	559,515			$	455,839			$	1,452,098			$	1,181,199
Costs of goods sold			361,630				299,608				937,968				783,247
Gross profit			197,885				156,231				514,130				397,952
Operating expenses:
Selling and service			46,536				43,463				135,270				124,940
Research and development			13,653				10,850				38,122				31,690
General and administrative			25,499				22,128				75,613				64,508
Amortization of intangibles			5,678				7,242				16,792				21,554
Total operating expenses			91,366				83,683				265,797				242,692
Income from operations			106,519				72,548				248,333				155,260
Other (expense) income:
Interest expense			(9,824	)			(10,672	)			(30,939	)			(32,353	)
Investment income			382				14				1,095				57
Loss on extinguishment of debt			–				–				(1,332	)			–
Other, net			(483	)			(1,710	)			(2,764	)			(3,525	)
Total other expense, net			(9,925	)			(12,368	)			(33,940	)			(35,821	)
Income before provision for income taxes			96,594				60,180				214,393				119,439
Provision for income taxes			20,072				20,404				49,870				42,105
Net income			76,522				39,776				164,523				77,334
Net income attributable to noncontrolling interests			746				341				1,841				433
Net income attributable to Generac Holdings Inc.		$	75,776			$	39,435			$	162,682			$	76,901
Net income attributable to common shareholders per common share - basic:		$	1.12			$	0.64			$	2.36			$	1.25
Weighted average common shares outstanding - basic:			61,579,564				61,758,190				61,659,817				62,094,807
Net income attributable to common shareholders per common share - diluted:		$	1.11			$	0.63			$	2.34			$	1.24
Weighted average common shares outstanding - diluted:			62,220,298				62,316,788				62,266,140				62,703,269
Comprehensive income attributable to Generac Holdings Inc.		$	80,768			$	42,939			$	173,355			$	90,867

 

 

Generac Holdings Inc.

Condensed Consolidated Statements of Cash Flows

(U.S. Dollars in Thousands)

(Unaudited)

 

		Nine Months Ended September 30,
		2018				2017
Operating activities
Net income		$	164,523			$	77,334
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation			18,332				17,137
Amortization of intangible assets			16,792				21,554
Amortization of original issue discount and deferred financing costs			3,554				2,400
Loss on extinguishment of debt			1,332				–
Deferred income taxes			17,218				25,336
Share-based compensation expense			9,910				8,402
Other			1,249				361
Net changes in operating assets and liabilities, net of acquisitions:
Accounts receivable			(55,649	)			(68,003	)
Inventories			(99,957	)			9,379
Other assets			(16,488	)			(3,852	)
Accounts payable			47,559				(206	)
Accrued wages and employee benefits			13,044				6,288
Other accrued liabilities			18,011				25,148
Excess tax benefits from equity awards			(432	)			(661	)
Net cash provided by operating activities			138,998				120,617
Investing activities
Proceeds from sale of property and equipment			213				77
Proceeds from beneficial interests in securitization transactions			2,825				2,102
Expenditures for property and equipment			(25,577	)			(16,658	)
Acquisition of business, net of cash acquired			(71,926	)			1,257
Net cash used in investing activities			(94,465	)			(13,222	)
Financing activities
Proceeds from short-term borrowings			28,332				74,443
Proceeds from long-term borrowings			51,425				3,069
Repayments of short-term borrowings			(12,478	)			(80,952	)
Repayments of long-term borrowings and capital lease obligations			(51,164	)			(13,051	)
Stock repurchases			(25,656	)			(30,012	)
Cash dividends paid to noncontrolling interests of subsidiary			(314	)			–
Payment of debt issuance costs			(1,702	)			(1,517	)
Taxes paid related to equity awards			(2,777	)			(2,479	)
Proceeds from exercise of stock options			5,191				1,717
Net cash used in financing activities			(9,143	)			(48,782	)
Effect of exchange rate changes on cash and cash equivalents			139				2,895
Net increase in cash and cash equivalents			35,529				61,508
Cash and cash equivalents at beginning of period			138,472				67,272
Cash and cash equivalents at end of period		$	174,001			$	128,780

 

 

Generac Holdings Inc.

Segment Reporting and Product Class Information

(U.S. Dollars in Thousands)

(Unaudited)

 

		Net Sales
		Three Months Ended September 30,								Nine Months Ended September 30,
Reportable Segments		2018				2017				2018				2017
Domestic		$	453,259			$	362,909			$	1,134,525			$	915,483
International			106,256				92,930				317,573				265,716
Total net sales		$	559,515			$	455,839			$	1,452,098			$	1,181,199
Product Classes
Residential products		$	311,918			$	251,203			$	748,790			$	603,888
Commercial & industrial products			206,366				173,842				597,119				494,498
Other			41,231				30,794				106,189				82,813
Total net sales		$	559,515			$	455,839			$	1,452,098			$	1,181,199

 

		Adjusted EBITDA
		Three Months Ended September 30,								Nine Months Ended September 30,
Reportable Segments		2018				2017				2018				2017
Domestic		$	117,108			$	82,817			$	273,185			$	188,400
International			7,366				5,625				25,300				16,471
Total adjusted EBITDA (1)		$	124,474			$	88,442			$	298,485			$	204,871

 

(1) See reconcilation of Adjusted EBITDA to Net income attributable to Generac Holdings Inc. on the following reconciliation schedule.

 

 

Generac Holdings, Inc.

Reconciliation Schedules

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

(Unaudited)

 

Net income to Adjusted EBITDA reconciliation
		Three Months Ended September 30,								Nine Months Ended September 30,
		2018				2017				2018				2017
Net income attributable to Generac Holdings Inc.		$	75,776			$	39,435			$	162,682			$	76,901
Net income attributable to noncontrolling interests			746				341				1,841				433
Net income			76,522				39,776				164,523				77,334
Interest expense			9,824				10,672				30,939				32,353
Depreciation and amortization			11,841				13,108				35,124				38,691
Income taxes provision			20,072				20,404				49,870				42,105
Non-cash write-down and other adjustments (1)			900				756				3,522				2,632
Non-cash share-based compensation expense (2)			2,919				2,584				9,910				8,402
Loss on extinguishment of debt (3)			-				-				1,332				-
Transaction costs and credit facility fees (4)			1,767				234				2,470				970
Business optimization expenses (5)			583				487				750				1,933
Other			46				421				45				451
Adjusted EBITDA			124,474				88,442				298,485				204,871
Adjusted EBITDA attributable to noncontrolling interests			1,454				1,178				5,633				3,589
Adjusted EBITDA attributable to Generac Holdings Inc.		$	123,020			$	87,264			$	292,852			$	201,282

 

(1)  Includes gains/losses on disposals of assets, unrealized mark-to-market adjustments on commodity contracts, and certain foreign currency and purchase accounting related adjustments. A full description of these and the other reconciliation adjustments contained in these schedules is included in Generac's SEC filings.
(2) Represents share-based compensation expense to account for stock options, restricted stock and other stock awards over their respective vesting periods.
(3) Represents the non-cash write-off of original issue discount and deferred financing costs due to a voluntary prepayment of Term Loan debt.
(4) Represents transaction costs incurred directly in connection with any investment, as defined in our credit agreement, equity issuance or debt issuance or refinancing, together with certain fees relating to our senior secured credit facilities.
(5) Represents severance and other non-recurring restructuring charges related to the consolidation of certain of our facilities.

 

Net income to Adjusted net income reconciliation
		Three Months Ended September 30,								Nine Months Ended September 30,
		2018				2017				2018				2017
Net income attributable to Generac Holdings Inc.		$	75,776			$	39,435			$	162,682			$	76,901
Net income attributable to noncontrolling interests			746				341				1,841				433
Net income			76,522				39,776				164,523				77,334
Provision for income taxes			20,072				20,404				49,870				42,105
Income before provision for income taxes			96,594				60,180				214,393				119,439
Amortization of intangible assets			5,678				7,242				16,792				21,554
Amortization of deferred finance costs and original issue discount			1,187				1,092				3,554				2,400
Loss on extinguishment of debt (3)			-				-				1,332				-
Transaction costs and other purchase accounting adjustments (6)			702				(35	)			1,516				979
Business optimization expenses (5)			583				487				750				1,933
Adjusted net income before provision for income taxes			104,744				68,966				238,337				146,305
Cash income tax expense (7)			(15,185	)			(10,878	)			(31,709	)			(19,607	)
Adjusted net income			89,559				58,088				206,628				126,698
Adjusted net income attributable to noncontrolling interests			447				697				2,491				1,912
Adjusted net income attributable to Generac Holdings Inc.		$	89,112			$	57,391			$	204,137			$	124,786
Adjusted net income attributable to Generac Holdings Inc. per common share - diluted:		$	1.43			$	0.92			$	3.28			$	1.99
Weighted average common shares outstanding - diluted:			62,220,298				62,316,788				62,266,140				62,703,269

 

(6) Represents transaction costs incurred directly in connection with any investment, as defined in our credit agreement, equity issuance or debt issuance or refinancing, and certain purchase accounting adjustments.
(7) Amounts for the three and nine months ended September 30, 2018 are now based on an anticipated cash income tax rate of approximately 15% for the full year ended 2018. Amounts for the three and nine months ended September 30, 2017 were based on an anticipated cash income tax rate at that time of approximately 17% for the full year ended 2017. Cash income tax expense for the respective periods is based on the projected taxable income and corresponding cash tax rate for the full year after considering the effects of current and deferred income tax items, and is calculated for each respective period by applying the derived full year cash tax rate to the period’s pretax income.

 

 

Free Cash Flow Reconciliation
		Three Months Ended September 30,								Nine Months Ended September 30,
		2018				2017				2018				2017
Net cash provided by operating activities		$	59,341			$	66,341			$	138,998			$	120,617
Proceeds from beneficial interests in securitization transactions			896				704				2,825				2,102
Expenditures for property and equipment			(13,251	)			(6,628	)			(25,577	)			(16,658	)
Free cash flow		$	46,986			$	60,417			$	116,246			$	106,061

 

 

GAAP Earnings Per Share		Three Months Ended September 30,								Nine Months Ended September 30,
		2018				2017				2018				2017
Numerator
Net income attributable to Generac Holdings Inc.		$	75,776			$	39,435			$	162,682			$	76,901
Redeemable noncontrolling interest redemption value adjustment			(6,912	)			-				(16,882	)			909
Net income attributable to common shareholders		$	68,864			$	39,435			$	145,800			$	77,810
Denominator
Weighted average shares, basic			61,579,564				61,758,190				61,659,817				62,094,807
Dilutive effect of stock compensation awards			640,734				558,598				606,323				608,462
Diluted shares			62,220,298				62,316,788				62,266,140				62,703,269
Net income attributable to common shareholders per share
Basic		$	1.12			$	0.64			$	2.36			$	1.25
Diluted		$	1.11			$	0.63			$	2.34			$	1.24

 

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