gnrc20211101_8k.htm
false 0001474735 0001474735 2021-11-02 2021-11-02
 
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 2, 2021
 
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)
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
GNRC
New York Stock Exchange
 
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 2, 2021, 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, 2021. 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.
 
2
 
 
Item 9.01               Financial Statements and Exhibits
 
(d) Exhibits
 
Exhibit No.
 
Description
     
99.1
 
     
104
 
Cover Page Interactive Data File (embedded within the inline XBRL document)
 
3
 
 
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.
   
   
 
https://cdn.kscope.io/27652984dcce08d8c36cc7efa0fb5478-sig1.jpg
 
Name: 
Raj Kanuru
Date: November 2, 2021
Title:
EVP, General Counsel & Secretary
 
4
ex_300475.htm

Exhibit 99.1

 

Generac Reports Third Quarter 2021 Results

Continued exceptional demand drives record quarterly revenue results and increasing backlog, providing further support for expected significant revenue growth in 2022

 

WAUKESHA, WISCONSIN (November 2, 2021) – Generac Holdings Inc. (NYSE: GNRC) (“Generac” or the “Company”), a leading global designer and manufacturer of energy technology solutions and other power products, today reported financial results for its third quarter ended September 30, 2021 and provided an update on its outlook for the full year 2021.

 

Third Quarter 2021 Highlights

 

Net sales increased 34% to a record $943 million during the third quarter of 2021 as compared to $701 million in the prior-year third quarter. Core sales growth, which excludes both the impact of acquisitions and foreign currency, increased approximately 30%.

 

 

-

Residential product sales grew 33% to $609 million as compared to $459 million last year.

 

 

-

Commercial & Industrial (“C&I”) product sales increased 47% to $258 million as compared to $176 million in the prior year.

 

Net income attributable to the Company during the third quarter was $132 million, or $1.93 per share, as compared to $115 million, or $1.82 per share, for the same period of 2020.

 

Adjusted net income attributable to the Company, as defined in the accompanying reconciliation schedules, was $151 million, or $2.35 per share, as compared to $133 million, or $2.08 per share, in the third quarter of 2020.

 

Adjusted EBITDA before deducting for noncontrolling interests, as defined in the accompanying reconciliation schedules, was $209 million, or 22.2% of net sales, as compared to $179 million, or 25.5% of net sales, in the prior year.

 

On July 2nd, the Company closed on the acquisition of Chilicon Power, a designer and provider of grid-interactive microinverter and monitoring solutions for the solar market, based in California.

 

On September 1st, the Company closed on the acquisition of Apricity Code Corporation, headquartered in Bend, Oregon, an advanced engineering and product design company focused on developing energy technology solutions.

 

On September 1st, the Company closed on the acquisition of Off Grid Energy, a designer and manufacturer of industrial-grade energy storage systems, headquartered in Rugby, United Kingdom.

 

On October 1st, the Company closed on the acquisition of Tank Utility, a provider of IoT propane tank monitoring solutions that enable the optimization of propane fuel logistics, headquartered in Boston, Massachusetts.

 

On November 1st, the Company announced the signing of a purchase agreement to acquire ecobee, a leader in sustainable home technology solutions including smart thermostats that deliver significant energy savings, security and peace of mind, headquartered in Toronto, Canada.

 

“We continued to experience exceptional demand during the third quarter leading to all-time record revenue and further increases in our backlog,” said Aaron Jagdfeld, President and Chief Executive Officer. “We again hit record production levels in spite of the challenging supply chain environment that deteriorated during the third quarter. We have tremendous momentum in our business as we head into 2022 with the continuation of robust home standby demand, an expanding Energy Technology solutions portfolio, and strong global demand for our C&I products. This visibility provides support for another year of expected significant revenue growth with improving margins as we realize the full impact of pricing and cost-reduction actions. To support this growth over the long term, we are planning to make further capacity investments by expanding distribution capabilities in our new South Carolina facility and investing in additional manufacturing automation equipment for home standby generators and other products.”

 

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Jagdfeld continued, “In addition, we recently announced several strategic acquisitions that will accelerate our new ‘Powering a Smarter World’ strategy as we continue our evolution into an energy technology solutions company. We’re particularly excited about yesterday’s announcement to acquire ecobee as this transaction will allow us to create a clean, efficient, and reliable home energy ecosystem that will not only help homeowners reduce their energy consumption, but also help grid operators meet the challenges of an electrical grid under enormous stress.”

 

Additional Third Quarter 2021 Consolidated Highlights

 

Gross profit margin was 35.6% as compared to 39.4% in the prior-year third quarter. The current quarter’s margin was pressured by higher input costs due to rising commodity prices, labor, logistics and plant start-up costs, which was partially offset by the early impacts of recent pricing actions.

 

Operating expenses increased $41.9 million, or 34.8%, as compared to the third quarter of 2020. The increase was primarily driven by additional variable expenses from the significant increase in sales volumes, higher employee and marketing costs, and the impact of acquisitions.

 

Provision for income taxes for the current year quarter was $32.6 million, or an effective tax rate of 19.7%, as compared to $32.1 million, or a 21.8% effective tax rate, for the prior year. The decline in effective tax rate was primarily due to a higher stock compensation deduction during the current year.

 

Cash flow from operations was $74 million during the third quarter, as compared to $155 million in the prior year. Free cash flow, as defined in the accompanying reconciliation schedules, was $42 million as compared to $148 million for 2020. The decline in free cash flow was due to higher working capital investment and capital expenditures in the current year quarter, partially offset by an increase in operating earnings.

 

Business Segment Results

 

Domestic Segment

 

Domestic segment sales increased 30% to $790.8 million as compared to $606.9 million in the prior year quarter, with the impact of acquisitions contributing approximately 1% of the revenue growth for the quarter. The core sales growth was driven by strength across both residential and C&I products highlighted by very strong growth with home standby generators, PWRcell® energy storage systems, telecom national account customers and C&I mobile products.

 

Adjusted EBITDA for the segment was $187.7 million, or 23.7% of net sales, as compared to $171.4 million in the prior year, or 28.2% of net sales. This margin performance was impacted by higher input costs, partially offset by the early impacts of improved pricing during the quarter.

 

International Segment

 

International segment sales increased 61% to $151.9 million as compared to $94.5 million in the prior year quarter, with the impact of acquisitions and foreign currency contributing approximately 29% of the revenue growth for the quarter. The core sales growth for the segment was driven by strength across all regions, primarily Europe and Latin America, that continued to experience a sharp increase in demand off the prior-year COVID lows and have recovered well above 2019 levels.

 

Adjusted EBITDA for the segment, before deducting for noncontrolling interests, was $21.5 million, or 14.1% of net sales, as compared to $7.4 million, or 7.9% of net sales, in the prior year. The increase in margin was primarily due to the positive impact of recent acquisitions and improved operating leverage on higher sales volumes.

 

Updated 2021 Outlook

The Company is maintaining its full-year 2021 net sales growth guidance range of approximately 47 to 50% compared to the prior year, which includes approximately 5% of favorable impact from acquisitions and foreign currency.

 

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While the Company continues to experience an exceptional demand environment, additional supply chain constraints, escalating logistics challenges, and rising input costs are increasingly impacting the business leading to further margin pressures. As a result of these factors and the impact of recent acquisitions, net income margin, before deducting for non-controlling interests, is now expected to be approximately 15.0% for the full-year 2021 as compared to the prior expectation of between 15.5 to 16.0%. The corresponding adjusted EBITDA margin is now expected to be approximately 23.5%, as compared to the previous guidance range of approximately 24.5 to 25.0%.

 

Conference Call and Webcast

 

Generac management will hold a conference call at 10:00 a.m. EDT on Tuesday, November 2, 2021 to discuss third quarter 2021 operating results. The conference call can be accessed by dialing (866) 415-3113 (domestic) or +1 (678) 509-7544 (international) and entering passcode 2488472.

 

The conference call will also be webcast simultaneously on Generac's website (http://www.generac.com), accessed 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 2488472. The telephonic replay will be available for 7 days.

 

About Generac

 

Generac is a leading energy technology company that provides backup and prime power systems for home and industrial applications, solar + battery storage solutions, advanced power grid software platforms and engine- and battery-powered tools and equipment. Founded in 1959, Generac introduced the first affordable backup generator and later created the category of automatic home standby generator. The company is committed to sustainable, cleaner energy products poised to revolutionize the 21st century electrical grid.

 

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 our products;

 

availability, cost and quality of raw materials and key components from our global supply chain and labor needed in producing our products;

 

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

 

the ability to satisfy the closing conditions for the acquisition of ecobee on the timeline expected or at all;

 

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;

 

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the risk that our acquisitions will not be integrated successfully;

 

the duration and scope of the impacts of the COVID-19 pandemic are uncertain and may or will continue to adversely affect our operations, supply chain, and distribution for certain of our products and services;

 

difficulties we may encounter as our business expands globally or into new markets;

 

our dependence on our distribution network;

 

our ability to invest in, develop or adapt to changing technologies and manufacturing techniques;

 

loss of our key management and employees;

 

increase in product and other liability claims or recalls;

 

failures or security breaches of our networks, information technology systems, or connected products; and

 

changes in environmental, health and safety, or product compliance laws and regulations affecting our products, operations, or customer demand.

 

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. In the current environment, some of the above factors have materialized and may or will continue to be impacted by the COVID-19 pandemic, which may cause actual results to vary from these 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 2020 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 and adjusted EBITDA margin 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 noncontrolling 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 noncontrolling 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.

 

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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 the accompanying Reconciliation Schedules and 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:

Michael W. Harris

Vice President – Corporate Development & Investor Relations
(262) 506-6064
InvestorRelations@generac.com

 

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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,

 
   

2021

   

2020

   

2021

   

2020

 
                                 

Net sales

  $ 942,698     $ 701,355     $ 2,670,113     $ 1,724,118  

Costs of goods sold

    606,704       425,206       1,672,570       1,066,666  

Gross profit

    335,994       276,149       997,543       657,452  
                                 

Operating expenses:

                               

Selling and service

    82,242       60,901       229,443       178,566  

Research and development

    27,165       20,658       74,897       58,762  

General and administrative

    40,802       31,061       115,311       88,732  

Amortization of intangibles

    12,206       7,892       32,237       23,340  

Total operating expenses

    162,415       120,512       451,888       349,400  

Income from operations

    173,579       155,637       545,655       308,052  
                                 

Other (expense) income:

                               

Interest expense

    (7,980 )     (8,096 )     (23,424 )     (25,081 )

Investment income

    165       301       1,012       1,921  

Loss on extinguishment of debt

                (831 )      

Other, net

    (400 )     (557 )     2,536       (2,687 )

Total other expense, net

    (8,215 )     (8,352 )     (20,707 )     (25,847 )
                                 

Income before provision for income taxes

    165,364       147,285       524,948       282,205  

Provision for income taxes

    32,611       32,050       114,341       59,967  

Net income

    132,753       115,235       410,607       222,238  

Net income (loss) attributable to noncontrolling interests

    1,183       265       3,008       (3,337 )

Net income attributable to Generac Holdings Inc.

  $ 131,570     $ 114,970     $ 407,599     $ 225,575  
                                 

Net income attributable to common shareholders per common share - basic:

  $ 1.98     $ 1.86     $ 6.42     $ 3.59  

Weighted average common shares outstanding - basic:

    62,690,437       62,353,473       62,583,957       62,244,872  
                                 

Net income attributable to common shareholders per common share - diluted:

  $ 1.93     $ 1.82     $ 6.27     $ 3.51  

Weighted average common shares outstanding - diluted:

    64,208,116       63,761,380       64,146,281       63,546,132  
                                 

Comprehensive income attributable to Generac Holdings Inc.

  $ 113,727     $ 123,887     $ 386,789     $ 187,548  

 

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Generac Holdings Inc.

Condensed Consolidated Balance Sheets

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

(Unaudited)

 

   

September 30,

   

December 31,

 
   

2021

   

2020

 

Assets

               

Current assets:

               

Cash and cash equivalents

  $ 423,726     $ 655,128  

Accounts receivable, less allowance for credit losses

    510,670       374,906  

Inventories

    934,948       603,317  

Prepaid expenses and other assets

    54,228       36,382  

Total current assets

    1,923,572       1,669,733  
                 

Property and equipment, net

    412,706       343,936  
                 

Customer lists, net

    154,152       49,205  

Patents and technology, net

    141,952       86,727  

Other intangible assets, net

    14,703       9,932  

Tradenames, net

    172,398       146,159  

Goodwill

    1,174,315       855,228  

Deferred income taxes

    3,813       1,497  

Operating lease and other assets

    102,819       73,006  

Total assets

  $ 4,100,430     $ 3,235,423  
                 

Liabilities and stockholders equity

               

Current liabilities:

               

Short-term borrowings

  $ 61,470     $ 39,282  

Accounts payable

    611,181       330,247  

Accrued wages and employee benefits

    69,882       63,036  

Other accrued liabilities

    270,536       204,812  

Current portion of long-term borrowings and finance lease obligations

    4,945       4,147  

Total current liabilities

    1,018,014       641,524  
                 

Long-term borrowings and finance lease obligations

    843,426       841,764  

Deferred income taxes

    175,665       115,769  

Operating lease and other long-term liabilities

    236,344       179,955  

Total liabilities

    2,273,449       1,779,012  
                 

Redeemable noncontrolling interest

    44,704       66,207  
                 

Stockholders’ equity:

               

Common stock, par value $0.01, 500,000,000 shares authorized, 72,335,705 and 72,024,329 shares issued at September 30, 2021 and December 31, 2020, respectively

    724       721  

Additional paid-in capital

    563,162       525,541  

Treasury stock, at cost

    (358,634 )     (332,164 )

Excess purchase price over predecessor basis

    (202,116 )     (202,116 )

Retained earnings

    1,834,477       1,432,565  

Accumulated other comprehensive loss

    (55,541 )     (34,254 )

Stockholders’ equity attributable to Generac Holdings Inc.

    1,782,072       1,390,293  

Noncontrolling interests

    205       (89 )

Total stockholders’ equity

    1,782,277       1,390,204  

Total liabilities and stockholders’ equity

  $ 4,100,430     $ 3,235,423  

 

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Generac Holdings Inc.

Condensed Consolidated Statements of Cash Flows

(U.S. Dollars in Thousands)

(Unaudited)

 

   

Nine Months Ended September 30,

 
   

2021

   

2020

 

Operating activities

               

Net income

  $ 410,607     $ 222,238  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation

    30,445       26,747  

Amortization of intangible assets

    32,237       23,340  

Amortization of original issue discount and deferred financing costs

    1,941       1,940  

Loss on extinguishment of debt

    831        

Deferred income taxes

    8,210       15,433  

Share-based compensation expense

    18,204       14,327  

Loss (gain) on disposal of assets

    (4,018 )      

Other, net

    (12 )     6,414  

Net changes in operating assets and liabilities, net of acquisitions:

               

Accounts receivable

    (116,768 )     (85,474 )

Inventories

    (322,954 )     (14,604 )

Other assets

    (6,874 )     2,543  

Accounts payable

    269,951       11,624  

Accrued wages and employee benefits

    4,497       11,793  

Other accrued liabilities

    49,987       38,211  

Excess tax benefits from equity awards

    (26,880 )     (6,222 )

Net cash provided by operating activities

    349,404       268,310  
                 

Investing activities

               

Proceeds from sale of property and equipment

    182       26  

Proceeds from sale of investment

    4,968        

Proceeds from beneficial interests in securitization transactions

    2,240       1,998  

Contribution to equity method investment

    (781 )      

Expenditures for property and equipment

    (87,456 )     (33,940 )

Acquisition of business, net of cash acquired

    (465,926 )     (22,815 )

Net cash used in investing activities

    (546,773 )     (54,731 )
                 

Financing activities

               

Proceeds from short-term borrowings

    127,816       198,087  

Proceeds from long-term borrowings

    50,000       297  

Repayments of short-term borrowings

    (105,206 )     (210,854 )

Repayments of long-term borrowings and finance lease obligations

    (54,889 )     (3,584 )

Payment of contingent acquisition consideration

    (3,750 )     (4,000 )

Payment of debt issuance costs

    (1,185 )      

Purchase of additional ownership interest

    (27,164 )      

Taxes paid related to equity awards

    (49,569 )     (13,533 )

Proceeds from the exercise of stock options

    30,502       11,991  

Net cash used in financing activities

    (33,445 )     (21,596 )
                 

Effect of exchange rate changes on cash and cash equivalents

    (588 )     (922 )
                 

Net increase (decrease) in cash and cash equivalents

    (231,402 )     191,061  

Cash and cash equivalents at beginning of period

    655,128       322,883  

Cash and cash equivalents at end of period

  $ 423,726     $ 513,944  

 

8

 

 

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

 

2021

   

2020

   

2021

   

2020

 

Domestic

  $ 790,764     $ 606,875     $ 2,267,648     $ 1,443,680  

International

    151,934       94,480       402,465       280,438  

Total net sales

  $ 942,698     $ 701,355     $ 2,670,113     $ 1,724,118  
                                 

Product Classes

                               

Residential products

  $ 608,816     $ 458,877     $ 1,750,956     $ 1,057,848  

Commercial & industrial products

    258,309       176,200       714,995       503,156  

Other

    75,573       66,278       204,162       163,114  

Total net sales

  $ 942,698     $ 701,355     $ 2,670,113     $ 1,724,118  

 

   

Adjusted EBITDA

 
   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2021

   

2020

   

2021

   

2020

 

Domestic

  $ 187,726     $ 171,359     $ 598,730     $ 374,065  

International

    21,475       7,419       42,344       13,877  

Total adjusted EBITDA (1)

  $ 209,201     $ 178,778     $ 641,074     $ 387,942  

 

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

 

9

 

 

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,

 
   

2021

   

2020

   

2021

   

2020

 

Net income attributable to Generac Holdings Inc.

  $ 131,570     $ 114,970     $ 407,599     $ 225,575  

Net income (loss) attributable to noncontrolling interests

    1,183       265       3,008       (3,337 )

Net income

    132,753       115,235       410,607       222,238  

Interest expense

    7,980       8,096       23,424       25,081  

Depreciation and amortization

    23,216       17,168       62,682       50,087  

Provision for income taxes

    32,611       32,050       114,341       59,967  

Non-cash write-down and other adjustments (1)

    3,333       477       638       1,868  

Non-cash share-based compensation expense (2)

    5,783       4,353       18,204       14,327  

Loss on extinguishment of debt (3)

    -       -       831       -  

Transaction costs and credit facility fees (4)

    3,385       568       9,471       1,160  

Business optimization and other charges (5)

    -       531       159       12,503  

Other

    140       300       717       711  

Adjusted EBITDA

    209,201       178,778       641,074       387,942  

Adjusted EBITDA attributable to noncontrolling interests

    2,247       920       6,454       950  

Adjusted EBITDA attributable to Generac Holdings Inc.

  $ 206,954     $ 177,858     $ 634,620     $ 386,992  

 

(1) Includes gains/losses on disposals of assets and sales of certain investments, 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 voluntary debt prepayment.

 

(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) For the three and nine months ended September 30, 2021, represents severance and other charges related to the consolidation of certain of our facilities. For the three and nine months ended September 30, 2020, represents severance, non-cash asset write-downs, and other charges to address the impact of the COVID-19 pandemic and decline in oil prices.

 

10

 

Net income to Adjusted net income reconciliation

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2021

   

2020

   

2021

   

2020

 
                                 

Net income attributable to Generac Holdings Inc.

  $ 131,570     $ 114,970     $ 407,599     $ 225,575  

Net income (loss) attributable to noncontrolling interests

    1,183       265       3,008       (3,337 )

Net income

    132,753       115,235       410,607       222,238  

Provision for income taxes

    32,611       32,050       114,341       59,967  

Income before provision for income taxes

    165,364       147,285       524,948       282,205  

Amortization of intangible assets

    12,206       7,892       32,237       23,340  

Amortization of deferred finance costs and original issue discount

    646       654       1,941       1,940  

Loss on extinguishment of debt (3)

    -             831        

Transaction costs and other purchase accounting adjustments (6)

    5,487       381       11,130       612  

(Gain)/loss attributable to business or asset dispositions (7)

    -             (3,991 )      

Business optimization and other charges (5)

    -       531       159       12,503  

Adjusted net income before provision for income taxes

    183,703       156,743       567,255       320,600  

Cash income tax expense (8)

    (31,290 )     (23,620 )     (106,564 )     (44,842 )

Adjusted net income

    152,413       133,123       460,691       275,758  

Adjusted net income (loss) attributable to noncontrolling interests

    1,272       198       3,616       (725 )

Adjusted net income attributable to Generac Holdings Inc.

  $ 151,141     $ 132,925     $ 457,075     $ 276,483  
                                 

Adjusted net income attributable to Generac Holdings Inc. per common share - diluted:

  $ 2.35     $ 2.08     $ 7.13     $ 4.35  

Weighted average common shares outstanding - diluted:

    64,208,116       63,761,380       64,146,281       63,546,132  

 

(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) Represents gains and losses attributable to the disposition of a business or assets occurring in other than ordinary course, as defined in our credit agreement.

 

(8) Amount for the three and nine months ended September 30, 2021 is based on an anticipated cash income tax rate of approximately 20.0% to 20.5% for the full year ending 2021. Amount for the three and nine months ended September 30, 2020 is based on an anticipated cash income tax rate at the time of approximately 16% for the full year ended 2020. 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 cash tax rate to the period’s pretax income.

 

Free Cash Flow Reconciliation

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2021

   

2020

   

2021

   

2020

 
                                 

Net cash provided by operating activities

  $ 74,411     $ 155,196     $ 349,404     $ 268,310  

Proceeds from beneficial interests in securitization transactions

    877       674       2,240       1,998  

Expenditures for property and equipment

    (33,234 )     (7,608 )     (87,456 )     (33,940 )

Free cash flow

  $ 42,054     $ 148,262     $ 264,188     $ 236,368  

 

11