Free cash flow a quarterly record of $101 million
Generac Holdings Inc. (NYSE: GNRC) (the “Company”), a leading
designer and manufacturer of power generation equipment and other
engine powered products, today reported financial results for its
fourth quarter and full-year ended December 31, 2015. Additionally,
the Company initiated its outlook for 2016.
Fourth Quarter 2015 Highlights
- Net sales were $357.8 million during
the fourth quarter of 2015 as compared to $404.0 million in the
prior-year fourth quarter, including a $14.9 million contribution
from a recent acquisition.
- Residential product sales increased
1.8% to $198.5 million as compared to $194.9 million in the
prior-year quarter, which was primarily due to the contribution
from a recent acquisition, mostly offset by a decline in shipments
of home standby generators as a result of lower power outage
activity.
- Commercial & Industrial (C&I)
product sales were $131.9 million as compared to $185.0 million in
the prior-year quarter, which was primarily due to a significant
decline in shipments of mobile products into oil & gas and
general rental markets driven by the substantial decline in energy
prices.
- Gross profit margin during the fourth
quarter improved 230 basis points over the prior-year quarter to
36.6% compared to 34.3%.
- Net income during the fourth quarter of
2015 was $9.2 million, or $0.14 per share, as compared to net
income of $49.4 million, or $0.70 per share, for the same period of
2014. The current-year net income includes the impact of $40.7
million of pre-tax, non-cash charges for the impairment of certain
intangible assets with nearly the entire amount relating to
tradenames as a result of a new brand strategy to transition and
consolidate various brands to the Generac® tradename.
- Adjusted net income, as defined in the
accompanying reconciliation schedules, was $65.3 million, or $0.97
per share, as compared to $68.4 million, or $0.98 per share, in the
fourth quarter of 2014.
- Adjusted EBITDA, as defined in the
accompanying reconciliation schedules, was $80.1 million as
compared to $92.2 million in the fourth quarter last year.
- Cash flow from operations was $111.8
million as compared to $110.5 million in the prior year quarter.
Free cash flow, as defined in the accompanying reconciliation
schedules, was a quarterly record of $101.2 million as compared to
$98.5 million in the fourth quarter of 2014.
- The Company repurchased 1.15 million
shares of its common stock during the fourth quarter for $35.6
million under its previously announced $200 million share
repurchase program.
- As announced yesterday, the Company
entered into an agreement to acquire a majority ownership interest
of PR Industrial S.r.l and its subsidiaries (collectively Pramac),
headquartered in Siena, Italy. With over 600 employees, four
manufacturing plants and 14 commercial branches located around the
world, Pramac is a leading global manufacturer of stationary,
mobile and portable generators sold in over 150 countries through a
broad distribution network. The acquisition is anticipated to close
before the end of the first quarter of 2016.
Full-Year 2015 Highlights
- Net sales were $1.317 billion during
2015 as compared to $1.461 billion during 2014.
- Residential product sales were $673.8
million as compared to $722.2 million in the prior year. The
decline from the prior year was primarily due to lower demand of
home standby generators as a result of the significant decline in
the power outage severity environment during 2015, partially offset
by the contribution from recent acquisitions.
- Commercial & Industrial product
sales were $548.4 million as compared to $652.2 million in the
prior year. The decline was primarily due to a significant
reduction in shipments into oil & gas and general rental
markets and, to a lesser extent, reduced shipments to telecom
national account customers and the negative impact of foreign
currency, partially offset by the contribution from recent
acquisitions.
- Net income during 2015 was $77.7
million, or $1.12 per share, as compared to $174.6 million, or
$2.49 per share for 2014. Current-year net income includes the
impact of $40.7 million of pre-tax, non-cash charges for the
impairment of certain intangible assets as previously discussed.
Net income for both years also includes the impact of changes in
the contractual interest rate relating to the Company’s term loan
credit agreement, resulting in a $16.0 million gain during 2014 and
$2.4 million loss during 2015.
- Adjusted net income was $198.4 million,
or $2.87 per share, as compared to $234.2 million, or $3.34 per
share, in 2014.
- Adjusted EBITDA for 2015 was $270.8
million as compared to $337.3 million last year.
- Cash flow from operations was $188.6
million as compared to $253.0 million in the prior year. Free cash
flow was $158.0 million as compared to $218.3 million in 2014.
- On August 1, 2015, the Company acquired
Country Home Products and its subsidiaries, a leading manufacturer
of high-quality, innovative, professional-grade engine-powered
equipment used in a wide variety of property maintenance
applications, which are primarily sold in North America under the
DR® Power Equipment brand.
- Uses of cash during 2015 included $30.7
million for capital expenditures, $73.8 million related to
acquisitions, $50.0 million for the pre-payment of term loan debt,
and approximately $100 million for stock repurchases.
“Despite the ongoing low power outage environment, shipments of
residential products improved organically on a sequential basis
during the fourth quarter and exceeded our expectations,” said
Aaron Jagdfeld, President and Chief Executive Officer. “This
strength helped to largely offset additional weakness with
shipments of mobile products caused by the ongoing decline in
energy prices. We achieved our second half 2015 goals for inventory
reductions and margin improvements, which led to a record level of
free cash flow during the fourth quarter. On the acquisition front,
the Pramac acquisition announced yesterday accelerates our strategy
of expanding geographically and elevates us to a major player in
the global power generation market.”
Additional Fourth Quarter 2015
Highlights
Residential product sales for the fourth quarter increased to
$198.5 million as compared to $194.9 million for the fourth quarter
of 2014. The increase was due to a combination of the contribution
from a recent acquisition and, to a lesser extent, an increase in
shipments of portable generators due to expanded placement of new
products. These increases were partially offset by a decline in
shipments of home standby generators primarily driven by very low
levels of power outage severity during the current year.
C&I product sales were $131.9 million as compared to $185.0
million for the comparable period in 2014. The decline was
primarily due to a significant decline in shipments of mobile
products into oil & gas and general rental markets as a result
of lower capital spending caused by the substantial decline in
energy prices. To a lesser extent, shipments of C&I products
during the current year were also impacted by declines in Latin
America along with the negative impact of foreign currency.
Gross profit margin was 36.6% compared to 34.3% in the
prior-year fourth quarter. The increase was primarily driven by
favorable product mix including the impact from a recent
acquisition, along with the favorable impact of lower commodity
costs and overseas sourcing benefits from a stronger U.S. dollar.
In addition, gross margin in the prior year was negatively impacted
by temporary increases in certain costs associated with the west
coast port congestion as well as other overhead-related costs that
did not repeat in the current-year quarter.
Net income during the fourth quarter of 2015 includes the impact
of $40.7 million of pre-tax, non-cash charges for the impairment of
intangibles with nearly the entire amount relating to certain
tradenames as a result of a new strategy to transition and
consolidate various brands acquired through acquisitions over the
past several years to the Generac® tradename.
Operating expenses increased $44.5 million as compared to the
fourth quarter of 2014, which includes the impact of the
aforementioned $40.7 million of intangible impairment charges.
Excluding the impact of these charges, operating expenses for the
quarter increased $3.8 million, or 6.5%, as compared to the prior
year. The increase was primarily driven by the addition of
recurring operating expenses associated with a recent acquisition,
partially offset by reductions in certain organic selling, general
and administrative expenses.
Free cash flow was $101.2 million as compared to $98.5 million
in the same period last year, as the decline in operating earnings
in the current year was more than offset by a larger benefit from a
reduction in working capital investment, and to a lesser extent, a
decline in cash income taxes and capital spending levels.
The Company repurchased 1.15 million shares of its common stock
during the fourth quarter of 2015 for $35.6 million under its share
repurchase program which was announced in August 2015. The program
authorizes the Company to repurchase up to $200 million of its
common stock over a 24 month period, and to date, a total of 3.3
million shares of common stock have been repurchased for
approximately $100 million.
2016 Outlook
The Company is initiating guidance for 2016 with net sales
expected to increase between 10 to 12% as compared to the prior
year, which assumes the contribution from the Pramac acquisition
that is anticipated to close before the end of the first quarter of
2016. Total organic sales on a constant currency basis are
anticipated to be down between 5 to 7%, with nearly all of the
decline expected to be from ongoing weakness in mobile product
shipments into the oil & gas and general rental markets. This
top-line guidance assumes no material changes in the current
macroeconomic environment and also assumes no improvement in power
outage severity relative to the very low levels experienced during
2015. Adjusted EBITDA margins are expected to be approximately
20.0% for the full-year 2016, and free cash flow generation is
expected to be strong, with the conversion of adjusted net income
anticipated to be over 90%.
“While several of our major end markets experienced significant
down-cycles during 2015, we still made important progress on a
variety of strategic initiatives throughout the year,” continued
Mr. Jagdfeld. “These included driving awareness for our products,
developing and expanding our distribution, further investing in
innovative new products, and implementing manufacturing
improvements. In addition, we continued to execute on our capital
allocation priorities including paying down debt, making another
strategic acquisition and returning capital to shareholders.
Despite a weaker demand environment that persists entering 2016, we
remain optimistic regarding the overall long-term growth prospects
for our business. With the Pramac acquisition, we enter the current
year as a more globally diversified company with a strong liquidity
position that gives us the flexibility to drive our Powering Ahead
strategic plan forward.”
Conference Call and Webcast
Generac management will hold a conference call at 9:00 a.m. EST
on Tuesday, February 16, 2016 to discuss highlights of the fourth
quarter and full-year 2015 operating results. The conference call
can be accessed by dialing (866) 415-3113 (domestic) or +1 (678)
509-7544 (international) and entering passcode 39115113.
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 39115113. The telephonic
replay will be available for 30 days.
About Generac
Since 1959, Generac has been 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, industrial, oil & gas, and
construction 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 used in producing Generac
products;
- the impact on our results of possible
fluctuations in interest rates and foreign currency exchange
rates;
- 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;
- competitive factors in the industry in
which Generac operates;
- 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 our 2014 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.
Reconciliations to GAAP Financial
Metrics
Adjusted EBITDA
The computation of adjusted EBITDA 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, 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.
Adjusted net income is defined as net income before 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 and certain
other non-cash gains and losses.
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 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.
Generac Holdings Inc. Consolidated Statements of Comprehensive
Income (Dollars in Thousands, Except Share and Per Share Data)
Three Months Ended December 31,
Year Ended December 31, 2015
2014 2015 2014 (Unaudited) (Unaudited)
(Unaudited) (Audited) Net sales $ 357,830 $ 403,997 $
1,317,299 $ 1,460,919 Costs of goods sold 226,706
265,587 857,349 944,700
Gross profit 131,124 138,410 459,950 516,219 Operating
expenses: Selling and service 36,925 30,363 130,242 120,408
Research and development 8,015 7,914 32,922 31,494 General and
administrative 12,050 15,715 52,947 54,795 Amortization of
intangibles 6,131 5,303 23,591 21,024 Tradename and goodwill
impairment 40,687 – 40,687 – Gain on remeasurement of contingent
consideration – – –
(4,877 ) Total operating expenses 103,808
59,295 280,389 222,844
Income from operations 27,316 79,115 179,561 293,375 Other
(expense) income: Interest expense (10,602 ) (11,804 ) (42,843 )
(47,215 ) Investment income 12 11 123 130 Loss on extinguishment of
debt – (248 ) (4,795 ) (2,084 ) Gain (loss) on change in
contractual interest rate – – (2,381 ) 16,014 Costs related to
acquisition (1,042 ) – (1,195 ) (396 ) Other, net (130 )
(220 ) (5,487 ) (1,462 ) Total other expense,
net (11,762 ) (12,261 ) (56,578 )
(35,013 ) Income before provision for income taxes 15,554
66,854 122,983 258,362 Provision for income taxes 6,372
17,464 45,236 83,749
Net income $ 9,182 $ 49,390 $ 77,747 $ 174,613 Net
income per common share - basic: $ 0.14 $ 0.72 $ 1.14 $ 2.55
Weighted average common shares outstanding - basic: 66,482,219
68,598,310 68,096,051 68,538,248 Net income per common share
- diluted: $ 0.14 $ 0.70 $ 1.12 $ 2.49 Weighted average common
shares outstanding - diluted: 67,472,321 70,170,300 69,200,297
70,171,044 Other comprehensive income (loss): Foreign
currency translation adjustment $ (1,069 ) $ (1,052 ) $ (7,624 ) $
(3,082 ) Net unrealized gain (loss) on derivatives 1,106 (701 )
(965 ) (1,420 ) Pension liability adjustment 1,881
(8,850 ) 1,881 (8,850 ) Other
comprehensive income (loss) 1,918 (10,603 )
(6,708 ) (13,352 ) Comprehensive income $ 11,100
$ 38,787 $ 71,039 $ 161,261 Generac
Holdings Inc. Consolidated Balance Sheets (Dollars in Thousands,
Except Share and Per Share Data)
December 31,
2015 2014 Assets Current assets: Cash
and cash equivalents $ 115,857 $ 189,761 Accounts receivable, less
allowance for doubtful accounts of $2,494 at
December 31, 2015 and $2,275 at December
31, 2014
182,185
189,107
Inventories 325,375 319,385 Deferred income taxes 29,355 22,841
Prepaid expenses and other assets 8,600 9,384
Total current assets 661,372 730,478 Property and
equipment, net 184,213 168,821 Customer lists, net 39,313
41,002 Patents, net 53,772 56,894 Other intangible assets, net
2,768 4,298 Tradenames, net 161,057 182,684 Goodwill 669,719
635,565 Deferred financing costs, net 12,965 16,243 Deferred income
taxes 6,673 46,509 Other assets 964 48
Total assets $ 1,792,816 $ 1,882,542
Liabilities and stockholders’ equity Current liabilities:
Short-term borrowings $ 8,594 $ 5,359 Accounts payable 108,332
132,248 Accrued wages and employee benefits 13,101 17,544 Other
accrued liabilities 82,540 84,814 Current portion of long-term
borrowings and capital lease obligations 657
557 Total current liabilities 213,224 240,522
Long-term borrowings and capital lease obligations 1,050,097
1,082,101 Deferred income taxes 6,166 13,449 Other long-term
liabilities 57,458 56,671 Total
liabilities 1,326,945 1,392,743 Stockholders’ equity: Common
stock, par value $0.01, 500,000,000 shares authorized, 69,582,669
and 69,122,271 shares issued at December 31, 2015 and 2014,
respectively 696 691 Additional paid-in capital 443,109 434,906
Treasury stock, at cost, 3,567,575 and 198,312 shares at December
31, 2015 and 2014, respectively (111,516 ) (8,341 ) Excess purchase
price over predecessor basis (202,116 ) (202,116 ) Retained
earnings 358,173 280,426 Accumulated other comprehensive loss
(22,475 ) (15,767 ) Total stockholders’ equity
465,871 489,799 Total liabilities and stockholders’
equity $ 1,792,816 $ 1,882,542 Generac Holdings Inc.
Consolidated Statements of Cash Flows (Dollars in Thousands)
Year Ended December 31, 2015 2014
Operating activities Net income $ 77,747 $ 174,613
Adjustment to reconcile net income to net cash provided by
operating activities: Depreciation 16,742 13,706 Amortization of
intangible assets 23,591 21,024 Amortization of original issue
discount 3,050 3,599 Amortization of deferred financing costs 2,379
3,016 Tradename and goodwill impairment 40,687 – Loss on
extinguishment of debt 4,795 2,084 (Gain) loss on change in
contractual interest rate 2,381 (16,014 ) Gain on remeasurement of
contingent consideration – (4,877 ) Provision for losses on
accounts receivable 481 672 Deferred income taxes 26,955 37,878
Loss on disposal of property and equipment 59 576 Share-based
compensation expense 8,241 12,612 Net changes in operating assets
and liabilities: Accounts receivable 9,610 (2,988 ) Inventories
9,084 3,508 Other assets 5,063 2,456 Accounts payable (27,771 )
15,269 Accrued wages and employee benefits (5,361 ) (9,405 ) Other
accrued liabilities 445 6,229 Excess tax benefits from equity
awards (9,559 ) (10,972 ) Net cash provided by
operating activities 188,619 252,986
Investing
activities Proceeds from sale of property and equipment 105 394
Expenditures for property and equipment (30,651 ) (34,689 )
Acquisition of businesses, net of cash acquired (73,782 )
(61,196 ) Net cash used in investing activities (104,328 )
(95,491 )
Financing activities Proceeds from
short-term borrowings 26,384 6,550 Proceeds from long-term
borrowings 100,000 – Repayments of short-term borrowings (23,149 )
(26,444 ) Repayments of long-term borrowings and capital lease
obligations (150,826 ) (94,035 ) Stock repurchases (99,942 ) –
Payment of debt issuance costs (2,117 ) (4 ) Cash dividends paid
(1,436 ) (902 ) Taxes paid related to the net share settlement of
equity awards (12,956 ) (12,160 ) Excess tax benefits from equity
awards 9,559 10,972 Net cash used in
financing activities (154,483 ) (116,023 )
Effect of exchange rate changes on cash and cash equivalents (3,712
) (1,858 ) Net increase (decrease) in cash and cash
equivalents (73,904 ) 39,614 Cash and cash equivalents at beginning
of period 189,761 150,147 Cash and cash
equivalents at end of period $ 115,857 $ 189,761
Supplemental disclosure of cash flow information
Cash paid during the period Interest $ 39,524 $ 42,592
Income taxes 6,087 34,283 Generac Holdings, Inc. Reconciliation
Schedules (Dollars in Thousands, Except Share and Per Share Data)
Net income to Adjusted EBITDA
reconciliation
Three Months Ended December 31, Year Ended
December 31, 2015 2014 2015
2014 (unaudited) (unaudited) (unaudited) (unaudited)
Net income $ 9,182 $ 49,390 $ 77,747 $ 174,613 Interest expense
10,602 11,804 42,843 47,215 Depreciation and amortization 10,573
8,985 40,333 34,730 Income taxes provision 6,372 17,464 45,236
83,749 Non-cash write-down and other adjustments (1) (199 ) 800
3,892 (3,853 ) Non-cash share-based compensation expense (2) 1,352
3,209 8,241 12,612 Tradename and goodwill impairment (3) 40,687 –
40,687 – Loss on extinguishment of debt (4) – 248 4,795 2,084
(Gain) loss on change in contractual interest rate (5) – – 2,381
(16,014 ) Transaction costs and credit facility fees (6) 1,250 261
2,249 1,851 Business optimization expenses (7) 204 – 1,947 – Other
61 32 465 296
Adjusted EBITDA $ 80,084 $ 92,193 $ 270,816
$ 337,283 (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. Additionally, the year ended
December 31, 2014 includes adjustments to certain earn-out
obligations in connection with acquisitions ($4.9 million). 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 impairment of certain
tradenames due to a new brand strategy to transition and
consolidate various brands to the Generac® tradename ($36.1
million) and the impairment of goodwill related to a prior
acquisition ($4.6 million).
(4) Represents the write-off of original issue discount and
capitalized debt issuance costs due to voluntary debt prepayments.
(5) The amount for the year ended December 31, 2015
represents a non-cash loss relating to a 25 basis point increase in
borrowing costs, effective third quarter 2015, as a result of the
credit agreement leverage ratio rising above 3.0 times. The amount
for the year ended December 31, 2014 represents a non-cash gain
relating to a 25 basis point reduction in borrowing costs,
effective second quarter 2014, as a result of the credit agreement
leverage ratio falling below 3.0 times. (6) 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. (7) Represents
severance and other non-recurring restructuring charges.
Net income to Adjusted net income
reconciliation
Three Months Ended December 31, Year Ended December
31, 2015 2014 2015 2014 (unaudited)
(unaudited) (unaudited) (unaudited) Net income $ 9,182 $
49,390 $ 77,747 $ 174,613 Provision for income taxes 6,372
17,464 45,236 83,749
Income before provision for income taxes 15,554 66,854
122,983 258,362 Amortization of intangible assets 6,131 5,303
23,591 21,024 Amortization of deferred finance costs and original
issue discount 1,061 1,770 5,429 6,615 Tradename and goodwill
impairment (8) 40,687 – 40,687 – Loss on extinguishment of debt (9)
– 248 4,795 2,084 (Gain) loss on change in contractual interest
rate (10) – – 2,381 (16,014 ) Transaction costs and other purchase
accounting adjustments (11) 1,228 511 2,710 (3,623 ) Business
optimization expenses (12) 204 –
1,947 – Adjusted net income before provision
for income taxes 64,865 74,686 204,523 268,448 Cash income tax
expense (13) 448 (6,253 ) (6,087 )
(34,283 ) Adjusted net income $ 65,313 $ 68,433
$ 198,436 $ 234,165 Adjusted net income
per common share - diluted: $ 0.97 $ 0.98 $ 2.87 $ 3.34
Weighted average common shares outstanding - diluted: 67,472,321
70,170,300 69,200,297 70,171,044
(8) Represents the impairment of certain
tradenames due to a new brand strategy to transition and
consolidate various brands to the Generac® tradename ($36.1
million) and the impairment of goodwill related to a prior
acquisition ($4.6 million).
(9) Represents the write-off of original issue discount and
capitalized debt issuance costs due to voluntary debt prepayments.
(10) The amount for the year ended December 31, 2015
represents a non-cash loss relating to a 25 basis point increase in
borrowing costs, effective third quarter 2015, as a result of the
credit agreement leverage ratio rising above 3.0 times. The amount
for the year ended December 31, 2014 represents a non-cash gain
relating to a 25 basis point reduction in borrowing costs,
effective second quarter 2014, as a result of the credit agreement
leverage ratio falling below 3.0 times.
(11) 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. The year ended
December 31, 2014 also includes adjustments to certain earn-out
obligations in connection with acquisitions ($4.9 million).
(12) Represents severance and other non-recurring
restructuring charges. (13) Amounts for the years ended
December 31, 2015 and 2014 are based on actual cash income taxes
paid during the full year ended 2015 and 2014, respectively, which
equates to a cash income tax rate of 4.9% and 13.3%, respectively,
for each year.
Free Cash Flow Reconciliation Three
Months Ended December 31, Year Ended December 31,
2015 2014 2015 2014 (unaudited)
(unaudited) (unaudited) (unaudited) Net cash provided by
operating activities $ 111,760 $ 110,475 $ 188,619 $ 252,986
Expenditures for property and equipment (10,543 )
(11,967 ) (30,651 ) (34,689 ) Free Cash Flow $
101,217 $ 98,508 $ 157,968 $ 218,297
SOURCE: Generac Holdings Inc.
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version on businesswire.com: http://www.businesswire.com/news/home/20160216005451/en/
Generac Holdings Inc.Michael W. HarrisVice President –
Finance(262) 544-4811 x2675Michael.Harris@Generac.com
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