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, 2016.
Third Quarter 2016 Highlights
- Net sales increased 3.8% to $373.1 million during the third
quarter of 2016 as compared to $359.3 million in the prior-year
third quarter, including $60.8 million of contribution from recent
acquisitions. - Domestic segment sales were
$299.1 million as compared to $332.2 million in the prior-year
quarter, which was primarily due to a continued decline in
shipments of mobile products given ongoing oil & gas weakness,
partially offset by the contribution from the Country Home Products
acquisition. - International segment sales
increased to $74.0 million as compared to $27.1 million in the
prior-year quarter, which was due to the contribution from the
Pramac acquisition.
- Net income attributable to the Company during the third quarter
of 2016 was $26.2 million, or $0.40 per share, as compared to $34.0
million, or $0.49 per share, for the same period of
2015.
- Adjusted net income attributable to the Company, as defined in
the accompanying reconciliation schedules, was $53.2 million, or
$0.82 per share, as compared to $63.4 million, or $0.92 per share,
in the third quarter of 2015.
- Adjusted EBITDA attributable to the Company, as defined in the
accompanying reconciliation schedules, was $72.1 million as
compared to $81.2 million in the third quarter last
year.
- Cash flow from operations was $48.3 million as compared to
$35.3 million in the prior year quarter. Free cash flow, as
defined in the accompanying reconciliation schedules, was $41.4
million as compared to $29.4 million in the third quarter of 2015.
- The Company repurchased 1.80 million shares of its common stock
during the third quarter for $65.4 million, which completes the
total authorized amount under its previously announced share
repurchase program. On October 24, 2016, the Board of
Directors of the Company approved a new share repurchase program,
authorizing the repurchase of an additional $250 million of its
common stock over the next 24 months.
“An increase in power outages coupled with successful
promotional campaigns led to shipments of residential products that
exceeded our expectations during the quarter,” said Aaron Jagdfeld,
President and Chief Executive Officer. “This outperformance
helped to offset continued weakness for our mobile products both
domestically and internationally. We also continued to
generate strong free cash flow during the quarter which allowed us
to complete our share repurchase program nearly a year ahead of the
original two-year timeframe, giving us confidence to authorize a
new share repurchase program.”
Additional Third Quarter 2016 Consolidated
Highlights Net sales increased 3.8% to $373.1 million
during the third quarter of 2016 as compared to $359.3 million in
the prior-year third quarter. Residential product sales
increased 4.3% to $192.9 million as compared to $185.0 million in
the prior year. Commercial & Industrial (C&I) product
sales increased 1.0% to $149.7 million as compared to $148.2
million in the prior year.
Gross profit margin improved 60 basis points to 36.9% compared
to 36.3% in the prior-year third quarter. Gross margin was
positively impacted by the ongoing favorable impacts from lower
commodity prices seen in prior quarters and continued overseas
sourcing benefits from a stronger U.S. dollar, along with an
overall favorable organic product mix. These benefits were
partially offset by the net mix impact from recent
acquisitions.
Operating expenses increased $19.0 million, or 30.4%, as
compared to the third quarter of 2015. The increase was primarily
driven by the addition of recurring operating expenses associated
with recent acquisitions, and to a lesser extent, increased
amortization expense.
Cash flow from operations was $48.3 million as compared to $35.3
million in the prior year, and free cash flow was $41.4 million as
compared to $29.4 million in the same period last year. The
increases in cash flow were primarily driven by a reduction in
working capital investment during the current-year quarter as
compared to the larger investment in the prior year, partially
offset by an overall decline in operating earnings.
The Company repurchased 1.80 million shares of its common stock
during the third quarter of 2016 for $65.4 million, which completes
the total authorized amount under its share repurchase program
which was announced in August 2015. Under the program, a
total of 6.0 million shares of common stock were repurchased for
approximately $200 million. On October 24, 2016, the Board of
Directors of the Company approved a new share repurchase program
which authorizes the repurchase of an additional $250 million of
its common stock over a 24 month period.
Business Segment Results
Domestic Segment
Domestic segment sales were $299.1 million as compared to $332.2
million in the prior-year quarter. The vast majority of the
decline was due to the ongoing significant declines in shipments of
mobile products into oil & gas and general rental
markets. In addition, shipments of home standby generators
declined modestly over the prior year, but exceeded
expectations. Partially offsetting these impacts was the
contribution from the Country Home Products acquisition, which
closed on August 1, 2015.
Adjusted EBITDA for the segment was $69.3 million, or 23.2% of
net sales, as compared to $77.1 million in the prior year, also
23.2% of net sales. Adjusted EBITDA margin in the current
year benefitted from overall favorable product mix as well as lower
commodity costs and overseas sourcing benefits from a stronger U.S.
dollar, offset by increased promotional activities and reduced
overall leverage of fixed operating expenses.
International Segment
International segment sales, primarily consisting of C&I
products, increased to $74.0 million as compared to $27.1 million
in the prior-year quarter. The increase was primarily due to
the contribution from the Pramac acquisition, which closed on March
1, 2016.
Adjusted EBITDA for the segment, before deducting for
non-controlling interests, declined to $3.5 million, or 4.8% of net
sales, as compared to $4.1 million, or 15.0% of net sales, in the
prior year. The decline in adjusted EBITDA margin as compared
to the prior year was primarily due to the Pramac acquisition,
unfavorable sales mix and foreign currency impacts, and reduced
operating leverage on lower organic sales volume.
2016 Outlook Update
The Company is revising upward its guidance for revenue growth
for the full year 2016, which is primarily due to an increased
outlook for residential products as a result of the higher power
outage activity experienced thus far during the second half of
2016. Full-year net sales are now expected to increase
between 9 to 10% over the prior year, which is an increase from the
6 to 8% growth previously expected. Total organic sales on a
constant currency basis are now anticipated to decline between 8 to
9%, which is an improvement from the previous assumption of down
between 10 and 13%.
Net income margins, before deducting for non-controlling
interests, are still expected to be approximately 7% and adjusted
EBITDA margins, also before deducting for non-controlling
interests, are also still expected to be approximately 19.5% for
the full-year 2016. Operating and free cash flow generation
is expected to increase significantly over the prior year,
benefitting from the strong conversion of adjusted net income.
“Despite a challenging power outage environment over the last
few years, our market position for residential products remains
strong, retail placement is currently at all-time highs, and the
number of active dealers has returned back to peak levels,”
continued Mr. Jagdfeld. “The moderate improvement in power
outage activity we have experienced recently should provide an
opportunity for us to better leverage the innovative sales and
marketing programs for home standby generators that we have
implemented over the last several years. Although business
conditions in several of our other end markets remain soft, we
continue to make strategic investments in new products,
technologies and infrastructure across the business to support the
next leg of growth that we believe will occur as these end markets
eventually recover.”
Conference Call and Webcast
Generac management will hold a conference call at 9:00 a.m. EDT
on Wednesday, October 26, 2016 to discuss highlights of the third
quarter of 2016 operating results. The conference call can be
accessed by dialing (866) 415-3113 (domestic) or +1 (678) 509-7544
(international) and entering passcode 1156253.
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 1156253. 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, 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 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 the 2015 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 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 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.
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, |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
373,121 |
|
|
$ |
359,291 |
|
|
$ |
1,027,032 |
|
|
$ |
959,469 |
|
Costs of goods
sold |
|
235,349 |
|
|
|
228,965 |
|
|
|
667,053 |
|
|
|
630,643 |
|
Gross profit |
|
137,772 |
|
|
|
130,326 |
|
|
|
359,979 |
|
|
|
328,826 |
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
Selling
and service |
|
44,429 |
|
|
|
34,715 |
|
|
|
124,064 |
|
|
|
93,317 |
|
Research
and development |
|
9,426 |
|
|
|
8,332 |
|
|
|
27,512 |
|
|
|
24,907 |
|
General
and administrative |
|
18,066 |
|
|
|
13,127 |
|
|
|
55,492 |
|
|
|
40,897 |
|
Amortization of intangibles |
|
9,511 |
|
|
|
6,285 |
|
|
|
25,525 |
|
|
|
17,460 |
|
Total
operating expenses |
|
81,432 |
|
|
|
62,459 |
|
|
|
232,593 |
|
|
|
176,581 |
|
Income from
operations |
|
56,340 |
|
|
|
67,867 |
|
|
|
127,386 |
|
|
|
152,245 |
|
|
|
|
|
|
|
|
|
Other (expense)
income: |
|
|
|
|
|
|
|
Interest
expense |
|
(11,299 |
) |
|
|
(10,210 |
) |
|
|
(33,714 |
) |
|
|
(32,241 |
) |
Investment income |
|
– |
|
|
|
39 |
|
|
|
36 |
|
|
|
111 |
|
Loss on
extinguishment of debt |
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(4,795 |
) |
Loss on
change in contractual interest rate |
|
(2,957 |
) |
|
|
(2,381 |
) |
|
|
(2,957 |
) |
|
|
(2,381 |
) |
Costs
related to acquisition |
|
(577 |
) |
|
|
(153 |
) |
|
|
(994 |
) |
|
|
(153 |
) |
Other,
net |
|
19 |
|
|
|
(1,908 |
) |
|
|
564 |
|
|
|
(5,357 |
) |
Total
other expense, net |
|
(14,814 |
) |
|
|
(14,613 |
) |
|
|
(37,065 |
) |
|
|
(44,816 |
) |
|
|
|
|
|
|
|
|
Income before provision
for income taxes |
|
41,526 |
|
|
|
53,254 |
|
|
|
90,321 |
|
|
|
107,429 |
|
Provision for income
taxes |
|
15,514 |
|
|
|
19,218 |
|
|
|
33,154 |
|
|
|
38,864 |
|
Net income |
|
26,012 |
|
|
|
34,036 |
|
|
|
57,167 |
|
|
|
68,565 |
|
Net loss attributable
to noncontrolling interests |
|
(171 |
) |
|
|
– |
|
|
|
(112 |
) |
|
|
– |
|
Net income attributable
to Generac Holdings Inc. |
$ |
26,183 |
|
|
$ |
34,036 |
|
|
$ |
57,279 |
|
|
$ |
68,565 |
|
|
|
|
|
|
|
|
|
Net
income attributable to Generac Holdings Inc. per common share -
basic: |
$ |
0.41 |
|
|
$ |
0.50 |
|
|
$ |
0.87 |
|
|
$ |
1.00 |
|
Weighted
average common shares outstanding - basic: |
|
64,615,935 |
|
|
|
68,175,466 |
|
|
|
65,506,469 |
|
|
|
68,642,479 |
|
|
|
|
|
|
|
|
|
Net
income attributable to Generac Holdings Inc. per common share -
diluted: |
$ |
0.40 |
|
|
$ |
0.49 |
|
|
$ |
0.87 |
|
|
$ |
0.98 |
|
Weighted
average common shares outstanding - diluted: |
|
65,126,117 |
|
|
|
69,182,465 |
|
|
|
65,992,127 |
|
|
|
69,781,300 |
|
|
|
|
|
|
|
|
|
Comprehensive income |
$ |
26,647 |
|
|
$ |
31,899 |
|
|
$ |
45,723 |
|
|
$ |
59,939 |
|
Generac Holdings Inc. |
Condensed Consolidated Balance Sheets |
(U.S. Dollars in Thousands, Except Share and Per Share
Data) |
|
|
|
|
|
September
30, |
|
December
31, |
|
|
2016 |
|
|
|
2015 |
|
|
(Unaudited) |
|
(Audited) |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
54,163 |
|
|
$ |
115,857 |
|
Accounts
receivable, less allowance for doubtful accounts |
|
244,722 |
|
|
|
182,185 |
|
Inventories |
|
359,363 |
|
|
|
325,375 |
|
Prepaid
expenses and other assets |
|
13,185 |
|
|
|
8,600 |
|
Total
current assets |
|
671,433 |
|
|
|
632,017 |
|
|
|
|
|
Property and equipment,
net |
|
207,504 |
|
|
|
184,213 |
|
|
|
|
|
Customer lists,
net |
|
49,776 |
|
|
|
39,313 |
|
Patents, net |
|
50,640 |
|
|
|
53,772 |
|
Other intangible
assets, net |
|
3,111 |
|
|
|
2,768 |
|
Tradenames, net |
|
161,451 |
|
|
|
161,057 |
|
Goodwill |
|
711,794 |
|
|
|
669,719 |
|
Deferred income
taxes |
|
7,693 |
|
|
|
34,812 |
|
Other assets |
|
3,506 |
|
|
|
964 |
|
Total assets |
$ |
1,866,908 |
|
|
$ |
1,778,635 |
|
|
|
|
|
Liabilities and stockholders’ equity |
|
|
|
Current
liabilities: |
|
|
|
Short-term borrowings |
$ |
35,517 |
|
|
$ |
8,594 |
|
Accounts
payable |
|
145,894 |
|
|
|
108,332 |
|
Accrued
wages and employee benefits |
|
21,041 |
|
|
|
13,101 |
|
Other
accrued liabilities |
|
92,415 |
|
|
|
82,540 |
|
Current
portion of long-term borrowings and capital lease obligations |
|
38,712 |
|
|
|
657 |
|
Total
current liabilities |
|
333,579 |
|
|
|
213,224 |
|
|
|
|
|
Long-term borrowings
and capital lease obligations |
|
1,013,671 |
|
|
|
1,037,132 |
|
Deferred income
taxes |
|
7,201 |
|
|
|
4,950 |
|
Other long-term
liabilities |
|
62,330 |
|
|
|
57,458 |
|
Total liabilities |
|
1,416,781 |
|
|
|
1,312,764 |
|
|
|
|
|
Redeemable
noncontrolling interests |
|
36,269 |
|
|
|
– |
|
|
|
|
|
Stockholders’
equity: |
|
|
|
Common
stock, par value $0.01, 500,000,000 shares authorized, 70,144,760
and 69,582,669 shares issued at September 30, 2016 and December 31,
2015, respectively |
|
701 |
|
|
|
696 |
|
Additional paid-in capital |
|
446,267 |
|
|
|
443,109 |
|
Treasury
stock, at cost |
|
(212,358 |
) |
|
|
(111,516 |
) |
Excess
purchase price over predecessor basis |
|
(202,116 |
) |
|
|
(202,116 |
) |
Retained
earnings |
|
415,452 |
|
|
|
358,173 |
|
Accumulated other comprehensive loss |
|
(34,031 |
) |
|
|
(22,475 |
) |
Stockholders’ equity attributable to Generac Holdings,
Inc. |
|
413,915 |
|
|
|
465,871 |
|
Noncontrolling interests |
|
(57 |
) |
|
|
– |
|
Total
stockholders' equity |
|
413,858 |
|
|
|
465,871 |
|
Total liabilities and
stockholders’ equity |
$ |
1,866,908 |
|
|
$ |
1,778,635 |
|
Generac Holdings Inc. |
Condensed Consolidated Statements of Cash Flows |
(U.S. Dollars in Thousands) |
(Unaudited) |
|
|
|
|
|
Nine Months Ended June 30, |
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
Operating
activities |
|
|
|
Net
income |
$ |
57,167 |
|
|
$ |
68,565 |
|
Adjustment to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation |
|
15,818 |
|
|
|
12,300 |
|
Amortization of intangible assets |
|
25,525 |
|
|
|
17,460 |
|
Amortization of original issue discount and deferred financing
costs |
|
3,229 |
|
|
|
4,368 |
|
Loss on
extinguishment of debt |
|
– |
|
|
|
4,795 |
|
Loss on
change in contractual interest rate |
|
2,957 |
|
|
|
2,381 |
|
Deferred
income taxes |
|
22,909 |
|
|
|
27,319 |
|
Share-based compensation expense |
|
7,805 |
|
|
|
6,889 |
|
Other |
|
(45 |
) |
|
|
377 |
|
Net
changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts
receivable |
|
(11,642 |
) |
|
|
(14,838 |
) |
Inventories |
|
6,177 |
|
|
|
(28,319 |
) |
Other
assets |
|
2,663 |
|
|
|
572 |
|
Accounts
payable |
|
(2,618 |
) |
|
|
(12,226 |
) |
Accrued
wages and employee benefits |
|
4,981 |
|
|
|
(1,167 |
) |
Other
accrued liabilities |
|
1,341 |
|
|
|
(2,644 |
) |
Excess
tax benefits from equity awards |
|
(6,754 |
) |
|
|
(8,973 |
) |
Net cash
provided by operating activities |
|
129,513 |
|
|
|
76,859 |
|
|
|
|
|
Investing
activities |
|
|
|
Proceeds
from sale of property and equipment |
|
1,349 |
|
|
|
105 |
|
Expenditures for property and equipment |
|
(20,847 |
) |
|
|
(20,108 |
) |
Acquisition of business, net of cash acquired |
|
(61,386 |
) |
|
|
(74,477 |
) |
Net cash
used in investing activities |
|
(80,884 |
) |
|
|
(94,480 |
) |
|
|
|
|
Financing
activities |
|
|
|
Proceeds
from short-term borrowings |
|
14,117 |
|
|
|
14,320 |
|
Proceeds
from long-term borrowings |
|
– |
|
|
|
100,000 |
|
Repayments of short-term borrowings |
|
(8,244 |
) |
|
|
(15,198 |
) |
Repayments of long-term borrowings and capital lease
obligations |
|
(10,976 |
) |
|
|
(150,595 |
) |
Stock
repurchases |
|
(99,934 |
) |
|
|
(64,378 |
) |
Payment
of debt issuance costs |
|
– |
|
|
|
(2,067 |
) |
Cash
dividends paid |
|
(76 |
) |
|
|
(1,429 |
) |
Taxes
paid related to the net share settlement of equity awards |
|
(12,308 |
) |
|
|
(12,380 |
) |
Excess
tax benefits from equity awards |
|
6,754 |
|
|
|
8,973 |
|
Net cash
used in financing activities |
|
(110,667 |
) |
|
|
(122,754 |
) |
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents |
|
344 |
|
|
|
(2,932 |
) |
|
|
|
|
Net
decrease in cash and cash equivalents |
|
(61,694 |
) |
|
|
(143,307 |
) |
Cash and
cash equivalents at beginning of period |
|
115,857 |
|
|
|
189,761 |
|
Cash and
cash equivalents at end of period |
$ |
54,163 |
|
|
$ |
46,454 |
|
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 |
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Domestic |
$ |
299,095 |
|
|
$ |
332,213 |
|
|
$ |
833,831 |
|
|
$ |
877,942 |
|
International |
|
74,026 |
|
|
|
27,078 |
|
|
|
193,201 |
|
|
|
81,527 |
|
Total net
sales |
$ |
373,121 |
|
|
$ |
359,291 |
|
|
$ |
1,027,032 |
|
|
$ |
959,469 |
|
|
|
|
|
|
|
|
|
|
Product Classes |
|
|
|
|
|
|
|
Residential products |
$ |
192,856 |
|
|
$ |
184,968 |
|
|
$ |
533,572 |
|
|
$ |
475,268 |
|
Commercial & industrial products |
|
149,676 |
|
|
|
148,234 |
|
|
|
409,396 |
|
|
|
416,577 |
|
Other |
|
30,589 |
|
|
|
26,089 |
|
|
|
84,064 |
|
|
|
67,624 |
|
Total net
sales |
$ |
373,121 |
|
|
$ |
359,291 |
|
|
$ |
1,027,032 |
|
|
$ |
959,469 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Domestic |
$ |
69,309 |
|
|
$ |
77,117 |
|
|
$ |
173,521 |
|
|
$ |
180,018 |
|
International |
|
3,527 |
|
|
|
4,055 |
|
|
|
13,050 |
|
|
|
10,714 |
|
Total
adjusted EBITDA (1) |
$ |
72,836 |
|
|
$ |
81,172 |
|
|
$ |
186,571 |
|
|
$ |
190,732 |
|
|
|
|
|
|
|
|
|
|
(1) See reconciliation 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) |
|
|
|
|
|
|
|
|
|
|
|
Net
income to Adjusted EBITDA reconciliation |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Generac Holdings Inc. |
$ |
26,183 |
|
|
$ |
34,036 |
|
|
$ |
57,279 |
|
|
$ |
68,565 |
|
Net loss
attributable to noncontrolling interests (1) |
|
(171 |
) |
|
|
– |
|
|
|
(112 |
) |
|
|
– |
|
Net
income |
|
|
|
26,012 |
|
|
|
34,036 |
|
|
|
57,167 |
|
|
|
68,565 |
|
Interest
expense |
|
|
|
11,299 |
|
|
|
10,210 |
|
|
|
33,714 |
|
|
|
32,241 |
|
Depreciation and amortization |
|
|
14,900 |
|
|
|
10,597 |
|
|
|
41,343 |
|
|
|
29,760 |
|
Provision
for income taxes |
|
|
15,514 |
|
|
|
19,218 |
|
|
|
33,154 |
|
|
|
38,864 |
|
Non-cash
write-down and other adjustments (2) |
|
(1,093 |
) |
|
|
2,115 |
|
|
|
1,689 |
|
|
|
4,091 |
|
Non-cash
share-based compensation expense (3) |
|
2,419 |
|
|
|
1,799 |
|
|
|
7,805 |
|
|
|
6,889 |
|
Loss on
extinguishment of debt (4) |
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
4,795 |
|
Loss on
change in contractual interest rate (5) |
|
2,957 |
|
|
|
2,381 |
|
|
|
2,957 |
|
|
|
2,381 |
|
Transaction
costs and credit facility fees (6) |
|
739 |
|
|
|
317 |
|
|
|
1,499 |
|
|
|
999 |
|
Business
optimization expenses (7) |
|
|
58 |
|
|
|
5 |
|
|
|
7,164 |
|
|
|
1,743 |
|
Other |
|
|
|
|
31 |
|
|
|
494 |
|
|
|
79 |
|
|
|
404 |
|
Adjusted
EBITDA |
|
|
|
72,836 |
|
|
|
81,172 |
|
|
|
186,571 |
|
|
|
190,732 |
|
Adjusted
EBITDA attributable to noncontrolling interests |
|
708 |
|
|
|
– |
|
|
|
3,015 |
|
|
|
– |
|
Adjusted
EBITDA attributable to Generac Holdings Inc. |
$ |
72,128 |
|
|
$ |
81,172 |
|
|
$ |
183,556 |
|
|
$ |
190,732 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes the noncontrolling interests' share of
expenses related to Pramac purchase accounting, including the
step-up in value of inventories and intangible amortization, of
$1.3 million and $6.9 million for the three and nine months ended
September 30, 2016, respectively. |
|
|
|
|
|
|
|
|
|
|
|
(2) 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. |
|
|
|
|
|
|
|
|
|
|
|
(3) Represents share-based compensation expense to account for
stock options, restricted stock and other stock awards over their
respective vesting periods. |
|
|
|
|
|
|
|
|
|
|
|
(4) Represents the write-off of original issue discount and
capitalized debt issuance costs due to voluntary debt
prepayments. |
|
|
|
|
|
|
|
|
|
|
|
(5) For the three and nine months ended September 30, 2016,
represents a non-cash loss relating to the continued 25 basis point
increase in borrowing costs as a result of the credit agreement
leverage ratio remaining above 3.0 times based on current
projections. For the three and nine months ended September 30,
2015, represents a non-cash loss relating to a 25 basis point
increase in borrowing costs as a result of the credit agreement
leverage ratio rising above 3.0 times effective third quarter 2015
and remaining above 3.0 times based on projections at the
time. |
|
|
|
|
|
|
|
|
|
|
|
(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) For the nine months ended September 30, 2016, represents
charges relating to business optimization and restructuring costs
to address the significant and extended downturn for capital
spending within the oil & gas industry, consisting of $2.7
million classified within cost of goods sold and $4.4 million
classified within operating expenses. For the three and nine months
ended September 30, 2015, represents severance and other
non-recurring restructuring charges. |
|
|
|
|
|
|
|
|
|
|
|
Net
income to Adjusted net income reconciliation |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Generac Holdings Inc. |
$ |
26,183 |
|
|
$ |
34,036 |
|
|
$ |
57,279 |
|
|
$ |
68,565 |
|
Net loss
attributable to noncontrolling interests (1) |
|
(171 |
) |
|
|
– |
|
|
|
(112 |
) |
|
|
– |
|
Net
income |
|
|
|
26,012 |
|
|
|
34,036 |
|
|
|
57,167 |
|
|
|
68,565 |
|
Provision
for income taxes |
|
|
15,514 |
|
|
|
19,218 |
|
|
|
33,154 |
|
|
|
38,864 |
|
Income
before provision for income taxes |
|
41,526 |
|
|
|
53,254 |
|
|
|
90,321 |
|
|
|
107,429 |
|
Amortization of intangible assets |
|
|
9,511 |
|
|
|
6,285 |
|
|
|
25,525 |
|
|
|
17,460 |
|
Amortization of deferred finance costs and original issue
discount |
|
1,107 |
|
|
|
1,024 |
|
|
|
3,229 |
|
|
|
4,368 |
|
Loss on
extinguishment of debt (4) |
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
4,795 |
|
Loss on
change in contractual interest rate (5) |
|
2,957 |
|
|
|
2,381 |
|
|
|
2,957 |
|
|
|
2,381 |
|
Transaction
costs and other purchase accounting adjustments (8) |
|
469 |
|
|
|
979 |
|
|
|
5,159 |
|
|
|
1,482 |
|
Business
optimization expenses (7) |
|
|
58 |
|
|
|
5 |
|
|
|
7,164 |
|
|
|
1,743 |
|
Adjusted
net income before provision for income taxes |
|
55,628 |
|
|
|
63,928 |
|
|
|
134,355 |
|
|
|
139,658 |
|
Cash income
tax expense (9) |
|
|
(2,325 |
) |
|
|
(500 |
) |
|
|
(5,595 |
) |
|
|
(6,535 |
) |
Adjusted
net income |
|
|
|
53,303 |
|
|
|
63,428 |
|
|
|
128,760 |
|
|
|
133,123 |
|
Adjusted
net income attributable to noncontrolling interests |
|
58 |
|
|
|
– |
|
|
|
1,939 |
|
|
|
– |
|
Adjusted
net income attributable to Generac Holdings Inc. |
$ |
53,245 |
|
|
$ |
63,428 |
|
|
$ |
126,821 |
|
|
$ |
133,123 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to Generac Holdings Inc. per
common share - diluted: |
$ |
0.82 |
|
|
$ |
0.92 |
|
|
$ |
1.92 |
|
|
$ |
1.91 |
|
Weighted
average common shares outstanding - diluted: |
|
65,126,117 |
|
|
|
69,182,465 |
|
|
|
65,992,127 |
|
|
|
69,781,300 |
|
|
|
|
|
|
|
|
|
|
|
|
(8) 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. |
|
|
|
|
|
|
|
|
|
|
|
(9) Amount for the three and nine months ended September 30,
2016 is based on an anticipated cash income tax rate at that time
of approximately 6% for the full year ended 2016 . Amount for the
three and nine months ended September 30, 2015 is based on an
anticipated cash income tax rate of approximately 6% for the full
year ended 2015. 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, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by operating activities |
$ |
48,278 |
|
|
$ |
35,280 |
|
|
$ |
129,513 |
|
|
$ |
76,859 |
|
Expenditures for property and equipment |
|
(6,843 |
) |
|
|
(5,850 |
) |
|
|
(20,847 |
) |
|
|
(20,108 |
) |
Free cash
flow |
|
|
$ |
41,435 |
|
|
$ |
29,430 |
|
|
$ |
108,666 |
|
|
$ |
56,751 |
|
CONTACT:
Michael W. Harris
Vice President – Finance
(262) 544-4811 x2675
Michael.Harris@Generac.com
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