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 second quarter ended June 30, 2017.
Second Quarter 2017 Highlights
- Net sales increased 7.6% to $395.4 million during the second
quarter of 2017 as compared to $367.4 million in the prior-year
second quarter, including $9.5 million of contribution from the
Motortech acquisition.
- Net income attributable to the Company during the second
quarter of 2017 was $25.7 million, or $0.41 per share, as compared
to $20.9 million, or $0.31 per share, for the same period of
2016. The prior-year net income includes $3.4 million of
pre-tax expense relating to the purchase accounting adjustment for
the step-up in value of inventories relating to the Pramac
acquisition.
- Adjusted net income attributable to the Company, as defined in
the accompanying reconciliation schedules, was $43.3 million, or
$0.69 per share, as compared to $42.7 million, or $0.64 per share,
in the second quarter of 2016.
- Adjusted EBITDA attributable to the Company, as defined in the
accompanying reconciliation schedules, was $68.7 million as
compared to $62.3 million in the second quarter last year.
- Cash flow from operations was $60.2 million as compared to
$59.1 million in the prior year quarter. Free cash flow, as
defined in the accompanying reconciliation schedules, was $53.7
million as compared to $52.2 million in the second quarter of
2016.
- The Company repurchased 845,000 shares of its common stock
during the second quarter for $30.0 million under its current share
repurchase program.
- On May 11, 2017, the Company amended its Term Loan credit
facility which, among other items, modified the pricing by
favorably reducing the applicable margin rate to a fixed rate of
2.25%, resulting in a 50 basis point reduction in the overall
interest rate from the level previously in effect, or approximately
$4.5 million of annualized interest savings.
“We are pleased with our second quarter results with strong
organic sales growth compared to the prior year leading to an
improvement in overall operating earnings and cash flow,” said
Aaron Jagdfeld, President and Chief Executive Officer.
“Shipments of home standby generators in particular were very
strong in the quarter as higher power outage activity and targeted
marketing in the first half drove increased activations as every
region in the US experienced solid double digit growth year over
year. Demand for our mobile products domestically also
continued to be much stronger as compared to the prior-year, as our
rental equipment customers further replaced and upgraded their
fleets during the quarter.”
Additional Second Quarter 2017 Consolidated
Highlights
Residential product sales increased 9.0% to $198.1 million as
compared to $181.7 million in the prior year. Commercial
& Industrial (C&I) product sales improved 8.9% to $170.8
million as compared to $156.7 million in the prior year.
Gross profit margin was 34.0% compared to 33.8% in the
prior-year second quarter. The prior year included $3.4
million of expense relating to the purchase accounting adjustment
for the step-up in value of inventories relating to the Pramac
acquisition. Excluding the impact of these expenses, gross
margin in the prior year was 34.7%. The pro-forma decline in
gross margin as compared to the prior year was due to a number of
factors including higher commodity prices seen in prior quarters
and, to a lesser extent, certain plant consolidation
costs.
Operating expenses increased $2.1 million, or 2.6%, as compared
to the second quarter of 2016. The increase was primarily
driven by the addition of recurring operating expenses associated
with the Motortech acquisition.
Cash flow from operations was $60.2 million as compared to $59.1
million in the prior year, and free cash flow was $53.7 million as
compared to $52.2 million in the same period last year. The
increases in cash flow were primarily driven by higher operating
earnings in the current-year quarter, partially offset by a smaller
benefit from working capital reduction during the current
year.
Business Segment Results
Domestic Segment
Domestic segment sales increased 6.7% to $305.9 million as
compared to $286.7 million in the prior-year quarter. The
current-year second quarter experienced strong growth in shipments
of home standby generators and mobile products. This strength
was partially offset by a decline in residential portable sales due
to excess levels of field inventory during the current-year quarter
along with new product placement with certain retail customers in
the prior-year quarter.
Adjusted EBITDA for the segment was $64.2 million, or 21.0% of
net sales, as compared to $57.4 million in the prior year, or 20.0%
of net sales. Adjusted EBITDA margin in the current year was
positively impacted by improved overall leverage of fixed operating
expenses on the organic increase in sales, partially offset by
unfavorable impact from higher commodity prices seen in prior
quarters.
International Segment
International segment sales, primarily consisting of C&I
products, increased 10.9% to $89.5 million as compared to $80.7
million in the prior-year quarter. The increase was primarily
due to the contribution from the recent acquisition of Motortech,
which closed on January 1, 2017.
Adjusted EBITDA for the segment, before deducting for
non-controlling interests, was $6.0 million, or 6.7% of net sales,
as compared to $6.6 million, or 8.2% of net sales, in the prior
year. The decline in adjusted EBITDA margin as compared to
the prior year was primarily due to unfavorable foreign currency
impacts and sales mix, along with higher commodity prices and
increased overall operating expenses including the expansion of
branch operations. These impacts were partially offset by the
addition of the Motortech acquisition.
2017 Outlook Update
The Company is increasing its prior guidance for revenue growth
for full-year 2017, which is primarily due to an improved outlook
for domestic mobile products, as well as higher international
segment sales from a stronger Euro relative to the U.S.
dollar. Full year net sales are now expected to increase
between 6 to 8% as compared to the prior year, with core organic
growth of between 2 to 3%. As a result of an unfavorable
shift in sales mix and foreign currency impacts, the Company is
revising its prior guidance for net income and adjusted EBITDA
margins for the full year 2017. Net income margins, before
deducting for non-controlling interests, are now expected to be
between 7.0 to 7.5%, while adjusted EBITDA margins, also before
deducting for non-controlling interests, are now expected to be
approximately 18.5% for the full year 2017.
The top-line guidance assumes no material changes in the current
macroeconomic environment and also assumes a power outage severity
level for the remainder of the year similar to that experienced
during 2016 excluding the impact of Hurricane Matthew.
Operating and free cash flow generation is expected to seasonally
increase during the second half, with the conversion of adjusted
net income expected to be over 90% for the full year.
Conference Call and Webcast
Generac management will hold a conference call at 9:00 a.m. EDT
on Wednesday, August 2, 2017 to discuss highlights of the second
quarter of 2017 operating results. The conference call can be
accessed by dialing (866) 415-3113 (domestic) or +1 (678) 509-7544
(international) and entering passcode 56163658.
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 56163658. The telephonic replay will be available for 7
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 2016 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 June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
395,376 |
|
|
$ |
367,376 |
|
|
$ |
727,190 |
|
|
$ |
653,911 |
|
Costs of goods
sold |
|
260,916 |
|
|
|
243,229 |
|
|
|
482,244 |
|
|
|
431,704 |
|
Gross profit |
|
134,460 |
|
|
|
124,147 |
|
|
|
244,946 |
|
|
|
222,207 |
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
Selling
and service |
|
43,116 |
|
|
|
42,366 |
|
|
|
83,300 |
|
|
|
79,635 |
|
Research
and development |
|
10,567 |
|
|
|
9,889 |
|
|
|
20,868 |
|
|
|
18,086 |
|
General
and administrative |
|
21,361 |
|
|
|
19,593 |
|
|
|
42,334 |
|
|
|
37,426 |
|
Amortization of intangibles |
|
7,129 |
|
|
|
8,217 |
|
|
|
14,312 |
|
|
|
16,014 |
|
Total
operating expenses |
|
82,173 |
|
|
|
80,065 |
|
|
|
160,814 |
|
|
|
151,161 |
|
Income from
operations |
|
52,287 |
|
|
|
44,082 |
|
|
|
84,132 |
|
|
|
71,046 |
|
|
|
|
|
|
|
|
|
Other (expense)
income: |
|
|
|
|
|
|
|
Interest
expense |
|
(10,893 |
) |
|
|
(11,380 |
) |
|
|
(21,681 |
) |
|
|
(22,415 |
) |
Investment income |
|
38 |
|
|
|
4 |
|
|
|
43 |
|
|
|
36 |
|
Costs
related to acquisition |
|
(136 |
) |
|
|
– |
|
|
|
(321 |
) |
|
|
(417 |
) |
Other,
net |
|
(1,437 |
) |
|
|
158 |
|
|
|
(1,214 |
) |
|
|
545 |
|
Total
other expense, net |
|
(12,428 |
) |
|
|
(11,218 |
) |
|
|
(23,173 |
) |
|
|
(22,251 |
) |
|
|
|
|
|
|
|
|
Income before provision
for income taxes |
|
39,859 |
|
|
|
32,864 |
|
|
|
60,959 |
|
|
|
48,795 |
|
Provision for income
taxes |
|
14,114 |
|
|
|
11,921 |
|
|
|
22,365 |
|
|
|
17,640 |
|
Net income |
|
25,745 |
|
|
|
20,943 |
|
|
|
38,594 |
|
|
|
31,155 |
|
Net income attributable
to noncontrolling interests |
|
85 |
|
|
|
55 |
|
|
|
92 |
|
|
|
59 |
|
Net income attributable
to Generac Holdings Inc. |
$ |
25,660 |
|
|
$ |
20,888 |
|
|
$ |
38,502 |
|
|
$ |
31,096 |
|
|
|
|
|
|
|
|
|
Net
income attributable to common shareholders per |
|
|
|
|
|
|
|
common share - basic: |
$ |
0.42 |
|
|
$ |
0.32 |
|
|
$ |
0.63 |
|
|
$ |
0.47 |
|
Weighted
average common shares outstanding - basic: |
|
62,146,393 |
|
|
|
65,870,714 |
|
|
|
62,260,170 |
|
|
|
65,955,455 |
|
|
|
|
|
|
|
|
|
Net
income attributable to common shareholders per |
|
|
|
|
|
|
|
common share - diluted: |
$ |
0.41 |
|
|
$ |
0.31 |
|
|
$ |
0.63 |
|
|
$ |
0.47 |
|
Weighted
average common shares outstanding - diluted: |
|
62,635,437 |
|
|
|
66,388,581 |
|
|
|
62,849,877 |
|
|
|
66,465,770 |
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Generac Holdings
Inc. |
$ |
32,577 |
|
|
$ |
7,622 |
|
|
$ |
48,964 |
|
|
$ |
19,076 |
|
|
|
|
|
|
|
|
|
Generac Holdings Inc. |
Condensed Consolidated Balance Sheets |
(U.S. Dollars in Thousands, Except Share and Per Share
Data) |
|
|
|
|
|
June 30, |
|
December
31, |
|
|
2017 |
|
|
|
2016 |
|
|
(Unaudited) |
|
(Audited) |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
67,071 |
|
|
$ |
67,272 |
|
Accounts
receivable, less allowance for doubtful accounts |
|
243,285 |
|
|
|
241,857 |
|
Inventories |
|
378,110 |
|
|
|
349,731 |
|
Prepaid
expenses and other assets |
|
9,314 |
|
|
|
24,649 |
|
Total
current assets |
|
697,780 |
|
|
|
683,509 |
|
|
|
|
|
Property and equipment,
net |
|
217,056 |
|
|
|
212,793 |
|
|
|
|
|
Customer lists,
net |
|
44,659 |
|
|
|
45,312 |
|
Patents, net |
|
44,409 |
|
|
|
48,061 |
|
Other intangible
assets, net |
|
2,699 |
|
|
|
2,925 |
|
Tradenames, net |
|
156,650 |
|
|
|
158,874 |
|
Goodwill |
|
716,820 |
|
|
|
704,640 |
|
Deferred income
taxes |
|
4,261 |
|
|
|
3,337 |
|
Other assets |
|
3,196 |
|
|
|
2,233 |
|
Total assets |
$ |
1,887,530 |
|
|
$ |
1,861,684 |
|
|
|
|
|
Liabilities and stockholders’ equity |
|
|
|
Current
liabilities: |
|
|
|
Short-term borrowings |
$ |
22,155 |
|
|
$ |
31,198 |
|
Accounts
payable |
|
163,359 |
|
|
|
181,519 |
|
Accrued
wages and employee benefits |
|
23,765 |
|
|
|
21,189 |
|
Other
accrued liabilities |
|
93,343 |
|
|
|
93,068 |
|
Current
portion of long-term borrowings and capital lease obligations |
|
7,700 |
|
|
|
14,965 |
|
Total
current liabilities |
|
310,322 |
|
|
|
341,939 |
|
|
|
|
|
Long-term borrowings
and capital lease obligations |
|
1,007,235 |
|
|
|
1,006,758 |
|
Deferred income
taxes |
|
37,575 |
|
|
|
17,278 |
|
Other long-term
liabilities |
|
66,633 |
|
|
|
61,459 |
|
Total liabilities |
|
1,421,765 |
|
|
|
1,427,434 |
|
|
|
|
|
Redeemable
noncontrolling interests |
|
37,796 |
|
|
|
33,138 |
|
|
|
|
|
Stockholders’
equity: |
|
|
|
Common
stock, par value $0.01, 500,000,000 shares authorized, 70,594,648
and 70,261,481 |
|
|
|
shares
issued at June 30, 2017 and December 31, 2016, respectively |
|
705 |
|
|
|
702 |
|
Additional paid-in capital |
|
454,763 |
|
|
|
449,049 |
|
Treasury
stock, at cost |
|
(293,684 |
) |
|
|
(262,402 |
) |
Excess
purchase price over predecessor basis |
|
(202,116 |
) |
|
|
(202,116 |
) |
Retained
earnings |
|
495,463 |
|
|
|
456,052 |
|
Accumulated other comprehensive loss |
|
(27,209 |
) |
|
|
(40,163 |
) |
Stockholders' equity attributable to Generac Holdings,
Inc. |
|
427,922 |
|
|
|
401,122 |
|
Noncontrolling interests |
|
47 |
|
|
|
(10 |
) |
Total
stockholders’ equity |
|
427,969 |
|
|
|
401,112 |
|
Total liabilities and
stockholders’ equity |
$ |
1,887,530 |
|
|
$ |
1,861,684 |
|
|
|
|
|
Generac Holdings Inc. |
Condensed Consolidated Statements of Cash Flows |
(U.S. Dollars in Thousands) |
(Unaudited) |
|
|
|
|
|
Six Months Ended June 30, |
|
2017 |
|
|
2016 |
|
Operating
activities |
|
|
|
Net
income |
$ |
38,594 |
|
|
$ |
31,155 |
|
Adjustment to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation |
|
11,271 |
|
|
|
10,429 |
|
Amortization of intangible assets |
|
14,312 |
|
|
|
16,014 |
|
Amortization of original issue discount and deferred financing
costs |
|
1,308 |
|
|
|
2,122 |
|
Deferred
income taxes |
|
17,164 |
|
|
|
9,072 |
|
Share-based compensation expense |
|
5,818 |
|
|
|
5,386 |
|
Other |
|
377 |
|
|
|
46 |
|
Net
changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts
receivable |
|
5,362 |
|
|
|
(9,389 |
) |
Inventories |
|
(13,981 |
) |
|
|
(1,046 |
) |
Other
assets |
|
1,069 |
|
|
|
2,297 |
|
Accounts
payable |
|
(26,560 |
) |
|
|
17,537 |
|
Accrued
wages and employee benefits |
|
1,902 |
|
|
|
6,166 |
|
Other
accrued liabilities |
|
(559 |
) |
|
|
(1,825 |
) |
Excess
tax benefits from equity awards |
|
(403 |
) |
|
|
(6,729 |
) |
Net cash
provided by operating activities |
|
55,674 |
|
|
|
81,235 |
|
|
|
|
|
Investing
activities |
|
|
|
Proceeds
from sale of property and equipment |
|
45 |
|
|
|
47 |
|
Expenditures for property and equipment |
|
(10,030 |
) |
|
|
(14,004 |
) |
Acquisition of business, net of cash acquired |
|
1,160 |
|
|
|
(60,886 |
) |
Net cash
used in investing activities |
|
(8,825 |
) |
|
|
(74,843 |
) |
|
|
|
|
Financing
activities |
|
|
|
Proceeds
from short-term borrowings |
|
62,435 |
|
|
|
10,278 |
|
Proceeds
from long-term borrowings |
|
3,069 |
|
|
|
– |
|
Repayments of short-term borrowings |
|
(72,971 |
) |
|
|
(6,327 |
) |
Repayments of long-term borrowings and capital lease
obligations |
|
(9,806 |
) |
|
|
(10,652 |
) |
Stock
repurchases |
|
(30,012 |
) |
|
|
(34,576 |
) |
Payment
of debt issuance costs |
|
(1,517 |
) |
|
|
– |
|
Cash
dividends paid |
|
– |
|
|
|
(76 |
) |
Taxes
paid related to the net share settlement of equity awards |
|
(1,958 |
) |
|
|
(12,099 |
) |
Proceeds
from exercise of stock options |
|
1,254 |
|
|
|
– |
|
Excess
tax benefits from equity awards |
|
– |
|
|
|
6,729 |
|
Net cash
used in financing activities |
|
(49,506 |
) |
|
|
(46,723 |
) |
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents |
|
2,456 |
|
|
|
115 |
|
|
|
|
|
Net
decrease in cash and cash equivalents |
|
(201 |
) |
|
|
(40,216 |
) |
Cash and
cash equivalents at beginning of period |
|
67,272 |
|
|
|
115,857 |
|
Cash and
cash equivalents at end of period |
$ |
67,071 |
|
|
$ |
75,641 |
|
|
|
|
|
Generac Holdings Inc. |
Segment Reporting and Product Class Information |
(U.S. Dollars in Thousands) |
(Unaudited) |
|
|
|
Net Sales |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
Reportable Segments |
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
Domestic |
$ |
305,907 |
|
$ |
286,720 |
|
$ |
554,404 |
|
$ |
534,736 |
International |
|
89,469 |
|
|
80,656 |
|
|
172,786 |
|
|
119,175 |
Total net
sales |
$ |
395,376 |
|
$ |
367,376 |
|
$ |
727,190 |
|
$ |
653,911 |
|
|
|
|
|
|
|
|
|
Product Classes |
|
|
|
|
|
|
|
Residential products |
$ |
198,117 |
|
$ |
181,735 |
|
$ |
352,973 |
|
$ |
340,716 |
Commercial & industrial products |
|
170,755 |
|
|
156,730 |
|
|
322,198 |
|
|
259,720 |
Other |
|
26,504 |
|
|
28,911 |
|
|
52,019 |
|
|
53,475 |
Total net
sales |
$ |
395,376 |
|
$ |
367,376 |
|
$ |
727,190 |
|
$ |
653,911 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
Domestic |
$ |
64,157 |
|
$ |
57,352 |
|
$ |
107,003 |
|
$ |
104,212 |
International |
|
6,034 |
|
|
6,574 |
|
|
10,846 |
|
|
9,523 |
Total
adjusted EBITDA (1) |
$ |
70,191 |
|
$ |
63,926 |
|
$ |
117,849 |
|
$ |
113,735 |
|
|
|
|
|
|
|
|
|
(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) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income to Adjusted EBITDA reconciliation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Generac Holdings Inc. |
$ |
25,660 |
|
|
$ |
20,888 |
|
|
$ |
38,502 |
|
|
$ |
31,096 |
|
|
|
Net loss
attributable to noncontrolling interests (1) |
|
85 |
|
|
|
55 |
|
|
|
92 |
|
|
|
59 |
|
|
|
Net
income |
|
|
|
25,745 |
|
|
|
20,943 |
|
|
|
38,594 |
|
|
|
31,155 |
|
|
|
Interest
expense |
|
|
|
10,893 |
|
|
|
11,380 |
|
|
|
21,681 |
|
|
|
22,415 |
|
|
|
Depreciation and amortization |
|
|
12,986 |
|
|
|
13,650 |
|
|
|
25,583 |
|
|
|
26,443 |
|
|
|
Provision
for income taxes |
|
|
14,114 |
|
|
|
11,921 |
|
|
|
22,365 |
|
|
|
17,640 |
|
|
|
Non-cash
write-down and other adjustments (2) |
|
1,710 |
|
|
|
2,909 |
|
|
|
1,876 |
|
|
|
2,782 |
|
|
|
Non-cash
share-based compensation expense (3) |
|
3,186 |
|
|
|
2,901 |
|
|
|
5,818 |
|
|
|
5,386 |
|
|
|
Transaction
costs and credit facility fees (4) |
|
420 |
|
|
|
237 |
|
|
|
736 |
|
|
|
760 |
|
|
|
Business
optimization expenses (5) |
|
|
1,346 |
|
|
|
– |
|
|
|
1,446 |
|
|
|
7,106 |
|
|
|
Other |
|
|
|
|
(209 |
) |
|
|
(15 |
) |
|
|
(250 |
) |
|
|
48 |
|
|
|
Adjusted
EBITDA |
|
|
|
70,191 |
|
|
|
63,926 |
|
|
|
117,849 |
|
|
|
113,735 |
|
|
|
Adjusted
EBITDA attributable to noncontrolling interests |
|
1,455 |
|
|
|
1,623 |
|
|
|
2,411 |
|
|
|
2,307 |
|
|
|
Adjusted
EBITDA attributable to Generac Holdings Inc. |
$ |
68,736 |
|
|
$ |
62,303 |
|
|
$ |
115,438 |
|
|
$ |
111,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
$1.1 million and $2.2 million for the three and six months ended
June 30, 2017, respectively, and $4.3 million and $5.5 million for
the three and six months ended June 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 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 six months ended June 30, 2017,
represents severance and other non-recurring plant consolidation
costs. For the six months ended June 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. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income to Adjusted net income reconciliation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Generac Holdings Inc. |
$ |
25,660 |
|
|
$ |
20,888 |
|
|
$ |
38,502 |
|
|
$ |
31,096 |
|
|
|
Net loss
attributable to noncontrolling interests (1) |
|
85 |
|
|
|
55 |
|
|
|
92 |
|
|
|
59 |
|
|
|
Net
income |
|
|
|
25,745 |
|
|
|
20,943 |
|
|
|
38,594 |
|
|
|
31,155 |
|
|
|
Provision
for income taxes |
|
|
14,114 |
|
|
|
11,921 |
|
|
|
22,365 |
|
|
|
17,640 |
|
|
|
Income
before provision for income taxes |
|
39,859 |
|
|
|
32,864 |
|
|
|
60,959 |
|
|
|
48,795 |
|
|
|
Amortization of intangible assets |
|
|
7,129 |
|
|
|
8,217 |
|
|
|
14,312 |
|
|
|
16,014 |
|
|
|
Amortization of deferred finance costs and original issue
discount |
|
818 |
|
|
|
1,066 |
|
|
|
1,308 |
|
|
|
2,122 |
|
|
|
Transaction
costs and other purchase accounting adjustments (6) |
|
429 |
|
|
|
3,443 |
|
|
|
1,014 |
|
|
|
4,690 |
|
|
|
Business
optimization expenses (5) |
|
|
1,346 |
|
|
|
– |
|
|
|
1,446 |
|
|
|
7,106 |
|
|
|
Adjusted
net income before provision for income taxes |
|
49,581 |
|
|
|
45,590 |
|
|
|
79,039 |
|
|
|
78,727 |
|
|
|
Cash income
tax expense (7) |
|
|
(5,642 |
) |
|
|
(1,450 |
) |
|
|
(8,729 |
) |
|
|
(3,270 |
) |
|
|
Adjusted
net income |
|
|
|
43,939 |
|
|
|
44,140 |
|
|
|
70,310 |
|
|
|
75,457 |
|
|
|
Adjusted
net income attributable to noncontrolling interests |
|
633 |
|
|
|
1,451 |
|
|
|
1,215 |
|
|
|
1,881 |
|
|
|
Adjusted
net income attributable to Generac Holdings Inc. |
$ |
43,306 |
|
|
$ |
42,689 |
|
|
$ |
69,095 |
|
|
$ |
73,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to Generac Holdings Inc.
per |
|
|
|
|
|
|
|
|
|
common share - diluted: |
$ |
0.69 |
|
|
$ |
0.64 |
|
|
$ |
1.10 |
|
|
$ |
1.11 |
|
|
|
Weighted
average common shares outstanding - diluted: |
|
62,635,437 |
|
|
|
66,388,581 |
|
|
|
62,849,877 |
|
|
|
66,465,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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) Amount for the three and six months ended June 30, 2017 is
based on an anticipated cash income tax rate of approximately 14%
for the full year ended 2017. Amount for the three and six months
ended June 30, 2016 is based on an anticipated cash income tax rate
of approximately 5% for the full year ended 2016. 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 June 30, |
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash
provided by operating activities |
$ |
60,220 |
|
|
$ |
59,084 |
|
|
$ |
55,674 |
|
|
$ |
81,235 |
|
|
|
Expenditures for property and equipment |
|
(6,482 |
) |
|
|
(6,911 |
) |
|
|
(10,030 |
) |
|
|
(14,004 |
) |
|
|
Free cash
flow |
|
|
$ |
53,738 |
|
|
$ |
52,173 |
|
|
$ |
45,644 |
|
|
$ |
67,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT:
Michael W. Harris
Vice President – Finance
(262) 544-4811 x2675
Michael.Harris@Generac.com
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