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 fourth quarter and full-year ended
December 31, 2017. Additionally, the Company initiated its outlook
for 2018.
Fourth Quarter 2017 Highlights
- Net sales increased 16.9% to $488.0 million during the fourth
quarter of 2017 as compared to $417.4 million in the prior-year
fourth quarter, including $9.6 million of contribution from the
Motortech acquisition.
- Net income attributable to the Company during the fourth
quarter was $81.2 million, or $1.30 per share, as compared to $41.5
million, or $0.64 per share, for the same period of 2016. The
current year net income includes the impact of a $28.4 million
non-cash gain, or $0.45 per share, largely from the revaluation of
the Company’s net deferred tax liabilities associated with the
enactment of the Tax Cuts and Jobs Act of 2017 (“Tax Reform
Act”).
- Adjusted net income attributable to the Company, as defined in
the accompanying reconciliation schedules, was $85.9 million, or
$1.37 per share, as compared to $71.4 million, or $1.12 per share,
in the fourth quarter of 2016. The current-year adjusted net
income includes the favorable impact from the acceleration of
certain tax deductions, mostly in response to the Tax Reform Act,
that resulted in a $0.15 benefit on a per share basis.
- Adjusted EBITDA attributable to the Company, as defined in the
accompanying reconciliation schedules, was $108.6 million as
compared to $91.0 million in the fourth quarter last
year.
- Cash flow from operations was a quarterly record of $138.4
million as compared to $123.9 million in the prior year
quarter. Free cash flow, as defined in the accompanying
reconciliation schedules, was also a quarterly record of $121.8
million as compared to $114.3 million in the fourth quarter of
2016.
- The Company amended its Term Loan credit facility which reduced
the applicable margin interest rate by 25 basis points from the
level previously in effect, and eliminated the annual excess cash
flow payment requirement if the consolidated net debt to adjusted
EBITDA leverage ratio (“net leverage ratio”) is maintained below
3.75 times. The net leverage ratio, as defined in the
accompanying reconciliation schedules, declined to 2.5 times as of
December 31, 2017 compared to 3.6 times as of December 31,
2016.
Full-Year 2017 Highlights
- Net sales increased 15.8% to $1.672 billion during 2017 as
compared to $1.444 billion during 2016, including $69.7 million of
contribution from acquisitions, resulting in total organic sales
growth for the year of 11.0%. Domestic segment sales
increased 10.5% to $1.297 billion as compared to $1.174 billion in
the prior year. International segment sales increased 38.8%
to $375.9 million as compared to $270.9 million in the prior
year.
- Net income attributable to the Company during 2017 was $159.4
million, or $2.56 per share, as compared to $98.8 million, or $1.50
per share for 2016. Net income for 2017 includes the impact
of the $28.4 million non-cash gain as a result of the Tax Reform
Act. The prior-year net income includes the impact of $7.1
million of non-recurring, pre-tax charges relating to the downturn
for capital spending within the oil & gas industry.
- Adjusted net income attributable to the Company was $212.9
million, or $3.40 per share, as compared to $198.3 million, or
$3.03 per share, in 2016.
- Adjusted EBITDA attributable to the Company for 2017 was $311.7
million as compared to $274.6 million last year.
- Cash flow from operations was $261.1 million as compared to
$253.4 million in the prior year. Free cash flow was $227.9
million as compared to $222.9 million in 2016.
“Our fourth quarter results put an exclamation point on a great
2017 as strong organic sales growth led to record quarterly sales
and cash flow,” said Aaron Jagdfeld, President and Chief Executive
Officer. “Shipments of home standby generators during the
quarter were near record levels as higher power outage activity
drove significant awareness for the product category during the
second half of the year. The increased interest in home
standby generators translated to elevated levels of sales leads
during the quarter and helped to push our residential dealer count
to an all-time high. Shipments of commercial and industrial
products were also strong during the quarter driven mainly by our
rental customers continued spending on new fleet equipment such as
light towers and mobile generators. In addition to our
fantastic Domestic segment results for the quarter, our continued
focus to create a more global company resulted in our best ever
level of shipments outside the U.S. and Canada as our International
segment experienced very strong organic sales growth and a
substantial increase in margins.”
Additional Fourth Quarter 2017 Consolidated
Highlights
Residential product sales increased 11.2% to $265.5 million as
compared to $238.9 million in the prior year. Commercial
& Industrial (C&I) product sales increased 27.1% to $188.3
million as compared to $148.1 million in the prior year.
Gross profit margin was largely flat at 36.8% compared to 36.9%
in the prior-year fourth quarter, which was due to a variety of
factors. Favorable pricing impacts along with improved
leverage of fixed manufacturing costs were offset by unfavorable
sales mix attributable to significantly higher International
segment and mobile products sales compared to prior year along with
higher commodity prices. Operating expenses increased $8.7 million,
or 11.4%, as compared to the fourth quarter of 2016. The
increase was primarily driven by the Motortech acquisition, higher
variable costs on the strong growth in organic sales, and an
increase in employee costs including higher incentive compensation,
partially offset by lower promotional costs benefitting from the
higher power outage environment. Cash flow from operations was
$138.4 million as compared to $123.9 million in the prior-year
fourth quarter, and free cash flow was $121.8 million as compared
to $114.3 million in the same quarter last year. The
improvements in cash flow were driven by a variety of factors
including the increase in operating earnings as compared to the
prior year and a larger benefit from working capital reduction
during the current year, partially offset by higher cash income
taxes and capital expenditures. On December 8, 2017, the Company
amended its Term Loan credit facility which, among other items,
modified the pricing by reducing the applicable margin rate to a
fixed rate of 2.00%, resulting in a 25 basis point reduction in
overall interest rate from the level previously in effect, or
approximately $2.3 million of annualized interest savings. In
addition, certain terms were amended to increase the Company’s
flexibility regarding repayment obligations, including the
elimination of the annual excess cash flow payment requirement if
the consolidated net leverage ratio is maintained below 3.75
times.
Business Segment Results
Domestic Segment
Domestic segment sales increased 11.2% to $377.9 million as
compared to $339.7 million in the prior-year quarter. The
current-year fourth quarter experienced strong growth in shipments
of home standby generators driven by increased outage activity,
along with the continuation of significant growth for mobile
products. Also contributing to the year-over-year sales
growth were increases in service parts.
Adjusted EBITDA for the segment was $100.6 million, or 26.6% of
net sales, as compared to $87.9 million in the prior year, or 25.9%
of net sales. Adjusted EBITDA margin in the current year
benefitted from a favorable pricing environment including lower
promotional costs, and improved overall leverage of fixed operating
costs on the higher organic sales volumes. These impacts were
partially offset by higher commodity prices and an increase in
employee costs including higher incentive compensation.
International Segment
International segment sales increased 41.8% to $110.2 million as
compared to $77.7 million in the prior-year quarter, including $9.6
million of contribution from the Motortech acquisition. The
significant organic growth compared to the prior year was due to
increased shipments of both C&I and residential products
primarily within the European region, together with large project
activity and the favorable impact of the stronger Euro.
Adjusted EBITDA for the segment, before deducting for
non-controlling interests, improved to $10.5 million, or 9.6% of
net sales, as compared to $3.9 million, or 5.0% of net sales, in
the prior year. The significant improvement in adjusted
EBITDA margin as compared to the prior year was primarily due to
improved leverage of fixed operating costs on the significant
increase in organic sales, as well as favorable sales mix from
higher-margin large project activity. These favorable impacts
were partially offset by higher commodity prices and increased
operating expenses associated with the expansion of certain branch
operations.
2018 Outlook The Company is initiating guidance
for 2018 with net sales expected to increase between 3 to 5% as
compared to the prior year, which includes a favorable foreign
currency impact of between 1 to 2%. Excluding the benefit of
elevated portable generator shipments during 2017 related to major
outage events from the active hurricane season, net sales are
expected to increase between 7 to 9% as compared to the prior
year. This top-line guidance assumes no major outage events
and a baseline power outage severity level similar to the
longer-term average. Should the baseline power outage environment
in 2018 be higher, or if there is “major” outage activity during
the year, it is likely the Company could exceed these
expectations.
Net income margins, before deducting for non-controlling
interests, are expected to be between 9.5 to 10.0% for the
full-year 2018, with adjusted EBITDA margins, also before deducting
for non-controlling interests, expected to be between 19.0 to 19.5%
for the year.
Operating and free cash flow generation is expected to be
strong, with the conversion of adjusted net income to free cash
flow expected to be over 90%.
Tax Reform
As a result of the Tax Reform Act, the Company recognized a
one-time, non-cash gain of $28.4 million in the fourth quarter
primarily from the impact of the revaluation of net deferred tax
liabilities. Excluding this gain, the effective tax rate during the
fourth quarter and full-year 2017 were 34.9% and 35.2%,
respectively. While the Company continues to assess the full
impact of tax reform, the preliminary analysis suggests a
meaningful benefit from the legislation. Specifically for
2018, the effective tax rate is expected to decline to between 25
to 26%, resulting in a corresponding benefit to cash flow of
between $10 to $12 million based on the outlook being
provided.
Conference Call and Webcast
Generac management will hold a conference call at 9:00 a.m. EST
on Tuesday, February 13, 2018 to discuss highlights of the fourth
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 1776607.
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 1776607. 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, foreign currency exchange rates, commodities and product
mix;
- the possibility that the expected synergies, efficiencies and
cost savings of our acquisitions will not be realized, or will not
be realized within the expected time period;
- the risk that our acquisitions will not be integrated
successfully;
- difficulties Generac may encounter as its business expands
globally;
- Generac's dependence on its distribution network;
- Generac's ability to invest in, develop or adapt to changing
technologies and manufacturing techniques;
- loss of key management and employees;
- increase in product and other liability claims or recalls;
and
- changes in environmental, health and safety laws and
regulations.
Should one or more of these risks or uncertainties materialize,
Generac's actual results may vary in material respects from those
projected in any forward-looking statements. A detailed discussion
of these and other factors that may affect future results is
contained in Generac's filings with the U.S. Securities and
Exchange Commission (“SEC”), particularly in the Risk Factors
section of the 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.
SOURCE: Generac Holdings Inc. CONTACT: Michael W. HarrisVice
President – Finance (262) 544-4811
x2675Michael.Harris@Generac.com
|
|
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, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Audited) |
|
|
|
|
|
|
|
|
Net sales |
$ |
488,002 |
|
|
$ |
417,421 |
|
|
$ |
1,672,445 |
|
|
$ |
1,444,453 |
|
Costs of goods
sold |
|
308,300 |
|
|
|
263,294 |
|
|
|
1,090,328 |
|
|
|
930,347 |
|
Gross profit |
|
179,702 |
|
|
|
154,127 |
|
|
|
582,117 |
|
|
|
514,106 |
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
Selling
and service |
|
44,053 |
|
|
|
40,543 |
|
|
|
171,755 |
|
|
|
164,607 |
|
Research
and development |
|
11,193 |
|
|
|
9,717 |
|
|
|
42,925 |
|
|
|
37,229 |
|
General
and administrative |
|
23,076 |
|
|
|
19,208 |
|
|
|
87,512 |
|
|
|
74,700 |
|
Amortization of intangibles |
|
7,307 |
|
|
|
7,428 |
|
|
|
28,861 |
|
|
|
32,953 |
|
Total
operating expenses |
|
85,629 |
|
|
|
76,896 |
|
|
|
331,053 |
|
|
|
309,489 |
|
Income from
operations |
|
94,073 |
|
|
|
77,231 |
|
|
|
251,064 |
|
|
|
204,617 |
|
|
|
|
|
|
|
|
|
Other (expense)
income: |
|
|
|
|
|
|
|
Interest
expense |
|
(10,314 |
) |
|
|
(10,854 |
) |
|
|
(42,667 |
) |
|
|
(44,568 |
) |
Investment income |
|
241 |
|
|
|
8 |
|
|
|
298 |
|
|
|
44 |
|
Loss on
extinguishment of debt |
|
– |
|
|
|
(574 |
) |
|
|
– |
|
|
|
(574 |
) |
Loss on
change in contractual interest rate |
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(2,957 |
) |
Costs
related to acquisition |
|
(405 |
) |
|
|
(88 |
) |
|
|
(777 |
) |
|
|
(1,082 |
) |
Other,
net |
|
(497 |
) |
|
|
338 |
|
|
|
(3,230 |
) |
|
|
902 |
|
Total
other expense, net |
|
(10,975 |
) |
|
|
(11,170 |
) |
|
|
(46,376 |
) |
|
|
(48,235 |
) |
|
|
|
|
|
|
|
|
Income before provision
for income taxes |
|
83,098 |
|
|
|
66,061 |
|
|
|
204,688 |
|
|
|
156,382 |
|
Provision for income
taxes |
|
607 |
|
|
|
24,416 |
|
|
|
43,553 |
|
|
|
57,570 |
|
Net income |
|
82,491 |
|
|
|
41,645 |
|
|
|
161,135 |
|
|
|
98,812 |
|
Net income attributable
to noncontrolling interests |
|
1,316 |
|
|
|
136 |
|
|
|
1,749 |
|
|
|
24 |
|
Net income attributable
to Generac Holdings Inc. |
$ |
81,175 |
|
|
$ |
41,509 |
|
|
$ |
159,386 |
|
|
$ |
98,788 |
|
|
|
|
|
|
|
|
|
Net
income attributable to common shareholders per |
|
|
|
|
|
|
|
common
share - basic: |
$ |
1.31 |
|
|
$ |
0.64 |
|
|
$ |
2.58 |
|
|
$ |
1.51 |
|
Weighted
average common shares outstanding - basic: |
|
61,883,857 |
|
|
|
63,021,966 |
|
|
|
62,040,704 |
|
|
|
64,905,793 |
|
|
|
|
|
|
|
|
|
Net
income attributable to common shareholders per |
|
|
|
|
|
|
|
common
share - diluted: |
$ |
1.30 |
|
|
$ |
0.64 |
|
|
$ |
2.56 |
|
|
$ |
1.50 |
|
Weighted
average common shares outstanding - diluted: |
|
62,500,072 |
|
|
|
63,533,112 |
|
|
|
62,642,872 |
|
|
|
65,382,774 |
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss): |
|
|
|
|
|
|
|
Foreign
currency translation adjustment |
$ |
(825 |
) |
|
$ |
(7,498 |
) |
|
$ |
15,191 |
|
|
$ |
(18,545 |
) |
Net
unrealized gain on derivatives |
|
2,367 |
|
|
|
1,044 |
|
|
|
3,712 |
|
|
|
535 |
|
Pension
liability adjustment |
|
62 |
|
|
|
322 |
|
|
|
62 |
|
|
|
322 |
|
Other
comprehensive income (loss) |
|
1,604 |
|
|
|
(6,132 |
) |
|
|
18,965 |
|
|
|
(17,688 |
) |
Total
comprehensive income |
|
84,095 |
|
|
|
35,513 |
|
|
|
180,100 |
|
|
|
81,124 |
|
Comprehensive income (loss) attributable to |
|
|
|
|
|
|
|
noncontrolling interests |
|
1,721 |
|
|
|
(1,727 |
) |
|
|
5,549 |
|
|
|
(973 |
) |
Comprehensive income attributable to Generac Holdings Inc. |
$ |
82,374 |
|
|
$ |
37,240 |
|
|
$ |
174,551 |
|
|
$ |
82,097 |
|
|
|
Generac Holdings Inc. |
Consolidated Balance Sheets |
(Dollars in Thousands, Except Share and Per Share
Data) |
|
|
|
December 31, |
|
2017 |
|
2016 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
138,472 |
|
|
$ |
67,272 |
|
Accounts
receivable, less allowance for doubtful accounts of $4,805 and |
|
|
|
|
|
|
|
$5,642 at
December 31, 2017 and 2016, respectively |
|
280,002 |
|
|
|
241,857 |
|
Inventories |
|
380,341 |
|
|
|
349,731 |
|
Prepaid
expenses and other assets |
|
19,741 |
|
|
|
24,649 |
|
Total
current assets |
|
818,556 |
|
|
|
683,509 |
|
|
|
|
|
|
|
|
|
Property and equipment,
net |
|
230,380 |
|
|
|
212,793 |
|
|
|
|
|
|
|
|
|
Customer lists,
net |
|
41,064 |
|
|
|
45,312 |
|
Patents, net |
|
39,617 |
|
|
|
48,061 |
|
Other intangible
assets, net |
|
2,401 |
|
|
|
2,925 |
|
Tradenames, net |
|
152,683 |
|
|
|
158,874 |
|
Goodwill |
|
721,523 |
|
|
|
704,640 |
|
Deferred income
taxes |
|
3,238 |
|
|
|
3,337 |
|
Other assets |
|
10,502 |
|
|
|
2,233 |
|
Total assets |
$ |
2,019,964 |
|
|
$ |
1,861,684 |
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Short-term borrowings |
$ |
20,602 |
|
|
$ |
31,198 |
|
Accounts
payable |
|
233,639 |
|
|
|
181,519 |
|
Accrued
wages and employee benefits |
|
27,992 |
|
|
|
21,189 |
|
Other
accrued liabilities |
|
105,067 |
|
|
|
93,068 |
|
Current
portion of long-term borrowings and capital lease obligations |
|
1,572 |
|
|
|
14,965 |
|
Total
current liabilities |
|
388,872 |
|
|
|
341,939 |
|
|
|
|
|
|
|
|
|
Long-term borrowings
and capital lease obligations |
|
906,548 |
|
|
|
1,006,758 |
|
Deferred income
taxes |
|
43,789 |
|
|
|
17,278 |
|
Other long-term
liabilities |
|
76,995 |
|
|
|
61,459 |
|
Total liabilities |
|
1,416,204 |
|
|
|
1,427,434 |
|
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interest |
|
43,929 |
|
|
|
33,138 |
|
|
|
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
|
|
|
Common
stock, par value $0.01, 500,000,000 shares authorized,
70,820,173 |
|
|
|
|
|
|
|
and
70,261,481 shares issued at December 31, 2017 and 2016,
respectively |
|
708 |
|
|
|
702 |
|
Additional paid-in capital |
|
459,816 |
|
|
|
449,049 |
|
Treasury
stock, at cost, 8,448,874 and 7,564,874 shares at December 31, |
|
|
|
|
|
|
|
2017 and
2016, respectively |
|
(294,005 |
) |
|
|
(262,402 |
) |
Excess
purchase price over predecessor basis |
|
(202,116 |
) |
|
|
(202,116 |
) |
Retained
earnings |
|
616,347 |
|
|
|
456,052 |
|
Accumulated other comprehensive loss |
|
(21,198 |
) |
|
|
(40,163 |
) |
Stockholders’ equity attributable to Generac Holdings Inc. |
|
559,552 |
|
|
|
401,122 |
|
Noncontrolling interests |
|
279 |
|
|
|
(10 |
) |
Total
stockholders’ equity |
|
559,831 |
|
|
|
401,112 |
|
Total liabilities and
stockholders’ equity |
$ |
2,019,964 |
|
|
$ |
1,861,684 |
|
|
|
|
|
|
Generac Holdings Inc. |
Consolidated Statements of Cash Flows |
(Dollars in Thousands) |
|
|
|
|
Year Ended December 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(Audited) |
Operating
activities |
|
|
|
|
|
Net
income |
$ |
161,135 |
|
|
$ |
98,812 |
|
Adjustment to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
Depreciation |
|
23,127 |
|
|
|
21,465 |
|
Amortization of intangible assets |
|
28,861 |
|
|
|
32,953 |
|
Amortization of original issue discount and deferred financing
costs |
|
3,516 |
|
|
|
3,940 |
|
Loss on
extinguishment of debt |
|
– |
|
|
|
574 |
|
Loss on
change in contractual interest rate |
|
– |
|
|
|
2,957 |
|
Deferred
income taxes |
|
21,439 |
|
|
|
39,347 |
|
Share-based compensation expense |
|
10,205 |
|
|
|
9,493 |
|
Other |
|
410 |
|
|
|
127 |
|
Net
changes in operating assets and liabilities: |
|
|
Accounts
receivable |
|
(29,771 |
) |
|
|
(9,082 |
) |
Inventories |
|
(16,278 |
) |
|
|
15,514 |
|
Other
assets |
|
(14,783 |
) |
|
|
406 |
|
Accounts
payable |
|
42,788 |
|
|
|
32,908 |
|
Accrued
wages and employee benefits |
|
6,105 |
|
|
|
5,196 |
|
Other
accrued liabilities |
|
27,514 |
|
|
|
6,719 |
|
Excess
tax benefits from equity awards |
|
(3,152 |
) |
|
|
(7,920 |
) |
Net cash
provided by operating activities |
|
261,116 |
|
|
|
253,409 |
|
|
|
|
|
|
|
Investing
activities |
|
|
|
|
|
Proceeds
from sale of property and equipment |
|
82 |
|
|
|
1,360 |
|
Expenditures for property and equipment |
|
(33,261 |
) |
|
|
(30,467 |
) |
Acquisition of business, net of cash acquired |
|
1,257 |
|
|
|
(61,386 |
) |
Deposit
paid related to acquisition |
|
– |
|
|
|
(15,329 |
) |
Net cash
used in investing activities |
|
(31,922 |
) |
|
|
(105,822 |
) |
|
|
|
|
|
|
Financing
activities |
|
|
|
|
|
Proceeds
from short-term borrowings |
|
101,991 |
|
|
|
28,712 |
|
Proceeds
from long-term borrowings |
|
3,069 |
|
|
|
– |
|
Repayments of short-term borrowings |
|
(114,874 |
) |
|
|
(27,755 |
) |
Repayments of long-term borrowings and capital lease
obligations |
|
(117,475 |
) |
|
|
(37,627 |
) |
Stock
repurchases |
|
(30,012 |
) |
|
|
(149,937 |
) |
Payment
of debt issuance costs |
|
(3,901 |
) |
|
|
(4,557 |
) |
Cash
dividends paid |
|
– |
|
|
|
(76 |
) |
Taxes
paid related to equity awards |
|
(5,892 |
) |
|
|
(14,008 |
) |
Proceeds
from the exercise of stock options |
|
6,951 |
|
|
|
1,623 |
|
Excess
tax benefits from equity awards |
|
– |
|
|
|
7,920 |
|
Net cash
used in financing activities |
|
(160,143 |
) |
|
|
(195,705 |
) |
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents |
|
2,149 |
|
|
|
(467 |
) |
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents |
|
71,200 |
|
|
|
(48,585 |
) |
Cash and
cash equivalents at beginning of period |
|
67,272 |
|
|
|
115,857 |
|
Cash and
cash equivalents at end of period |
$ |
138,472 |
|
|
$ |
67,272 |
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information |
|
|
|
|
|
Cash paid during the period |
|
|
|
|
|
Interest |
$ |
41,105 |
|
|
$ |
42,456 |
|
Income
taxes |
|
23,836 |
|
|
|
8,889 |
|
|
|
|
|
|
|
|
Generac Holdings Inc. |
Segment Reporting and Product Class Information |
(U.S. Dollars in Thousands) |
(Unaudited) |
|
|
Net Sales |
|
Three Months Ended December 31, |
|
Year Ended December 31, |
Reportable Segments |
2017 |
|
2016 |
|
2017 |
|
2016 |
Domestic |
$ |
377,851 |
|
$ |
339,728 |
|
$ |
1,296,578 |
|
$ |
1,173,559 |
International |
|
110,151 |
|
|
77,693 |
|
|
375,867 |
|
|
270,894 |
Total net
sales |
$ |
488,002 |
|
$ |
417,421 |
|
$ |
1,672,445 |
|
$ |
1,444,453 |
|
|
|
|
|
|
|
|
Product Classes |
|
|
|
|
|
|
|
Residential products |
$ |
265,516 |
|
$ |
238,864 |
|
$ |
870,410 |
|
$ |
772,436 |
Commercial & industrial products |
|
188,316 |
|
|
148,136 |
|
|
685,052 |
|
|
557,532 |
Other |
|
34,170 |
|
|
30,421 |
|
|
116,983 |
|
|
114,485 |
Total net
sales |
$ |
488,002 |
|
$ |
417,421 |
|
$ |
1,672,445 |
|
$ |
1,444,453 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Domestic |
$ |
100,589 |
|
$ |
87,907 |
|
$ |
290,720 |
|
$ |
261,428 |
International |
|
10,539 |
|
|
3,909 |
|
|
27,010 |
|
|
16,959 |
Total
adjusted EBITDA (1) |
$ |
111,128 |
|
$ |
91,816 |
|
$ |
317,730 |
|
$ |
278,387 |
|
|
|
|
|
|
|
|
(1) See reconciliation of Adjusted EBITDA to Net income
attributable to Generac Holdings Inc. on the following
reconciliation schedule. |
|
|
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, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Generac Holdings Inc. |
$ |
81,175 |
|
|
$ |
41,509 |
|
|
$ |
159,386 |
|
|
$ |
98,788 |
|
Net income
attributable to noncontrolling interests (1) |
|
1,316 |
|
|
|
136 |
|
|
|
1,749 |
|
|
|
24 |
|
Net
income |
|
82,491 |
|
|
|
41,645 |
|
|
|
161,135 |
|
|
|
98,812 |
|
Interest
expense |
|
10,314 |
|
|
|
10,854 |
|
|
|
42,667 |
|
|
|
44,568 |
|
Depreciation and amortization |
|
13,297 |
|
|
|
13,075 |
|
|
|
51,988 |
|
|
|
54,418 |
|
Provision
for income taxes |
|
607 |
|
|
|
24,416 |
|
|
|
43,553 |
|
|
|
57,570 |
|
Non-cash
write-down and other adjustments (2) |
|
291 |
|
|
|
(1,332 |
) |
|
|
2,923 |
|
|
|
357 |
|
Non-cash
share-based compensation expense (3) |
|
1,803 |
|
|
|
1,688 |
|
|
|
10,205 |
|
|
|
9,493 |
|
Loss on
extinguishment of debt (4) |
|
– |
|
|
|
574 |
|
|
|
- |
|
|
|
574 |
|
Loss on
change in contractual interest rate (5) |
|
– |
|
|
|
– |
|
|
|
- |
|
|
|
2,957 |
|
Transaction
costs and credit facility fees (6) |
|
1,175 |
|
|
|
943 |
|
|
|
2,145 |
|
|
|
2,442 |
|
Business
optimization expenses (7) |
|
979 |
|
|
|
152 |
|
|
|
2,912 |
|
|
|
7,316 |
|
Other |
|
171 |
|
|
|
(199 |
) |
|
|
202 |
|
|
|
(120 |
) |
Adjusted
EBITDA |
|
111,128 |
|
|
|
91,816 |
|
|
|
317,730 |
|
|
|
278,387 |
|
Adjusted
EBITDA attributable to noncontrolling interests |
|
2,486 |
|
|
|
769 |
|
|
|
6,075 |
|
|
|
3,784 |
|
Adjusted
EBITDA attributable to Generac Holdings Inc. |
$ |
108,642 |
|
|
$ |
91,047 |
|
|
$ |
311,655 |
|
|
$ |
274,603 |
|
|
(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 $1.2 million
and $4.7 million for the three months and year ended December 31,
2017, respectively, and $1.1 million and $8.0 million for the three
months and year ended December 31, 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 year ended December 31, 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 projections at that 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 three months and year ended December 31, 2017,
represents severance and other non-recurring plant consolidation
costs. For the year ended December 31, 2016, primarily 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 December 31, |
|
Year Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
Net income
attributable to Generac Holdings Inc. |
$ |
81,175 |
|
|
$ |
41,509 |
|
|
$ |
159,386 |
|
|
$ |
98,788 |
|
Net income
attributable to noncontrolling interests (1) |
|
1,316 |
|
|
|
136 |
|
|
|
1,749 |
|
|
|
24 |
|
Net
income |
|
82,491 |
|
|
|
41,645 |
|
|
|
161,135 |
|
|
|
98,812 |
|
Provision
for income taxes |
|
607 |
|
|
|
24,416 |
|
|
|
43,553 |
|
|
|
57,570 |
|
Income
before provision for income taxes |
|
83,098 |
|
|
|
66,061 |
|
|
|
204,688 |
|
|
|
156,382 |
|
Amortization of intangible assets |
|
7,307 |
|
|
|
7,428 |
|
|
|
28,861 |
|
|
|
32,953 |
|
Amortization of deferred finance costs and original issue
discount |
|
1,116 |
|
|
|
711 |
|
|
|
3,516 |
|
|
|
3,940 |
|
Loss on
extinguishment of debt (5) |
|
– |
|
|
|
574 |
|
|
|
- |
|
|
|
574 |
|
Loss on
change in contractual interest rate (6) |
|
– |
|
|
|
– |
|
|
|
- |
|
|
|
2,957 |
|
Transaction
costs and other purchase accounting adjustments (8) |
|
727 |
|
|
|
494 |
|
|
|
1,706 |
|
|
|
5,653 |
|
Business
optimization expenses (7) |
|
979 |
|
|
|
152 |
|
|
|
2,912 |
|
|
|
7,316 |
|
Adjusted
net income before provision for income taxes |
|
93,227 |
|
|
|
75,420 |
|
|
|
241,683 |
|
|
|
209,775 |
|
Cash income
tax expense (9) |
|
(6,017 |
) |
|
|
(3,704 |
) |
|
|
(25,624 |
) |
|
|
(9,299 |
) |
Adjusted
net income |
|
87,210 |
|
|
|
71,716 |
|
|
|
216,059 |
|
|
|
200,476 |
|
Adjusted
net income attributable to noncontrolling interests |
|
1,289 |
|
|
|
280 |
|
|
|
3,201 |
|
|
|
2,219 |
|
Adjusted
net income attributable to Generac Holdings Inc. |
$ |
85,921 |
|
|
$ |
71,436 |
|
|
$ |
212,858 |
|
|
$ |
198,257 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted
net income attributable to Generac Holdings Inc. per |
|
|
|
|
|
|
|
|
|
common share - diluted: |
$ |
1.37 |
|
|
$ |
1.12 |
|
|
$ |
3.40 |
|
|
$ |
3.03 |
|
Weighted
average common shares outstanding - diluted: |
|
62,500,072 |
|
|
|
63,533,112 |
|
|
|
62,642,872 |
|
|
|
65,382,774 |
|
|
|
|
|
|
|
|
|
|
|
(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 months and year ended December 31,
2017 is based on an anticipated cash income tax rate of 12.5% for
the full year ended 2017. Amount for the three months and year
ended December 31, 2016 is based on an anticipated cash income tax
rate of 5.9% 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 December 31, |
|
Year Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
Net cash
provided by operating activities |
$ |
138,397 |
|
|
$ |
123,896 |
|
|
$ |
261,116 |
|
|
$ |
253,409 |
|
Expenditures for property and equipment |
|
(16,603 |
) |
|
|
(9,620 |
) |
|
|
(33,261 |
) |
|
|
(30,467 |
) |
Free cash
flow |
$ |
121,794 |
|
|
$ |
114,276 |
|
|
$ |
227,855 |
|
|
$ |
222,942 |
|
|
|
|
|
|
|
|
|
|
|
Net
Debt to Adjusted EBITDA Leverage Ratio |
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
|
2017 |
|
2016 |
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings |
$ |
20,602 |
|
|
$ |
31,198 |
|
|
|
|
|
Current
portion of long-term borrowings and capital lease obligations |
|
1,572 |
|
|
|
14,965 |
|
|
|
|
|
Long-term
borrowings and capital lease obligations |
|
906,548 |
|
|
|
1,006,758 |
|
|
|
|
|
Less:
Cash |
|
(138,472 |
) |
|
|
(67,272 |
) |
|
|
|
|
Net
debt |
|
790,250 |
|
|
|
985,649 |
|
|
|
|
|
Adjusted
EBITDA attributable to Generac Holdings Inc. |
|
311,655 |
|
|
|
274,603 |
|
|
|
|
|
Net debt to
adjusted EBITDA leverage ratio |
|
2.5 |
|
|
|
3.6 |
|
|
|
|
|
|
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