Record second quarter results driven by strong,
broad-based demand and margin growth; Raising outlook for 2018
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, 2018.
Second Quarter 2018
Highlights
- Net sales increased 25.3% to $494.9 million during the second
quarter of 2018 as compared to $394.9 million in the prior-year
second quarter, including $4.0 million of contribution from the
Selmec acquisition, which closed on June 1, 2018. Core sales
growth, which excludes both the favorable impact of acquisitions
and foreign currency, was approximately 23%.
- Gross profit margin improved 190 basis points to 35.6% as
compared to 33.7% in the second quarter of 2017.
- Net income attributable to the Company during the second
quarter was $53.3 million, or $0.82 per share, as compared to $25.3
million, or $0.41 per share, for the same period of
2017.
- Adjusted net income attributable to the Company, as defined in
the accompanying reconciliation schedules, was $68.9 million, or
$1.11 per share, as compared to $42.7 million, or $0.68 per share,
in the second quarter of 2017.
- Adjusted EBITDA attributable to the Company, as defined in the
accompanying reconciliation schedules, was $99.6 million as
compared to $68.3 million in the second quarter last
year.
- Cash flow from operations was $50.7 million as compared to
$59.5 million in the prior year quarter. Free cash flow, as
defined in the accompanying reconciliation schedules, was $45.9
million as compared to $53.7 million in the second quarter of
2017.
- As a result of the continued strong demand for both residential
and commercial & industrial (“C&I”) products, together with
the closing of the Selmec acquisition, the Company is increasing
its full-year 2018 sales growth guidance to approximately 13 to 14%
with Adjusted EBITDA margins of approximately 20.0%.
“Our second quarter results further demonstrate
the tremendous earnings power of Generac as solid execution across
our entire business helped drive a 300 basis point expansion in
EBITDA margins over the prior year,” said Aaron Jagdfeld, President
and Chief Executive Officer. “We continue to see robust
demand across all of our end markets and geographies, with
particular strength coming from residential products as power
outages over the last twelve months have been well above the
long-term average. Global interest for our C&I mobile and
stationary products has also been strong primarily driven by an
increase in telecom, healthcare and other large projects, as well
as the continued investment in fleet equipment by our rental
account customers. Lastly, on June 1st, we closed on the
acquisition of Selmec, further expanding our presence in the
important Latin American backup power market.”
Additional Second Quarter 2018
Consolidated Highlights
Residential product sales increased 24.1% to
$246.4 million as compared to $198.5 million in the prior
year. C&I product sales increased 26.9% to $215.6 million
as compared to $169.9 million in the prior year, with core sales
growth of approximately 21%.
Gross profit margin improved 190 basis points to
35.6% as compared to 33.7% in the prior-year second quarter.
The increase reflected better leverage of fixed manufacturing costs
on the significant increase in sales, a more favorable pricing
environment, and focused initiatives to improve margins.
These items were partially offset by general inflationary pressures
from higher commodities, currencies, wages and logistics costs.
Operating expenses increased $9.7 million, or 11.9%, as compared to
the second quarter of 2017. The increase was primarily driven
by higher variable operating expenses given the higher sales
volumes, an increase in employee costs including additional
incentive compensation, and increased International operating
expenses given the stronger Euro. These items were partially
offset by lower promotional costs as well as lower intangible
amortization expense.
Consolidated Adjusted EBITDA, before deducting
for non-controlling interests, improved to $102.2 million, or 20.7%
of net sales, as compared to $69.7 million, or 17.7% of net sales,
in the prior year. Cash flow from operations was $50.7 million as
compared to $59.5 million in the prior-year second quarter, and
free cash flow was $45.9 million as compared to $53.7 million in
the same quarter last year. The year-over-year decline in
second quarter cash flow reflected increased working capital
investment driven by organic sales growth and the replenishment of
inventory levels in anticipation of the summer storm
season.
The current year earnings per share calculation
of $0.82 includes the impact of a $2.3 million adjustment to
increase the value of the redeemable noncontrolling interest for
the Pramac acquisition, resulting in a $0.04 reduction in earnings
per share. Under U.S. GAAP accounting rules, any adjustments to the
redemption value are recorded directly to retained earnings.
However, the redemption value adjustments are required to be
reflected in the earnings per share calculation as detailed in the
accompanying reconciliation schedules.
On January 1, 2018, the Company adopted
Accounting Standards Update 2014-09, Revenue from Contracts with
Customers, and all related amendments, commonly known as the “new
revenue recognition standard”. The full retrospective method
was elected under this standard, which requires application to all
periods presented. As a result, the prior-year 2017 results
have been restated accordingly. However, the adoption of this
standard did not have a material impact on the Company’s financial
statements.
Business Segment Results
Domestic Segment
Domestic segment sales increased 24.8% to $381.0
million as compared to $305.4 million in the prior-year
quarter. The current-year quarter continued to experience
strong growth in shipments of home standby and portable generators
and also benefitted from robust C&I shipments driven by mobile
products fleet replacement and strength in stationary generators
through national accounts. Increased service part sales also
contributed to the year-over-year growth.
Adjusted EBITDA for the segment was $90.6
million, or 23.8% of net sales, as compared to $63.7 million in the
prior year, or 20.9% of net sales. Adjusted EBITDA margin in
the current year benefitted from improved overall operating
leverage on the higher organic sales volumes, a favorable pricing
environment, lower promotional costs, and focused margin
improvement initiatives. These benefits were partially offset
by an increase in employee costs, including higher incentive
compensation, and general inflationary pressures.
International Segment
International segment sales increased 27.3% to
$113.9 million as compared to $89.5 million in the prior-year
quarter, including $4.0 million of contribution from the Selmec
acquisition. Core sales growth was approximately 16%,
primarily due to broad-based growth of C&I products across
Europe, Asia and Latin America.
Adjusted EBITDA for the segment, before
deducting for non-controlling interests, improved to $11.6 million,
or 10.2% of net sales, as compared to $6.0 million, or 6.7% of net
sales, in the prior year. The improvement was primarily due
to increased leverage of fixed operating costs on the higher
organic sales and favorable mix. These favorable impacts were
partially offset by higher commodity prices, along with the
expansion of certain branch operations.
Updated 2018 Outlook The
Company is increasing its prior guidance for revenue growth for
full-year 2018 due to improving end-market conditions and the
closing of the Selmec acquisition. Full year net sales are
now expected to grow between 13 to 14% over the prior year, which
is an increase from the 6 to 8% growth previously expected.
Core sales growth is expected to be approximately 10%, which is an
increase from the 5 to 6% growth previously expected. This
top-line guidance assumes no “major” outage events and a baseline
power outage severity level similar to the longer-term average for
the remainder of the year. Should the baseline power outage
environment in 2018 be higher, or if there is a “major” event
during the year, the Company could exceed these expectations.
Given the increase in net sales guidance, net
income margins, before deducting for non-controlling interests, are
now expected to be approximately 10.5% for the full-year 2018,
which is an increase from the 9.5 to 10.0% guidance previously
expected. Adjusted EBITDA margins, also before deducting for
non-controlling interests, are now expected to be approximately
20.0% for the year, up from the prior 19.0 to 19.5%
guidance.
Operating and free cash flow generation is
expected to remain strong, with the conversion of adjusted net
income to free cash flow still forecasted to be over 90%.
Conference Call and Webcast
Generac management will hold a conference call
at 9:00 a.m. EDT on Wednesday, August 1, 2018 to discuss highlights
of the second quarter of 2018 operating results. The conference
call can be accessed by dialing (866) 415-3113 (domestic) or +1
(678) 509-7544 (international) and entering passcode 1768097.
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 1768097. The telephonic
replay will be available for 7 days.
About Generac
Founded in 1959, Generac is 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 and labor needed in producing Generac products;
- the impact on our results of possible fluctuations in interest
rates, foreign currency exchange rates, commodities, product mix,
and regulatory tariffs;
- 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 2017 Annual Report on Form 10-K
and in its periodic reports on Form 10-Q. Stockholders, potential
investors and other readers should consider these factors carefully
in evaluating the forward-looking statements.
Any forward-looking statement made by Generac in
this press release speaks only as of the date on which it is
made. Generac undertakes no obligation to update any
forward-looking statement, whether as a result of new information,
future developments or otherwise, except as may be required by
law.
Non-GAAP Financial Metrics
Core Sales
The Company references core sales to further
supplement Generac's condensed consolidated financial statements
presented in accordance with U.S. GAAP. Core sales excludes
the impact of acquisitions and fluctuations in foreign currency
translation. Management believes that core sales facilitates
easier and more meaningful comparison of net sales performance with
prior and future periods.
Adjusted EBITDA
The computation of adjusted EBITDA attributable
to the Company 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, plus
proceeds from beneficial interests in securitization transactions,
less expenditures for property and equipment, and is intended to be
a measure of operational cash flow taking into account additional
capital expenditure investment into the business.
The presentation of this additional information
is not meant to be considered in isolation of, or as a substitute
for, results prepared in accordance with U.S. GAAP. Please
see 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: York
RagenChief Financial Officer (262) 506-6064
InvestorRelations@generac.com
|
Generac Holdings Inc. |
Condensed Consolidated Balance Sheets |
(U.S. Dollars in Thousands, Except Share and Per Share
Data) |
(Unaudited) |
|
|
|
|
|
June 30, |
|
December
31, |
|
|
2018 |
|
|
|
2017 |
|
Assets |
|
|
|
Current assets: |
|
|
|
|
|
Cash and
cash equivalents |
$ |
111,714 |
|
|
$ |
138,472 |
|
Accounts receivable, less allowance for doubtful accounts |
|
311,668 |
|
|
|
279,294 |
|
Inventories |
|
479,880 |
|
|
|
387,049 |
|
Prepaid
expenses and other assets |
|
27,174 |
|
|
|
19,741 |
|
Total
current assets |
|
930,436 |
|
|
|
824,556 |
|
|
|
|
|
Property and equipment,
net |
|
233,433 |
|
|
|
230,380 |
|
|
|
|
|
Customer lists,
net |
|
69,772 |
|
|
|
41,064 |
|
Patents, net |
|
34,770 |
|
|
|
39,617 |
|
Other intangible
assets, net |
|
3,370 |
|
|
|
2,401 |
|
Tradenames, net |
|
154,495 |
|
|
|
152,683 |
|
Goodwill |
|
758,072 |
|
|
|
721,523 |
|
Deferred income
taxes |
|
1,633 |
|
|
|
3,238 |
|
Other assets |
|
23,294 |
|
|
|
10,502 |
|
Total assets |
$ |
2,209,275 |
|
|
$ |
2,025,964 |
|
|
|
|
|
Liabilities and stockholders’ equity |
|
|
|
Current
liabilities: |
|
|
Short-term borrowings |
$ |
23,995 |
|
|
$ |
20,602 |
|
Accounts
payable |
|
274,234 |
|
|
|
233,639 |
|
Accrued
wages and employee benefits |
|
32,820 |
|
|
|
27,992 |
|
Other
accrued liabilities |
|
147,628 |
|
|
|
112,618 |
|
Current
portion of long-term borrowings and capital lease obligations |
|
1,372 |
|
|
|
1,572 |
|
Total
current liabilities |
|
480,049 |
|
|
|
396,423 |
|
|
|
|
|
Long-term borrowings
and capital lease obligations |
|
908,066 |
|
|
|
906,548 |
|
Deferred income
taxes |
|
57,506 |
|
|
|
41,852 |
|
Other long-term
liabilities |
|
93,364 |
|
|
|
82,893 |
|
Total liabilities |
|
1,538,985 |
|
|
|
1,427,716 |
|
|
|
|
|
Redeemable
noncontrolling interests |
|
53,035 |
|
|
|
43,929 |
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
|
Common
stock, par value $0.01, 500,000,000 shares authorized, 71,030,347
and 70,820,173 |
|
|
|
|
|
|
|
shares
issued at June 30, 2018 and December 31, 2017, respectively |
|
710 |
|
|
|
708 |
|
Additional paid-in capital |
|
468,598 |
|
|
|
459,816 |
|
Treasury
stock, at cost |
|
(321,052 |
) |
|
|
(294,005 |
) |
Excess
purchase price over predecessor basis |
|
(202,116 |
) |
|
|
(202,116 |
) |
Retained
earnings |
|
687,772 |
|
|
|
610,835 |
|
Accumulated other comprehensive loss |
|
(16,900 |
) |
|
|
(21,198 |
) |
Stockholders’ equity attributable to Generac Holdings,
Inc. |
|
617,012 |
|
|
|
554,040 |
|
Noncontrolling interests |
|
243 |
|
|
|
279 |
|
Total
stockholders' equity |
|
617,255 |
|
|
|
554,319 |
|
Total liabilities and
stockholders’ equity |
$ |
2,209,275 |
|
|
$ |
2,025,964 |
|
|
|
|
|
|
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, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
494,949 |
|
|
$ |
394,875 |
|
|
$ |
892,583 |
|
|
$ |
725,360 |
|
Costs of goods
sold |
|
318,693 |
|
|
|
261,954 |
|
|
|
576,338 |
|
|
|
483,639 |
|
Gross profit |
|
176,256 |
|
|
|
132,921 |
|
|
|
316,245 |
|
|
|
241,721 |
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
Selling
and service |
|
46,052 |
|
|
|
42,010 |
|
|
|
88,734 |
|
|
|
81,477 |
|
Research
and development |
|
12,616 |
|
|
|
10,553 |
|
|
|
24,469 |
|
|
|
20,840 |
|
General
and administrative |
|
26,639 |
|
|
|
21,407 |
|
|
|
50,114 |
|
|
|
42,380 |
|
Amortization of intangibles |
|
5,482 |
|
|
|
7,129 |
|
|
|
11,114 |
|
|
|
14,312 |
|
Loss on
remeasurement of contingent consideration |
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
Total
operating expenses |
|
90,789 |
|
|
|
81,099 |
|
|
|
174,431 |
|
|
|
159,009 |
|
Income from
operations |
|
85,467 |
|
|
|
51,822 |
|
|
|
141,814 |
|
|
|
82,712 |
|
|
|
|
|
|
|
|
|
Other (expense)
income: |
|
|
|
|
|
|
|
Interest
expense |
|
(11,002 |
) |
|
|
(10,893 |
) |
|
|
(21,115 |
) |
|
|
(21,681 |
) |
Investment income |
|
367 |
|
|
|
38 |
|
|
|
713 |
|
|
|
43 |
|
Loss on extinguishment of debt |
|
(1,332 |
) |
|
|
– |
|
|
|
(1,332 |
) |
|
|
– |
|
Costs
related to acquisition |
|
(26 |
) |
|
|
(136 |
) |
|
|
(37 |
) |
|
|
(321 |
) |
Other,
net |
|
(861 |
) |
|
|
(1,577 |
) |
|
|
(2,244 |
) |
|
|
(1,494 |
) |
Total
other expense, net |
|
(12,854 |
) |
|
|
(12,568 |
) |
|
|
(24,015 |
) |
|
|
(23,453 |
) |
|
|
|
|
|
|
|
|
Income before provision
for income taxes |
|
72,613 |
|
|
|
39,254 |
|
|
|
117,799 |
|
|
|
59,259 |
|
Provision for income
taxes |
|
18,382 |
|
|
|
13,878 |
|
|
|
29,798 |
|
|
|
21,701 |
|
Net income |
|
54,231 |
|
|
|
25,376 |
|
|
|
88,001 |
|
|
|
37,558 |
|
Net income attributable
to noncontrolling interests |
|
970 |
|
|
|
85 |
|
|
|
1,095 |
|
|
|
92 |
|
Net income attributable
to Generac Holdings Inc. |
$ |
53,261 |
|
|
$ |
25,291 |
|
|
$ |
86,906 |
|
|
$ |
37,466 |
|
|
|
|
|
|
|
|
|
Net
income attributable to common shareholders per common share -
basic: |
$ |
0.83 |
|
|
$ |
0.41 |
|
|
$ |
1.25 |
|
|
$ |
0.62 |
|
Weighted
average common shares outstanding - basic: |
|
61,534,423 |
|
|
|
62,146,393 |
|
|
|
61,696,014 |
|
|
|
62,260,170 |
|
|
|
|
|
|
|
|
|
Net income attributable to common shareholders per common
share - diluted: |
$ |
0.82 |
|
|
$ |
0.41 |
|
|
$ |
1.24 |
|
|
$ |
0.61 |
|
|
Weighted
average common shares outstanding - diluted: |
|
62,054,447 |
|
|
|
62,635,437 |
|
|
|
62,259,712 |
|
|
|
62,849,877 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Generac Holdings
Inc. |
$ |
47,884 |
|
|
$ |
32,208 |
|
|
$ |
92,587 |
|
|
$ |
47,928 |
|
|
|
|
|
|
|
|
|
|
Generac Holdings Inc. |
Condensed Consolidated Statements of Cash Flows |
(U.S. Dollars in Thousands) |
(Unaudited) |
|
|
|
|
|
Six Months Ended June 30, |
|
|
2018 |
|
|
|
2017 |
|
Operating
activities |
|
|
|
Net
income |
$ |
88,001 |
|
|
$ |
37,558 |
|
Adjustment to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation |
|
12,169 |
|
|
|
11,271 |
|
Amortization of intangible assets |
|
11,114 |
|
|
|
14,312 |
|
Amortization of original issue discount and deferred financing
costs |
|
2,367 |
|
|
|
1,308 |
|
Loss on
extinguishment of debt |
|
1,332 |
|
|
|
– |
|
Loss on
remeasurement of contingent consideration |
|
– |
|
|
|
– |
|
Deferred
income taxes |
|
6,257 |
|
|
|
16,500 |
|
Share-based compensation expense |
|
6,991 |
|
|
|
5,818 |
|
Other |
|
599 |
|
|
|
377 |
|
Net changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts
receivable |
|
(24,876 |
) |
|
|
2,504 |
|
Inventories |
|
(85,592 |
) |
|
|
(8,236 |
) |
Other
assets |
|
(13,047 |
) |
|
|
1,069 |
|
Accounts
payable |
|
33,442 |
|
|
|
(26,560 |
) |
Accrued
wages and employee benefits |
|
4,510 |
|
|
|
1,902 |
|
Other
accrued liabilities |
|
36,578 |
|
|
|
(3,144 |
) |
Excess
tax benefits from equity awards |
|
(188 |
) |
|
|
(403 |
) |
Net cash
provided by operating activities |
|
79,657 |
|
|
|
54,276 |
|
|
|
|
|
Investing
activities |
|
|
|
Proceeds
from sale of property and equipment |
|
196 |
|
|
|
45 |
|
Proceeds
from beneficial interests in securitization transactions |
|
1,929 |
|
|
|
1,398 |
|
Expenditures for property and equipment |
|
(12,326 |
) |
|
|
(10,030 |
) |
Acquisition of business, net of cash acquired |
|
(71,926 |
) |
|
|
1,160 |
|
Net cash
used in investing activities |
|
(82,127 |
) |
|
|
(7,427 |
) |
|
|
|
|
Financing
activities |
|
|
|
Proceeds
from short-term borrowings |
|
12,133 |
|
|
|
62,435 |
|
Proceeds
from long-term borrowings |
|
50,000 |
|
|
|
3,069 |
|
Repayments of short-term borrowings |
|
(8,172 |
) |
|
|
(72,971 |
) |
Repayments of long-term borrowings and capital lease
obligations |
|
(50,797 |
) |
|
|
(9,806 |
) |
Stock
repurchases |
|
(25,656 |
) |
|
|
(30,012 |
) |
Cash
dividends paid to noncontrolling interests of subsidiary |
|
(314 |
) |
|
|
– |
|
Payment
of debt issuance costs |
|
(1,473 |
) |
|
|
(1,517 |
) |
Taxes
paid related to equity awards |
|
(1,725 |
) |
|
|
(1,958 |
) |
Proceeds
from exercise of stock options |
|
2,124 |
|
|
|
1,254 |
|
Net cash
used in financing activities |
|
(23,880 |
) |
|
|
(49,506 |
) |
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents |
|
(408 |
) |
|
|
2,456 |
|
|
|
|
|
Net
decrease in cash and cash equivalents |
|
(26,758 |
) |
|
|
(201 |
) |
Cash and
cash equivalents at beginning of period |
|
138,472 |
|
|
|
67,272 |
|
Cash and
cash equivalents at end of period |
$ |
111,714 |
|
|
$ |
67,071 |
|
|
|
|
|
|
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 |
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
Domestic |
$ |
381,047 |
|
$ |
305,406 |
|
$ |
681,266 |
|
$ |
552,574 |
International |
|
113,902 |
|
|
89,469 |
|
|
211,317 |
|
|
172,786 |
Total net
sales |
$ |
494,949 |
|
$ |
394,875 |
|
$ |
892,583 |
|
$ |
725,360 |
|
Product Classes |
|
|
|
|
|
|
|
Residential products |
$ |
246,398 |
|
$ |
198,468 |
|
$ |
436,872 |
|
$ |
352,685 |
Commercial & industrial products |
|
215,628 |
|
|
169,903 |
|
|
390,753 |
|
|
320,656 |
Other |
|
32,923 |
|
|
26,504 |
|
|
64,958 |
|
|
52,019 |
Total net
sales |
$ |
494,949 |
|
$ |
394,875 |
|
$ |
892,583 |
|
$ |
725,360 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
Domestic |
$ |
90,602 |
|
$ |
63,692 |
|
$ |
156,077 |
|
$ |
105,583 |
International |
|
11,628 |
|
|
6,034 |
|
|
17,934 |
|
|
10,846 |
Total
adjusted EBITDA (1) |
$ |
102,230 |
|
$ |
69,726 |
|
$ |
174,011 |
|
$ |
116,429 |
|
(1) See reconcilation 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, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
Net income
attributable to Generac Holdings Inc. |
$ |
53,261 |
|
|
$ |
25,291 |
|
|
$ |
86,906 |
|
|
$ |
37,466 |
|
Net income
attributable to noncontrolling interests |
|
970 |
|
|
|
85 |
|
|
|
1,095 |
|
|
|
92 |
|
Net
income |
|
54,231 |
|
|
|
25,376 |
|
|
|
88,001 |
|
|
|
37,558 |
|
Interest
expense |
|
11,002 |
|
|
|
10,893 |
|
|
|
21,115 |
|
|
|
21,681 |
|
Depreciation and amortization |
|
11,600 |
|
|
|
12,986 |
|
|
|
23,283 |
|
|
|
25,583 |
|
Income
taxes provision |
|
18,382 |
|
|
|
13,878 |
|
|
|
29,798 |
|
|
|
21,701 |
|
Non-cash
write-down and other adjustments (1) |
|
1,316 |
|
|
|
1,710 |
|
|
|
2,622 |
|
|
|
1,876 |
|
Non-cash
share-based compensation expense (2) |
|
3,885 |
|
|
|
3,186 |
|
|
|
6,991 |
|
|
|
5,818 |
|
Loss on
extinguishment of debt (3) |
|
1,332 |
|
|
|
- |
|
|
|
1,332 |
|
|
|
- |
|
Transaction
costs and credit facility fees (4) |
|
441 |
|
|
|
420 |
|
|
|
703 |
|
|
|
736 |
|
Business
optimization expenses (5) |
|
29 |
|
|
|
1,346 |
|
|
|
167 |
|
|
|
1,446 |
|
Other |
|
12 |
|
|
|
(69 |
) |
|
|
(1 |
) |
|
|
30 |
|
Adjusted
EBITDA |
|
102,230 |
|
|
|
69,726 |
|
|
|
174,011 |
|
|
|
116,429 |
|
Adjusted
EBITDA attributable to noncontrolling interests |
|
2,630 |
|
|
|
1,455 |
|
|
|
4,179 |
|
|
|
2,411 |
|
Adjusted
EBITDA attributable to Generac Holdings Inc. |
$ |
99,600 |
|
|
$ |
68,271 |
|
|
$ |
169,832 |
|
|
$ |
114,018 |
|
|
(1) Includes gains/losses on disposals of
assets, unrealized mark-to-market adjustments on commodity
contracts, and certain foreign currency and purchase accounting
related adjustments. A full description of these and the other
reconciliation adjustments contained in these schedules is included
in Generac's SEC filings. |
|
(2) Represents share-based compensation
expense to account for stock options, restricted stock and other
stock awards over their respective vesting periods. |
|
(3) Represents the non-cash write-off of
original issue discount and deferred financing costs due to a
voluntary prepayment of Term Loan debt. |
|
(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) Represents severance and other
non-recurring restructuring charges related to the consolidation of
certain of our facilities. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income to Adjusted net income reconciliation |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
Net income
attributable to Generac Holdings Inc. |
$ |
53,261 |
|
|
$ |
25,291 |
|
|
$ |
86,906 |
|
|
$ |
37,466 |
|
Net income
attributable to noncontrolling interests |
|
970 |
|
|
|
85 |
|
|
|
1,095 |
|
|
|
92 |
|
Net
income |
|
54,231 |
|
|
|
25,376 |
|
|
|
88,001 |
|
|
|
37,558 |
|
Provision
for income taxes |
|
18,382 |
|
|
|
13,878 |
|
|
|
29,798 |
|
|
|
21,701 |
|
Income
before provision for income taxes |
|
72,613 |
|
|
|
39,254 |
|
|
|
117,799 |
|
|
|
59,259 |
|
Amortization of intangible assets |
|
5,482 |
|
|
|
7,129 |
|
|
|
11,114 |
|
|
|
14,312 |
|
Amortization of deferred finance costs and original
issue discount |
|
1,190 |
|
|
|
818 |
|
|
|
2,367 |
|
|
|
1,308 |
|
Loss on extinguishment of debt (3) |
|
1,332 |
|
|
|
- |
|
|
|
1,332 |
|
|
|
- |
|
Transaction
costs and other purchase accounting adjustments (6) |
|
794 |
|
|
|
429 |
|
|
|
814 |
|
|
|
1,014 |
|
Business
optimization expenses (5) |
|
29 |
|
|
|
1,346 |
|
|
|
167 |
|
|
|
1,446 |
|
Adjusted net income before provision for income taxes |
|
81,440 |
|
|
|
48,976 |
|
|
|
133,593 |
|
|
|
77,339 |
|
Cash income
tax expense (7) |
|
(11,114 |
) |
|
|
(5,642 |
) |
|
|
(16,524 |
) |
|
|
(8,729 |
) |
Adjusted
net income |
|
70,326 |
|
|
|
43,334 |
|
|
|
117,069 |
|
|
|
68,610 |
|
Adjusted
net income attributable to noncontrolling interests |
|
1,383 |
|
|
|
633 |
|
|
|
2,044 |
|
|
|
1,215 |
|
Adjusted
net income attributable to Generac Holdings Inc. |
$ |
68,943 |
|
|
$ |
42,701 |
|
|
$ |
115,025 |
|
|
$ |
67,395 |
|
|
Adjusted
net income attributable to Generac Holdings Inc. per common
share - diluted: |
$ |
1.11 |
|
|
$ |
0.68 |
|
|
$ |
1.85 |
|
|
$ |
1.07 |
|
Weighted
average common shares outstanding - diluted: |
|
62,054,447 |
|
|
|
62,635,437 |
|
|
|
62,259,712 |
|
|
|
62,849,877 |
|
|
(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) Amounts for the three and six months
ended June 30, 2018 are now based on an anticipated cash income tax
rate of approximately 14% to 15% for the full year ended 2018.
Amounts for the three and six months ended June 30, 2017 were based
on an anticipated cash income tax rate at that time of
approximately 14% for the full year ended 2017. 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 full year cash tax rate to the period’s pretax income. |
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow Reconciliation |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
Net cash
provided by operating activities |
$ |
50,689 |
|
|
$ |
59,451 |
|
|
$ |
79,657 |
|
|
$ |
54,276 |
|
Proceeds from beneficial interests in securitization
transactions |
|
1,062 |
|
|
|
769 |
|
|
|
1,929 |
|
|
|
1,398 |
|
Expenditures for property and equipment |
|
(5,830 |
) |
|
|
(6,482 |
) |
|
|
(12,326 |
) |
|
|
(10,030 |
) |
Free cash
flow |
$ |
45,921 |
|
|
$ |
53,738 |
|
|
$ |
69,260 |
|
|
$ |
45,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Earnings Per Share |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Numerator |
|
|
|
|
|
|
|
Net income attributable to Generac Holdings Inc. |
$ |
53,261 |
|
|
$ |
25,291 |
|
|
$ |
86,906 |
|
|
$ |
37,466 |
|
Redeemable noncontrolling interest redemption value
adjustment |
|
(2,305 |
) |
|
|
295 |
|
|
|
(9,970 |
) |
|
|
909 |
|
Net income attributable to common shareholders |
$ |
50,956 |
|
|
$ |
25,586 |
|
|
$ |
76,936 |
|
|
$ |
38,375 |
|
|
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
|
Weighted average shares, basic |
|
61,534,423 |
|
|
|
62,146,393 |
|
|
|
61,696,014 |
|
|
|
62,260,170 |
|
Dilutive effect of stock compensation awards |
|
520,024 |
|
|
|
489,044 |
|
|
|
563,698 |
|
|
|
589,707 |
|
Diluted shares |
|
62,054,447 |
|
|
|
62,635,437 |
|
|
|
62,259,712 |
|
|
|
62,849,877 |
|
|
|
|
|
|
|
|
|
Net income attributable to common shareholders per share |
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.83 |
|
|
$ |
0.41 |
|
|
$ |
1.25 |
|
|
$ |
0.62 |
|
Diluted |
$ |
0.82 |
|
|
$ |
0.41 |
|
|
$ |
1.24 |
|
|
$ |
0.61 |
|
|
|
|
|
|
|
|
|
|
|
|
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