Generac Holdings Inc. (NYSE: GNRC) (“Generac” or the “Company”), a
leading global designer and manufacturer of energy technology
solutions and other power products, today reported financial
results for its third quarter ended September 30, 2022 and provided
its outlook for the full year 2022.
Third Quarter 2022 Highlights
- Net sales increased
15% to $1.09 billion during the third quarter of 2022 as compared
to $943 million in the prior-year third quarter. Core sales growth,
which excludes both the impact of acquisitions and foreign
currency, increased approximately 10%.
- Residential product
sales grew 9% to $664 million as compared to $609 million last
year.
- Commercial &
Industrial (“C&I”) product sales increased 20% to $311 million
as compared to $258 million in the prior year.
- Net income
attributable to the Company during the third quarter was $58
million, or $0.83 per share, as compared to $132 million, or $1.93
per share, for the same period of 2021. The current year net income
includes pre-tax charges totaling $55.3 million, including $17.9
million of bad debt expense related to a clean energy product
customer that has filed for bankruptcy and $37.3 million of clean
energy product warranty-related matters.
- Adjusted net income
attributable to the Company, as defined in the accompanying
reconciliation schedules, was $112 million, or $1.75 per share, as
compared to $151 million, or $2.35 per share, in the third quarter
of 2021.
- Adjusted EBITDA
before deducting for noncontrolling interests, as defined in the
accompanying reconciliation schedules, was $184 million, or 16.9%
of net sales, as compared to $209 million, or 22.2% of net sales,
in the prior year.
- On October 3rd, the
Company closed on the acquisition of Blue Pillar, an industrial
internet of things platform (IoT) developer headquartered in
Indianapolis, Indiana that designs, deploys, and manages industrial
IoT network software solutions to enable distributed energy
generation monitoring and control.
“As disclosed in our preliminary announcement, despite net sales
growing at a strong mid-teens rate, third quarter results fell
short of our prior expectations,” said Aaron Jagdfeld, President
and Chief Executive Officer. “Commercial & Industrial product
sales continued to experience strong growth during the quarter, but
Residential product sales began to slow as installation capacity
constraints in our distribution network led to higher field
inventory levels for home standby generators. This has resulted in
lower orders than expected from our channel partners even as we’ve
seen sequential improvements in several key metrics for the home
standby category. Additionally in the quarter, shipments of clean
energy products were negatively impacted by a large clean energy
product customer which ceased operations during the quarter.”
Jagdfeld continued, “While home standby order headwinds from our
channel partners are expected to persist through the first half of
2023, the secular growth themes and mega-trends supporting the
Company’s ‘Powering A Smarter World’ enterprise strategy are still
very much intact. As reliance on electricity grows and supply &
demand imbalances increase further, Generac will continue to invest
in technologies and solutions to lead the evolution to the next
generation grid.”
Additional Third Quarter 2022 Consolidated
Highlights
Gross profit margin was 33.2% as compared to 35.6% in the
prior-year third quarter. Continued higher input costs were
partially offset by realization of previously implemented pricing
actions, resulting in a modest price/cost headwind compared to the
prior year. In addition, recent acquisitions and less favorable
sales mix negatively impacted margins during the current year.
Operating expenses increased $111.2 million, or 68.4%, as
compared to the third quarter of 2021, which includes $55.3 million
of pre-tax charges comprised of $17.9 million of bad debt expense
related to a clean energy product customer that has filed for
bankruptcy and $37.3 million of clean energy product
warranty-related matters. The quarter also includes a $13.5 million
increase in acquisition-related amortization expense. The remaining
increase was primarily driven by the impact of recurring operating
expenses from recent acquisitions, increased employee costs, and
higher marketing spend most notably in the home standby
category.
Provision for income taxes for the current year quarter was
$11.6 million, or an effective tax rate of 16.1%, as compared to
$32.6 million, or a 19.7% effective tax rate, for the prior year.
The decrease in effective tax rate was primarily driven by certain
discrete tax items that decreased the tax expense in the current
year quarter on a net basis.
Cash flow from operations was $(56.0) million during the third
quarter, as compared to $74.4 million in the prior year. Free cash
flow, as defined in the accompanying reconciliation schedules, was
$(73.5) million as compared to $42.1 million in the third quarter
of 2021. The decline in free cash flow was due to lower operating
earnings, increased tax payments and higher working capital levels
in the current year quarter, partially offset by lower capital
expenditures.
During the third quarter of 2022, the Company repurchased
536,633 shares of its common stock for $123.9 million, which
exhausted the Company’s previously existing stock repurchase
program. In July 2022, the Company's Board of Directors approved
another stock repurchase program which allows for the repurchase of
up to $500 million of the Company's common stock over a 24-month
period.Business Segment Results
Domestic Segment
Domestic segment total sales (including inter-segment sales)
increased 18% to $946.6 million as compared to $802.2 million in
the prior year quarter, with the impact of acquisitions
contributing approximately 8% of the revenue growth for the
quarter. Core sales growth was led by C&I product
shipments experiencing strong growth across all channels,
highlighted by national rental equipment, telecom and industrial
distributor customers, with home standby generators also
experiencing year-over-year growth in the quarter. This growth was
partially offset by lower clean energy product sales.
Adjusted EBITDA for the segment was $159.8 million, or 16.9% of
domestic segment total sales, as compared to $187.7 million in the
prior year, or 23.4% of total sales. This margin performance was
impacted by higher input costs, partially offset by pricing
benefits. In addition, continued operating expense investments for
future growth and the impact of acquisitions had an unfavorable
effect on margins during the quarter, as operating expenses as
percentage of sales came in higher than expected on the lower
shipment volumes relative to expectations.
International Segment
International segment total sales (including inter-segment
sales) increased 14% to $182.5 million as compared to $159.8
million in the prior year quarter, with the impact of acquisitions
and foreign currency providing an approximately 8% net headwind to
revenue growth for the quarter. The 22% core total
sales growth for the segment was driven by strong growth across all
major regions as compared to the prior year, most notably in
Europe.
Adjusted EBITDA for the segment, before deducting for
noncontrolling interests, was $24.0 million, or 13.2% of
international segment total sales, as compared to $21.5 million, or
13.4% of total sales, in the prior year. This margin
performance was impacted by less favorable sales mix, mostly offset
by improved operating leverage on higher volumes.
2022 Outlook Update
Consistent with the update provided in the Company’s preliminary
third quarter earnings announcement on October 19th, Generac
expects its full-year 2022 net sales growth to be approximately 22
to 24% as compared to the prior year, which includes approximately
5 to 7% net impact from acquisitions and foreign currency.
Additionally, the Company expects net income margin, before
deducting for non-controlling interests, to be approximately 9.0 to
10.0% for the full-year 2022. This net income guidance includes the
impact of the aforementioned $55.3 million of third quarter pre-tax
charges. The corresponding adjusted EBITDA margin is expected to be
approximately 18.0 to 19.0%.
Conference Call and Webcast
Generac management will hold a conference call at 10:00 a.m. EDT
on Wednesday, November 2, 2022 to discuss third quarter 2022
operating results. The conference call can be accessed at the
following link:
https://register.vevent.com/register/BI3d00d0fc061b4e438a6aee644a56a692.
Individuals that wish to listen via telephone will be given dial-in
information.
The conference call will also be webcast simultaneously on
Generac's website (http://www.generac.com), accessed 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.
About Generac
Generac is a leading energy technology company that provides
backup and prime power systems for home and industrial
applications, solar + battery storage solutions, smart home energy
management devices and energy services, advanced power grid
software platforms and engine- and battery-powered tools and
equipment. Founded in 1959, Generac introduced the first affordable
backup generator and later created the category of automatic home
standby generator. The company is committed to sustainable, cleaner
energy products poised to revolutionize the 21st century electrical
grid.
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 our products;
- fluctuations in cost and quality of
raw materials required to manufacture our products;
- availability of both labor and key
components from our global supply chain, including single-sourced
components, needed in producing our products;
- 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;
- the impact on our results of
possible fluctuations in interest rates, foreign currency exchange
rates, commodities, product mix, logistics costs and regulatory
tariffs;
- the duration and impact of the
COVID-19 pandemic;
- difficulties we may encounter as
our business expands globally or into new markets;
- our dependence on our distribution
network;
- our ability to invest in, develop
or adapt to changing technologies and manufacturing
techniques;
- loss of our key management and
employees;
- increase in product and other
liability claims or recalls;
- failures or security breaches of
our networks, information technology systems, or connected
products;
- changes in environmental, health
and safety, or product compliance laws and regulations affecting
our products, operations, or customer demand;
- significant legal proceedings,
claims, lawsuits or government investigations.
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. In the current
environment, some of the above factors have materialized and may or
will continue to be impacted by the COVID-19 pandemic, which may
cause actual results to vary from these 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 2021 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
To supplement our condensed consolidated financial statements
presented in accordance with U.S. GAAP, the Company provides the
computation of Adjusted EBITDA attributable to the Company, which
is defined as net income before noncontrolling interest adjusted
for the following items: interest expense, depreciation expense,
amortization of intangible assets, income tax expense, certain
non-cash gains and losses including purchase accounting and
contingent consideration adjustments, share-based compensation
expense, losses on extinguishment of debt, certain transaction
costs and credit facility fees, business optimization expenses,
certain specific provisions, and adjusted EBITDA attributable to
noncontrolling interests, as set forth in the reconciliation table
below.
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 noncontrolling
interests adjusted for the following items: 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 and other charges, certain other non-cash gains and
losses, and adjusted net income attributable to non-controlling
interests. In addition, for periods prior to 2022, adjusted net
income reflects cash income tax expense due to the existence of the
tax shield from the amortization of tax-deductible goodwill and
intangible assets from the acquisition of the Company by CCMP
Capital Advisors, LLC in 2006. Due to the expiration of this tax
shield in the fourth quarter of 2021, there is no similar
reconciling item starting in 2022.
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 the
accompanying Reconciliation Schedules and 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. HarrisSenior
Vice President – Corporate Development & Investor Relations
(262) 506-6064InvestorRelations@generac.com
Generac Holdings
Inc. |
Condensed
Consolidated Statements of Comprehensive Income |
(U.S. Dollars in
Thousands, Except Share and Per Share Data) |
(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
Net
sales |
$ |
1,088,258 |
|
|
$ |
942,698 |
|
|
$ |
3,515,505 |
|
|
$ |
2,670,113 |
|
Costs of
goods sold |
|
727,154 |
|
|
|
606,704 |
|
|
|
2,336,668 |
|
|
|
1,672,570 |
|
Gross
profit |
|
361,104 |
|
|
|
335,994 |
|
|
|
1,178,837 |
|
|
|
997,543 |
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
Selling and service |
|
170,381 |
|
|
|
82,242 |
|
|
|
388,690 |
|
|
|
229,443 |
|
Research and development |
|
39,985 |
|
|
|
27,165 |
|
|
|
121,328 |
|
|
|
74,897 |
|
General and administrative |
|
37,464 |
|
|
|
40,802 |
|
|
|
132,036 |
|
|
|
115,311 |
|
Amortization of intangibles |
|
25,751 |
|
|
|
12,206 |
|
|
|
77,681 |
|
|
|
32,237 |
|
Total
operating expenses |
|
273,581 |
|
|
|
162,415 |
|
|
|
719,735 |
|
|
|
451,888 |
|
Income from
operations |
|
87,523 |
|
|
|
173,579 |
|
|
|
459,102 |
|
|
|
545,655 |
|
|
|
|
|
|
|
|
|
Other
(expense) income: |
|
|
|
|
|
|
|
Interest expense |
|
(15,514 |
) |
|
|
(7,980 |
) |
|
|
(35,303 |
) |
|
|
(23,424 |
) |
Investment income |
|
451 |
|
|
|
165 |
|
|
|
620 |
|
|
|
1,012 |
|
Loss on extinguishment of debt |
|
– |
|
|
|
– |
|
|
|
(3,743 |
) |
|
|
(831 |
) |
Other, net |
|
(420 |
) |
|
|
(400 |
) |
|
|
331 |
|
|
|
2,536 |
|
Total other
expense, net |
|
(15,483 |
) |
|
|
(8,215 |
) |
|
|
(38,095 |
) |
|
|
(20,707 |
) |
|
|
|
|
|
|
|
|
Income
before provision for income taxes |
|
72,040 |
|
|
|
165,364 |
|
|
|
421,007 |
|
|
|
524,948 |
|
Provision
for income taxes |
|
11,594 |
|
|
|
32,611 |
|
|
|
86,028 |
|
|
|
114,341 |
|
Net
income |
|
60,446 |
|
|
|
132,753 |
|
|
|
334,979 |
|
|
|
410,607 |
|
Net income
attributable to noncontrolling interests |
|
2,176 |
|
|
|
1,183 |
|
|
|
6,492 |
|
|
|
3,008 |
|
Net income
attributable to Generac Holdings Inc. |
$ |
58,270 |
|
|
$ |
131,570 |
|
|
$ |
328,487 |
|
|
$ |
407,599 |
|
|
|
|
|
|
|
|
|
Net income attributable to common shareholders per common share -
basic: |
$ |
0.84 |
|
|
$ |
1.98 |
|
|
$ |
4.69 |
|
|
$ |
6.42 |
|
Weighted average common shares outstanding - basic: |
|
63,249,881 |
|
|
|
62,690,437 |
|
|
|
63,480,161 |
|
|
|
62,583,957 |
|
|
|
|
|
|
|
|
|
Net income attributable to common shareholders per common share -
diluted: |
$ |
0.83 |
|
|
$ |
1.93 |
|
|
$ |
4.61 |
|
|
$ |
6.27 |
|
Weighted average common shares outstanding - diluted: |
|
64,267,638 |
|
|
|
64,208,116 |
|
|
|
64,630,346 |
|
|
|
64,146,281 |
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Generac Holdings Inc. |
$ |
21,683 |
|
|
$ |
113,727 |
|
|
$ |
264,912 |
|
|
$ |
386,789 |
|
|
|
|
|
|
|
|
|
Generac Holdings
Inc. |
Condensed
Consolidated Balance Sheets |
(U.S. Dollars in
Thousands, Except Share and Per Share Data) |
(Unaudited) |
|
|
|
|
|
September
30, |
|
December
31, |
|
|
2022 |
|
|
|
2021 |
|
Assets |
|
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
229,911 |
|
|
$ |
147,339 |
|
Accounts receivable, less allowance for credit losses |
|
542,528 |
|
|
|
546,466 |
|
Inventories |
|
1,424,691 |
|
|
|
1,089,705 |
|
Prepaid expenses and other current assets |
|
116,139 |
|
|
|
64,954 |
|
Total
current assets |
|
2,313,269 |
|
|
|
1,848,464 |
|
|
|
|
|
Property and
equipment, net |
|
450,133 |
|
|
|
440,852 |
|
|
|
|
|
Customer
lists, net |
|
205,016 |
|
|
|
238,722 |
|
Patents and
technology, net |
|
455,845 |
|
|
|
492,473 |
|
Other
intangible assets, net |
|
44,207 |
|
|
|
66,436 |
|
Tradenames,
net |
|
228,170 |
|
|
|
243,531 |
|
Goodwill |
|
1,359,588 |
|
|
|
1,409,674 |
|
Deferred
income taxes |
|
16,273 |
|
|
|
15,740 |
|
Operating
lease and other assets |
|
173,792 |
|
|
|
121,888 |
|
Total
assets |
$ |
5,246,293 |
|
|
$ |
4,877,780 |
|
|
|
|
|
Liabilities and stockholders’ equity |
|
|
|
Current
liabilities: |
|
|
|
Short-term borrowings |
$ |
64,588 |
|
|
$ |
72,035 |
|
Accounts payable |
|
523,552 |
|
|
|
674,208 |
|
Accrued wages and employee benefits |
|
54,430 |
|
|
|
72,060 |
|
Accrued product liability |
|
100,451 |
|
|
|
59,052 |
|
Other accrued liabilities |
|
354,053 |
|
|
|
272,622 |
|
Current portion of long-term borrowings and finance lease
obligations |
|
8,056 |
|
|
|
5,930 |
|
Total
current liabilities |
|
1,105,130 |
|
|
|
1,155,907 |
|
|
|
|
|
Long-term
borrowings and finance lease obligations |
|
1,282,856 |
|
|
|
902,091 |
|
Deferred
income taxes |
|
131,978 |
|
|
|
205,964 |
|
Operating
lease and other long-term liabilities |
|
319,788 |
|
|
|
341,681 |
|
Total
liabilities |
|
2,839,752 |
|
|
|
2,605,643 |
|
|
|
|
|
Redeemable
noncontrolling interest |
|
86,936 |
|
|
|
58,050 |
|
|
|
|
|
Stockholders’ equity: |
|
|
|
Common stock, par value $0.01, 500,000,000 shares authorized,
72,640,001 and 72,386,017 |
|
|
|
shares issued at September 30, 2022 and December 31, 2021,
respectively |
|
728 |
|
|
|
725 |
|
Additional paid-in capital |
|
976,001 |
|
|
|
952,939 |
|
Treasury stock, at cost |
|
(599,304 |
) |
|
|
(448,976 |
) |
Excess purchase price over predecessor basis |
|
(202,116 |
) |
|
|
(202,116 |
) |
Retained earnings |
|
2,263,627 |
|
|
|
1,965,957 |
|
Accumulated other comprehensive loss |
|
(120,406 |
) |
|
|
(54,755 |
) |
Stockholders’ equity attributable to Generac Holdings Inc. |
|
2,318,530 |
|
|
|
2,213,774 |
|
Noncontrolling interests |
|
1,075 |
|
|
|
313 |
|
Total
stockholders’ equity |
|
2,319,605 |
|
|
|
2,214,087 |
|
Total
liabilities and stockholders’ equity |
$ |
5,246,293 |
|
|
$ |
4,877,780 |
|
|
|
|
|
Generac Holdings
Inc. |
Condensed
Consolidated Statements of Cash Flows |
(U.S. Dollars in
Thousands) |
(Unaudited) |
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2022 |
|
|
|
2021 |
|
Operating activities |
|
|
|
Net
income |
$ |
334,979 |
|
|
$ |
410,607 |
|
Adjustment
to reconcile net income to net cash (used in) provided by operating
activities: |
|
|
|
Depreciation |
|
39,043 |
|
|
|
30,445 |
|
Amortization of intangible assets |
|
77,681 |
|
|
|
32,237 |
|
Amortization of original issue discount and deferred financing
costs |
|
2,261 |
|
|
|
1,941 |
|
Loss on extinguishment of debt |
|
3,743 |
|
|
|
831 |
|
Deferred income taxes |
|
(83,272 |
) |
|
|
8,210 |
|
Share-based compensation expense |
|
23,423 |
|
|
|
18,204 |
|
Gain on disposal of assets |
|
(555 |
) |
|
|
(4,018 |
) |
Other noncash (gains) charges |
|
7,037 |
|
|
|
(12 |
) |
Net changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts receivable |
|
(20,810 |
) |
|
|
(116,768 |
) |
Inventories |
|
(353,618 |
) |
|
|
(322,954 |
) |
Other assets |
|
(7,033 |
) |
|
|
(6,874 |
) |
Accounts payable |
|
(136,289 |
) |
|
|
269,951 |
|
Accrued wages and employee benefits |
|
(17,418 |
) |
|
|
4,497 |
|
Other accrued liabilities |
|
105,544 |
|
|
|
49,987 |
|
Excess tax benefits from equity awards |
|
(17,068 |
) |
|
|
(26,880 |
) |
Net cash
(used in) provided by operating activities |
|
(42,352 |
) |
|
|
349,404 |
|
|
|
|
|
Investing activities |
|
|
|
Proceeds
from sale of property and equipment |
|
2,049 |
|
|
|
182 |
|
Proceeds
from sale of investment |
|
1,308 |
|
|
|
4,968 |
|
Proceeds
from beneficial interests in securitization transactions |
|
2,745 |
|
|
|
2,240 |
|
Contribution
to equity method investment |
|
(14,930 |
) |
|
|
(781 |
) |
Expenditures
for property and equipment |
|
(64,833 |
) |
|
|
(87,456 |
) |
Acquisition
of business, net of cash acquired |
|
(11,421 |
) |
|
|
(465,926 |
) |
Net cash
used in investing activities |
|
(85,082 |
) |
|
|
(546,773 |
) |
|
|
|
|
Financing activities |
|
|
|
Proceeds
from short-term borrowings |
|
237,182 |
|
|
|
127,816 |
|
Proceeds
from long-term borrowings |
|
935,614 |
|
|
|
50,000 |
|
Repayments
of short-term borrowings |
|
(239,550 |
) |
|
|
(105,206 |
) |
Repayments
of long-term borrowings and finance lease obligations |
|
(540,481 |
) |
|
|
(54,889 |
) |
Stock
repurchases |
|
(123,900 |
) |
|
|
– |
|
Payment of
contingent acquisition consideration |
|
(16,135 |
) |
|
|
(3,750 |
) |
Payment of
debt issuance costs |
|
(10,330 |
) |
|
|
(1,185 |
) |
Purchase of
additional ownership interest |
|
(375 |
) |
|
|
(27,164 |
) |
Cash
dividends paid to noncontrolling interest of subsidiary |
|
(309 |
) |
|
|
– |
|
Taxes paid
related to equity awards |
|
(40,472 |
) |
|
|
(49,569 |
) |
Proceeds
from the exercise of stock options |
|
13,627 |
|
|
|
30,502 |
|
Net cash
provided by (used in) financing activities |
|
214,871 |
|
|
|
(33,445 |
) |
|
|
|
|
Effect of
exchange rate changes on cash and cash equivalents |
|
(4,865 |
) |
|
|
(588 |
) |
|
|
|
|
Net increase
(decrease) in cash and cash equivalents |
|
82,572 |
|
|
|
(231,402 |
) |
Cash and
cash equivalents at beginning of period |
|
147,339 |
|
|
|
655,128 |
|
Cash and
cash equivalents at end of period |
$ |
229,911 |
|
|
$ |
423,726 |
|
|
|
|
|
Generac Holdings
Inc. |
Segment Reporting
and Product Class Information |
(U.S. Dollars in
Thousands) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales
by Reportable Segment |
|
|
Three Months Ended September 30, 2022 |
|
Three Months Ended September 30, 2021 |
|
|
External Net Sales |
|
Intersegment Sales |
|
Total Sales |
|
External Net Sales |
|
Intersegment Sales |
|
Total Sales |
Domestic |
$ |
931,132 |
|
$ |
15,485 |
|
|
$ |
946,617 |
|
|
$ |
790,764 |
|
$ |
11,470 |
|
|
$ |
802,234 |
|
International |
|
157,126 |
|
|
25,416 |
|
|
|
182,542 |
|
|
|
151,934 |
|
|
7,826 |
|
|
|
159,760 |
|
Intercompany elimination |
|
- |
|
|
(40,901 |
) |
|
|
(40,901 |
) |
|
|
- |
|
|
(19,296 |
) |
|
|
(19,296 |
) |
Total net sales |
$ |
1,088,258 |
|
$ |
- |
|
|
$ |
1,088,258 |
|
|
$ |
942,698 |
|
$ |
- |
|
|
$ |
942,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales
by Reportable Segment |
|
|
Nine Months Ended September 30, 2022 |
|
Nine Months Ended September 30, 2021 |
|
|
External Net Sales |
|
Intersegment Sales |
|
Total Sales |
|
External Net Sales |
|
Intersegment Sales |
|
Total Sales |
Domestic |
$ |
3,003,237 |
|
$ |
44,742 |
|
|
$ |
3,047,979 |
|
|
$ |
2,267,648 |
|
$ |
26,949 |
|
|
$ |
2,294,597 |
|
International |
|
512,268 |
|
|
59,075 |
|
|
|
571,343 |
|
|
|
402,465 |
|
|
16,378 |
|
|
|
418,843 |
|
Intercompany elimination |
|
- |
|
|
(103,817 |
) |
|
|
(103,817 |
) |
|
|
- |
|
|
(43,327 |
) |
|
|
(43,327 |
) |
Total net sales |
$ |
3,515,505 |
|
$ |
- |
|
|
$ |
3,515,505 |
|
|
$ |
2,670,113 |
|
$ |
- |
|
|
$ |
2,670,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External Net Sales by Product Class |
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
Residential products |
$ |
664,115 |
|
$ |
608,816 |
|
|
$ |
2,337,072 |
|
|
$ |
1,750,957 |
|
|
|
|
Commercial & industrial products |
|
311,186 |
|
|
258,309 |
|
|
|
899,263 |
|
|
|
714,994 |
|
|
|
|
Other |
|
112,957 |
|
|
75,573 |
|
|
|
279,170 |
|
|
|
204,162 |
|
|
|
|
Total net sales |
$ |
1,088,258 |
|
$ |
942,698 |
|
|
$ |
3,515,505 |
|
|
$ |
2,670,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
Domestic |
$ |
159,810 |
|
$ |
187,726 |
|
|
$ |
572,159 |
|
|
$ |
598,730 |
|
|
|
|
International |
|
24,006 |
|
|
21,475 |
|
|
|
79,532 |
|
|
|
42,344 |
|
|
|
|
Total adjusted EBITDA (1) |
$ |
183,816 |
|
$ |
209,201 |
|
|
$ |
651,691 |
|
|
$ |
641,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
Net income
attributable to Generac Holdings Inc. |
$ |
58,270 |
|
|
$ |
131,570 |
|
|
$ |
328,487 |
|
|
$ |
407,599 |
|
Net income
attributable to noncontrolling interests |
|
2,176 |
|
|
|
1,183 |
|
|
|
6,492 |
|
|
|
3,008 |
|
Net
income |
|
60,446 |
|
|
|
132,753 |
|
|
|
334,979 |
|
|
|
410,607 |
|
Interest
expense |
|
15,514 |
|
|
|
7,980 |
|
|
|
35,303 |
|
|
|
23,424 |
|
Depreciation
and amortization |
|
39,165 |
|
|
|
23,216 |
|
|
|
116,724 |
|
|
|
62,682 |
|
Provision
for income taxes |
|
11,594 |
|
|
|
32,611 |
|
|
|
86,028 |
|
|
|
114,341 |
|
Non-cash
write-down and other adjustments (1) |
|
(6,840 |
) |
|
|
3,333 |
|
|
|
(10,025 |
) |
|
|
638 |
|
Non-cash
share-based compensation expense (2) |
|
6,861 |
|
|
|
5,783 |
|
|
|
23,423 |
|
|
|
18,204 |
|
Loss on
extinguishment of debt (3) |
|
- |
|
|
|
- |
|
|
|
3,743 |
|
|
|
831 |
|
Transaction
costs and credit facility fees (4) |
|
1,250 |
|
|
|
3,385 |
|
|
|
3,831 |
|
|
|
9,471 |
|
Business
optimization and other charges (5) |
|
622 |
|
|
|
- |
|
|
|
3,371 |
|
|
|
159 |
|
Provision
for clean energy product charges (6) |
|
55,265 |
|
|
|
- |
|
|
|
55,265 |
|
|
|
- |
|
Other |
|
(61 |
) |
|
|
140 |
|
|
|
(951 |
) |
|
|
717 |
|
Adjusted
EBITDA |
|
183,816 |
|
|
|
209,201 |
|
|
|
651,691 |
|
|
|
641,074 |
|
Adjusted
EBITDA attributable to noncontrolling interests |
|
3,632 |
|
|
|
2,247 |
|
|
|
10,799 |
|
|
|
6,454 |
|
Adjusted
EBITDA attributable to Generac Holdings Inc. |
$ |
180,184 |
|
|
$ |
206,954 |
|
|
$ |
640,892 |
|
|
$ |
634,620 |
|
|
|
|
|
|
|
|
|
(1) Includes
gains/losses on disposals of assets and sales of certain
investments, unrealized mark-to-market adjustments on commodity
contracts, certain foreign currency related adjustments, and
certain purchase accounting and contingent consideration
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
write-off of original issue discount and capitalized debt issuance
costs due to voluntary debt prepayment. |
|
|
|
|
|
|
|
|
(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) The current year
periods predominantly represents severance and other non-recurring
restructuring charges related to the suspension of operations at
certain of our facilities. |
|
|
|
|
|
|
|
|
(6) Represents a
specific credit loss provision of $17.9 million for a clean energy
product customer that filed for bankruptcy, as well as a warranty
provision of $37.3 million to address certain clean energy product
warranty-related matters |
|
|
|
|
|
|
|
|
Net
income to Adjusted net income reconciliation |
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
Net income
attributable to Generac Holdings Inc. |
$ |
58,270 |
|
|
$ |
131,570 |
|
|
$ |
328,487 |
|
|
$ |
407,599 |
|
Net income
attributable to noncontrolling interests |
|
2,176 |
|
|
|
1,183 |
|
|
|
6,492 |
|
|
|
3,008 |
|
Net
income |
|
60,446 |
|
|
|
132,753 |
|
|
|
334,979 |
|
|
|
410,607 |
|
Provision
for income taxes (7) |
|
- |
|
|
|
32,611 |
|
|
|
- |
|
|
|
114,341 |
|
Amortization
of intangible assets |
|
25,751 |
|
|
|
12,206 |
|
|
|
77,681 |
|
|
|
32,237 |
|
Amortization
of deferred finance costs and original issue discount |
|
974 |
|
|
|
646 |
|
|
|
2,261 |
|
|
|
1,941 |
|
Loss on
extinguishment of debt (3) |
|
- |
|
|
|
– |
|
|
|
3,743 |
|
|
|
831 |
|
Transaction
costs and other purchase accounting adjustments (8) |
|
(7,605 |
) |
|
|
5,487 |
|
|
|
(7,651 |
) |
|
|
11,130 |
|
(Gain)/loss
attributable to business or asset dispositions (9) |
|
- |
|
|
|
– |
|
|
|
(229 |
) |
|
|
(3,991 |
) |
Business
optimization and other charges (5) |
|
622 |
|
|
|
– |
|
|
|
3,371 |
|
|
|
159 |
|
Provision
for clean energy product charges (6) |
|
55,265 |
|
|
|
– |
|
|
|
55,265 |
|
|
|
– |
|
Tax effect
of add backs (10) |
|
(21,233 |
) |
|
|
– |
|
|
|
(36,907 |
) |
|
|
– |
|
Cash income
tax expense (7) |
|
- |
|
|
|
(31,290 |
) |
|
|
- |
|
|
|
(106,564 |
) |
Adjusted net
income |
|
114,220 |
|
|
|
152,413 |
|
|
|
432,513 |
|
|
|
460,691 |
|
Adjusted net
income (loss) attributable to noncontrolling interests |
|
2,031 |
|
|
|
1,272 |
|
|
|
7,199 |
|
|
|
3,616 |
|
Adjusted net
income attributable to Generac Holdings Inc. |
$ |
112,189 |
|
|
$ |
151,141 |
|
|
$ |
425,314 |
|
|
$ |
457,075 |
|
|
|
|
|
|
|
|
|
Adjusted net
income attributable to Generac Holdings Inc. per |
|
|
|
|
|
|
|
common share - diluted: |
$ |
1.75 |
|
|
$ |
2.35 |
|
|
$ |
6.58 |
|
|
$ |
7.13 |
|
Weighted
average common shares outstanding - diluted: |
|
64,267,638 |
|
|
|
64,208,116 |
|
|
|
64,630,346 |
|
|
|
64,146,281 |
|
|
|
|
|
|
|
|
|
(7) Amount for the
three and nine months ended September 30, 2021 is based on an
anticipated cash income tax rate at the time of approximately 20.0%
to 20.5% for the full year ended 2021 due to the existence of the
tax shield from the amortization of tax-deductible goodwill and
intangible assets from our acquisition by CCMP Capital Advisors,
LLC in 2006. Due to the expiration of this tax shield in the fourth
quarter of 2021, there is no similar reconciling item for the
current year period. For comparative purposes to the current year,
using the GAAP tax expense for the three and nine months ended
September 30, 2021 would result in adjusted net income per diluted
share of $2.25 and $6.83, respectively, on a pro forma basis. |
|
|
|
|
|
|
|
|
(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 and
contingent consideration adjustments. |
|
|
|
|
|
|
|
|
(9) Represents gains
and losses attributable to the disposition of a business or assets
occurring in other than ordinary course, as defined in our credit
agreement. |
|
|
|
|
|
|
|
|
(10) In the third
quarter of 2022, management determined that certain add-backs in
2022 should be reported net of tax. Add-backs in the first and
second quarter of 2022 were not reported net of tax, and we
reported adjusted net income attributable to Generac Holdings Inc.
for the first and second quarters ended 2022 of $135,271 or $2.09
and $193,528 or $2.99, respectively. Taking into account the tax
effect on certain add-backs, the revised reported adjusted net
income attributable to Generac Holdings Inc. for the first and
second quarters ended 2022 is $128,150 or $1.98 and $185,270 or
$2.86, respectively. |
|
|
|
|
|
|
|
|
Free
Cash Flow Reconciliation |
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
|
|
Net cash
(used in) provided by operating activities |
$ |
(56,045 |
) |
|
$ |
74,411 |
|
|
$ |
(42,352 |
) |
|
$ |
349,404 |
|
Proceeds
from beneficial interests in securitization transactions |
|
902 |
|
|
|
877 |
|
|
|
2,745 |
|
|
|
2,240 |
|
Expenditures
for property and equipment |
|
(18,330 |
) |
|
|
(33,234 |
) |
|
|
(64,833 |
) |
|
|
(87,456 |
) |
Free cash
flow |
$ |
(73,473 |
) |
|
$ |
42,054 |
|
|
$ |
(104,440 |
) |
|
$ |
264,188 |
|
Generac (NYSE:GNRC)
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Generac (NYSE:GNRC)
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From Jul 2023 to Jul 2024