WAUKESHA, Wis., Feb. 13, 2020 (GLOBE NEWSWIRE) — 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 fourth quarter and full-year ended December 31, 2019.Fourth Quarter 2019 HighlightsNet sales increased 4.9% to $590.9 million during the fourth quarter of 2019 as compared to $563.4 million in the prior-year fourth quarter.  Core sales growth, which excludes both the impact of acquisitions and foreign currency, was approximately 4%.    Residential product sales increased 9.7% to $322.5 million as compared to $293.9 million last year, with core sales growth of approximately 7%. Commercial & Industrial (“C&I”) product sales decreased 2.7% to $217.1 million as compared to $223.2 million in the prior year, with core sales also declining approximately 3%.Net income attributable to the Company during the fourth quarter was $69.6 million, or $1.12 per share, as compared to $75.6 million, or $1.20 per share, for the same period of 2018.  See accompanying reconciliation schedules for related earnings per share calculations.Adjusted net income attributable to the Company, as defined in the accompanying reconciliation schedules, was $96.5 million, or $1.53 per share, as compared to $88.1 million, or $1.42 per share, in the fourth quarter of 2018.Adjusted EBITDA before deducting for noncontrolling interests, as defined in the accompanying reconciliation schedules, was $129.1 million, or 21.9% of net sales, as compared to $126.1 million, or 22.4% of net sales, in the prior year.Cash flow from operations was $175.1 million as compared to $108.2 million in the prior year.  Free cash flow, as defined in the accompanying reconciliation schedules, was $160.3 million as compared to $87.3 million in 2018.  The increase was primarily driven by the monetization of previous working capital investments, together with lower capital expenditures compared to the prior year quarter. As previously announced, on December 13, 2019, the Company amended its Term Loan credit agreement, which among other things extended the maturity of the term loan from May 2023 to December 2026.  In conjunction with the amendment, the Company paid down $49 million of debt on the term loan.Full-Year 2019 HighlightsNet sales increased 8.9% to $2.20 billion during 2019 as compared to $2.02 billion in 2018, including $41.2 million of contribution from acquisitions.  Total core sales growth for the year was approximately 8%.Residential product sales increased 9.7% to $1.14 billion as compared to $1.04 billion last year, with core sales growth of approximately 9%. C&I product sales increased 6.3% to $871.6 million as compared to $820.3 million in the prior year, with core sales also increasing approximately 6%.Net income attributable to the Company during 2019 was $252.0 million, or $4.03 per share, as compared to $238.3 million, or $3.54 per share for 2018.Adjusted net income attributable to the Company was $317.8 million, or $5.06 per share, as compared to $292.2 million, or $4.70 per share, in 2018.Adjusted EBITDA before deducting for non-controlling interests for 2019 was $454.1 million, or 20.6% of net sales, as compared to $424.6 million, or 21.0% of net sales, last year.Cash flow from operations was $308.9 million as compared to $247.2 million in the prior year.  Free cash flow was $250.7 million as compared to $203.6 million in 2018. “The fourth quarter was a great finish to a very strong 2019 with record performance for both the quarter and the full-year for net sales, adjusted EBITDA and free cash flow,” said Aaron Jagdfeld, President and Chief Executive Officer.  “Home standby demand was again robust during the quarter driven by California as public utility shut-offs drove a dramatic increase in interest for these products.  We also made the first shipments of our new PWRcell™ energy storage system during the quarter, and the outlook for our clean energy products continues to exceed our expectations.  Our full-year results for residential products were also exceptionally strong and broad-based, and we experienced similar trends with domestic C&I product shipments through our industrial distributors as the penetration of natural gas generators continues to accelerate. Additionally, shipments to our telecom national account customers for the full year increased significantly as they continue to expand and harden their networks in preparation for the impending rollout of 5G technology.  We believe our 2019 performance is further evidence of the tremendous growth opportunities for Generac, and as we enter 2020 we are incredibly excited about the long-term prospects for our business.”Additional Fourth Quarter 2019 Consolidated HighlightsGross profit margin improved 130 basis points to 37.6% compared to 36.3% in the prior-year fourth quarter.  Pricing actions and favorable sales mix, as well as lower realized commodity and foreign currency input costs, were partially offset by increased regulatory tariffs, and the unfavorable mix impact from acquisitions.Provision for income taxes for the current year quarter was $13.4 million, or an effective tax rate of 16.1%, as compared to $20.0 million, or a 20.7% effective tax rate, for the prior year.  The current year quarter was favorably impacted by a year-end revaluation adjustment related to a reduction in the state income tax rate.  For the full year, the effective tax rate for 2019 was 21.1% compared to 22.5% in the prior year. During the fourth quarter of 2019, the Company completed the termination of its domestic pension plan, which did not result in a reduction of benefits to plan participants.  This resulted in pre-tax settlement charges of $10.9 million during the quarter, or $0.17 per share. Business Segment ResultsDomestic SegmentDomestic segment sales increased 7.7% to $470.1 million as compared to $436.3 million in the prior year quarter.  Core sales growth, which excludes the impact of the Neurio and Pika acquisitions, was approximately 6%.  The current year quarter experienced strong growth in shipments of home standby generators due to increased outage activity across the U.S. and Canada, which included public safety power shut-offs in California.  In addition, C&I stationary generator shipments were also strong during the quarter and broad-based through the Company’s North American distributor channel.  The overall Domestic segment growth was partially offset by lower shipments of C&I products to national telecom and rental account customers.Adjusted EBITDA for the segment was $122.9 million, or 26.1% of net sales, as compared to $116.3 million in the prior year, or 26.7% of net sales.  Pricing initiatives, favorable sales mix, and improved commodity and currency input costs were more than offset by the aforementioned regulatory tariffs and higher operating expense investments.  International SegmentInternational segment sales decreased 4.9% to $120.9 million as compared to $127.1 million in the prior year quarter.  Core sales, which excludes the unfavorable impact of currency and the impact of the Captiva acquisition, declined approximately 4% compared to the prior year as slower economic growth and geopolitical headwinds caused softness in certain key regions of the world in which we operate.Adjusted EBITDA for the segment, before deducting for noncontrolling interests, was $6.2 million, or 5.2% of net sales, as compared to $9.7 million, or 7.7% of net sales, in the prior year.  Decreased operating leverage on the lower sales volumes was the primary contributor to the margin decline.2020 Outlook

The Company is initiating guidance for 2020 with net sales expected to increase between 6 to 8% as compared to the prior year on an as-reported basis, and 5 to 7% on a core basis.  This guidance assumes a level of power outages in line with the longer-term baseline average, but includes the benefit of one significant power shut-off event in California. Should there be a major event, such as a landed hurricane, along with additional public safety power shut-offs in California, we could expect approximately 3 to 5% of incremental revenue growth on top of the baseline guidance, resulting in an upside case as-reported sales growth of 9 to 13%.Net income margin, before deducting for non-controlling interests, is expected to be approximately 11% for the full-year 2020, with corresponding adjusted EBITDA margin expected to be approximately 20.0%.  Should there be a more active outage environment during 2020, we would expect margins to increase by approximately 50 basis points above this baseline guidance, resulting in an upside case adjusted EBITDA margin of approximately 20.5%.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 approximately 90%.Conference Call and WebcastGenerac management will hold a conference call at 9:00 a.m. EST on Thursday, February 13, 2020 to discuss fourth quarter and full year 2019 operating results. The conference call can be accessed by dialing (866) 415-3113 (domestic) or +1 (678) 509-7544 (international) and entering passcode 9159339.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.About GeneracFounded in 1959, Generac is a leading global designer and manufacturer of a wide range of energy technology solutions and other power products.  As an industry leader serving residential, light commercial, and industrial markets, Generac’s products and solutions are available globally through a broad network of independent dealers, distributors, retailers, e-commerce partners, wholesalers and equipment rental companies, as well as sold direct to certain end user customers. Forward-looking InformationCertain 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;availability, cost and quality of raw materials and key components from our global supply chain and labor needed in producing our 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 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 or information technology systems; andChanges in environmental, health and safety, or product compliance laws and regulations affecting our products or operations.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 2018 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 MetricsCore SalesThe 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 EBITDAThe 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 noncontrolling interests, taking into account certain charges and gains that were recognized during the periods presented. Adjusted Net IncomeTo 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 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 FlowIn 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.

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