"Generac Suffers An Earnings Brownout

April 30 -- For most companies, tough weather conditions are always a negative. In the power-generator industry, though, companies like Generac Holdings have often thrived when bad storms bring power lines down and leave millions of residents without electricity from the grid. Still, coming into Thursday morning's first-quarter financial report, Generac investors were nervous about the fact that despite the cold winter, relatively few storm events had a major impact on the grid. As it turned out, Generac's quarter did fall short of what most investors had expected, but other factors that many wouldn't have thought of played a role in holding back the generator maker's results. Let's look more closely at Generac's latest results and what they mean for its future.

Generac's first-quarter performance reflected a considerable slowdown for the generator specialist. Revenue of $311.8 million was down almost 9% from year-ago levels, which was considerably worse than the 5% sales decline that most of those following the stock were looking to see. The impact on earnings was even more severe, with adjusted net income falling by about a third and earnings per share of $0.49 falling 20% below the consensus estimate among shareholders.

Neither of Generac's two major product lines performed well. The Commercial and Industrial division suffered the larger decline in revenue, with sales dropping 15% as Generac cited a decline in shipments to its customers in two key industries. Yet sales were also sluggish on the residential side, with revenue falling more than 4% on weaker than expected levels of power outages across its geographical market. In addition, tough winter conditions hampered installation efforts for many residential customers, slowing the rate of natural demand for the market.

Other factors also hit Generac. Gross margins fell 2 percentage points to 32.9%, with Generac having to absorb some costs due to the slowdown in key ports on the West Coast. Increased marketing and advertising expenses pushed operating expenses up more than 6% from the year-ago quarter.

CEO Aaron Jagdfeld took a long-term view on responding to the tough conditions. "The rapid decline in oil and gas related investment," Jagdfeld said, "coupled with continued softness in capital spending in the telecom sector had a negative impact on our [commercial and industrial] product shipments during the quarter." Jagdfeld noted the challenges of having multiple end markets perform badly at the same time.

Even with the winter having fallen short of expectations, Generac thinks that times will get better. As Jagdfeld put it, "Despite a softer demand environment in the near term, we remain focused on driving awareness for our products, expanding and developing out distribution, launching innovative new products, and controlling costs."

Still, improvement will take time, and the poor start to the year led Generac to cut its guidance for 2015. Generac now expects roughly flat sales for the year, even under the assumption that a slow power-outage environment in the first half of 2015 will give way to more typical conditions later in the year. Adjusted operating earnings are also likely to see growth disappear for the year, according to the company.

The good news, though, is that Generac has left itself far better diversified than it was in the past. With solid exposure to both industrial and residential applications, Generac isn't entirely vulnerable to the vagaries of the weather.

Still, investors were unhappy with Generac's results, sending the stock plunging 8% in the first two hours of pre-market trading following the announcement. Without the storm-driven demand that Generac has had in several past years, the company will have to prove to shareholders that it can keep growing even when Mother Nature doesn't make the need for its products eminently clear.

Dan Caplinger     www.fool.com

Generac Reports First Quarter 2015 Results

WAUKESHA, Wis. -- Apr. 30, 2015-- Generac Holdings Inc., a leading designer and manufacturer of power generation equipment and other engine powered products, today reported financial results for its first quarter ended March 31, 2015.

First Quarter 2015 Highlights

• Net sales were $311.8 million during the first quarter of 2015 as compared to $342.0 million in the prior-year first quarter.
• Residential product sales were $156.8 million during the first quarter as compared to $164.0 million in the prior-year quarter, primarily due to lower portable generator shipments resulting from a decline in power outage severity compared to the prior year.
• Commercial & Industrial (C&I) product sales were $133.8 million during the first quarter as compared to $157.4 million in the prior-year quarter, primarily due to a decline in shipments to telecom national account customers and, to a lesser extent, oil & gas markets.
• Net income during the first quarter of 2015 was $19.7 million, or $0.28 per share, as compared to $34.7 million, or $0.50 per share, for the same period of 2014. Adjusted net income, as defined in the accompanying reconciliation schedules, was $34.1 million, or $0.49 per share, as compared to $50.7 million, or $0.72 per share, in the first quarter of 2014.
• Adjusted EBITDA, as defined in the accompanying reconciliation schedules, was $57.1 million as compared to $77.5 million in the first quarter last year.
• Cash flow from operations in the first quarter of 2015 was $25.3 million as compared to $36.4 million in the prior year quarter. Free cash flow, as defined in the accompanying reconciliation schedules, was $18.7 million as compared to $31.4 million in the first quarter of 2014.
• For the trailing four quarters, including the first quarter of 2015, net sales were $1.431 billion; net income was $159.6 million; adjusted EBITDA was $316.9 million; cash flow from operations was $241.9 million; and free cash flow was $205.6 million.
• During the first quarter of 2015, the Company made a voluntary pre-payment of term loan debt of $50 million. Total liquidity at March 31, 2015 was strong with cash and cash equivalents on hand of $150.1 millionand approximately $150 million available on the Company’s ABL revolving credit facility. Total net debt to adjusted EBITDA, as defined in the accompanying reconciliation schedules, at the end of the first quarter was 2.8 times.

“The first quarter of this year was particularly challenging with several of the end markets we serve performing below our expectations,” said Aaron Jagdfeld, President and Chief Executive Officer. “With an extremely low power outage environment and difficult winter weather, shipments of residential products were weaker than expected. In addition, the rapid decline in oil and gas related investment coupled with continued softness in capital spending in the telecom sector also had a negative impact on our C&I product shipments during the quarter.

Despite a softer demand environment in the near term, we remain focused on driving awareness for our products, expanding and developing our distribution, launching innovative new products and controlling costs.”

Additional First Quarter 2015 Highlights

Residential product sales for the first quarter of 2015 were $156.8 million as compared to $164.0 million for the first quarter of 2014. The decline was primarily driven by a power outage severity environment during the quarter that was well below normalized levels and prior year, resulting in fewer shipments of portable generators. Additionally, although shipments for home standby generators were approximately flat during the quarter, heavy snow and colder temperatures in certain key regions limited growth for the category as installations were slowed by these conditions.

C&I product sales for the first quarter of 2015 were $133.8 million as compared to $157.4 million for the comparable period in 2014. The decline was primarily due to reduced shipments to telecom national account customers in the current year as a result of lower capital spending by certain of these customers and, to a lesser extent, reduced sales into oil & gas markets. Partially offsetting these declines were contributions from recent acquisitions and growth in Latin America.

Gross profit margin for the first quarter of 2015 was 32.9% compared to 34.9% in the prior-year first quarter. The decline was driven by a number of factors including a temporary increase in certain costs associated with the slowdown of activity in west coast ports, unfavorable absorption of manufacturing overhead-related costs, mark-to-market adjustments on commodity forward contracts, and the impact from recent acquisitions. These declines were partially offset by a more favorable mix of residential products.

Operating expenses for the first quarter of 2015 increased $3.5 million, or 6.4%, as compared to the first quarter of 2014. The increase was primarily driven by increased marketing and advertising expenses and the addition of recurring operating expenses associated with recent acquisitions.

2015 Outlook Update

As a result of current end market conditions, the Company is revising its prior guidance for revenue growth and adjusted EBITDA margins for the full year 2015.

Net sales for 2015 are now expected to be approximately flat as compared to the prior year, primarily the result of a power outage severity environment that is expected to remain below normal during the first half of the year, with the assumption of a return to more normalized baseline levels of outage activity during the second half.

Adjusted EBITDA for 2015 is also expected to be approximately flat as compared to the prior year, resulting in EBITDA margins of approximately 23.0% for the full year. Free cash flow is expected to remain strong for the full year 2015 due to an attractive margin profile, low cost of debt, favorable tax attributes and capital-efficient operating model.

“Although market conditions have been difficult so far in 2015, we believe many of these headwinds to be temporary in nature as the numerous long-term growth opportunities that impact our business remain firmly in place,” continued Mr. Jagdfeld.

“We have become a more diversified company in recent years, with a strong balance sheet and the capability to generate significant free cash flow, providing us with the flexibility to drive our Powering Ahead strategic plan forward.”

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, industrial, oil & gas, and construction 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.

Generac Reports Fourth Quarter and Full-Year 2014 Results

Home standby shipments exceed internal expectations and drive sequential quarterly sales improvement in residential products, as increased sales from C&I products further diversifies business

WAUKESHA, Wis.-- Feb. 11, 2015-- Generac Holdings Inc., a leading 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, 2014. Additionally, the Company initiated its outlook for 2015.

Fourth quarter 2014 Highlights

• Net sales increased by 7.4% to $404.0 million as compared to $376.2 million in the prior-year fourth quarter.
• Commercial & Industrial (C&I) product sales increased 17.1% to $185.0 million as compared to $157.9 million in the fourth quarter of 2013. The increase in sales was primarily driven by strength in oil & gas markets and the contributions from recent acquisitions, partially offset by a decline in shipments to certain telecom customers.
• Residential product sales declined slightly to $194.9 million from $199.1 million for the fourth quarter of 2013, as the current-year quarter faced a strong prior-year comparison that still benefited from the afterglow period of demand from Superstorm Sandy. Residential product sales for the fourth quarter of 2014 improved 6.1% on a sequential basis from $183.7 million in the third quarter of 2014.
• Net income during the fourth quarter of 2014 was $49.4 million, or $0.70 per share, as compared to $48.5 million, or $0.69 per share, for the same period of 2013. Adjusted net income, as defined in the accompanying reconciliation schedules, was $68.4 million, or $0.98 per share, as compared to $77.5 million, or $1.11 per share, in the fourth quarter of 2013.
• Adjusted EBITDA, as defined in the accompanying reconciliation schedules, was $92.2 million as compared to $103.6 million in the fourth quarter last year.
• Cash flow from operations in the fourth quarter of 2014 was $110.5 million as compared to $104.7 million in the prior year quarter. Free cash flow, as defined in the accompanying reconciliation schedules, was a quarterly record of $98.5 million as compared to $88.2 million in the fourth quarter of 2013.
• Total liquidity at December 31, 2014 was strong with cash and cash equivalents of $189.8 million and approximately $150 million available on the Company’s ABL revolving credit facility. Total net debt to adjusted EBITDA, as defined in the accompanying reconciliation schedules, at the end of the fourth quarter was 2.7 times.

Full-Year 2014 Highlights

• Net sales were $1.461 billion during 2014 as compared to $1.486 billion in 2013.
• Residential product sales were $722.2 million as compared to $843.7 million in the prior year. The prior year benefited from approximately $140 million in incremental shipments as a result of satisfying the extended lead times that resulted from Superstorm Sandy, which did not repeat during 2014. Excluding this benefit in the prior year, residential product sales increased approximately 3%.
• Commercial & Industrial product sales increased 14.4% to $652.2 million as compared to $569.9 million in 2013. The increase was primarily due to the contributions from recent acquisitions along with strength in oil & gas markets, partially offset by reduced capital spending with certain telecom customers and overall softness within Latin America.
• Net income during 2014 was $174.6 million, or $2.49 per share, as compared to $174.5 million or $2.51 per share for 2013. Adjusted net income was $234.2 million, or $3.34 per share, as compared to $301.7 million, or $4.33 per share, in 2013.
• Adjusted EBITDA for 2014 was $337.3 million as compared to $402.6 million last year.
• Cash flow from operations during 2014 was $253.0 million as compared to $259.9 million in the prior year. Free cash flow was $218.3 million as compared to $229.2 million in 2013.
• The Company acquired Pramac America, LLC in early September, resulting in the ownership of the Powermate trade name and the right to license the DeWalt brand name for certain residential engine powered tools. In addition, the Company acquired MAC, Inc. and its related entities in early October, a leading manufacturer of premium-grade commercial and industrial mobile heaters within the U.S. and Canada.
• Uses of cash during 2014 included $34.7 million for capital expenditures, $61.2 million related to acquisitions and $87.0 million for the pre-payment of term loan debt, including a $25.0 million payment made during the fourth quarter.

“Home standby generator sales exceeded our expectations during the fourth quarter, with activation rates proving to be resilient as we leveraged our innovative sales and marketing techniques to help create awareness for the product category in a below-normal power outage environment,” said Aaron Jagdfeld, President and Chief Executive Officer.

“For full-year 2014, organic sales improved over 2013 when excluding the approximately$140 million sales headwind in the prior year from Superstorm Sandy, allowing us to hold a new and higher baseline of demand despite certain of our end markets performing below our expectations during the year.

In addition, the revenue base for our C&I products continued to increase in scale during 2014, and now represents nearly half of our total sales. We also once again generated a strong level of free cash flow, generating over$200 million for the third consecutive year. 

We enter 2015 as a more diversified company, with a strong balance sheet and free cash flow generation capability that provide us the flexibility to drive our Powering Ahead strategic plan forward.”

Additional Fourth Quarter 2014 Highlights

Residential product sales for the fourth quarter of 2014 improved on a sequential basis to $194.9 million from $183.7 million in the third quarter of 2014, primarily driven by a solid increase in home standby generators. Residential product sales declined slightly on a year-over-year basis from $199.1 million for the fourth quarter of 2013, which was a strong prior-year comparison that still benefited from the afterglow period of demand from the one-year anniversary of Super Storm Sandy. 

Also, the fourth quarter of 2014 continued to experience a power outage severity environment that remained well below normalized levels. These factors resulted in a modest year-over-year decline in both home standby and portable generator sales.

C&I product sales for the fourth quarter of 2014 increased 17.1% to $185.0 million as compared to $157.9 million for the comparable period in 2013. The improvement was driven primarily by strength in oil & gas shipments and contributions from recent acquisitions, which was partially offset by a decline in telecom shipments resulting from reduced capital spending by certain customers.

Gross margin for the fourth quarter of 2014 was 34.3% compared to 38.7% in the prior-year fourth quarter. The decline was driven by the combination of a higher mix of organic C&I product shipments, the impact from recent acquisitions, and a temporary increase in certain costs associated with the slowdown of activity in west coast ports as well as other overhead-related costs.

Operating expenses for the fourth quarter of 2014 increased $4.8 million, or 8.9%, as compared to the fourth quarter of 2013. The increase was driven by the addition of recurring operating expenses associated with recent acquisitions, a more favorable adjustment to warranty reserves in the fourth quarter of 2013 as compared to the current year, and increased marketing and advertising expenses.

2015 Outlook

The Company is initiating guidance for 2015 with net sales expected to increase in the low-to-mid-single digit range as compared to the prior year. This top-line guidance assumes no material changes in the current macroeconomic environment and no major power outage events during 2015, but does assume a more normalized baseline level of power outage severity during the year.

Adjusted EBITDA margins are expected to be approximately 23.5% to 24.0%, an improvement compared to 23.1% for 2014. Free cash flow generation is expected to remain strong in 2015 and grow from prior-year levels due to an attractive margin profile, low-cost of debt, favorable tax attributes and capital-efficient operating model.

“We remain excited about the numerous secular growth opportunities for our products, including the substantial penetration opportunity that exists for residential and light commercial standby generators,” continued Mr. Jagdfeld. “While the near-term outlook in certain end-market verticals such as telecommunications and oil & gas point to softer demand, we are optimistic about the long-term need for our products used in these applications, as well as the opportunity to increase our share of the C&I market through our recently expanded product offering.

In addition, we believe the overall secular shifts in the market toward natural gas generators and the rental of mobile power equipment remain in place. With our strong liquidity, we are confident in our ability to continue to invest in the future growth of the business, both organically and through acquisitions, while also further executing our diversification and international expansion strategies.”

Generac Reports Third Quarter 2014 Results

WAUKESHA, Wis.-- Nov. 6, 2014-- Generac Holdings Inc., a leading designer and manufacturer of power generation equipment and other engine powered products, today reported financial results for its third quarter ended September 30, 2014.

Third quarter 2014 Highlights

• Net sales were $352.3 million during the third quarter of 2014 as compared to $363.3 million in the prior-year third quarter.
• Residential product sales were $183.7 million during the third quarter as compared to $192.7 million in the prior-year quarter, primarily due to a decline in portable generator sales and, to a lesser extent, shipments of home standby generators.
• Commercial and Industrial (CandI) product sales were $146.4 million during the third quarter as compared to $151.5 million in the prior-year quarter. Contributions from recent acquisitions and strength in oil and gas markets were more than offset by a decline in shipments to telecom national account customers.
• Net income during the third quarter of 2014 was $36.5 million, or $0.52 per share, as compared to $47.1 million, or $0.67 per share, for the same period of 2013. Adjusted net income, as defined in the accompanying reconciliation schedules, was $57.9 million, or $0.83 per share, as compared to $73.7 million, or $1.06 per share, in the third quarter of 2013.
• Adjusted EBITDA, as defined in the accompanying reconciliation schedules, was $83.1 million as compared to $100.1 million in the third quarter last year.
• Cash flow from operations in the third quarter of 2014 was $57.2 million as compared to $80.9 million in the prior year quarter. Free cash flow, as defined in the accompanying reconciliation schedules, was $47.8 million as compared to $76.7 million in the third quarter of 2013.
• For the trailing four quarters, including the third quarter of 2014, net sales were $1.433 billion; net income was $173.7 million; adjusted EBITDA was $348.7 million; cash flow from operations was $247.2 million; and free cash flow was $208.0 million.
• On September 1, 2014, the Company acquired Pramac America, LLC, resulting in the ownership of the Powermate trade name and the right to license the DeWalt brand name for certain residential engine powered tools. The transaction also included working capital associated with these products. This acquisition helps to expand the Generac brand portfolio across its residential product platform and increases its product offering in the portable generator category.
• As previously announced, on October 1, 2014, the Company acquired MAC, Inc. and its related entities (“MAC”), a leading manufacturer of premium-grade commercial and industrial mobile heaters within the U.S. and Canada. The acquisition expands the Company’s portfolio of mobile power products and provides increased access to the oil and gas market.

“Home standby generator sales improved at a solid rate as compared to the second quarter of 2014, as we continue to build awareness and expand our leadership position for this product category. Despite current market conditions where power outage severity has been well below normal, we believe the penetration opportunity that exists for home standby generators remains significant,” said Aaron Jagdfeld, President and Chief Executive Officer.

“Our CandI product sales continued to experience good momentum within the oil and gas market, while capital spending with certain telecom customers was lower in the quarter resulting in reduced shipments to this end market. On the acquisition front, we have been active in recent months by closing two transactions which broaden our residential engine powered tool product line and expand our CandI mobile products platform, while also increasing our exposure to the oil and gas market.

We remain focused on our “Powering Ahead” strategic plan by proactively executing on a number of growth initiatives to drive a new and higher baseline of demand for our products.”

Additional Third quarter 2014 Highlights

Residential product sales for the third quarter of 2014 improved on a sequential basis to $183.7 million from $179.6 million in the second quarter of 2014, driven by a solid increase in shipments of home standby generators partially offset by a normal seasonal decline in power washer sales.

Residential product sales declined on a year-over-year basis from $192.7 million for the third quarter of 2013 as the prior year was still benefiting from the afterglow period of demand from Superstorm Sandy. Also, the third quarter of 2014 continued to experience a power outage severity environment that remained below normalized levels. These factors resulted in a year-over-year decline in portable generator sales and, to a lesser extent, shipments of home standby generators.

CandI product sales for the third quarter of 2014 were $146.4 million as compared to $151.5 million for the comparable period in 2013. Shipments to telecom national account customers declined in the current year quarter as compared to the prior year primarily resulting from reduced capital spending by certain customers. This decline was partially offset by contributions from recent acquisitions and strength in oil and gas markets.

Gross profit margin for the third quarter of 2014 was 37.0% compared to 38.4% in the prior-year third quarter. The decline was primarily driven by an increase in promotional activities during the current year quarter along with the mix impact from recent acquisitions. These declines were partially offset by a higher mix of home standby generators and lower mix of organic CandI product shipments.

Operating expenses for the third quarter of 2014 increased $7.3 million, or 14.0%, as compared to the third quarter of 2013. The increase was driven by a $5.6 million favorable adjustment to warranty reserves in the third quarter of 2013 that did not repeat in the current year, along with increased marketing and advertising expenses and the addition of operating expenses associated with recent acquisitions.

Interest expense in the third quarter of 2014 was $12.3 million, which was largely flat as compared to $12.5 million in the prior year. During the third quarter of 2014, a voluntary $50 million pre-payment of term loan debt was made which resulted in the recording of a $1.8 million loss on extinguishment of debt.

2014 Outlook

The Company is revising its prior guidance for revenue growth and adjusted EBITDA margins for full year 2014 resulting from a power outage environment that remains well below normalized levels, a reduced level of capital spending with certain telecom customers and the continued overall economic softness in Latin America.

For the full-year 2014, the Company now expects net sales to decline in the mid-single digit range over the prior year, and adjusted EBITDA margins are now expected to be in the low-to-mid 20% range. Free cash flow is expected to remain strong for the full year 2014 as a result of this strong margin profile, together with a low cost of debt, favorable tax attributes and capital-efficient operating model.

“Although current market conditions were below our expectations in the third quarter of 2014, we believe the numerous long-term growth opportunities that impact our business remain in place,” continued Mr. Jagdfeld. “With our strong balance sheet and free cash flow generation profile, we are confident in our ability to continue to invest in the future growth of the business, both organically and through acquisitions. In doing this, we expect to drive further penetration of standby generators as well as benefit from being a more balanced and globally-focused company, as we further implement our diversification and international expansion strategies.”

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, industrial, oil and gas, and construction markets, Generac's power products are available globally through a broad network of independent dealers, retailers, wholesalers and equipment rental companies, as well as sold direct to certain end user customers.

Generac Acquires North Dakota Mobile Heater Manufacturer

October 2 -- Waukesha-based Generac Holdings Inc., a designer and manufacturer of generators and other small engine powered products, has acquired Bismarck, N.D.-based MAC Inc. and its related entities.

MAC is a leading manufacturer of premium-grade commercial and industrial mobile heaters in the U.S. and Canada. It has about 100 employees.

 “The acquisition of MAC is an exciting development for Generac as it further expands our growing mobile products platform by adding a strong brand of industrial heaters and increases our access to the projected long term up-cycle in the oil and gas market,” said Aaron Jagdfeld, president and chief executive officer of Generac. “In addition to gaining immediate access to a broad lineup of mobile heating equipment that is essential to colder climate oil & gas and construction sites, this acquisition creates cross-selling opportunities with our existing mobile products distribution.”

The MAC management team will continue to lead the company, and the MAC product brand will be retained and will join Generac's family of brands. The purchase agreements were executed and the transaction simultaneously closed on Wednesday.  The purchase price and terms of the transaction were not announced.

“We’ve worked hard to build MAC into a great company, and we believe that partnering with Generac best positions our organization for continued growth,” said Michael Seifert, president and chief executive officer of MAC Inc. “We are excited to be joining the Generac team, and we see many synergies for both companies as a result of this transaction.”

MAC primarily serves the oil & gas and construction markets, as well as other industrial sectors through national equipment rental companies and independent dealers. MAC’s line of flameless, indirect-fired and hydronic surface heaters are recognized as some of the safest, most reliable and efficient machines in the market.

www.biztimes.com

Generac Reports Second Quarter 2014 Results

Strong home standby shipments drive sequential sales improvement in residential products as increased sales from C&I products further diversifies business

WAUKESHA, Wis.-- July 31 -- Generac Holdings Inc., a leading designer and manufacturer of power generation equipment and other engine powered products, today reported financial results for its second quarter ended June 30, 2014.

SECOND QUARTER 2014 HIGHLIGHT

   -- Net sales increased over the prior year by 4.6% to $362.6 million as

      compared to $346.7 million in the second quarter of 2013.

          -- Commercial & Industrial (C&I) product sales increased 22.5% to

             $163.5 million as compared $133.4 million in the prior-year second

             quarter, primarily due to the contribution of recent acquisitions

             and continued strength in the oil & gas market.

          -- Residential product sales were $179.6 million during the second

             quarter of 2014 as compared to $196.6 million in the prior year

             quarter. The prior year second quarter benefited from

             approximately $40 million in shipments due to Superstorm Sandy.

             Excluding this prior year benefit, residential product sales

             increased approximately 15% primarily as a result of strong home

             standby generator shipments.

   -- Net income during the second quarter of 2014 was $54.0 million, or $0.77

      per share, as compared to $28.3 million, or $0.40 per share, for the same

      period of 2013.

   -- Adjusted net income, as defined in the accompanying reconciliation

      schedules, was $57.1 million, or $0.82 per share, as compared to $66.6

      million, or $0.95 per share, in the second quarter of 2013.

   -- Adjusted EBITDA, as defined in the accompanying reconciliation schedules,

      was $84.5 million as compared to $90.1 million in the second quarter last

      year.

   -- Cash flow from operations in the second quarter of 2014 was $48.9 million

      as compared to $36.1 million in the prior year quarter. Free cash flow,

      as defined in the accompanying reconciliation schedules, was $40.5

      million as compared to $30.3 million in the second quarter of 2013.

   -- For the trailing four quarters, including the second quarter of 2014, net

      sales were $1.444 billion; net income was $184.3 million; adjusted EBITDA

      was $365.7 million; cash flow from operations was $270.9 million; and

      free cash flow was $236.9 million.

"Our second quarter results for residential products were seasonally higher as we saw shipments increase as compared to the first quarter of 2014 due to strength in home standby generators. We remain focused on a number of key initiatives to continue to grow the market, further building on our leadership position in this product category," said Aaron Jagdfeld, President and Chief Executive Officer.

"C&I products continue to represent a growing portion of our sales as we have recently increased our exposure to new markets such as oil & gas, broadened our industrial product line, and strengthened our industrial distribution network to further diversify our business. We also continue to convert a significant amount of our earnings to free cash flow, providing us with the flexibility to drive our Powering Ahead strategic plan forward."

ADDITIONAL SECOND QUARTER 2014 HIGHLIGHTS

Residential product sales for the second quarter of 2014 were $179.6 million as compared to $164.0 million in the first quarter of 2014, and as compared to $196.6 million for the second quarter of 2013. Sales of residential products during the prior-year second quarter were positively impacted by approximately $40 million in incremental shipments as a result of satisfying the extended lead times that resulted from Superstorm Sandy, which did not repeat during the second quarter of 2014.

Excluding this benefit in the prior year quarter, residential product revenue increased approximately 15% during the current year quarter, driven by strong shipments of home standby generators. In addition, increased revenue from power washer products contributed to this year-over-year sales growth in residential products.

C&I product sales for the second quarter of 2014 increased 22.5% to $163.5 million from $133.4 million for the comparable period in 2013. The improvement was driven primarily by contributions from recent acquisitions and strength in oil & gas end markets, along with increased sales of natural gas generators used in light commercial and retail applications.

Partially offsetting this strength was a year-over-year decline in sales within Latin America driven by the combination of a difficult prior-year comparison related to certain large projects which did not repeat, as well as overall economic softness in the region.

Gross profit margin for the second quarter of 2014 was 35.3% compared to 37.8% in the prior-year second quarter. Gross margin was impacted over the prior year due to the addition of recent acquisitions along with a return to regular promotional activities consistent with a period of normal seasonality.

Operating expenses for the second quarter of 2014 declined $4.7 million, or 8.6%, as compared to the second quarter of 2013, primarily driven by a $4.9 million gain recorded in the current year quarter relating to a re-measurement of a contingent earn-out obligation from a recent acquisition. Excluding this gain, operating expenses were approximately flat relative to prior year despite the addition of SG&A costs associated with recent acquisitions.

Interest expense in the second quarter of 2014 declined to $11.4 million compared to $14.3 million in the same period last year, resulting from a reduction in interest rate from the credit agreement refinancing completed in May 2013. In conjunction with the May 2013 refinancing and other debt prepayments made in the prior year quarter, a $13.5 million loss on extinguishment of debt was recorded during the second quarter of 2013.

Beginning in the second quarter of 2014, there was a further 25 basis point reduction in borrowing costs as a result of the leverage ratio as defined in the credit agreement falling below 3.0 times, resulting in a $16.0 million non-cash gain being recorded in the current year quarter.

2014 OUTLOOK

The Company is reaffirming its prior guidance for 2014 in terms of revenue growth, EBITDA margins and cash flows. For the full-year 2014, the Company still expects net sales to increase in the mid-single digit range as compared to the prior year. This sales outlook assumes an increased level of power outage severity in the second half of 2014 as compared to recent quarters, returning to a more normalized annual baseline level.

Adjusted EBITDA margins are expected to remain in the mid-20% range as previously guided, which are consistent with the average levels seen during the past four years. Free cash flow is still expected to be approximately 90% of full year 2014 adjusted net income.

"We remain excited about the compelling penetration opportunities for our residential and light commercial standby generators as we continue to focus our efforts on several high impact initiatives to increase the adoption for these products," continued Mr. Jagdfeld.

"These initiatives are targeted at improving the awareness, availability and affordability of standby generators and are highlighted by our innovative sales and marketing processes, our efforts to increase and develop distribution, and our introduction of new products. In addition, we have several initiatives aimed at increasing our share of the C&I market by leveraging our recently expanded product offering.

We also believe the overall secular trends toward natural gas generators, rental of mobile power equipment, and the penetration of certain end markets such as telecommunications and oil & gas will continue to drive additional growth. Through the execution of our Powering Ahead strategic plan, we expect to capitalize on these long-term opportunities, while also becoming a more balanced company as we further implement our diversification and international expansion strategies."

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, industrial and construction markets, Generac's power products are available globally through a broad network of independent dealers, retailers, wholesalers and equipment rental companies, as well as sold direct to certain end user customers.

Generac Reports First Quarter 2014 Results

WAUKESHA, Wis.-- May 1, 2014 -- Generac Holdings Inc., a leading designer and manufacturer of power generation equipment and other engine powered products, today reported financial results for its first quarter ended March 31, 2014.

First Quarter 2014 Highlights

Net sales were $342.0 million as compared to $399.6 million in the first quarter of 2013.

Commercial & Industrial (C&I) product sales increased 23.8% to $157.4 million as compared $127.1 million in the prior-year first quarter, due to a combination of acquisitions and continued organic growth.

Residential product sales were $164.0 million during the first quarter of 2014 as compared to $255.2 million in the prior year quarter. The prior year first quarter benefitted from elevated demand due to Superstorm Sandy, while the first quarter of 2014 was negatively impacted by colder temperatures and snow cover which delayed installations and slowed demand for home standby generators.

Net income during the first quarter of 2014 was $34.7 million, or $0.50 per share, as compared to $50.7 million or $0.73 per share for the same period of 2013.

Adjusted net income, as defined in the accompanying reconciliation schedules, was $50.7 million as compared to $83.9 million in the first quarter of 2013. Adjusted diluted net income per share was $0.72 as compared to $1.21 per share in the first quarter of 2013.

Adjusted EBITDA, as defined in the accompanying reconciliation schedules, was $77.5 million as compared to $108.8 million in the first quarter last year.

Cash flow from operations in the first quarter of 2014 was $36.4 million as compared to $38.3 million in the prior year quarter. Free cash flow, as defined in the accompanying reconciliation schedules, was $31.4 million as compared to $33.9 million in the first quarter of 2013.

For the trailing four quarters, including the first quarter of 2014, net sales were $1.428 billion; net income was $158.6 million; adjusted EBITDA was $371.3 million; cash flow from operations was $258.0 million; and free cash flow was $226.7 million.

“We are pleased with our overall financial results for the quarter as they were in line with our expectations. Shipments of residential products during the first quarter were more typical of the seasonality we historically see in winter months, which was magnified in the current season with heavy snow and colder temperatures delaying installs of residential standby units, ” said Aaron Jagdfeld, President and Chief Executive Officer. 

“Shipments of C&I products were again strong during the quarter as a result of continued organic growth and the contribution from recent acquisitions. Through a combination of our internal growth initiatives and M&A activity, we remain focused on driving a new and higher baseline of demand for our products, while also becoming a more diversified company with improved global scale.”

Additional First Quarter 2014 Highlights

Residential product sales for the first quarter of 2014 were $164.0 million as compared to $255.2 million for the comparable period in 2013. Sales of residential products during the prior-year first quarter of 2013 were positively impacted by approximately $100 million in incremental shipments as a result of satisfying the extended lead times that resulted from Superstorm Sandy, which did not repeat during the first quarter of 2014. Excluding this benefit in the prior year quarter, residential product revenue increased during the first quarter of 2014, driven by higher shipments of portable generators.

C&I product sales for the first quarter of 2014 increased 23.8% to $157.4 million from $127.1 million for the comparable period in 2013. The increase was driven by recent acquisitions along with solid organic growth for stationary generators and light towers. The strength in organic revenues was primarily driven by an increase in shipments to national account customers.

Gross profit margin for the first quarter of 2014 was 34.9% compared to 38.4% in the prior-year first quarter. Gross margin was impacted over the prior year primarily due to a notably higher mix of organic C&I product shipments and lower mix of home standby generators, together with the impact of recent acquisitions.

Operating expenses for the first quarter of 2014 declined $2.7 million, or 4.8%, as compared to the first quarter of 2013. The expense reduction was driven primarily by a decline in warranty expense driven by warranty rate improvements in recent quarters, partially offset by the addition of operating expenses associated with recent acquisitions.

Interest expense in the first quarter of 2014 declined to $11.7 million compared to $15.7 million in the same period last year, the result of a reduction in interest rate from the credit agreement refinancing completed in May 2013.

2014 Outlook

The Company is reaffirming its prior guidance for 2014 in terms of revenue growth, EBITDA margins and cash flows. For the full-year 2014, the Company still expects net sales to increase in the mid-single digit range as compared to the prior year. This top-line guidance assumes no material changes in the current macroeconomic environment, no major power outage events for the remainder of 2014, and no benefit from additional acquisitions.

Adjusted EBITDA margins are expected to remain in the mid-20% range as previously guided, as a higher mix of C&I product shipments relative to prior expectations is projected to be offset by reduced operating expenses. These attractive margins are consistent with the average levels seen during the past four years.

“We expect to continue to benefit from the long-term secular growth drivers for our business,” continued Mr. Jagdfeld. “Given the relatively low penetration for both residential and light-commercial standby generators, we believe there is a substantial opportunity for long-term growth as the leader in these emerging product categories.

We are also optimistic about the increasing need for our products used in certain end-market verticals such as telecommunications and oil & gas, as well as the overall ongoing secular shifts in the market toward natural gas generators and the rental of mobile power equipment. As we continue to execute on our Powering Ahead strategic plan, we are confident in our ability to continue to invest in the future growth of the business, both organically and through acquisitions.”

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, industrial and construction markets, Generac's power products are available globally through a broad network of independent dealers, retailers, wholesalers and equipment rental companies, as well as sold direct to certain end user customers.