2 0
1 9
G E N E R A C
A N N U A L
R E P O R T
A B O U T G E N E R A C
Founded in 1959.
A leading global designer and manufacturer of a
wide range of energy technology solutions and
other power products serving residential, light
commercial and industrial markets.
Products 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.
Fourteen acquisitions completed since 2011.
Approximately 5,700 employees as of 1/1/2020.
Global manufacturing, distribution, fulfillment and
commercial footprint with facilities located in the
U.S., Latin America, Europe and Asia.
Dear Shareholders,
2019 was another record year for Generac across several key financial metrics including Revenue, Adjusted EBITDA, Adjusted
EPS, and Free Cash Flow. Revenue grew 9% for the year which was on top of very strong topline growth in both 2018 and
2017 of 21% and 16%, respectively – a robust 15% compound annual growth rate over the last three years. Gross margin
expanded 40 basis points for the year to 36% and Adjusted EBITDA margin came in strong at 21%. Led by record fourth quarter
performance, we also generated over $300 million of operating cash flow and over $250 million of free cash flow for the full-year.
Key Strategic Accomplishments
In addition to our strong financial performance, we also had some key accomplishments during the year that we believe are
important to the execution of our strategy. The secular penetration opportunity for home standby generators continued to be
demonstrated as shipments once again increased at a strong rate during the year. We continue to see very encouraging trends
with several important performance metrics for home standby including in-home consultations, activations, and residential dealer
count. We made significant progress in ramping up efforts to capitalize on a dramatic increase in generator interest and demand
in California due to the fire prevention related power shutoffs events, as residential product shipments alone to the state increased
by more than $50 million compared to the prior year. We also launched our new Clean Energy efforts during the year by entering
into the energy storage and monitoring markets, including making the important and strategic acquisitions of Pika Energy and
Neurio Technology during the first half of 2019. We achieved a critical milestone during the fourth quarter by shipping the first of
our new PWRcellTM storage systems with our PWRviewTM monitoring platform, which has been very well received by the market to
date.
Another key accomplishment during 2019 was the exceptionally strong growth experienced for our domestic Commercial &
Industrial stationary generators, which benefitted from market share gains and the dual secular drivers of increasing penetration
for natural gas generators and the impending deployment of next-generation 5G technology. We also further expanded our
international business with the Captiva acquisition in India during the first quarter – one of the largest power generation markets
in the world.
10-Year Anniversary as a Public Company
Earlier this year, we rang the opening bell at the New York Stock Exchange commemorating the 10th anniversary of our initial
public offering in February 2010. Since going public, Generac has transformed itself from a company primarily focused on
Emergency Backup Power to an Industrial Technology company and now with a more specific focus on Energy Technology
solutions. During our time as a public company, we have grown revenue at a compounded annual rate of 10% organically and
14% on an as-reported basis, while making significant investments across the business to dramatically expand our served
addressable markets, maintaining strong Adjusted EBITDA margins in the low-20% range, and generating approximately $2
billion dollars of free cash flow during the last decade.
We are extremely proud of this proven track record of strong and profitable revenue growth, which has led to a total
shareholder return over the past ten years that has significantly outperformed the overall market. In addition to the success
we’ve had, we are as excited as we’ve ever been about the future long-term growth prospects for Generac which are driven
by several overall Mega Trends and many other powerful macro secular drivers for our business, and we will continue to
proactively invest in the strategic initiatives that align with the company’s “Powering Our Future” strategy.
160306INSERT_r3_Letter 2019.indd 1
160306INSERT_r3_Letter 2019.indd 1
4/22/20 11:17 AM
4/22/20 11:17 AM
160306INSERT_r2_Letter 2019.indd 2160306INSERT_r2_Letter 2019.indd 24/21/20 6:32 PM4/21/20 6:32 PMIn ClosingAs 2020 unfolds and the world enters an uncertain economic time as a result of the COVID-19 pandemic, Generac is in the very fortunate position of having a strong balance sheet and liquidity position. This financial strength gives us tremendous flexibility and peace of mind during the uncertain economic environment that we’re operating in during 2020. Specifically, at the end of 2019, our gross debt leverage ratio was only 2.0 times, we had approximately $600 million of liquidity through existing cash and equivalents and revolving credit availability, and we have no maturities on our term loan until December 2026. Having financial flexibility as we navigate through these challenging times is critical in continuing to invest and allocate resources as we execute on our strategic plan to generate the best return for our shareholders. Even more importantly, this financial strength gives us the flexibility to remain laser focused on continuing to provide the kinds of products and services that are essential to the safety and security of residential homes and businesses and critical infrastructure across the globe.On behalf of the entire Generac team, I would like to thank our stakeholders for your ongoing confidence and support as we look forward to our continued success in the future.Sincerely,Aaron P. Jagdfeld President & CEO Generac Holdings Inc. 160306INSERT_r1_Letter 2019.indd 3160306INSERT_r1_Letter 2019.indd 34/18/20 12:41 AM4/18/20 12:41 AMK FORM 10-K [ 2019 ] 160306INSERT_r1_Letter 2019.indd 4160306INSERT_r1_Letter 2019.indd 44/18/20 12:41 AM4/18/20 12:41 AM[ THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY. ] UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
FORM 10-K
(cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
Or
(cid:3) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 001-34627
GENERAC HOLDINGS INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
S45 W29290 Hwy 59, Waukesha, WI
(Address of principal executive offices)
20-5654756
(IRS Employer Identification No.)
53189
(Zip Code)
(262) 544-4811
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
GNRC
New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes (cid:2) No (cid:3)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes (cid:3) No (cid:2)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:2) No (cid:3)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). Yes (cid:2) No (cid:3)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:3)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller
reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:2)
Non-accelerated filer (cid:3)
Accelerated filer (cid:3)
Smaller reporting company (cid:3)
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:3)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes (cid:3) No (cid:2)
The aggregate market value of the voting common equity held by non-affiliates of the registrant on June 28, 2019, the last
business day of the registrant’s most recently completed second fiscal quarter, was approximately $4,191,188,195 based upon the
closing price reported for such date on the New York Stock Exchange.
As of February 19, 2020, 62,567,525 shares of registrant’s common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Annual Report to Stockholders for the year ended December 31, 2019 furnished to the Securities
and Exchange Commission are incorporated by reference into Part II of this Form 10-K. Portions of the registrant’s Proxy Statement
for the 2020 Annual Meeting of Stockholders (the ‘‘2020 Proxy Statement’’), which will be filed by the registrant on or prior to
120 days following the end of the registrant’s fiscal year ended December 31, 2019, are incorporated by reference into Part III of this
Form 10-K.
2019 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Item 6.
Item 7.
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial
Item 9.
Page
2
11
22
22
23
23
23
25
33
50
52
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
105
105
106
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11.
Security Ownership of Certain Beneficial Owners and Management and Related
Item 12.
Item 13.
Item 14.
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
106
106
106
106
106
Item 15.
Item 16.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
107
111
PART IV
Forward-Looking Statements
This annual report contains forward-looking statements that are subject to risks and uncertainties.
Forward-looking statements give our current expectations and projections relating to our 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.
The forward-looking statements contained in this annual report are based on assumptions that we
have made in light of our industry experience and on our perceptions of historical trends, current
conditions, expected future developments and other factors we believe are appropriate under the
circumstances. As you read and consider this report, you should understand that these statements are
not guarantees of performance or results. They involve risks, uncertainties (some of which are beyond
our control) and assumptions. Although we believe that these forward-looking statements are based on
reasonable assumptions, you should be aware that many factors could affect our actual financial results
and cause them to differ materially from those anticipated in the forward-looking statements. The
forward-looking statements contained in this annual report include estimates regarding:
(cid:129) our business, financial and operating results, and future economic performance;
(cid:129) proposed new product and service offerings; and
(cid:129) management’s goals, expectations and objectives and other similar expressions concerning
matters that are not historical facts.
Factors that could affect our actual financial results and cause them to differ materially from those
anticipated in the forward-looking statements include:
(cid:129) frequency and duration of power outages impacting demand for our products;
(cid:129) availability, cost and quality of raw materials and key components from our global supply chain
and labor needed in producing our products;
(cid:129) the impact on our results of possible fluctuations in interest rates, foreign currency exchange
rates, commodities, product mix and regulatory tariffs;
(cid:129) 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;
(cid:129) the risk that our acquisitions will not be integrated successfully;
(cid:129) difficulties we may encounter as our business expands globally or into new markets;
(cid:129) our dependence on our distribution network;
(cid:129) our ability to invest in, develop or adapt to changing technologies and manufacturing techniques;
(cid:129) loss of our key management and employees;
(cid:129) increase in product and other liability claims or recalls;
(cid:129) failures or security breaches of our networks or information technology systems; and
(cid:129) changes 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, or should any of these assumptions
prove incorrect, our 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 Item 1A of this Annual Report on Form 10-K. Stockholders, potential investors and other
readers should consider these factors carefully in evaluating the forward-looking statements.
Any forward-looking statement made by us in this report speaks only as of the date on which it is
made. Factors or events that could cause our actual results to differ may emerge from time to time,
and it is not possible for us to predict all of them. We undertake 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.
Item 1. Business
PART I
Founded in 1959, Generac Holdings Inc. (the Company or Generac) is a leading global designer
and manufacturer of a wide range of energy technology solutions. The Company provides power
generation equipment, energy storage systems, and other power products serving the residential, light
commercial and industrial markets.
Power generation is a key focus of the Company, which differentiates us from our competitors who
also have broad operations outside of the power equipment market. As the only significant market
participant focused predominantly on these products, we maintain one of the leading market positions
in the power equipment market in North America and an expanding presence internationally. We
believe we have one of the widest ranges of products in the marketplace, including residential,
commercial and industrial standby generators; as well as portable and mobile generators used in a
variety of applications. A key strategic focus for the Company in recent years has been leveraging our
leading position in the growing market for cleaner burning, more cost-effective natural gas fueled
generators to expand into applications beyond standby power. We have also been focused on
‘‘connecting’’ the equipment we manufacture to the users of that equipment, helping to drive additional
value to our customers and our distribution partners over the product lifecycle.
During 2019, we began providing energy storage systems as a clean energy solution for residential
use that capture and store electricity from solar panels or other power sources and help reduce home
energy costs while also protecting homes from brief power outages.
Other engine powered products that we design and manufacture include light towers which provide
temporary lighting for various end markets; commercial and industrial mobile heaters and pumps used
in the oil & gas, construction and other industrial markets; and a broad product line of outdoor power
equipment for residential and commercial use.
We design, manufacture, source and modify engines, alternators, transfer switches and other
components necessary for our power products, which are fueled by natural gas, liquid propane,
gasoline, diesel and Bi-Fuel(cid:4). We also design, source, modify and integrate batteries, inverters, power
electronics, controls, energy monitoring devices and other components into our energy storage systems.
Our products are available globally through a broad network of independent dealers, distributors,
retailers, ecommerce partners, wholesalers and equipment rental companies under a variety of brand
names. We also sell direct to certain national and regional account customers, as well as to individual
consumers, that are the end users of our products.
We have a significant market share in the residential and light commercial markets for automatic
standby generators, which we believe remain under-penetrated in the marketplace. We also have a
leading market position for portable generators used in residential, light construction and recreational
applications. We believe that our leading market position is largely attributable to our strategy of
providing a broad product line of high-quality, innovative and affordable products through our
extensive and multi-layered distribution network to whom we offer comprehensive support programs,
and leads from the factory. In addition, we are a leading provider of light towers, mobile generators,
2
flameless heaters, outdoor power equipment and industrial diesel generators ranging in sizes up to
3,250kW. As we enter the rapidly developing market for energy storage, we offer energy storage
systems ranging in configurations up to 34kWh, and expect to gain share by leveraging our capabilities
that we have developed to grow the residential standby generator market.
Over the years, we have executed a number of acquisitions that support our strategic plan. A
summary of recent acquisitions can be found in Note 1, ‘‘Description of Business,’’ to the consolidated
financial statements in Item 8 of this Annual Report on Form 10-K.
Products
We design and manufacture stationary, portable and mobile generators with single-engine outputs
ranging between 800W and 3,250kW. We have the ability to expand the power range for certain
stationary generator solutions to much larger multi-megawatt systems through an integrated paralleling
configuration called Modular Power Systems (MPS). Other engine powered products and solutions that
we provide include light towers, mobile heaters, power washers and water pumps, along with a broad
line of outdoor power equipment. We now have a complete line of energy storage systems and energy
monitoring solutions as we enter the clean energy markets. We classify our products into three
categories based on similar range of power output geared for varying end customer uses: Residential
products, Commercial & Industrial (C&I) products and Other products & services. The following
summary outlines our portfolio of products, including their key attributes and customer applications.
Residential Products
Our residential automatic standby generators range in output from 6kW to 60kW, operate on
natural gas, liquid propane or diesel, and are permanently installed with an automatic transfer switch,
which we also manufacture. Air-cooled engine residential standby generators range in outputs from
6kW to 22kW, are available in steel and aluminum enclosures and serve as an emergency backup for
small to medium-sized homes. Liquid-cooled engine generators serve as emergency backup for larger
homes and small businesses and range in output from 22kW to 150kW. We also provide a remote
monitoring system with various options for home standby generators called Mobile Link(cid:4). This remote
monitoring capability is a standard, WiFi-enabled feature on every home standby generator that we
offer, and allows our customers to check the status of their generator conveniently online, and also
provides the capability to similarly receive maintenance and service alerts. Our remote monitoring
platform also allows our distribution partners to monitor their installed base of customers through a
feature that we call ‘‘Fleet’’, enabling them to offer a more proactive experience to service a customer’s
generator.
We provide a broad product line of portable and inverter generators that are fueled predominantly
by gasoline, with certain models running on propane and diesel fuel, which range in size from 800W to
17.5kW. These products serve as an emergency home backup source of electricity and are also used for
construction and recreational purposes. Our portable generators are targeted at homeowners, with price
points ranging between the consumer value end of the market through the premium homeowner
market; at professional contractors, starting at the value end through the premium contractor segment;
and at the recreational market with our inverter product line. In addition, we offer manual transfer
switches to supplement our portable generator product offering.
We provide a broad product line of engine driven power washers for residential and commercial
use, fueled by gasoline, which range in pressure from 2,500 to 4,200 PSI. We also provide a broad
product line of outdoor power equipment that includes water pumps, trimmer & brush mowers, log
splitters, lawn & leaf vacuums, and chipper shredders for the property maintenance needs of
residences, commercial properties, municipalities and farms. These products are largely sold in North
3
America through online catalogs, retail hardware stores and outdoor power equipment dealers
primarily under the DR(cid:5) brand name.
The acquisitions of Neurio Technology Inc. in March 2019 and Pika Energy, Inc. in April 2019
accelerated our entrance into the energy storage and energy monitoring markets. Late in 2019 we
began selling complete energy storage systems—marketed under the names PWRcellTM and
PWRviewTM. This clean energy solution consists of a system of batteries, an inverter, power electronic
controls, energy monitoring hardware & software, and other components. These systems capture and
store electricity from solar panels or the electric grid and help reduce home energy costs while also
protecting homes from brief power outages, and range in size from 8kWh up to 34kWh.
Residential products comprised 51.9%, 51.5% and 51.8%, respectively, of total net sales in 2019,
2018 and 2017.
Commercial & Industrial Products
We offer a full line of C&I generators fueled by diesel, natural gas, liquid propane and Bi-Fuel(cid:4).
We believe we have one of the broadest product offerings in the industry with power outputs ranging
from 10kW up to 3,250kW.
Our light-commercial standby generators include a full range of affordable systems from 22kW to
150kW and related transfer switches, providing three-phase power sufficient for most small and
mid-sized businesses such as grocery stores, convenience stores, restaurants, gas stations, pharmacies,
retail banks, small health care facilities and other small-footprint retail applications. Our light-
commercial generators run on natural gas, liquid propane and diesel fuel.
We design and manufacture a broad product line of standard and configured stationary generators
and related transfer switches for various industrial standby, continuous-duty and prime rated
applications. Our single-engine industrial generators range in output from 10kW up to 3,250kW, which
includes stationary and containerized packages, with our MPS technology extending our product range
up to much larger multi-megawatt systems through an integrated paralleling configuration. During 2018,
we introduced a new 750kW gaseous-fueled generator, our largest and most powerful generator to date,
with plans going forward to expand these cleaner-fuel generators into larger applications. We offer four
fuel options for our industrial generators, including diesel, natural gas, liquid propane or Bi-Fuel(cid:4).
Bi-Fuel(cid:4) generators operate on a combination of both diesel and natural gas to allow our customers
the advantage of multiple fuel sources and extended run times. Our industrial standby generators are
primarily used as emergency backup for larger applications in the healthcare, telecom, datacom,
commercial office, retail, municipal and manufacturing markets.
Our MPS technology combines the power of several smaller generators to produce the output of a
larger generator, providing our customers with redundancy and scalability in a cost-effective manner.
For larger industrial applications, our MPS products offer customers an efficient, affordable way to
scale their standby power needs, and also offer superior reliability given their built-in redundancy which
allows individual units to be taken off-line for routine maintenance while retaining coverage for critical
circuits.
We also offer a full line of industrial transfer switches to meet varying needs from light industrial
applications all the way to the most demanding critical installations. Generac’s industry-leading feature
set and flexible platforms offer a variety of switching technologies for customized solutions to meet any
project needs.
We provide a broad product line of light towers, mobile generators and mobile heaters, which
provide temporary lighting, power and heat for various end markets, such as road and commercial
construction, energy, mining, military and special events. We manufacture commercial mobile pumps
and dust-suppression equipment for a wide variety of applications. We also manufacture various
4
gaseous-engine control systems and accessories, which are sold to gas-engine manufacturers and
aftermarket customers.
C&I products comprised 39.5%, 40.6% and 40.8% respectively, of total net sales in 2019, 2018 and
2017.
Other Products and Services
Our ‘‘Other Products and Services’’ category primarily consists of aftermarket service parts and
product accessories sold to our customers, the amortization of extended warranty deferred revenue, and
the service offerings in various parts of our business, including integration, project management, remote
monitoring services, and energy monitoring services.
Other products comprised 8.6%, 7.9% and 7.4%, respectively, of total net sales in 2019, 2018 and
2017.
Distribution Channels and Customers
We distribute our products through a variety of different distribution channels to increase
awareness of our product categories and brands, and to ensure our products reach a broad, global
customer base. This distribution network includes independent residential dealers, industrial distributors
and dealers, national and regional retailers, e-commerce partners, electrical, HVAC and solar
wholesalers (including certain private label arrangements), catalogs, equipment rental companies,
equipment distributors, and solar installers. We also sell direct to certain national and regional account
customers, as well as to individual consumers, who are the end users of our products.
We believe our global distribution network is a competitive advantage that has strengthened over
the years as a result of adding, expanding and developing the various distribution channels through
which we sell our products. We offer a broad set of tools, programs, factory support, and leads to help
our distribution partners be successful. Our network is well balanced with no customer providing more
than 5% of our sales in 2019.
At over 6,000 strong, we have the industry’s largest network of factory direct independent
generator dealers in North America.
Our residential/light commercial dealer network sells, installs and services our residential and light
commercial products to end users. We have increased our level of investment in recent years by
focusing on a variety of initiatives to more effectively market and sell our home standby products and
better align our dealer network with Generac. These initiatives have helped to improve lead quality and
develop our dealers, thereby increasing close rates and lowering our cost per lead. We intend to
leverage these practices to grow the rapidly developing markets for energy storage and energy
monitoring.
Our industrial network consists of a combination of primary distributors as well as a support
network of dealers serving the global market. Over the past several years, we have been expanding our
dealer network globally through acquisitions and organic means, in order to expand our international
sales opportunities. The industrial distributors and dealers provide industrial and commercial end users
with ongoing sales, installation and product support. Our industrial distributors and dealers help
maintain the local relationships with commercial electrical contractors, specifying engineers and
national account regional buying offices.
Our retail distribution network includes thousands of locations across the globe and includes a
variety of regional and national home improvement chains, retailers, clubs, buying groups and farm
supply stores. These physical retail locations are supplemented by a growing presence of e-commerce
retailers, along with a number of catalog retailers. This network primarily sells our residential standby,
5
portable and light-commercial generators, as well as our other engine powered tools. The placement of
our products at retail locations drives significant awareness for our brands and the automatic home
standby product category.
Our wholesaler network distributes our residential and light-commercial generators, and now our
energy storage systems. The channel consists of selling branches of both national and local distribution
houses for electrical, HVAC and solar products on a wholesale basis. They typically sell to electrical
dealers and solar installers who are not in our dealer network.
On a selective basis, we have established private label and licensing arrangements with third party
partners to provide residential, light-commercial and industrial generators. These partners include
leading home equipment, electrical equipment and construction machinery companies, each of which
provides access to incremental channels of distribution for our products.
The distribution for our C&I mobile products includes international, national, regional and
specialty equipment rental companies, equipment distributors and construction companies, which
primarily serve non-residential building construction, road construction, energy markets and special
events. In addition, international acquisitions have provided access to numerous independent
distributors in over 150 countries.
We sell direct to certain national and regional account customers that are the end users of our
products covering a number of end market verticals, including telecommunication, retail, banking,
energy, healthcare, convenience stores, grocery stores and other light commercial applications.
Additionally, our residential products are also sold direct to individual consumers, who are the end
users of the product.
Business Strategy
We have been executing on our strategic plan, which serves as the framework for the significant
investments we have made to capitalize on the long-term growth prospects of Generac. Our strategic
plan centers around a number of key mega-trends that we believe will drive significant secular growth
opportunities for our business. Significant changes in the energy landscape, climate change, the
abundance of natural gas globally, an aging infrastructure, and 5G telecommunications are all major
themes that we believe will drive future long-term growth. As we continue to move our strategic plan
into the future, we are focused on a number of initiatives that are driven by the following four key
objectives, which are called ‘‘Powering Our Future’’:
Growing the residential standby generator market. As the leader in the home standby generator
market, it is incumbent upon us to continue to drive growth and increase the penetration rate of these
products in households across the world. Central to this strategy is to increase the awareness,
availability and affordability of home standby generators. Ongoing power outage activity due to more
severe weather and an aging electrical grid, combined with expanding and developing our residential/
light commercial dealer base and overall distribution in affected regions, are key drivers in elevating the
awareness of home standby generators over the long term. We intend to continue to supplement these
key growth drivers by focusing on a variety of strategic initiatives targeted toward generating more sales
leads, improving close rates and reducing the total overall cost of a home standby system. In addition,
we intend to continue to focus on innovation in this growing product category and introduce new
products and solutions into the marketplace. With only approximately 4.75% penetration of the
addressable market of homes in the United States (which we define as single-family detached, owner-
occupied households with a home value of over $125,000, as defined by the U.S. Census Bureau’s 2017
American Housing Survey for the United States), we believe there are opportunities to further
penetrate the residential standby generator market both domestically and internationally. As the energy
landscape continues to change and favor on-site renewable power, we intend to leverage our significant
experience and competencies developed over the past two decades in growing the residential standby
6
generator market to accelerate our recent entrance into the emerging residential energy storage and
monitoring markets.
Gaining market share and entering new markets. We continue to put a strong focus on improving
our share of the power equipment markets in which we participate around the world by emphasizing
our innovation and continually expanding our product lines and services. We design and build a wide
range of products from portable, stationary and mobile generators, light towers, mobile heaters, pumps,
brush mowers and trimmers, and other engine powered equipment. We have many advantages over our
competitors with strengths in our engineering, sourcing and operations capabilities as well as a global
distribution network that we believe can be leveraged further for continued market share gains in the
markets we serve around the world. We are also focused on expanding our addressable market
opportunities by entering new markets, be it with new products or new geographies around the world.
Lead with natural gas power generation products. We will attempt to gain incremental market share
within commercial and industrial markets through our leading position in the growing market for
cleaner burning, more cost effective natural gas fueled standby power solutions. While still a smaller
portion of the overall C&I market, we believe demand for these products continues to increase at a
faster rate than traditional diesel fueled generators as a result of their lower capital investment and
operating costs. Given the abundance of natural gas as a global source for base-load power, we also
intend to explore new gaseous generator related market opportunities, including increasing our product
capabilities for applications beyond standby generation including continuous-duty, prime rated,
distributed generation, demand response and combined heat and power. We plan to do this by
leveraging our deep technical capabilities for gaseous-fueled products, leading position for natural gas
standby generators and growing market acceptance for these products. As part of this strategy, we plan
to continue to expand our natural gas product offering into larger power nodes to take advantage of
the continuing shift from diesel to natural gas generators.
Connect with customers, partners and product. We will work to diversify our business model from
solely ‘‘equipment centric’’ to a systems and services provider through connectivity solutions and
subscription based applications deployed enterprise wide. This includes an important emphasis on
improving the end-user experience and helping customers to lower utility costs. The initial focus is
increasing connection with our products to unlock opportunities and revenue streams. We have
developed tools and programs that add value to dealers and end-users that will result in recurring
revenue from subscriptions and parts. We will leverage data obtained from connected devices by
developing predictive analytics that result in continuously improving product quality, sales processes and
tools, energy optimization, aftermarket penetration, customer experience and alignment with dealers.
Finally, we will build or acquire energy management capabilities to monetize an ecosystem of devices
that relate to energy use, storage, generation, control and optimization.
Expansion globally is a core piece to the success of each of our strategic objectives. The recent
acquisitions that now comprise our International segment have significantly increased our global
presence by adding product, manufacturing and distribution capabilities that serve local markets around
the world, and have resulted in us becoming a leading global player in the markets for backup power
and mobile power equipment. As we look forward, we intend to leverage our increased international
footprint attained from these acquisitions to serve the significant global markets for power generation
and power storage outside the U.S. and Canada.
See ‘‘Item 7, Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Business Drivers and Trends’’ for additional drivers that influence demand for our
products and other trends affecting the markets that we serve.
7
Manufacturing
We operate numerous manufacturing plants, distribution facilities and inventory warehouses
located throughout the world. We store finished goods at third-party logistics providers in the United
States that accommodate material storage and rapid response requirements of our customers. See
‘‘Item 2—Properties’’ for additional details regarding the locations and activities of our principal
operations.
In recent years, we have added manufacturing capacity through investments in automation,
improved utilization and the expansion of our manufacturing footprint through organic means as well
as through acquisitions. We believe we have sufficient capacity to achieve our business goals for the
near-to-intermediate term.
Research and Development
Our focus on power generation equipment, energy storage systems, and other power products
drives technological innovation, specialized engineering and manufacturing competencies. Research and
development (R&D) is a core competency and includes a staff of over 500 engineers working on
numerous projects at various facilities worldwide. These activities are focused on developing new
technologies and product enhancements, as well as maintaining product competitiveness by improving
manufacturing costs, safety characteristics, reliability and performance while ensuring compliance with
regulatory standards. We have over 35 years of experience using natural gas engines and have
developed specific expertise with fuel systems and emissions technology. In the residential and light
commercial markets, we have developed proprietary engines, cooling packages, controls, fuel systems
and emissions systems. The Pika Energy and Neurio Technologies acquisitions have built out resources
and expertise in the energy storage and energy monitoring markets. They provide advanced capabilities
with power electronics and battery management software, along with proprietary inverter technologies
and hardware and software for energy monitoring and management. We believe that our expertise in
power equipment gives us the capability to develop new products that will allow continued
diversification in our end markets.
Intellectual Property
We are committed to research and development, and we rely on a combination of patents and
trademarks to establish and protect our proprietary rights. Our patents protect certain features and
technologies we have developed for use in our products including fuel systems, air flow, electronics and
controls, noise reduction and air-cooled engines. We believe the existence of these patents and
trademarks, along with our ongoing processes to register additional patents and trademarks, protect our
intellectual property rights and enhance our brands and competitive position. We also use proprietary
manufacturing processes that require customized equipment. With our continuous focus on research
and development, we expect to develop new intellectual property on an ongoing basis.
Suppliers of Raw Materials
Our primary raw material inputs are steel, copper and aluminum, all of which are purchased from
third parties and, in many cases, as part of machined or manufactured components. We have developed
an extensive network of reliable suppliers in the United States and around the world. We believe our
Strategic Global Sourcing function is a competitive strength and continuously evaluates the quality and
cost structure of our purchased components and assesses the capabilities of our supply chain.
Components are sourced accordingly based on this evaluation. Our supplier quality engineers conduct
on-site audits of major supply chain partners and help to maintain the reliability of critical sourced
components.
8
Competition
The market for power generation equipment, energy storage systems, and other engine powered
products is competitive. We face competition from a variety of large diversified industrial companies as
well as smaller generator manufacturers, along with mobile equipment, engine powered tools, solar
inverter and battery storage providers, both domestic and internationally.
Specifically in the generator market, most of the traditional participants compete on a more
focused basis, targeting specific applications within their larger diversified product mix. We are the only
significant market participant with a primary focus on power equipment with a key emphasis on
standby, portable and mobile generators with broad capabilities across the residential, light-commercial
and industrial markets. We believe that our engineering capabilities and core focus on generators
provide us with manufacturing flexibility and enables us to maintain a first-mover advantage over our
competition for product innovation. We also believe our broad product offering, diverse omni-channel
distribution model and strong factory support provide additional advantages as well.
A summary of the primary competitors across our main product classes are as follows:
Residential products—Kohler, Briggs & Stratton, Cummins, Honda, Champion, Techtronics
International, Husqvarna, Ariens, LG Chem, Tesla, Enphase, and Solar Edge, along with a number of
smaller domestic and foreign competitors; certain of which also have broad operations in other
manufacturing businesses.
C&I products—Caterpillar, Cummins, Kohler, MTU, IGSA, Wacker, MultiQuip, Terex, Doosan,
Briggs & Stratton (Allmand), Atlas Copco and Himonisa; certain of which focus on the market for
diesel generators as they are also diesel engine manufacturers. Also, we compete against other regional
packagers that serve local markets throughout the world.
In a continuously evolving market, we believe our scale and broad capabilities make us well
positioned to remain competitive. We compete primarily on the basis of brand reputation, quality,
reliability, pricing, innovative features, breadth of product offering, product availability and factory
support.
Employees
As of December 31, 2019, we had 5,689 employees (5,412 full time and 277 part-time and
temporary employees). Of those, 2,953 employees were directly involved in manufacturing at our
manufacturing facilities.
Domestically, we have had an ‘‘open shop’’ bargaining agreement for the past 50 years. The
current agreement, which expires October 17, 2021, covers our Eagle, Wisconsin facility. Additionally,
our plants in Mexico, Italy and Spain are operated under various local or national union groups. Our
other facilities are not unionized.
Regulation, including Environmental Matters
As a manufacturing company, our operations are subject to a variety of federal, state, local and
foreign laws and regulations covering environmental, health and safety matters. Applicable laws and
regulations include those governing, among other things, emissions to air, discharges to water, noise
and employee safety, as well as the generation, handling, storage, transportation, treatment, and
disposal of waste and other materials. In addition, our products are subject to various laws and
regulations relating to, among other things, emissions and fuel requirements, as well as labeling,
storage, transport, and marketing.
Our products sold in the United States are regulated by the U.S. Environmental Protection Agency
(EPA), California Air Resources Board (CARB) and various other state and local air quality
9
management districts. These governing bodies continue to pass regulations that require us to meet
more stringent emission standards, and all of our engines and engine-driven products are regulated
within the United States and its territories. In addition, certain products in the United States are
subject to safety standards as established by various other standards and rule making bodies, or state
and local agencies, including the U.S. Consumer Product Safety Commission (CPSC).
Similarly, other countries have varying degrees of regulation for our products, depending upon
product application and fuel types.
Available Information
The Company’s principal executive offices are located at S45 W29290 Highway 59, Waukesha,
Wisconsin, 53189 and the Company’s telephone number is (262) 544-4811. The Company’s website is
www.generac.com. The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and amendments to those reports are available free of charge through
the ‘‘Investor Relations’’ portion of the Company’s web site, as soon as reasonably practicable after
they are filed with the Securities and Exchange Commission (SEC). The information provided on these
websites is not part of this report and is therefore not incorporated herein by reference.
Information About Our Executive Officers
The following table sets forth information regarding our executive officers:
Name
Age
Position
Aaron P. Jagdfeld . . . . . . . .
York A. Ragen . . . . . . . . . .
Russell S. Minick . . . . . . . .
Tom Pettit . . . . . . . . . . . . .
Erik Wilde . . . . . . . . . . . . .
Patrick Forsythe . . . . . . . . .
President, Chief Executive Officer and Chairman
48
48 Chief Financial Officer
59 Chief Marketing Officer
51 Chief Operations Officer
45 Executive Vice President, Industrial, Americas
52 Executive Vice President, Global Engineering
Aaron P. Jagdfeld has served as our Chief Executive Officer since September 2008, as a director
since November 2006 and was named Chairman in February 2016. Prior to becoming Chief Executive
Officer, Mr. Jagdfeld worked for Generac for 15 years. He began his career in the finance department
in 1994 and became our Chief Financial Officer in 2002. In 2007, he was appointed President and was
responsible for sales, marketing, engineering and product development. Prior to joining Generac,
Mr. Jagdfeld worked in the audit practice of the Milwaukee, Wisconsin office of Deloitte and Touche.
Mr. Jagdfeld holds a Bachelor of Business Administration in Accounting from the University of
Wisconsin-Whitewater.
York A. Ragen has served as our Chief Financial Officer since September 2008. Prior to becoming
Chief Financial Officer, Mr. Ragen held Director of Finance and Vice President of Finance positions at
Generac. Prior to joining Generac in 2005, Mr. Ragen was Vice President, Corporate Controller at
APW Ltd., a spin-off from Applied Power Inc., now known as Enerpac Tool Group. Mr. Ragen began
his career at Arthur Andersen in the Milwaukee, Wisconsin office audit practice. Mr. Ragen holds a
Bachelor of Business Administration in Accounting from the University of Wisconsin-Whitewater.
Russell S. Minick began serving as our Chief Marketing Officer in August 2016. Prior to his
appointment, he served as our Executive Vice President, Residential Products since October 2011, with
this responsibility being expanded in January 2014 to Executive Vice President, Global Residential
Products and to Executive Vice President, North America in September 2014. Prior to joining Generac,
Mr. Minick was President & CEO of Home Care Products for Electrolux from 2006 to 2011, President
of The Gunlocke Company at HNI Corporation from 2003 to 2006, Senior Vice President of Sales,
Marketing and Product Development at True Temper Sports from 2002 to 2003, and General Manager
10
of Extended Warranty Operations for Ford Motor Company from 1998 to 2002. Mr. Minick is a
graduate of the University of Northern Iowa, and holds a degree in marketing.
Tom Pettit began serving as our Chief Operations Officer in February 2020. Since 2017, Mr. Pettit
was Executive Vice President and Chief Integrated Supply Chain Officer of nVent Electric plc, a
leading global provider of electrical connection and protection solutions and a former subsidiary of
Pentair plc (‘‘Pentair’’), a global industrial company. Mr. Pettit previously served as the Operations Vice
President of Pentair since 2015, and as the Chief Operating Officer for BioScrip, Inc., a provider of
infusion and home care management solutions, from 2014-2015. Mr. Pettit holds a B.S. in General
Engineering from West Point Military Academy and an MBA from the University of Hawaii.
Erik Wilde began serving as our Executive Vice President, Industrial, Americas in July 2016.
Mr. Wilde was Vice President and General Manager of the Mining Division for Komatsu America
Corp., a manufacturer of construction, mining, and compact construction equipment, from 2013 until he
joined Generac. Prior to that role, he held leadership positions as Vice President of the ICT Business
Division and Product Marketing at Komatsu America Corp. beginning in 2005. Mr. Wilde holds a
Bachelor of Business Administration in Management from Boise State University and an M.B.A. from
Keller Graduate School of Management.
Patrick Forsythe has served as our Executive Vice President of Global Engineering since re-joining
Generac in July 2015. Mr. Forsythe was Vice President, Global Engineering & Technology of Hayward
Industries, a producer of residential and commercial pool and spa equipment, from 2008 to 2015, Vice
President, Global Engineering at Ingersoll Rand Company (and the acquired Doosan Infracore
International) from 2004 to 2008, and Director of Engineering at Ingersoll Rand Company from 2002
to 2004. Prior to 2002, Mr. Forsythe worked in various engineering management capacities with
Generac from 1995 to 2002. Mr. Forsythe holds a Higher National Diploma (HND) in Mechanical
Engineering from the University of Ulster (United Kingdom), a B.S. in Mechanical Engineering, and
an M.S. in Manufacturing Management & Technology from The Open University (United Kingdom).
Item 1A. Risk Factors
You should carefully consider the following risks. These risks could materially affect our business,
results of operations or financial condition, cause the trading price of our common stock to decline
materially or cause our actual results to differ materially from those expected or those expressed in any
forward-looking statements made by us. These risks are not exclusive, and additional risks to which we
are subject include, but are not limited to, the factors mentioned under ‘‘Forward-Looking Statements’’
and the risks of our businesses described elsewhere in this Annual Report.
Risk factors related to our business and industry
Demand for the majority of our products is significantly affected by unpredictable power outage activity that
can lead to substantial variations in, and uncertainties regarding, our financial results from period to period.
Sales of our products are subject to consumer buying patterns, and demand for the majority of our
products is affected by power outage events caused by thunderstorms, hurricanes, ice storms, blackouts,
public safety power shutoffs, and other power grid reliability issues. The impact of these outage events
on our sales can vary depending on the location, frequency and severity of the outages. Sustained
periods without major power disruptions can lead to reduced consumer awareness of the benefits of
standby and portable generator products and can result in reduced sales growth rates and excess
inventory. There are smaller, more localized power outages that occur frequently that drive a baseline
level of demand for back-up power solutions. The lack of major power outage events and fluctuations
to the baseline levels of power outage activity are part of managing our business, and these fluctuations
could have an adverse effect on our net sales and profits. Despite their unpredictable nature, we
believe power disruptions create awareness and accelerate adoption for our home standby products.
11
Demand for our products is significantly affected by durable goods spending by consumers and businesses,
and other macroeconomic conditions.
Our business is affected by general economic conditions, and uncertainty or adverse changes such
as the prolonged downturn in U.S. residential investment and the impact of more stringent credit
standards could lead to a decline in demand for our products and pressure to reduce our prices. Our
sales of light-commercial and industrial generators are affected by conditions in the non-residential
construction sector and by the capital investment trends for small and large businesses and
municipalities. If these businesses and municipalities cannot access credit markets or do not utilize
discretionary funds to purchase our products as a result of the economy or other factors, our business
could suffer and our ability to realize benefits from our strategy of increasing sales in the light-
commercial and industrial sectors through, among other things, our focus on innovation and product
development, including natural gas engine and modular technology, could be adversely affected. In
addition, consumer confidence and home remodeling expenditures have a significant impact on sales of
our residential products, and prolonged periods of weakness in consumer durable goods spending could
have a material impact on our business. Typically, we do not have contracts with our customers which
call for committed volume, and we cannot guarantee that our current customers will continue to
purchase our products at the same level, if at all. If general economic conditions or consumer
confidence were to worsen, or if the non-residential construction sector or rate of capital investments
were to decline, our net sales and profits would likely be adversely affected. Additionally, timing of
capital spending by our national account customers can vary from quarter-to-quarter based on capital
availability and internal capital spending budgets. Also, the availability of renewable energy mandates
and investment tax credits and other subsidies can have an impact on the demand for energy storage
systems.
Decreases in the availability and quality, or increases in the cost, of raw materials, key components and labor
we use could materially reduce our earnings.
The principal raw materials that we use to produce our products are steel, copper and aluminum.
We also source a significant number of component parts from third parties that we utilize to
manufacture our products. The prices of those raw materials and components are susceptible to
significant fluctuations due to trends in supply and demand, commodity prices, currencies,
transportation costs, government regulations and tariffs, price controls, economic conditions and other
unforeseen circumstances beyond our control. We do not have long-term supply contracts in place to
ensure the raw materials and components we use are available in necessary amounts or at fixed prices.
If we are unable to mitigate raw material or component price increases through product design
improvements, price increases to our customers, manufacturing productivity improvements, or hedging
transactions, our profitability could be adversely affected. Also, our ability to continue to obtain quality
materials and components is subject to the continued reliability and viability of our suppliers, including
in some cases, suppliers who are the sole source of certain important components, including diesel
engines. If we are unable to obtain adequate, cost efficient or timely deliveries of required raw
materials and components, or sufficient labor resources, we may be unable to manufacture sufficient
quantities of products on a timely basis. This could cause us to lose sales, incur additional costs, delay
new product introductions or suffer harm to our reputation. For example, in December 2019, a strain
of coronavirus was reported to have surfaced in Wuhan, China, resulting in temporary closures or
production delays at certain of our suppliers. At this point, the extent to which the coronavirus may
impact our results is uncertain.
12
The industry in which we compete is highly competitive, and our failure to compete successfully could
adversely affect our results of operations and financial condition.
We operate in markets that are highly competitive. Some of our competitors have established
brands and are larger in size or are divisions of large diversified companies which have substantially
greater financial resources than we do. Some of our competitors may be willing to reduce prices and
accept lower margins in order to compete with us. In addition, we could face new competition from
large international or domestic companies with established industrial brands that enter our end
markets. Demand for our products may also be affected by our ability to respond to changes in design
and functionality, to respond to downward pricing pressure, and to provide shorter lead times for our
products than our competitors. If we are unable to respond successfully to these competitive pressures,
we could lose market share, which could have an adverse impact on our results. For further
information, see ‘‘Item 1—Business—Competition’’.
Our industry is subject to technological change, and our failure to continue developing new and improved
products and to bring these products rapidly to market could have an adverse impact on our business.
New products, or refinements and improvements of existing products, may have technical failures,
delayed introductions, higher than expected production costs or may not be well accepted by our
customers. If we are not able to anticipate, identify, develop and market high quality products in line
with technological advancements that respond to changes in customer preferences, demand for our
products could decline and our operating results could be adversely affected.
We rely on independent dealers and distribution partners, and the loss of these dealers and distribution
partners, or of any of our sales arrangements with significant private label, national, retail or equipment
rental customers, would adversely affect our business.
In addition to our direct sales force and manufacturer sales representatives, we depend on the
services of independent distributors and dealers to sell our products and provide service and
aftermarket support to our end customers. We also rely upon our distribution channels to drive
awareness for our product categories and our brands. In addition, we sell our products to end users
through private label arrangements with leading home equipment, electrical equipment and
construction machinery companies; arrangements with top retailers and equipment rental companies;
and our direct national accounts with telecommunications and industrial customers. Our distribution
agreements and any contracts we have with large national, retail and other customers are typically not
exclusive, and many of the distributors with whom we do business offer competitors’ products and
services. Impairment of our relationships with our distributors, dealers or large customers, loss of a
substantial number of these distributors or dealers or of one or more large customers, or an increase in
our distributors’ or dealers’ sales of our competitors’ products to our customers or of our large
customers’ purchases of our competitors’ products could materially reduce our sales and profits. Also,
our ability to successfully realize our growth strategy is dependent in part on our ability to identify,
attract and retain new distributors at all layers of our distribution platform, including increasing the
number of energy storage distributors, and we cannot be certain that we will be successful in these
efforts. For further information, see ‘‘Item 1—Business—Distribution Channels and Customers’’.
Our business could be negatively impacted if we fail to adequately protect our intellectual property rights or if
third parties claim that we are in violation of their intellectual property rights.
We consider our intellectual property rights to be important assets, and seek to protect them
through a combination of patent, trademark, copyright and trade secret laws, as well as licensing and
confidentiality agreements. These protections may not be adequate to prevent third parties from using
our intellectual property without our authorization, breaching any confidentiality agreements with us,
copying or reverse engineering our products, or developing and marketing products that are
13
substantially equivalent to or superior to our own. The unauthorized use of our intellectual property by
others could reduce our competitive advantage and harm our business. Not only are intellectual
property-related proceedings burdensome and costly, but they could span years to resolve and we might
not ultimately prevail. We cannot guarantee that any patents, issued or pending, will provide us with
any competitive advantage or will not be challenged by third parties. Moreover, the expiration of our
patents may lead to increased competition with respect to certain products.
In addition, we cannot be certain that we do not or will not infringe third parties’ intellectual
property rights. Any such claim, even if it is without merit, may be expensive and time-consuming to
defend, subject us to damages, cause us to cease making, using or selling certain products that
incorporate the disputed intellectual property, require us to redesign our products, divert management
time and attention, and/or require us to enter into costly royalty or licensing arrangements.
Our operations are subject to various environmental, health and safety laws and regulations, and
non-compliance with or liabilities under such laws and regulations could result in substantial costs, fines,
sanctions and claims.
Our operations are subject to a variety of foreign, federal, state and local environmental, health
and safety laws and regulations including those governing, among other things, emissions to air;
discharges to water; noise; and the generation, handling, storage, transportation, treatment and disposal
of waste and other materials. In addition, under federal and state environmental laws, we could be
required to investigate, remediate and/or monitor the effects of the release or disposal of materials
both at sites associated with past and present operations and at third-party sites where wastes
generated by our operations were disposed. This liability may be imposed retroactively and whether or
not we caused, or had any knowledge of, the existence of these materials and may result in our paying
more than our fair share of the related costs. We could also be subject to a recall action by regulatory
authorities. Violations of or liabilities under such laws and regulations could result in substantial costs,
fines and civil or criminal proceedings or personal injury and workers’ compensation claims.
Our products are subject to substantial government regulation.
Our products are subject to extensive statutory and regulatory requirements governing, among
other things, emissions, noise, labeling, transport, product content, and data privacy, including standards
imposed by the EPA, CARB and other regulatory agencies around the world. Also, as we increase our
connectivity with our products and customers, we may be required to comply with additional data
privacy and cybersecurity regulations. These laws are constantly evolving and many are becoming
increasingly stringent. Changes in applicable laws or regulations, or in the enforcement thereof, could
require us to redesign our products and could adversely affect our business or financial condition in the
future. Developing and marketing products to meet such new requirements could result in substantial
additional costs that may be difficult to recover in some markets. In some cases, we may be required to
modify our products or develop new products to comply with new regulations, particularly those
relating to air emissions and carbon monoxide. Typically, additional costs associated with significant
compliance modifications are passed on to the market. While we have been able to meet previous
deadlines and requirements, failure to comply with other existing and future regulatory standards could
adversely affect our position in the markets we serve.
We may incur costs and liabilities as a result of product liability claims.
We face a risk of exposure to product liability claims in the event that the use of our products is
alleged to have resulted in injury or other damage. Although we currently maintain product liability
insurance coverage, we may not be able to obtain such insurance on acceptable terms in the future, if
at all, or obtain insurance that will provide adequate coverage against potential claims. Product liability
claims can be expensive to defend and can divert the attention of management and other personnel for
14
long periods of time, regardless of the ultimate outcome. A significant unsuccessful product liability
defense could have a material adverse effect on our financial condition and results of operations. In
addition, we believe our business depends on the strong brand reputation we have developed. If our
reputation is damaged, we may face difficulty in maintaining our market share and pricing with respect
to some of our products, which could reduce our sales and profitability.
The loss of any key members of our senior management team or key employees could disrupt our operations
and harm our business.
Our success depends, in part, on the efforts of certain key individuals, including the members of
our senior management team, who have significant experience in the power products industry. If, for
any reason, our senior executives do not continue to be active in management, or if our key employees
leave our company, our business, financial condition or results of operations could be adversely
affected. Failure to continue to attract these individuals at reasonable compensation levels could have a
material adverse effect on our business, liquidity and results of operations. Although we do not
anticipate that we will have to replace any of these individuals in the near future, the loss of the
services of any of our key employees could disrupt our operations and have a material adverse effect
on our business.
Disruptions caused by labor disputes or organized labor activities could harm our business.
We may from time to time experience union organizing activities in our non-union facilities.
Disputes with the current labor union or new union organizing activities could lead to work slowdowns
or stoppages and make it difficult or impossible for us to meet scheduled delivery times for product
shipments to our customers, which could result in loss of business. In addition, union activity could
result in higher labor costs, which could harm our financial condition, results of operations and
competitive position. A work stoppage or limitations on production at our facilities for any reason
could have an adverse effect on our business, results of operations and financial condition. In addition,
many of our suppliers have unionized work forces. Strikes or work stoppages experienced by our
customers or suppliers could have an adverse effect on our business, results of operations and financial
condition.
We may experience material disruptions to our manufacturing operations.
While we seek to operate our facilities in compliance with applicable rules and regulations and
take measures to minimize the risks of disruption at our facilities, a material disruption at one of our
manufacturing facilities could prevent us from meeting customer demand, reduce our sales and/or
negatively impact our financial results. Any of our manufacturing facilities, or any of our equipment
within an otherwise operational facility, could cease operations unexpectedly due to a number of
events, including:
(cid:129) equipment or information technology infrastructure failure;
(cid:129) disruptions in the transportation infrastructure including roads, bridges, railroad tracks and
container ports;
(cid:129) fires, floods, tornadoes, earthquakes, or other catastrophes; and
(cid:129) other operational problems.
In addition, a significant portion of our manufacturing and production facilities are located in
Wisconsin within a 100-mile radius of each other. We could experience prolonged periods of reduced
production due to unforeseen events occurring in or around our manufacturing facilities in Wisconsin.
In the event of a business interruption at our facilities, in particular our Wisconsin facilities, we may be
unable to shift manufacturing capabilities to alternate locations, accept materials from suppliers or
15
meet customer shipment needs, among other severe consequences. Such an event could have a material
and adverse impact on our financial condition and results of our operations.
A significant portion of our purchased components are sourced in foreign countries, exposing us to additional
risks that may not exist in the United States.
We source a significant portion of our purchased components overseas, primarily in Asia and
Europe. Our international sourcing subjects us to a number of potential risks in addition to the risks
associated with third-party sourcing generally. Such risks include:
(cid:129) inflation or changes in political and economic conditions;
(cid:129) unstable regulatory environments;
(cid:129) changes in import and export duties;
(cid:129) domestic and foreign customs and tariffs;
(cid:129) currency rate fluctuations;
(cid:129) trade restrictions;
(cid:129) labor unrest;
(cid:129) logistical challenges, including extended container port congestion, and higher logistics costs;
(cid:129) communications challenges; and
(cid:129) other restraints and burdensome taxes.
These factors may have an adverse effect on our ability to efficiently and cost effectively source
our purchased components overseas. In particular, if the U.S. dollar were to depreciate significantly
against the currencies in which we purchase raw materials from foreign suppliers, our cost of goods
sold could increase materially, which would adversely affect our results of operations.
We are vulnerable to supply disruptions from single-sourced suppliers.
We single-source certain types of parts in our product designs. Any delay in our suppliers’
deliveries may impair our ability to deliver products to our customers. A wide variety of factors could
cause such delays including, but not limited to, lack of capacity, economic downturns, availability of
credit, logistical challenges, weather events or natural disasters.
As a U.S. corporation that conducts business in a variety of foreign countries, we are subject to the Foreign
Corrupt Practices Act and a variety of anti-corruption laws worldwide. A determination that we violated any
of these laws may affect our business and operations adversely.
The U.S. Foreign Corrupt Practices Act (FCPA) generally prohibits U.S. companies and their
intermediaries from making improper payments to foreign officials for the purpose of obtaining or
keeping business. The United Kingdom Bribery Act (UKBA) prohibits domestic and foreign bribery of
the private sector as well as public officials. Any determination that we have violated any
anti-corruption laws could have a material adverse effect on our financial position, operating results
and cash flows.
Policy changes affecting international trade could adversely impact the demand for our products and our
competitive position.
Changes in government policies on foreign trade and investment can affect the demand for our
products, impact the competitive position of our products or prevent us from being able to sell
16
products in certain countries. Our business benefits from free trade agreements, and efforts to
withdraw from, or substantially modify such agreements, in addition to the implementation of more
restrictive trade policies, such as more detailed inspections, higher tariffs, import or export licensing
requirements, exchange controls or new barriers to entry, could have a material adverse effect on our
results of operations, financial condition or cash flows. For example, starting in 2018 and continuing
through 2019, we experienced increased tariffs on many of our products and product components,
although these tariffs did not ultimately have a material adverse effect on our results due to the
implementation of various mitigation efforts in conjunction with our supply chain and end market
partners.
Additionally, the United Kingdom’s exit from EU membership, and discussions regarding its exit
from the EU, have caused and may continue to cause significant volatility in global stock markets,
currency exchange rate fluctuations and global economic uncertainty. Although it is unknown what the
terms of the United Kingdom’s future relationship with the EU will be, it is possible that there will be
greater restrictions on imports and exports between the United Kingdom and EU and increased
regulatory complexities. Any of these factors could adversely impact customer demand, our
relationships with customers and suppliers and our results of operations.
Our total assets include goodwill and other indefinite-lived intangibles. If we determine these have become
impaired, our net income could be materially adversely affected.
Goodwill represents the excess of cost over the fair market value of net assets acquired in business
combinations. Indefinite-lived intangibles are comprised of certain tradenames. At December 31, 2019,
goodwill and other indefinite-lived intangibles totaled $933.6 million. We review goodwill and other
intangibles at least annually for impairment and any excess in carrying value over the estimated fair
value is charged to the statement of comprehensive income. Future impairment may result from, among
other things, deterioration in the performance of an acquired business or product line, adverse market
conditions and changes in the competitive landscape, adverse changes in applicable laws or regulations,
including changes that restrict the activities of an acquired business or product line, and a variety of
other circumstances. A reduction in net income resulting from the write-down or impairment of
goodwill or indefinite-lived intangibles could have a material adverse effect on our financial statements.
Refer to the Critical Accounting Policies in Item 7 of this Annual Report on Form 10-K for further
information regarding the Company’s process for evaluating its goodwill for impairment.
We are unable to determine the specific impact of changes in selling prices or changes in volumes or mix of
our products on our net sales.
Because of the wide range of products that we sell, the level of customization for many of our
products, the frequent rollout of new products, the different accounting systems utilized, and the fact
that we do not apply pricing changes uniformly across our entire portfolio of products, we are unable
to determine with specificity the effect of volume or mix changes or changes in selling prices on our net
sales.
We may not realize all of the anticipated benefits of our acquisitions or those benefits may take longer to
realize than expected. We may also encounter significant unexpected difficulties in integrating acquired
businesses.
Our ability to realize the anticipated benefits of our acquisitions will depend, to a large extent, on
our ability to integrate the acquired businesses with our business. The integration of independent
businesses is a complex, costly and time-consuming process. Further, integrating and managing
businesses with international operations may pose challenges not previously experienced by our
management. As a result, we may be required to devote significant management attention and
resources to integrating the business practices and operations of any acquired businesses with ours. The
17
integration process may disrupt our business and, if implemented ineffectively, could preclude
realization of the full benefits expected by us. Our failure to meet the challenges involved in integrating
an acquired business into our existing operations or otherwise to realize the anticipated benefits of the
transaction could cause an interruption of, or a loss of momentum in, our activities and could adversely
affect our results of operations.
In addition, the overall integration of our acquired businesses may result in material unanticipated
problems, expenses, liabilities, competitive responses, loss of customer relationships, and diversion of
management’s attention, and may cause our stock price to decline. The difficulties of combining the
operations of acquired businesses with ours include, among others:
(cid:129) managing a larger company;
(cid:129) maintaining employee morale and retaining key management and other employees;
(cid:129) complying with newly applicable foreign regulations;
(cid:129) integrating two business cultures, which may prove to be incompatible;
(cid:129) the possibility of faulty assumptions underlying expectations regarding the integration process;
(cid:129) retaining existing customers and attracting new customers;
(cid:129) consolidating corporate and administrative infrastructures and eliminating duplicative operations;
(cid:129) the diversion of management’s attention from ongoing business concerns and performance
shortfalls as a result of the diversion of management’s attention to the acquisition;
(cid:129) unanticipated issues in integrating information technology, communications and other systems;
(cid:129) unanticipated changes in applicable laws and regulations;
(cid:129) managing tax costs or inefficiencies associated with integrating the operations of the combined
company;
(cid:129) unforeseen expenses or delays associated with the acquisition;
(cid:129) difficulty comparing financial reports due to differing financial and/or internal reporting systems;
and
(cid:129) making any necessary modifications to internal financial control standards to comply with the
Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder.
Many of these factors will be outside of our control and any one of them could result in increased
costs, decreases in the amount of expected revenues and diversion of management’s time and energy,
which could materially impact our business, financial condition and results of operations. In addition,
even if the operations of our acquired businesses are integrated successfully with our operations, we
may not realize the full benefits of the transaction, including the synergies, cost savings or sales or
growth opportunities that we expect. These benefits may not be achieved within the anticipated time
frame, or at all. Or, additional unanticipated costs may be incurred in the integration of our businesses.
All of these factors could cause dilution to our earnings per share, decrease or delay the expected
accretive effect of the acquisition, and cause a decrease in the price of our common stock. As a result,
we cannot assure you that the combination of our acquisitions with our business will result in the
realization of the full benefits anticipated from the transaction.
18
We may encounter difficulties in operating or implementing a new enterprise resource planning (ERP) system
across our subsidiaries, which may adversely affect our operations and financial reporting.
Over the past four years, we have implemented a new ERP system for a majority of our business
as part of our ongoing efforts to improve and strengthen our operational and financial processes and
our reporting systems. We expect to implement the new ERP system at our other locations in future
years. The ERP system may not provide the benefits anticipated, could add costs and complications to
ongoing operations, and may impact our ability to process transactions efficiently, all of which may
have a material adverse effect on the Company’s business and results of operations.
Failures or security breaches of our networks or information technology systems could have an adverse effect
on our business.
We rely heavily on information technology (IT) both in our products and services for customers
and in our IT systems. Further, we collect and store sensitive information in our data centers and on
our networks. Government agencies and security experts have warned about growing risks of hackers,
cyber-criminals, malicious insiders and other actors targeting confidential information and all types of
IT systems. These actors may engage in fraudulent activities, theft of confidential or proprietary
information and sabotage.
Our IT systems, our connected products, and our confidential information may be vulnerable to
damage or intrusion from a variety of attacks including computer viruses, worms or other malicious
software programs. The risk of such attacks may increase as we integrate newly acquired companies or
develop new connected products and related software. These attacks pose a risk to the security of our
products, systems and networks and those of our customers, suppliers and third-party service providers,
as well as to the confidentiality of our information and the integrity and availability of our data. While
we attempt to mitigate these risks through board oversight, controls, due diligence, employee training
and communication, third party intrusion testing, system hardening, email and web filters, regular
patching, surveillance, encryption, and other measures, we remain vulnerable to information security
threats
Despite the precautions we take, an intrusion or infection of our systems or connected products
could result in the disruption of our business, or a loss of proprietary or confidential information.
Similarly, an attack on our IT systems or connected products could result in theft or disclosure of trade
secrets or other intellectual property, a breach of confidential customer or employee information, or
product failure or misuse. Any such events could have an adverse impact on sales, harm our reputation
and cause us to incur legal liability and increased costs to address such events and related security
concerns. As the threats evolve and become more potent, we may incur additional costs to secure the
products that we sell, as well as our data and infrastructure of networks and devices.
Certain current favorable tax attributes may no longer be realized in the future, resulting in less cash on hand
available to invest in other business activities.
As of December 31, 2019, we had approximately $225 million of tax-deductible goodwill and
intangible asset amortization remaining from our acquisition by CCMP Capital Advisors, LLC in 2006
that we expect to generate aggregate cash tax savings of approximately $57 million through 2021,
assuming continued profitability of our U.S. business and a combined federal and state tax rate of
25.3%. The recognition of the tax benefit associated with these assets for tax purposes is expected to be
$122 million annually in 2020 and $102 million in 2021, which generates annual cash tax savings of
$31 million in 2020 and $26 million in 2021. Based on current business plans, we believe that our cash
tax obligations through 2021 will be significantly reduced by these tax attributes, after which our cash
tax obligation will increase. Other domestic acquisitions have resulted in additional tax deductible
19
goodwill and intangible assets that will generate tax savings, but are not material to the Company’s
consolidated financial statements.
Risks related to our common stock
If securities or industry analysts do not publish research or reports about our business, if they adversely
change their recommendations regarding our common stock or if our results of operations do not meet their
expectations, our common stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that
industry or securities analysts publish about us or our business. If one or more of these analysts cease
coverage of our company or fail to publish reports on us regularly, we could lose visibility in the
financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if
one or more of the analysts who cover us downgrade recommendations regarding our stock, or if our
results of operations do not meet their expectations, our stock price could decline and such decline
could be material.
Anti-takeover provisions in our amended and restated certificate of incorporation and by-laws could prohibit a
change of control that our stockholders may favor and could negatively affect our stock price.
Provisions in our amended and restated certificate of incorporation and by-laws may make it more
difficult and expensive for a third party to acquire control of us even if a change of control would be
beneficial to the interests of our stockholders. These provisions could discourage potential takeover
attempts and could adversely affect the market price of our common stock. These provisions may also
prevent or frustrate attempts by our stockholders to replace or remove our management. For example,
our amended and restated certificate of incorporation and by-laws:
(cid:129) permit our Board of Directors to issue preferred stock with such terms as they determine,
without stockholder approval;
(cid:129) provide that only one-third of the members of the Board of Directors are elected at each
stockholders meeting and prohibit removal without cause;
(cid:129) require advance notice for stockholder proposals and director nominations; and
(cid:129) contain limitations on convening stockholder meetings.
These provisions make it more difficult for stockholders or potential acquirers to acquire us
without negotiation and could discourage potential takeover attempts and could adversely affect the
market price of our common stock.
We do not have plans to pay dividends on our common stock in the foreseeable future.
We currently do not have plans to pay dividends in the foreseeable future on our common stock.
We intend to use future earnings for the operation and expansion of our business, as well as for
repayment of outstanding debt, acquisitions, and for share repurchases. In addition, the terms of our
senior secured credit facilities limit our ability to pay dividends on our common stock. As a result,
capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable
future. While we may change this policy at some point in the future, we cannot assure you that we will
make such a change.
20
Risks related to our capital structure
We have indebtedness which could adversely affect our cash flow and our ability to make payments on our
indebtedness.
As of December 31, 2019 we had total indebtedness of $898.9 million. Our level of indebtedness
increases the possibility that we may be unable to generate cash sufficient to pay, when due, the
principal of, interest on or other amounts due in respect of our indebtedness. While we maintain
interest rate swaps covering a portion of our outstanding debt, our interest expense could increase if
interest rates increase because debt under our credit facilities bears interest at a variable rate based on
LIBOR or other base rate. In connection with our term loan amendment in December 2019, language
was added to the agreement to include a benchmark replacement rate, selected by the administrative
agent and the borrower, as a replacement to LIBOR that would take affect at the time LIBOR ceases.
The Company plans to work with its lenders in the near future to amend other LIBOR based debt
agreements to add a replacement rate should the use of LIBOR cease. If we do not have sufficient
earnings to service our debt, we may be required to refinance all or part of our existing debt, sell
assets, borrow more money or sell securities, none of which we can guarantee we will be able to do.
The terms of our credit facilities restrict our current and future operations, particularly our ability to respond
to changes in our business or to take certain actions.
Our credit facilities contain, and any future indebtedness of ours or our subsidiaries would likely
contain, a number of restrictive covenants that impose significant operating and financial restrictions on
us and our subsidiaries, including restrictions on our ability to engage in acts that may be in our best
long-term interests. These restrictions include, among other things, our ability to:
(cid:129) incur liens;
(cid:129) incur or assume additional debt or guarantees or issue preferred stock;
(cid:129) pay dividends, or make redemptions and repurchases, with respect to capital stock;
(cid:129) prepay, or make redemptions and repurchases of, subordinated debt;
(cid:129) make loans and investments;
(cid:129) make capital expenditures;
(cid:129) engage in mergers, acquisitions, asset sales, sale/leaseback transactions and transactions with
affiliates;
(cid:129) change the business conducted by us or our subsidiaries; and
(cid:129) amend the terms of subordinated debt.
The operating and financial restrictions in our credit facilities and any future financing agreements
may adversely affect our ability to finance future operations or capital needs or to engage in other
business activities. A breach of any of the restrictive covenants in our credit facilities would result in a
default. If any such default occurs, the lenders under our credit facilities may elect to declare all
outstanding borrowings, together with accrued interest and other fees, to be immediately due and
payable, or enforce their security interest, any of which would result in an event of default. The lenders
will also have the right in these circumstances to terminate any commitments they have to provide
further borrowings. Our existing credit facilities do not contain any financial maintenance covenants.
21
We may need additional capital to finance our growth strategy or to refinance our existing credit facilities, and
we may not be able to obtain it on acceptable terms, or at all, which may limit our ability to grow.
We may require additional financing to expand our business. Financing may not be available to us
or may be available to us only on terms that are not favorable. The terms of our senior secured credit
facilities limit our ability to incur additional debt. In addition, economic conditions, including a
downturn in the credit markets, could impact our ability to finance our growth on acceptable terms or
at all. If we are unable to raise additional funds or obtain capital on acceptable terms, we may have to
delay, modify or abandon some or all of our growth strategies. In the future, if we are unable to
refinance our credit facilities on acceptable terms, our liquidity could be adversely affected.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We own or lease manufacturing, distribution and office facilities globally totaling over five million
square feet. We also have inventory warehouses that accommodate material storage and rapid response
requirements of our customers. The following table provides information about our principal facilities
exceeding 20,000 square feet:
Location
Owned/
Leased
Activities
Segment
Domestic
Waukesha, WI . . . . . . . . . . . . . . . . Owned Corporate headquarters, R&D
Domestic
Eagle, WI . . . . . . . . . . . . . . . . . . . Owned Manufacturing, office, training
Domestic
Whitewater, WI . . . . . . . . . . . . . . Owned Manufacturing, office, distribution
Oshkosh, WI . . . . . . . . . . . . . . . . . Owned Manufacturing, office, warehouse, R&D Domestic
Berlin, WI . . . . . . . . . . . . . . . . . . Owned Manufacturing, office, warehouse, R&D Domestic
Domestic
Jefferson, WI . . . . . . . . . . . . . . . . Owned Manufacturing, distribution, R&D
Domestic
Janesville, WI . . . . . . . . . . . . . . . . Leased Distribution
Domestic
Various WI . . . . . . . . . . . . . . . . . . Leased Warehouse
Domestic
Maquoketa, IA . . . . . . . . . . . . . . . Owned
South Burlington, VT . . . . . . . . . . Leased Office
Domestic
Mexico City, Mexico . . . . . . . . . . . Owned Manufacturing, sales, distribution,
Storage, rental property
Mexico City, Mexico . . . . . . . . . . . Leased
San Mateo Cuautepec, Mexico . . . . Leased
Hidalgo, Mexico . . . . . . . . . . . . . . Owned Manufacturing, sales, distribution,
warehouse, office, R&D
Storage, warehouse
Storage, manufacturing
warehouse, office, R&D
Milan, Italy . . . . . . . . . . . . . . . . . . Leased Manufacturing, sales, distribution,
International
International
International
International
warehouse, office, R&D
International
Casole d’Elsa, Italy . . . . . . . . . . . . Leased Manufacturing, office, warehouse, R&D International
Balsicas, Spain . . . . . . . . . . . . . . . Leased Manufacturing, office, warehouse, R&D International
Foshan, China . . . . . . . . . . . . . . . . Owned Manufacturing, office, warehouse, R&D International
International
Saint-Nizier-sous-Charlieu, France . Leased
International
Ribeirao Preto, Brazil . . . . . . . . . . Leased Manufacturing, office, warehouse
International
Stoke-on-Trent, United Kingdom . . Leased
Sydney, Australia . . . . . . . . . . . . . . Leased
International
Celle, Germany . . . . . . . . . . . . . . . Owned Manufacturing, office, warehouse, R&D International
International
Charzyno, Poland . . . . . . . . . . . . . Owned Manufacturing
International
West Bengal, India . . . . . . . . . . . . Leased Manufacturing, warehouse
Sales, office, warehouse
Sales, office, warehouse
Sales, office, warehouse
22
In addition to the countries represented above, the Company has other operations or sales offices
in the United Arab Emirates, Singapore, Canada and the Dominican Republic, as well as several other
countries throughout Europe.
As of December 31, 2019, substantially all of our domestically-owned and a portion of our
internationally-owned properties are subject to collateral provisions under our senior secured credit
facilities.
Item 3. Legal Proceedings
From time to time, we are involved in legal proceedings primarily involving product liability,
employment matters and general commercial disputes arising in the ordinary course of our business. As
of December 31, 2019, we believe that there is no litigation pending that would have a material effect
on our results of operations or financial condition.
Item 4. Mine Safety Disclosures
Not Applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Shares of our common stock are traded on the New York Stock Exchange (NYSE) under the
symbol ‘‘GNRC.’’
Purchases of Equity Securities By the Issuer and Affiliated Purchasers
The following table summarizes the stock repurchase activity for the three months ended
December 31, 2019, which consisted of the withholding of shares upon the vesting of restricted stock
awards to pay related withholding taxes on behalf of the recipient:
Total Number
of Shares
Purchased
Average Price
Paid per Share
Total Number Of
Shares Purchased
As Part Of Publicly
Announced Plans Or
Programs
10/01/19 - 10/31/19 . . . . . . . . . . . . . .
11/01/19 - 11/30/19 . . . . . . . . . . . . . .
12/01/19 - 12/31/19 . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . .
—
1,409
682
2,091
—
$93.38
98.11
$95.54
—
—
—
Approximate Dollar
Value Of Shares
That May Yet Be
Purchased Under
The Plans Or
Programs
$250,000,000
$250,000,000
$250,000,000
For equity compensation plan information, refer to Note 17, ‘‘Share Plans,’’ to the consolidated
financial statements in Item 8 of this Annual Report on Form 10-K. For information on the Company’s
stock repurchase plans, refer to Note 13, ‘‘Stock Repurchase Programs,’’ to the consolidated financial
statements.
Stock Performance Graph
The line graph below compares the cumulative total stockholder return on our common stock with
the cumulative total return of the Standard & Poor’s S&P 500 Index, the S&P 500 Industrials Index
and the Russell 2000 Index for the five-year period ended December 31, 2019. The graph and table
assume that $100 was invested on December 31, 2014 in each of our common stock, the S&P 500
Index, the S&P MidCap 400 Index and the Russell 2000 Index, and that all dividends were reinvested.
Cumulative total stockholder returns for our common stock, the S&P 500 Index, the S&P 500
Industrials Index and the Russell 2000 Index are based on our fiscal year.
23
COMPARISON OF CUMULATIVE TOTAL RETURN
Generac Holdings Inc.
S&P 500 Index – Total Return
S&P MidCap 400 Index
Russell 2000 Index
$250
$200
$150
$100
$50
$0
12/31/2014
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
ASSUMES $100 INVESTED ON DEC. 31, 2014
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2019
8APR202019084130
Company / Market / Peer Group
12/31/2014
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
Generac Holdings Inc.
. . . . . . . . . . .
S&P 500 Index—Total Returns . . . . .
S&P MidCap 400 Index . . . . . . . . . .
Russell 2000 Index . . . . . . . . . . . . . .
$100.00
100.00
100.00
100.00
$ 63.67
101.38
96.29
95.59
$ 87.13
113.51
114.33
115.95
$105.90
138.29
130.85
132.94
$106.29
132.23
114.50
118.30
$215.12
173.86
142.04
148.49
Holders
As of February 19, 2020, there were 194 registered holders of record of Generac’s common stock.
A substantially greater number of holders of Generac common stock are ‘‘street name’’ or beneficial
holders, whose shares are held of record by banks, brokers and other financial institutions.
Dividends
We do not have plans to pay dividends on our common stock in the foreseeable future. However,
in the future, subject to factors such as general economic and business conditions, our financial
condition and results of operations, our capital requirements, our future liquidity and capitalization,
and other such factors that our Board of Directors may deem relevant, we may change this policy and
choose to pay dividends. Our ability to pay dividends on our common stock is currently limited by the
terms of our senior secured credit facilities and may be further restricted by any future indebtedness we
incur. Dividends from, and cash generated by our subsidiaries will be our principal sources of cash to
repay indebtedness, fund operations, repurchase shares of common stock and pay dividends.
Accordingly, our ability to pay dividends to our stockholders is dependent on the earnings and
distributions of funds from our subsidiaries.
Securities Authorized for Issuance Under Equity Compensation Plans
For information on securities authorized for issuance under our equity compensation plans, refer
to ‘‘Item 12—Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters,’’ which is incorporated herein by reference.
24
Recent Sales of Unregistered Securities
None.
Use of Proceeds from Registered Securities
Not applicable.
Item 6. Selected Financial Data
The following table sets forth our selected historical consolidated financial data for the periods and
at the dates indicated. The selected historical consolidated financial data for the years ended
December 31, 2019, 2018 and 2017 are derived from our audited consolidated financial statements
included elsewhere in this annual report. The selected historical consolidated financial data for the
years ended December 31, 2016 and 2015 is derived from our audited historical consolidated financial
statements not included in this annual report.
The results indicated below and elsewhere in this annual report are not necessarily indicative of
our future performance. This information should be read together with ‘‘Item 7—Management’s
Discussion and Analysis of Financial Condition and Results of Operations’’ and our consolidated
financial statements and related notes thereto in Item 8 of this Annual Report on Form 10-K.
Over the years, we have executed a number of acquisitions that support our strategic plan. A
summary of the recent acquisitions can be found in Note 1, ‘‘Description of Business,’’ to the
consolidated financial statements in Item 8 of this Annual Report on Form 10-K. In addition, in August
2015, we closed the Country Home Products acquisition, and in March 2016, we acquired a majority
ownership interest in PR Industrial S.r.l. and its subsidiaries (Pramac).
25
(U.S. Dollars in thousands, except per share data)
2019
2018
2017
2016
2015
Year Ended December 31,
Statement of Operations Data:
Net sales . . . . . . . . . . . . . . . . . . . . . . . .
Costs of goods sold . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:
Selling and service . . . . . . . . . . . . . . .
Research and development . . . . . . . . .
General and administrative . . . . . . . . .
Amortization of intangibles(1) . . . . . . .
Tradename and goodwill
impairment(2) . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . .
Other (expense) income:
Interest expense . . . . . . . . . . . . . . . . . .
Investment income . . . . . . . . . . . . . . .
Loss on extinguishment of debt(3) . . . .
Loss on pension settlement(4) . . . . . . .
Loss on change in contractual interest
rate(5) . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . .
$2,204,336 $2,023,464 $1,679,373 $1,447,743 $1,317,299
857,349
1,094,587
1,406,584
1,298,424
935,322
797,752
725,040
584,786
512,421
459,950
217,683
68,394
110,868
28,644
—
425,589
372,163
191,887
50,019
103,841
22,112
—
367,859
357,181
174,841
42,869
87,581
28,861
—
334,152
250,634
164,860
37,163
74,693
32,953
—
309,669
202,752
130,242
32,922
52,947
23,591
40,687
280,389
179,561
(41,544)
2,767
(926)
(10,920)
(40,956)
1,893
(1,332)
—
(42,667)
298
—
—
(44,568)
44
(574)
—
(42,843)
123
(4,795)
—
—
(1,933)
—
(5,710)
—
(4,566)
(2,957)
(1,000)
(2,381)
(6,682)
Total other expense, net . . . . . . . . . . . . .
(52,556)
(46,105)
(46,935)
(49,055)
(56,578)
Income before provision for income taxes
Provision for income taxes(6) . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Generac
319,607
67,299
252,308
311,076
69,856
241,220
203,699
44,142
159,557
153,697
56,519
97,178
122,983
45,236
77,747
301
2,963
1,749
24
—
Holdings Inc.
. . . . . . . . . . . . . . . . . .
$ 252,007 $ 238,257 $ 157,808 $
97,154 $
77,747
Net income attributable to common
shareholders per common share—
diluted:
. . . . . . . . . . . . . . . . . . . . . . .
Statement of Cash Flows data:
Depreciation . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . .
Expenditures for property and equipment
$
$
Other Financial Data:
Adjusted EBITDA attributable to
4.03 $
3.54 $
2.53 $
1.47 $
1.12
32,265 $
28,644
(60,802)
25,296 $
22,112
(47,601)
23,127 $
28,861
(33,261)
21,465 $
32,953
(30,467)
16,742
23,591
(30,651)
Generac Holdings Inc.(7) . . . . . . . . . .
$ 449,150 $ 416,793 $ 311,225 $ 272,738 $ 270,816
Adjusted net income attributable to
Generac Holdings Inc.(8) . . . . . . . . . .
317,822
292,213
211,869
195,572
198,436
26
As of December 31,
(U.S. Dollars in thousands)
2019
2018
2017
2016
2015
Balance Sheet Data:
Current assets . . . . . . . . . . . . . . . . . .
. . . . . . .
Property and equipment, net
Goodwill . . . . . . . . . . . . . . . . . . . . . .
Other intangibles and other assets(9) .
$1,195,829
316,976
805,284
347,580
$1,120,769
278,929
764,655
261,961
$ 824,557
230,380
721,523
249,505
$ 687,794
212,793
704,640
260,742
$ 632,017
184,213
669,719
292,686
Total assets . . . . . . . . . . . . . . . . . . . .
$2,665,669
$2,426,314
$2,025,965
$1,865,969
$1,778,635
Total current liabilities . . . . . . . . . . . .
Long-term borrowings, less current
portion . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities(9) . . . . . . .
Redeemable noncontrolling interests . .
Total stockholders’ equity . . . . . . . . . .
Total liabilities and stockholders’
$ 497,064
$ 560,706
$ 396,423
$ 347,926
$ 213,224
837,767
236,760
61,227
1,032,851
876,396
166,947
61,004
761,261
906,548
124,745
43,929
554,320
1,006,758
80,968
33,138
397,179
1,037,132
62,408
—
465,871
equity . . . . . . . . . . . . . . . . . . . . . .
$2,665,669
$2,426,314
$2,025,965
$1,865,969
$1,778,635
(1) Our amortization of intangibles expense includes the straight-line amortization of customer lists,
patents and technology, certain tradenames and other finite-lived intangible assets.
(2) During the fourth quarter of 2015, our Board of Directors approved a plan to strategically
transition and consolidate certain of our brands acquired through acquisitions to the Generac(cid:5)
tradename. This brand strategy change resulted in a reclassification to a two year remaining useful
life and a $36.1 million non-cash charge to write-down the impacted tradenames to net realizable
value. Additionally, during the fourth quarter of 2015, a $4.6 million goodwill impairment charge
was recorded related to the write-down of the Ottomotores reporting unit goodwill.
(3) Represents the non-cash write-off of original issue discount and deferred financing costs due to
voluntary debt prepayments. Refer to Note 12, ‘‘Credit Agreements,’’ to the consolidated financial
statements in Item 8 of this Annual Report on Form 10-K for further information on the losses on
extinguishment of debt.
(4) Represents pre-tax settlement charges related to the termination of the Company’s domestic
pension plan in the fourth quarter of 2019. Refer to Note 16, ‘‘Benefit Plans,’’ to the consolidated
financial statements in Item 8 of this Annual Report on Form 10-K for further information
regarding the Company’s pension plans.
(5) For the year ended December 31, 2016, represents a non-cash loss in the third quarter 2016
relating to the continued 25 basis point increase in borrowing costs as a result of the credit
agreement leverage ratio remaining above 3.0 times based on projections at that time. For the year
ended December 31, 2015, represents a non-cash loss relating to a 25 basis point increase in
borrowing costs as a result of the credit agreement leverage ratio rising above 3.0 times effective in
the third quarter 2015 and expected to remain above 3.0 times based on projections at that time.
Following the May 2017 Term Loan amendment, which removed the pricing grid based on leverage
ratio achieved, gains or losses on changes in contractual interest rate will no longer be recorded in
the statements of comprehensive income. Refer to Note 12, ‘‘Credit Agreements,’’ to the
consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further
information on the gains and losses on changes in the contractual interest rate.
(6) On December 22, 2017, the U.S. Government enacted a comprehensive tax reform bill commonly
referred to as the Tax Cuts and Jobs Act (the Tax Act, or Tax Reform). As a result of the Tax Act,
we recognized a one-time, non-cash benefit of $28.4 million in the fourth quarter of 2017 primarily
27
from the impact of the revaluation of the Company’s net deferred tax liabilities. Refer to Note 15,
‘‘Income Taxes,’’ to the consolidated financial statements in Item 8 of this Annual Report on
Form 10-K for further information on the Tax Act and its impact.
(7) Adjusted EBITDA represents net income before noncontrolling interests, interest expense, taxes,
depreciation and amortization, as further adjusted for the other items reflected in the
reconciliation table set forth below. The computation of adjusted EBITDA is based on the
definition of EBITDA contained in the Term Loan and ABL Facility (terms defined in Note 12,
‘‘Credit Agreements,’’ to the consolidated financial statements in Item 8 of this Annual Report on
Form 10-K).
(8) Adjusted Net Income 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 our 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 noncontrolling interests, as set
forth in the reconciliation table below.
(9) On January 1, 2019, the Company adopted ASU 2016-02, Leases. The Company adopted this
standard using the modified retrospective approach as of the date of adoption, meaning no prior
period balances were impacted by the adoption. The adoption of the standard had a material
impact on the Company’s consolidated balance sheet primarily related to the recognition of
right-of-use (ROU) assets and lease liabilities for operating leases. At December 31, 2019, the
Company had $36.0 million in ROU assets included in other assets and $37.0 million in lease
liabilities included in other liabilities. Refer to Note 10, ‘‘Leases,’’ to the consolidated financial
statements in Item 8 of this Annual Report on Form 10-K for further information regarding the
Company’s leases.
We view Adjusted EBITDA as a key measure of our performance. We present Adjusted EBITDA
not only due to its importance for purposes of our credit agreements, but also because it assists us in
comparing our performance across reporting periods on a consistent basis as it excludes items that we
do not believe are indicative of our core operating performance. Our management uses Adjusted
EBITDA:
(cid:129) for planning purposes, including the preparation of our annual operating budget and developing
and refining our internal projections for future periods;
(cid:129) to allocate resources to enhance the financial performance of our business;
(cid:129) as a benchmark for the determination of the bonus component of compensation for our senior
executives under our management incentive plan, as described further in our Proxy Statement;
(cid:129) to evaluate the effectiveness of our business strategies and as a supplemental tool in evaluating
our performance against our budget for each period; and
(cid:129) in communications with our Board of Directors and investors concerning our financial
performance.
We believe Adjusted EBITDA is used by securities analysts, investors and other interested parties
in the evaluation of the Company. Management believes the disclosure of Adjusted EBITDA offers an
additional financial metric that, when coupled with results prepared in accordance with U.S. generally
accepted accounting principles (U.S. GAAP) and the reconciliation to U.S. GAAP results, provides a
28
more complete understanding of our results of operations and the factors and trends affecting our
business. We believe Adjusted EBITDA is useful to investors for the following reasons:
(cid:129) Adjusted EBITDA and similar non-GAAP measures are widely used by investors to measure a
company’s operating performance without regard to items that can vary substantially from
company to company depending upon financing and accounting methods, book values of assets,
tax jurisdictions, capital structures and the methods by which assets were acquired;
(cid:129) investors can use Adjusted EBITDA as a supplemental measure to evaluate the overall
operating performance of our company, including our ability to service our debt and other cash
needs; and
(cid:129) by comparing our Adjusted EBITDA in different historical periods, our investors can evaluate
our operating performance excluding the impact of items described below.
The adjustments included in the reconciliation table listed below are provided for under our Term
Loan and ABL Facility, and also are presented to illustrate the operating performance of our business
in a manner consistent with the presentation used by our management and Board of Directors. These
adjustments eliminate the impact of a number of items that:
(cid:129) we do not consider indicative of our ongoing operating performance, such as non-cash write-
downs and other charges, non-cash gains, write-offs relating to the retirement of debt, severance
costs and other restructuring-related business optimization expenses;
(cid:129) we believe to be akin to, or associated with, interest expense, such as administrative agent fees,
revolving credit facility commitment fees and letter of credit fees; or
(cid:129) are non-cash in nature, such as share-based compensation expense.
We explain in more detail in footnotes (a) through (i) below why we believe these adjustments are
useful in calculating Adjusted EBITDA as a measure of our operating performance.
Adjusted EBITDA does not represent, and should not be a substitute for, net income or cash flows
from operations as determined in accordance with U.S. GAAP. Adjusted EBITDA has limitations as an
analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results
as reported under U.S. GAAP. Some of the limitations are:
(cid:129) Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital
expenditures or contractual commitments;
(cid:129) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital
needs;
(cid:129) Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements
necessary to service interest or principal payments on our debt;
(cid:129) although depreciation and amortization are non-cash charges, the assets being depreciated and
amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect
any cash requirements for such replacements;
(cid:129) several of the adjustments that we use in calculating Adjusted EBITDA, such as non-cash write-
downs and other charges, while not involving cash expense, do have a negative impact on the
value of our assets as reflected in our consolidated balance sheet prepared in accordance with
U.S. GAAP; and
(cid:129) other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness
as a comparative measure.
29
Furthermore, as noted above, one of our uses of Adjusted EBITDA is as a benchmark for
determining elements of compensation for our senior executives. At the same time, some or all of these
senior executives have responsibility for monitoring our financial results, generally including the
adjustments in calculating Adjusted EBITDA (subject ultimately to review by our Board of Directors in
the context of the Board’s review of our financial statements). While many of the adjustments (for
example, transaction costs and credit facility fees), involve mathematical application of items reflected
in our financial statements, others involve a degree of judgment and discretion. While we believe all of
these adjustments are appropriate, and while the calculations are subject to review by our Board of
Directors in the context of the Board’s review of our financial statements, and certification by our
Chief Financial Officer in a compliance certificate provided to the lenders under our Term Loan and
ABL Facility, this discretion may be viewed as an additional limitation on the use of Adjusted EBITDA
as an analytical tool.
Because of these limitations, Adjusted EBITDA should not be considered as a measure of
discretionary cash available to us to invest in the growth of our business. We compensate for these
limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only
supplementally.
The following table presents a reconciliation of net income to Adjusted EBITDA attributable to
Generac Holdings Inc.:
(U.S. Dollars in thousands)
2019
2018
2017
2016
2015
Net income attributable to Generac
Holdings Inc.
. . . . . . . . . . . . . . . . . . . . . . .
$252,007
$238,257
$157,808
$ 97,154
$ 77,747
Year Ended December 31,
Net income attributable to noncontrolling
interests(a) . . . . . . . . . . . . . . . . . . . . . . . . .
301
2,963
1,749
Net income . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . .
Non-cash write-down and other adjustments(b)
Non-cash share-based compensation expense(c)
Tradename and goodwill impairment(d) . . . . . .
Loss on extinguishment of debt(e) . . . . . . . . . .
Loss on pension settlement(f) . . . . . . . . . . . . .
(Gain) loss on change in contractual interest
rate(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs and credit facility fees(h) . . .
Business optimization expenses(i) . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA attributable to
252,308
41,544
60,767
67,299
240
16,694
—
926
10,920
—
2,724
1,572
(879)
241,220
40,956
47,408
69,856
3,532
14,563
—
1,332
—
—
3,883
952
850
159,557
42,667
51,988
44,142
2,923
10,205
—
—
—
—
2,145
2,912
761
24
97,178
44,568
54,418
56,519
357
9,493
—
574
—
2,957
2,442
7,316
700
—
77,747
42,843
40,333
45,236
3,892
8,241
40,687
4,795
—
2,381
2,249
1,947
465
454,115
424,552
317,300
276,522
270,816
noncontrolling interests . . . . . . . . . . . . . . . .
4,965
7,759
6,075
3,784
—
Adjusted EBITDA attributable to Generac
Holdings Inc.
. . . . . . . . . . . . . . . . . . . . . . .
$449,150
$416,793
$311,225
$272,738
$270,816
(a) Includes the noncontrolling interests’ share of expenses related to Pramac purchase accounting,
including the step-up in value of inventories and intangible amortization of $4.2 million,
30
$4.6 million, $4.7 million, and $8.0 million for the years ended December 31, 2019, 2018, 2017, and
2016, respectively.
(b) Represents the following non-cash charges: gains/losses on disposal of assets, unrealized
mark-to-market adjustments on commodity contracts, transactional foreign currency gains/losses
and certain purchase accounting related adjustments. We believe that adjusting net income for
these non-cash charges is useful for the following reasons:
(cid:129) The gains/losses on disposals of assets result from the sale of assets that are no longer useful in
our business and therefore represent gains or losses that are not from our core operations;
(cid:129) The adjustments for unrealized mark-to-market gains and losses on commodity contracts
represent non-cash items to reflect changes in the fair value of forward contracts that have not
been settled or terminated. We believe it is useful to adjust net income for these items because
the charges do not represent a cash outlay in the period in which the charge is incurred,
although Adjusted EBITDA must always be used together with our U.S. GAAP statements of
comprehensive income and cash flows to capture the full effect of these contracts on our
operating performance;
(cid:129) The purchase accounting adjustments represent non-cash items to reflect fair value at the date
of acquisition, and therefore do not reflect our ongoing operations
(c) Represents share-based compensation expense to account for stock options, restricted stock and
other stock awards over their respective vesting period.
(d) During the fourth quarter of 2015, our Board of Directors approved a plan to strategically
transition and consolidate certain of our brands acquired through acquisitions to the Generac(cid:5)
tradename. This brand strategy change resulted in a reclassification to a two year remaining useful
life and a $36.1 million non-cash charge to write-down the impacted tradenames to net realizable
value. Additionally, during the fourth quarter of 2015, a $4.6 million goodwill impairment charge
was recorded related to the write-down of the Ottomotores reporting unit goodwill.
(e) Represents the non-cash write-off of original issue discount and deferred financing costs due to
voluntary prepayments of Term Loan debt. Refer to Note 12, ‘‘Credit Agreements,’’ to the
consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further
information on the losses on extinguishment of debt.
(f) Represents pre-tax settlement charges related to the termination of the Company’s domestic
pension plan in the fourth quarter of 2019. Refer to Note 16, ‘‘Benefit Plans,’’ to the consolidated
financial statements in Item 8 of this Annual Report on Form 10-K for further information
regarding the Company’s pension plans.
(g) For the year ended December 31, 2016, represents a non-cash loss relating to the continued 25
basis point increase in borrowing costs as a result of the credit agreement leverage ratio remaining
above 3.0 times based on projections at that time. For the year ended December 31, 2015,
represents a non-cash loss relating to a 25 basis point increase in borrowing costs as a result of the
credit agreement leverage ratio rising above 3.0 times and expected to remain above 3.0 times
based on projections at that time. Following the May 2017 Term Loan amendment, which removed
the pricing grid based on leverage ratio achieved, gains or losses on changes in contractual interest
rate will no longer be recorded in the statements of comprehensive income. Refer to Note 12,
‘‘Credit Agreements,’’ to the consolidated financial statements in Item 8 of this Annual Report on
Form 10-K for further information on the gains and losses on changes in the contractual interest
rate.
(h) 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
31
relating to our senior secured credit facilities, such as administrative agent fees and credit facility
commitment fees under our Term Loan and ABL Facility, which we believe to be akin to, or
associated with, interest expense and whose inclusion in Adjusted EBITDA is therefore similar to
the inclusion of interest expense in that calculation, and transaction costs relating to the acquisition
of businesses.
(i) Represents severance and non-recurring plant consolidation costs. Additionally, the year ended
December 31, 2016 primarily represents charges relating to business optimization and restructuring
costs to address the significant and extended downturn for capital spending within the oil & gas
industry. These charges represent expenses that are not from our core operations and do not
reflect our ongoing operations.
We believe Adjusted Net Income is used by securities analysts, investors and other interested
parties in the evaluation of our company’s operations. Management believes the disclosure of Adjusted
Net Income offers an additional financial metric that, when used in conjunction with U.S. GAAP
results and the reconciliation to U.S. GAAP results, provides a more complete understanding of our
ongoing results of operations, and the factors and trends affecting our business.
The adjustments included in the reconciliation table listed below are presented to illustrate the
operating performance of our business in a manner consistent with the presentation used by investors
and securities analysts. Similar to the Adjusted EBITDA reconciliation, these adjustments eliminate the
impact of a number of items we do not consider indicative of our ongoing operating performance or
cash flows, such as amortization costs, transaction costs and write-offs relating to the retirement of
debt. We also make adjustments to present cash taxes paid as a result of our favorable tax attributes,
causing our cash tax rate to be lower than our U.S GAAP tax rate.
Similar to Adjusted EBITDA, Adjusted Net Income does not represent, and should not be a
substitute for, net income or cash flows from operations as determined in accordance with U.S. GAAP.
Adjusted Net Income has limitations as an analytical tool, and you should not consider it in isolation,
or as a substitute for analysis of our results as reported under U.S. GAAP. Some of the limitations are:
(cid:129) Adjusted Net Income does not reflect changes in, or cash requirements for, our working capital
needs;
(cid:129) although amortization is a non-cash charge, the assets being amortized may have to be replaced
in the future, and Adjusted Net Income does not reflect any cash requirements for such
replacements; and
(cid:129) other companies may calculate Adjusted Net Income differently than we do, limiting its
usefulness as a comparative measure.
32
The following table presents a reconciliation of net income to Adjusted Net Income attributable to
Generac Holdings Inc.:
(U.S. Dollars in thousands)
2019
2018
2017
2016
2015
Net income attributable to Generac
Holdings Inc.
. . . . . . . . . . . . . . . . . . . . . . .
$252,007
$238,257
$157,808
$ 97,154
$ 77,747
Net income attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . .
301
2,963
1,749
24
—
Year Ended December 31,
Net income . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . .
Income before provision for income taxes . . . .
Amortization of intangible assets . . . . . . . . . . .
Amortization of deferred finance costs and
original issue discount . . . . . . . . . . . . . . . . .
Tradename and goodwill impairment . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . .
Loss on pension settlement . . . . . . . . . . . . . . .
(Gain) loss on change in contractual interest
252,308
67,299
319,607
28,644
4,712
—
926
10,920
241,220
69,856
311,076
22,112
159,557
44,142
203,699
28,861
97,178
56,519
153,697
32,953
4,749
—
1,332
—
3,516
—
—
—
3,940
—
574
—
77,747
45,236
122,983
23,591
5,429
40,687
4,795
—
rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
2,957
2,381
Transaction costs and other purchase
accounting adjustments(a) . . . . . . . . . . . . . .
Business optimization expenses . . . . . . . . . . . .
874
1,572
2,578
952
1,706
2,912
5,653
7,316
2,710
1,947
Adjusted net income before provision for
income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Cash income tax expense(b) . . . . . . . . . . . . . .
367,255
(47,945)
342,799
(47,064)
240,694
(25,624)
207,090
(9,299)
204,523
(6,087)
Adjusted net income . . . . . . . . . . . . . . . . . . .
Adjusted net income attributable to
319,310
295,735
215,070
197,791
198,436
noncontrolling interests . . . . . . . . . . . . . . . .
1,488
3,522
3,201
2,219
—
Adjusted net income attributable to Generac
Holdings Inc.
. . . . . . . . . . . . . . . . . . . . . . .
$317,822
$292,213
$211,869
$195,572
$198,436
(a) Represents transaction costs incurred directly in connection with any investment, as defined in our
credit agreement, equity issuance or debt issuance or refinancing, and certain purchase accounting
adjustments.
(b) For the years ended December 31, 2019, 2018, 2017, and 2016, the amount is based on a cash
income tax rate of 15.0%, 15.1%, 12.5% and 5.9%, respectively. Cash income tax expense for 2019,
2018, 2017 and 2016 is based on the projected taxable income and corresponding cash taxes
payable for the full year after considering the effects of current and deferred income tax items,
and is calculated by applying the derived cash tax rate to the period’s pretax income. For the year
ended December 31, 2015, the amount is based on actual cash income taxes paid that year.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be
read together with ‘‘Item 1—Business,’’ ‘‘Item 6—Selected Financial Data’’ and the consolidated
financial statements and the related notes thereto in Item 8 of this Annual Report on Form 10-K. This
discussion contains forward-looking statements, based on current expectations and related to future
events and our future financial performance, that involve risks and uncertainties. Our actual results may
33
differ materially from those anticipated in these forward-looking statements as a result of many factors,
including those set forth under ‘‘Item 1A—Risk Factors.’’
Overview
We are a leading global designer and manufacturer of a wide range of energy technology solutions.
The Company provides power generation equipment, energy storage systems, and other power products
serving the residential, light commercial and industrial markets. Power generation is a key focus, which
differentiates us from our main competitors that also have broad operations outside of the power
equipment market. As the only significant market participant focused predominantly on these products,
we have one of the leading market positions in the power equipment market in North America and an
expanding presence internationally. We believe we have one of the widest ranges of products in the
marketplace, including residential, commercial and industrial standby generators, as well as portable
and mobile generators used in a variety of applications. A key strategic focus for the Company in
recent years has been leveraging our leading position in the growing market for cleaner burning, more
cost effective natural gas fueled generators to expand into applications beyond standby power. We have
also been focused on ‘‘connecting’’ the equipment we manufacture to the users of that equipment,
helping to drive additional value to our customers and our distribution partners over the product
lifecycle. Other power products that we design and manufacture include light towers which provide
temporary lighting for various end markets; commercial and industrial mobile heaters and pumps used
in the oil & gas, construction and other industrial markets; and a broad product line of outdoor power
equipment for residential and commercial use. During 2019, we began providing energy storage systems
as a clean energy solution for residential use that capture and store electricity from solar panels or
other power sources and help reduce home energy costs while also protecting homes from brief power
outages.
Business Drivers and Operational Factors
In operating our business and monitoring its performance, we pay attention to a number of
business drivers and trends as well as operational factors. The statements in this section are based on
our current expectations.
Business Drivers and Trends
Our performance is affected by the demand for reliable power generation products, energy storage
systems, and other power products by our customer base. This demand is influenced by several
important drivers and trends affecting our industry, including the following:
Increasing penetration opportunity. Many potential customers are still not aware of the costs and
benefits of automatic backup power solutions. We estimate that penetration rates for home standby
generators are only approximately 4.75% of the addressable market of homes in the United States. The
decision to purchase backup power for many light-commercial buildings such as convenience stores,
restaurants and gas stations is more return-on-investment driven and as a result these applications have
relatively lower penetration rates as compared to buildings used in code-driven or mission critical
applications such as hospitals, wastewater treatment facilities, 911 call centers, data centers and certain
industrial locations. The emergence of lower cost, cleaner burning natural gas fueled generators has
helped to increase the penetration of standby generators over the past decade in the light-commercial
market. In addition, the installed base of backup power for telecommunications infrastructure is still
increasing due to a variety of factors including the impending rollout of next-generation 5G wireless
networks enabling new technologies and the growing importance for critical communications and other
uninterrupted voice and data services. We believe by expanding our distribution network, continuing to
develop our product lines, and targeting our marketing efforts, we can continue to build awareness and
increase penetration for our standby generators for residential, commercial and industrial purposes.
34
Effect of large scale and baseline power disruptions. Power disruptions are an important driver of
customer awareness for back-up power and have historically influenced demand for generators, both in
the United States and internationally. Increased frequency and duration of major power outage events,
that have a broader impact beyond a localized level, increases product awareness and may drive
consumers to accelerate their purchase of a standby or portable generator during the immediate and
subsequent period, which we believe may last for six to twelve months following a major power outage
event for standby generators. For example, the major outage events that occurred during the second
half of 2017 drove strong demand for portable and home standby generators, and the increased
awareness of these products contributed to strong revenue growth in both 2017 and 2018. Major power
disruptions are unpredictable by nature and, as a result, our sales levels and profitability may fluctuate
from period to period. In addition, there are smaller, more localized power outages that occur
frequently across the United States that drive the baseline level of demand for back-up power solutions.
The level of baseline power outage activity occurring across the United States can also fluctuate, and
may cause our financial results to fluctuate from year to year.
Energy storage and monitoring markets developing quickly. During 2019, we entered the rapidly
developing energy storage and monitoring markets with the acquisitions of Pika Energy and Neurio
Technologies. We believe the electric power landscape will undergo significant changes in the decade
ahead as a result of rising utility rates, grid instability and power utility quality issues, environmental
concerns, and the continuing performance and cost improvements in renewable energy and batteries.
On-site power generation from solar, wind, geothermal, and natural gas generators is projected to
become more prevalent as will the need to manage, monitor and store this power—potentially
developing into a significant market opportunity annually. The capabilities provided by Pika and Neurio
have enabled us to bring an efficient and intelligent energy-savings solution to the energy storage and
monitoring markets which we believe will position Generac as a key participant going forward.
Although very different from the emergency backup power space we serve today, we believe this
market will develop similarly as the home standby generator market has over the past two decades. Our
efforts to develop a cost-effective global supply chain, omni-channel distribution, targeted consumer-
based marketing content, and proprietary in-home sales tools have played a critical role in creating the
market for home standby generators, and we intend to leverage our expertise and capabilities in these
areas as we work to grow the energy storage and monitoring markets.
California market for backup power increasing. During 2019, the largest utility in the state of
California along with other utilities announced their intention and ultimately executed a number of
Public Safety Power Shutoff (PSPS) events in large portions of their service areas. These events were
pro-active measures to prevent their equipment from potentially causing catastrophic wildfires during
the dry and windy season of the year. The occurrence of these events, along with the utilities warning
these actions could continue in the future as they upgrade their transmission and distribution
infrastructure, have resulted in significant awareness and increased demand for our generators in
California, where penetration rates of home standby generators stand at approximately 1%. We have a
significant focus on expanding distribution in California and are working together with local regulators,
inspectors, and gas utilities to increase their bandwidth and sense of urgency around approving and
providing the infrastructure necessary for home standby and other backup power products. Our efforts
in this part of the country will also be helpful in developing the market for energy storage and
monitoring where the installed base of solar and other renewable sources of electricity are some of the
highest in the U.S., and the regulatory environment is mandating renewable energy on new construction
starting in 2020.
Impact of residential investment cycle. The market for residential generators and energy storage
systems is also affected by the residential investment cycle and overall consumer confidence and
sentiment. When homeowners are confident of their household income, the value of their home and
overall net worth, they are more likely to invest in their home. These trends can have an impact on
35
demand for residential generators and energy storage systems. Trends in the new housing market
highlighted by residential housing starts can also impact demand for these products. Demand for
outdoor power equipment is also impacted by several of these factors, as well as weather precipitation
patterns. Finally, the existence of renewable energy mandates and investment tax credits and other
subsidies can also have an impact on the demand for energy storage systems.
Impact of business capital investment and other economic cycles. The global market for our
commercial and industrial products is affected by different capital investment cycles, which can vary
across the numerous regions around the world in which we participate. These markets include
non-residential building construction, durable goods and infrastructure spending, as well as investments
in the exploration and production of oil & gas, as businesses or organizations either add new locations
or make investments to upgrade existing locations or equipment. These trends can have a material
impact on demand for these products. The capital investment cycle may differ for the various
commercial and industrial end markets that we serve including light commercial, retail, office,
telecommunications, industrial, data centers, healthcare, construction, oil & gas and municipal
infrastructure, among others. The market for these products is also affected by general economic and
geopolitical conditions as well as credit availability in the geographic regions that we serve. In addition,
we believe demand for our mobile power products will continue to benefit from a secular shift towards
renting versus buying this type of equipment.
Factors Affecting Results of Operations
We are subject to various factors that can affect our results of operations, which we attempt to
mitigate through factors we can control, including continued product development, expanded
distribution, pricing, cost control and hedging. Certain operational and other factors that affect our
business include the following:
Effect of commodity, currency and component price fluctuations.
Industry-wide price fluctuations of
key commodities, such as steel, copper and aluminum, along with other components we use in our
products, as well as changes in labor costs required to produce our products, can have a material
impact on our results of operations. Acquisitions in recent years have further expanded our commercial
and operational presence outside of the United States. These international acquisitions, along with our
existing global supply chain, expose us to fluctuations in foreign currency exchange rates and regulatory
tariffs that can also have a material impact on our results of operations.
We have historically attempted to mitigate the impact of any inflationary pressures through
improved product design and sourcing, manufacturing efficiencies, price increases and select hedging
transactions. Our results are also influenced by changes in fuel prices in the form of freight rates, which
in some cases are accepted by our customers and in other cases are paid by us.
Seasonality. Although there is demand for our products throughout the year, in each of the past
five years, approximately 20% to 24% of our net sales occurred in the first quarter, 22% to 25% in the
second quarter, 26% to 28% in the third quarter and 27% to 29% in the fourth quarter, with different
seasonality depending on the occurrence, timing and severity of major power outage activity in each
year. Major outage activity is unpredictable by nature and, as a result, our sales levels and profitability
may fluctuate from period to period. The seasonality experienced during a major power outage, and for
the subsequent quarters following the event, will vary relative to other periods where no major outage
events occurred. We maintain a flexible production and supply chain infrastructure in order to respond
to outage-driven peak demand.
Factors influencing interest expense and cash interest expense.
Interest expense can be impacted by a
variety of factors, including market fluctuations in LIBOR, interest rate election periods, interest rate
swap agreements, repayments or borrowings of indebtedness, and amendments to our credit
36
agreements. In connection with our term loan amendment in December 2019, language was added to
the agreement to include a benchmark replacement rate, selected by the administrative agent and the
borrower, as a replacement to LIBOR that would take affect at the time LIBOR ceases. We plan to
work with our lenders in the future to amend other LIBOR based debt agreements to add a
replacement rate should the use of LIBOR cease. Interest expense increased slightly during 2019
compared to 2018, primarily due to increased borrowings by our foreign subsidiaries. Refer to Note 12,
‘‘Credit Agreements,’’ to the consolidated financial statements in Item 8 of this Annual Report on
Form 10-K for further information.
Factors influencing provision for income taxes and cash income taxes paid. On December 22, 2017,
the U.S. government enacted the Tax Act, which significantly changed how the U.S. taxes corporations.
During 2018, the U.S. Treasury Department (Treasury) issued several new regulations and other
guidance which we have incorporated into our final tax calculations. At December 31, 2019, we
consider the tax expense recorded for the impact of Tax Reform to be complete. It is possible
additional regulations or guidance could be issued by Treasury or by a state which may create an
additional tax expense or benefit. We will update our future tax provisions based on new regulations or
guidance accordingly.
As a result of the Tax Act, we recognized a one-time, non-cash benefit of $28.4 million in the
fourth quarter of 2017 primarily from the impact of the revaluation of our net deferred tax liabilities.
This non-cash benefit resulted primarily from the Federal rate reduction from 35% to 21%.
As of December 31, 2019, we had approximately $225 million of tax-deductible goodwill and
intangible asset amortization remaining from our acquisition by CCMP Capital Advisors, LLC in 2006
that we expect to generate aggregate cash tax savings of approximately $57 million through 2021,
assuming continued profitability of our U.S. business and a combined federal and state tax rate of
25.3%. The recognition of the tax benefit associated with these assets for tax purposes is expected to be
$122 million in 2020 and $102 million in 2021, which generates annual cash tax savings of $31 million
in 2020 and $26 million in 2021. Based on current business plans, we believe that our cash tax
obligations through 2021 will be significantly reduced by these tax attributes, after which our cash tax
obligation will increase. Other domestic acquisitions have resulted in additional tax deductible goodwill
and intangible assets that will generate tax savings, but are not material to our consolidated financial
statements.
Components of Net Sales and Expenses
Net Sales
Our net sales primarily consist of product sales to our customers. This includes sales of our power
generation equipment, energy storage systems, and other power products to the residential, light
commercial and industrial markets, as well as service parts to our dealer network. Net sales also include
shipping and handling charges billed to customers, with the related freight costs included in cost of
goods sold. Additionally, we offer other services, including extended warranties, remote monitoring,
installation and maintenance services. However, these services accounted for less than three percent of
our net sales for the year ended December 31, 2019. Refer to Note 2, ‘‘Significant Accounting
Policies—Revenue Recognition,’’ to the consolidated financial statements in Item 8 of this Annual
Report on Form 10-K for further information on our revenue streams and related revenue recognition
accounting policies.
We are not dependent on any one channel or customer for our net sales, with no single customer
representing more than 5% of our sales, and our top ten customers representing less than 19% of our
net sales for the year ended December 31, 2019.
37
Costs of Goods Sold
The principal elements of costs of goods sold are component parts, raw materials, factory overhead
and labor. Component parts and raw materials comprised approximately 75% of costs of goods sold for
the year ended December 31, 2019. The principal component parts are engines, alternators, and
batteries. We design and manufacture air-cooled engines for certain of our generators up to 22kW,
along with certain liquid-cooled, natural gas engines. We source engines for certain of our smaller
products and all of our diesel products. For certain natural gas engines, we source the base engine
block, and then add a significant amount of value engineering, sub-systems and other content to the
point that we are recognized as the OEM of those engines. We design and manufacture many of the
alternators for our units. We also manufacture other generator components where we believe we have a
design and cost advantage. We source component parts from an extensive global network of reliable,
high quality suppliers. In some cases, these relationships are proprietary.
The principal raw materials used in the manufacturing process that are sourced are steel, copper
and aluminum. We are susceptible to fluctuations in the cost of these commodities, impacting our costs
of goods sold. We seek to mitigate the impact of commodity prices on our business through a
continued focus on global sourcing, product design improvements, manufacturing efficiencies, price
increases and select hedging transactions. We are also impacted by foreign currency fluctuations given
our global supply chain. There is typically a lag between raw material price fluctuations and their effect
on our costs of goods sold.
Other sources of costs include our manufacturing and warehousing facilities, factory overhead,
labor and shipping costs. Factory overhead includes utilities, support personnel, depreciation, general
supplies, support and maintenance. Although we attempt to maintain a flexible manufacturing cost
structure, our margins can be impacted when we cannot timely adjust labor and manufacturing costs to
match fluctuations in net sales.
Operating Expenses
Our operating expenses consist of costs incurred to support our sales, marketing, distribution,
service parts, engineering, information systems, human resources, accounting, finance, risk management,
legal and tax functions, among others. These expenses include personnel costs such as salaries, bonuses,
employee benefit costs, taxes, and share-based compensation cost, and are classified into three
categories: selling and service, research and development, and general and administrative. Additionally,
the amortization expense related to our finite-lived intangible assets is included within operating
expenses.
Selling and service. Our selling and service expenses consist primarily of personnel expense,
marketing expense, standard assurance warranty expense and other sales expenses. Our personnel
expense recorded in selling and services expenses includes the expense of our sales force responsible
for our broad customer base and other personnel involved in the marketing, sales and service of our
products. Standard warranty expense, which is recorded at the time of sale, is estimated based on
historical trends. Our marketing expenses include direct mail costs, printed material costs, product
display costs, market research expenses, trade show expenses, media advertising, promotional expenses
and co-op advertising costs. Marketing expenses are generally related to the launch of new product
offerings, participation in trade shows and other events, opportunities to create market awareness for
our products, and general brand awareness marketing efforts.
Research and development. Our research and development expenses support numerous projects
covering all of our product lines. They also support our connectivity, remote monitoring, and energy
monitoring initiatives. We operate engineering facilities with extensive capabilities at many locations
globally and employ over 500 personnel with focus on new product development, existing product
improvement and cost containment. We are committed to research and development, and rely on a
38
combination of patents and trademarks to establish and protect our proprietary rights. Our research
and development costs are expensed as incurred.
General and administrative. Our general and administrative expenses include personnel costs for
general and administrative employees; accounting, legal and professional services fees; information
technology costs; insurance; travel and entertainment expense; and other corporate expenses.
Amortization of intangibles. Our amortization of intangibles expense includes the straight-line
amortization of finite-lived tradenames, customer lists, patents and technology, and other intangibles
assets.
Other (Expense) Income
Other (expense) income includes the interest expense on our outstanding borrowings, amortization
of debt financing costs and original issue discount, and cash flows related to interest rate swap
agreements. Other (expense) income also includes other financial items such as losses on
extinguishment of debt, gains (losses) on changes in contractual interest rate, loss on pension
settlement, and investment income earned on our cash and cash equivalents.
Results of Operations
Year ended December 31, 2019 compared to year ended December 31, 2018
The following table sets forth our consolidated statement of operations data for the periods
indicated:
(U.S. Dollars in thousands)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:
Selling and service . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . .
Total other expense, net . . . . . . . . . . . . . . . . . . . . . . . .
Income before provision for income taxes . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . .
Year Ended December 31,
2019
2018
$ Change % Change
$2,204,336
1,406,584
$2,023,464
1,298,424
180,872
108,160
8.9%
8.3%
797,752
725,040
72,712
10.0%
217,683
68,394
110,868
28,644
425,589
372,163
(52,556)
319,607
67,299
252,308
301
191,887
50,019
103,841
22,112
367,859
25,796
18,375
7,027
6,532
57,730
357,181
(46,105)
14,982
(6,451)
13.4%
36.7%
6.8%
29.5%
15.7%
4.2%
14.0%
311,076
69,856
241,220
2,963
8,531
2.7%
(2,557) (cid:6)3.7%
11,088
4.6%
(2,662) (cid:6)89.8%
5.8%
13,750
Net income attributable to Generac Holdings Inc. . . . . .
$ 252,007
$ 238,257
39
The following sets forth our reportable segment information for the periods indicated:
(U.S. Dollars in thousands)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International
$1,742,898
461,438
$1,566,520
456,944
$176,378
4,494
Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,204,336
$2,023,464
$180,872
11.3%
1.0%
8.9%
Net Sales by Segment
Year Ended December 31,
2019
2018
$ Change
% Change
Adjusted EBITDA
by Segment
Year Ended December 31,
2019
2018
$ Change
% Change
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International
$ 428,667
25,448
$ 388,495
36,057
Total Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . .
$ 454,115
$ 424,552
$ 40,172
10.3%
(10,609) (cid:6)29.4%
7.0%
$ 29,563
The following table sets forth our product class information for the periods indicated:
(U.S. Dollars in thousands)
Residential products . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial & industrial products . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,143,723
871,595
189,018
$1,042,739
820,270
160,455
$100,984
51,325
28,563
Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,204,336
$2,023,464
$180,872
9.7%
6.3%
17.8%
8.9%
Year Ended December 31,
2019
2018
$ Change
% Change
Net sales. The increase in Domestic segment sales for the year ended December 31, 2019 was
primarily due to strong shipments of home standby generators due to increased trends of power outage
activity across the U.S. and Canada, inclusive of public utility power shut-offs in California. In addition,
C&I stationary generator shipments were also strong, particularly for natural gas and telecom
applications. The Pika and Neurio acquisitions provided a modest contribution of sales in 2019 given
their start-up nature. The overall Domestic segment sales growth was partially offset by lower
shipments of portable generators and C&I mobile products.
The slight increase in International segment sales for the year ended December 31, 2019 was
primarily due to contributions from the Selmec and Captiva acquisitions. International segment sales in
2019 were impacted by the unfavorable results of foreign currency and geopolitical headwinds that
caused economic softness in certain key regions of the world in which we operate.
Total contribution from non-annualized recent acquisitions for the year ended December 31, 2019
was $36.1 million.
Gross profit. Gross profit margin for the year ended December 31, 2019 was 36.2% compared to
35.8% for the year ended December 31, 2018. The increase reflected a favorable sales mix towards
higher margin home standby generators and price increases implemented since the prior period. These
items were partially offset by the impact of recent acquisitions and the realization of higher input costs,
including regulatory tariffs, logistics costs, and labor rates.
Operating expenses. The increase in operating expenses was primarily driven by incremental
variable operating expense on the strong sales growth, recurring operating expenses from recent
40
acquisitions, an increase in employee headcount related to strategic initiatives, higher marketing and
promotional spend, and higher intangible amortization expenses.
Other expense. The increase in other expense, net was primarily due to a $10.9 million pre-tax
settlement charge related to the termination of the Company’s domestic pension plan in the fourth
quarter of 2019, partially off-set by more favorable foreign currency adjustments compared to the prior
year.
Provision for income taxes. The effective income tax rates for the years ended December 31, 2019
and 2018 were 21.1% and 22.5%, respectively. The decrease in the effective tax rate is primarily due to
a reduction in the U.S. state income tax expense and lower foreign earnings, which are subject to
higher jurisdictional tax rates.
Net income attributable to Generac Holdings Inc. The increase in net income attributable to
Generac Holdings Inc. was primarily due to the factors outlined above.
Adjusted EBITDA. Adjusted EBITDA margins for the Domestic segment for the year ended
December 31, 2019 were 24.6% of net sales as compared to 24.8% of net sales for the year ended
December 31, 2018. Adjusted EBITDA margin in the current year benefited from favorable sales mix,
pricing initiatives, and fixed operating cost leverage on the higher sales volumes. These favorable
impacts were more than offset by higher input costs, including regulatory tariffs, increased employee
headcount, higher marketing and promotional spend, and recurring operating expenses from recent
acquisitions.
Adjusted EBITDA margins for the International segment, before deducting for non-controlling
interests, for the year ended December 31, 2019 were 5.5% of net sales as compared to 7.9% of net
sales for the year ended December 31, 2018. The decrease in Adjusted EBITDA margin as compared
to the prior year was primarily due to unfavorable sales mix, higher input costs, and incremental
operating expense investments.
Adjusted net income. Adjusted Net Income of $317.8 million for the year ended December 31,
2019 increased 8.8% from $292.2 million for the year ended December 31, 2018, due to the factors
outlined above.
In the fourth quarter of 2019, management determined that the Latin American export operations
of the legacy Generac business should have been included in the International reportable segment
beginning in 2018. Previously, this was reported in the Domestic segment, in amounts that were not
material. Refer to Note 7, ‘‘Segment Reporting,’’ to the consolidated financial statements in Item 8 of
this Annual Report on Form 10-K for further information regarding this correction.
41
Year ended December 31, 2018 compared to year ended December 31, 2017
The following table sets forth our consolidated statement of operations data for the periods
indicated:
(U.S. Dollars in thousands)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:
Selling and service . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Research and development
General and administrative . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . .
Total other expense, net . . . . . . . . . . . . . . . . . . . . . . .
Income before provision for income taxes . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . .
Year Ended December 31,
2018
2017
$ Change
% Change
$2,023,464
1,298,424
$1,679,373
1,094,587
$344,091
203,837
725,040
584,786
140,254
20.5%
18.6%
24.0%
191,887
50,019
103,841
22,112
367,859
357,181
(46,105)
311,076
69,856
241,220
2,963
174,841
42,869
87,581
28,861
334,152
250,634
(46,935)
203,699
44,142
159,557
1,749
9.7%
17,046
16.7%
7,150
16,260
18.6%
(6,749) (cid:6)23.4%
10.1%
33,707
106,547
830
107,377
25,714
81,663
1,214
42.5%
(cid:6)1.8%
52.7%
58.3%
51.2%
N/A
51.0%
Net income attributable to Generac Holdings Inc.
. . . .
$ 238,257
$ 157,808
$ 80,449
The following table sets forth our reportable segment information for the periods indicated:
(U.S. Dollars in thousands)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International
$1,566,520
456,944
$1,271,678
407,695
$294,842
49,249
Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,023,464
$1,679,373
$344,091
23.2%
12.1%
20.5%
Net Sales by Segment
Year Ended December 31,
2018
2017
$ Change
% Change
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International
$ 388,495
36,057
$ 282,450
34,850
$106,045
1,207
Total Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . .
$ 424,552
$ 317,300
$107,252
37.5%
3.5%
33.8%
Adjusted EBITDA
Year Ended December 31,
2018
2017
$ Change
% Change
42
The following table sets forth our product class information for the periods indicated:
(U.S. Dollars in thousands)
Residential products . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial & industrial products . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,042,739
820,270
160,455
$ 870,491
684,352
124,530
$172,248
135,918
35,925
Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,023,464
$1,679,373
$344,091
19.8%
19.9%
28.8%
20.5%
Year Ended December 31,
2018
2017
$ Change
% Change
Net sales. The increase in Domestic sales for the year ended December 31, 2018 was primarily
due to strong broad-based growth in shipments of home standby generators, portable generators,
outdoor power equipment and service parts. Shipments of residential products were particularly strong
with demand climbing from the elevated outage environment which continued to drive awareness
around the home standby category and the need for homeowners to have back-up power. Sales of our
C&I mobile and stationary products were also strong during the year with rental, telecom, and
healthcare market verticals experiencing growth.
The increase in International sales for the year ended December 31, 2018 was primarily due to the
$30.7 million contribution from the Selmec acquisition, and broad-based core growth from the Pramac,
Ottomotores and Motortech businesses as we continue to drive market penetration across the globe.
Gross profit. Gross profit margin for the year ended December 31, 2018 was 35.8% compared to
34.8% for the year ended December 31, 2017. The increase reflected a favorable mix of home standby
generators, improved leverage of fixed manufacturing costs on the increase in sales, favorable pricing
environment, and focused initiatives to improve margins. These items were partially offset by general
inflationary pressures from higher commodities, currencies, wages and logistics costs.
Operating expenses. The increase in operating expenses was primarily driven by an increase in
employee and incentive compensation costs, higher selling-related variable operating expenses given the
higher sales volumes, and the recurring operating expenses from the Selmec acquisition. These items
were partially offset by lower promotion, marketing and intangible amortization expenses.
Other expense. The decrease in other expense, net was primarily due to lower interest expense
and higher investment income, partially offset by the $1.3 million loss on extinguishment of debt
resulting from a $50.0 million voluntary prepayment of Term Loan debt.
Provision for income taxes. The effective income tax rates for the years ended December 31, 2018
and 2017 were 22.5% and 21.3%, respectively. The reduction of the U.S. federal statutory tax rate from
35% to 21% as a result of the Tax Act was more than offset by the 2017 one-time, non-cash
$28.4 million benefit from revaluing our net deferred tax liabilities in accordance with the Tax Act.
Net income attributable to Generac Holdings Inc. The increase in net income attributable to
Generac Holdings Inc. was primarily due to the factors outlined above, partially offset by an increase in
net income attributable to noncontrolling interests.
Adjusted EBITDA. Adjusted EBITDA margins for the Domestic segment for the year ended
December 31, 2018 were 24.8% of net sales as compared to 22.2% of net sales for the year ended
December 31, 2017. Adjusted EBITDA margin in 2018 benefitted from improved operating leverage,
favorable sales mix from higher shipments of home standby generators, a favorable pricing
environment, lower promotional costs, and focused margin improvement initiatives. These benefits were
partially offset by an increase in employee costs and general inflationary pressures.
43
Adjusted EBITDA margins for the International segment, before deducting for non-controlling
interests, for the year ended December 31, 2018 were 7.9% of net sales as compared to 8.5% of net
sales for the year ended December 31, 2017. The slight decrease in EBITDA margin is due to an
unfavorable sales mix as 2017 included higher shipments of portable generators following large-scale
outages from Hurricane Maria. This unfavorable sales mix was partially offset by increased leverage of
fixed operating costs in 2018.
Adjusted net income. Adjusted Net Income of $292.2 million for the year ended December 31,
2018 increased 37.9% from $211.9 million for the year ended December 31, 2017, due to the factors
outlined above, partially offset by an increase in cash income tax expense.
Liquidity and Financial Position
Our primary cash requirements include payment for our raw material and component supplies,
salaries & benefits, facility and lease costs, operating expenses, interest and principal payments on our
debt and capital expenditures. We finance our operations primarily through cash flow generated from
operations and, if necessary, borrowings under our ABL Facility.
Our credit agreements originally provided for a $1.2 billion term loan B credit facility (Term Loan)
and include a $300.0 million uncommitted incremental term loan facility. The Term Loan currently
matures on December 13, 2026 and bears interest at rates based upon either a base rate plus an
applicable margin of 0.75% or adjusted LIBOR rate plus an applicable margin of 1.75%. The Term
Loan does not require an Excess Cash Flow payment if our secured leverage ratio is maintained below
3.75 to 1.00 times. As of December 31, 2019, our secured leverage ratio was 1.50 to 1.00 times, and we
were in compliance with all covenants of the Term Loan. There are no financial maintenance covenants
on the Term Loan.
Our credit agreements also provide for the $300.0 million ABL Facility, which matures on June 12,
2023. As of December 31, 2019, there were $31.0 million of borrowings outstanding and $268.6 million
of availability under the ABL Facility, net of outstanding letters of credit. We were in compliance with
all covenants of the ABL Facility as of December 31, 2019.
In August 2015, our Board of Directors approved a $200.0 million stock repurchase program,
which we completed in the third quarter of 2016. In October 2016, our Board of Directors approved a
new $250.0 million stock repurchase program, which expired in the fourth quarter of 2018. In
September 2018, the Board of Directors approved another stock repurchase program, which
commenced in October 2018, and under which we may repurchase an additional $250.0 million of
common stock over 24 months from time to time, in amounts and at prices we deem appropriate,
subject to market conditions and other considerations. During the year ended December 31, 2019, no
repurchases were made. Since the inception of all programs, we have repurchased 8,676,706 shares of
our common stock for $305.5 million (an average repurchase price of $35.21 per share), all funded with
cash on hand.
Long-term Liquidity
We believe that our cash flow from operations and availability under our ABL Facility and other
short-term lines of credit, combined with our favorable tax attributes (which result in a lower cash tax
rate as compared to the U.S. statutory tax rate) provide us with sufficient capital to continue to grow
our business in the future. We may use a portion of our cash flow to pay interest and principal on our
outstanding debt as well as repurchase shares of our common stock, impacting the amount available for
working capital, capital expenditures and other general corporate purposes. As we continue to expand
our business, we may require additional capital to fund working capital, capital expenditures or
acquisitions.
44
Cash Flow
Year ended December 31, 2019 compared to year ended December 31, 2018
The following table summarizes our cash flows by category for the periods presented:
(U.S. Dollars in thousands)
Net cash provided by operating activities . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . .
2019
2018
$ Change
% Change
$ 308,887
(170,078)
(41,918)
$ 247,227
(108,894)
(52,034)
24.9%
$ 61,660
56.2%
(61,184)
10,116 (cid:6)19.4%
Year Ended December 31,
The increase in net cash provided by operating activities was primarily driven by the monetization
of previous working capital investments and an increase in operating earnings compared to prior year.
Net cash used in investing activities for the year ended December 31, 2019 primarily represented
cash payments of $112.0 million related to the acquisition of businesses and $60.8 million for the
purchase of property and equipment. Net cash used in investing activities for the year ended
December 31, 2018 primarily consisted of cash payments of $65.4 million related to the acquisition of
businesses and $47.6 million for the purchase of property and equipment.
Net cash used in financing activities for the year ended December 31, 2019 primarily consisted of
$112.6 million of debt repayments ($53.1 million of long-term borrowings and $59.5 million of
short-term borrowings), $6.4 million of taxes paid related to equity awards, and $5.5 million of
contingent consideration for acquired businesses. These payments were partially offset by $75.0 million
cash proceeds from borrowings ($73.3 million for short-term borrowings and $1.7 million for long-term
borrowings) and $9.4 million of proceeds from the exercise of stock options.
Net cash used in financing activities for the year ended December 31, 2018 primarily consisted of
$129.7 million of debt repayments ($101.8 million of long-term borrowings and $27.9 million of
short-term borrowings), $25.7 million for the repurchase of our common stock, and $5.7 million of
taxes paid related to equity awards. These payments were partially offset by $105.4 million of cash
proceeds from borrowings ($54.0 million for short-term borrowings and $51.4 million for long-term
borrowings) and $5.6 million of proceeds from the exercise of stock options.
Year ended December 31, 2018 compared to year ended December 31, 2017
The following table summarizes our cash flows by category for the periods presented:
(U.S. Dollars in thousands)
Net cash provided by operating activities . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . .
Year Ended December 31,
2018
2017
$ 247,227
(108,894)
(52,034)
$ 257,322
(28,128)
(160,143)
$ Change
% Change
$ (10,095) (cid:6)3.9%
(80,766)
287.1%
108,109 (cid:6)67.5%
The decrease in net cash provided by operating activities was primarily driven by increased working
capital investment due to strong organic growth and incremental inventory purchases ahead of expected
tariff changes, which was partially offset by an increase in operating earnings.
Net cash used in investing activities for the year ended December 31, 2018 primarily represented
cash payments of $65.4 million related to the acquisition of businesses and $47.6 million for the
purchase of property and equipment. Net cash used in investing activities for the year ended
December 31, 2017 primarily consisted of cash payments for the purchase of property and equipment.
Net cash used in financing activities for the year ended December 31, 2018 primarily consisted of
$129.7 million of debt repayments ($101.8 million of long-term borrowings and $27.9 million of
45
short-term borrowings), $25.7 million for the repurchase of our common stock, and $5.7 million of
taxes paid related to equity awards. These payments were partially offset by $105.4 million of cash
proceeds from borrowings ($54.0 million for short-term borrowings and $51.4 million for long-term
borrowings) and $5.6 million of proceeds from the exercise of stock options.
Net cash used in financing activities for the year ended December 31, 2017 primarily consisted of
$232.4 million of debt repayments ($117.5 million of long-term borrowings and $114.9 million of
short-term borrowings), $30.0 million for the repurchase of our common stock, $5.9 million of taxes
paid related to equity awards and $3.9 million of payments for debt issuance costs. These payments
were partially offset by $105.1 million cash proceeds from borrowings ($102.0 million for short-term
borrowings and $3.1 million for long-term borrowings) and $7.0 million of proceeds from the exercise
of stock options.
Senior Secured Credit Facilities
Refer to Note 12, ‘‘Credit Agreements,’’ to the consolidated financial statements in Item 8 and the
‘‘Liquidity and Financial Position’’ section included in Item 7 of this Annual Report on Form 10-K for
information on the senior secured credit facilities.
Covenant Compliance
The Term Loan contains restrictions on the Company’s ability to pay distributions and dividends.
Payments can be made to the Company or other parent companies for certain expenses such as
operating expenses in the ordinary course, fees and expenses related to any debt or equity offering and
to pay franchise or similar taxes. Dividends can be used to repurchase equity interests, subject to
limitations in certain circumstances. Additionally, the Term Loan restricts the aggregate amount of
dividends and distributions that can be paid and, in certain circumstances, requires pro forma
compliance with certain fixed charge coverage ratios or gross leverage ratios, as applicable, in order to
pay certain dividends and distributions. The Term Loan also contains other affirmative and negative
covenants that, among other things, limit the incurrence of additional indebtedness, liens on property,
sale and leaseback transactions, investments, loans and advances, mergers or consolidations, asset sales,
acquisitions, transactions with affiliates, prepayments of certain other indebtedness and modifications of
our organizational documents. The Term Loan does not contain any financial maintenance covenants.
The Term Loan contains customary events of default, including, among others, nonpayment of
principal, interest or other amounts, failure to perform covenants, inaccuracy of representations or
warranties in any material respect, cross-defaults with other material indebtedness, certain undischarged
judgments, the occurrence of certain ERISA, bankruptcy or insolvency events, or the occurrence of a
change in control (as defined in the Term Loan). A bankruptcy or insolvency event of default will cause
the obligations under the Term Loan to automatically become immediately due and payable.
The ABL Facility also contains covenants and events of default substantially similar to those in the
Term Loan, as described above.
46
Contractual Obligations
The following table summarizes our expected payments for significant contractual obligations as of
December 31, 2019, using the interest rates in effect as of that date:
(U.S. Dollars in thousands)
Long-term debt, including current
Total
Less than 1 Year
2 - 3 Years
4 - 5 Years
After 5 Years
portion(1) . . . . . . . . . . . . . . . . . . .
$ 832,236
$
553
$ 1,683
$ — $830,000
Finance lease obligations, including
current portion . . . . . . . . . . . . . . . .
Interest on long-term debt and finance
lease obligations . . . . . . . . . . . . . . .
Operating leases(2) . . . . . . . . . . . . . .
25,962
1,830
3,479
2,174
18,479
218,085
50,542
30,479
9,511
60,539
14,302
60,336
10,755
66,731
15,974
Total contractual cash obligations . . . .
$1,126,825
$42,373
$80,003
$73,265
$931,184
(1) The Term Loan matures on December 13, 2026. The ABL Facility provides for a $300.0 million
senior secured ABL revolving credit facility, which matures on June 12, 2023. There was no
outstanding balance on the ABL Facility classified as long-term as of December 31, 2019.
(2) Includes future cash disbursements for three leases entered into in December 2019 for which there
is not a corresponding right of use asset or lease liability recorded in the Consolidated Balance
Sheets for the year ended December 31, 2019, due to the leases having a commencement date in
2020. Total payments to be made over the lease term for these three leases total $5.8 million.
In 2019, the Company terminated its domestic Pension Plan. In connection with the termination,
all obligations were settled in the fourth quarter of 2019 through the purchase of annuities and lump
sum distributions.
Capital Expenditures
Our operations require capital expenditures for technology, research & development, tooling,
equipment, capacity expansion, IT systems & infrastructure and upgrades. Capital expenditures were
$60.8 million, $47.6 million and $33.3 million for the years ended December 31, 2019, 2018 and 2017,
respectively, and were funded through cash from operations.
Off-Balance Sheet Arrangements
We have an arrangement with a finance company to provide floor plan financing for selected
dealers. This arrangement provides liquidity for our dealers by financing dealer purchases of products
with credit availability from the finance company. We receive payment from the finance company after
shipment of product to the dealer and our dealers are given a longer period of time to pay the finance
company. If our dealers do not pay the finance company, we may be required to repurchase the
applicable inventory held by the dealer. We do not indemnify the finance company for any credit losses
they may incur.
Total inventory financed under this arrangement accounted for approximately 11% and 10% of net
sales for the years ended December 31, 2019 and 2018, respectively. The amount financed by dealers
which remained outstanding was $49.6 million and $47.2 million as of December 31, 2019 and 2018,
respectively.
47
Critical Accounting Policies
In preparing the financial statements in accordance with U.S. GAAP, management is required to
make estimates and assumptions that have an impact on the asset, liability, revenue and expense
amounts reported. These estimates can also affect our supplemental information disclosures, including
information about contingencies, risk and financial condition. We believe, given current facts and
circumstances, that our estimates and assumptions are reasonable, adhere to U.S. GAAP, and are
consistently applied. Inherent in the nature of an estimate or assumption is the fact that actual results
may differ from estimates and estimates may vary as new facts and circumstances arise. We make
routine estimates and judgments in determining net realizable value of accounts receivable, inventories,
property and equipment, prepaid expenses, product warranties and other reserves. Management
believes our most critical accounting estimates and assumptions are in the following areas: goodwill and
other indefinite-lived intangible asset impairment assessment; business combinations and purchase
accounting; and income taxes.
Goodwill and Other Indefinite-Lived Intangible Assets
Refer to Note 2, ‘‘Significant Accounting Policies—Goodwill and Other Indefinite-Lived Intangible
Assets,’’ to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for
further information on the Company’s policy regarding the accounting for goodwill and other intangible
assets. The Company performed the required annual impairment tests for goodwill and other
indefinite-lived intangible assets for the fiscal years 2019, 2018 and 2017, and found no impairment.
When preparing a discounted cash flow analysis for purposes of our annual impairment test, we
make a number of key estimates and assumptions. We estimate the future cash flows of the business
based on historical and forecasted revenues and operating costs. This, in turn, involves further
estimates, such as estimates of future growth rates and inflation rates. In addition, we apply a discount
rate to the estimated future cash flows for the purpose of the valuation. This discount rate is based on
the estimated weighted average cost of capital for the business and may change from year to year.
Weighted average cost of capital includes certain assumptions such as market capital structures, market
betas, risk-free rate of return and estimated costs of borrowing
In our October 31, 2019 impairment test calculation, the Latin America reporting unit had an
estimated fair value that exceeded its carrying value by approximately 10%. The carrying value of the
Latin America goodwill was $48.1 million. Key financial assumptions utilized to determine the fair
value of the reporting unit includes revenue growth levels that reflect recovering end markets, an
expanding customer and project pipeline, increased sales of service parts and service contracts,
improving profit margins, a 3% terminal growth rate and an 11.1% discount rate. The reporting unit’s
fair value would approximate its carrying value with a 100 basis point increase in the discount rate or a
100 basis point reduction in the sales continuous annual growth rate and terminal growth rate. As of
the October 31, 2019 impairment test date, there was no other reporting unit with a carrying value that
was at risk of exceeding its fair value.
As noted above, a considerable amount of management judgment and assumptions are required in
performing the goodwill and indefinite-lived intangible asset impairment tests. While we believe our
judgments and assumptions are reasonable, different assumptions could change the estimated fair
values. A number of factors, many of which we have no ability to control, could cause actual results to
differ from the estimates and assumptions we employed. These factors include:
(cid:129) a prolonged global or regional economic downturn;
(cid:129) a significant decrease in the demand for our products;
(cid:129) the inability to develop new and enhanced products and services in a timely manner;
48
(cid:129) a significant adverse change in legal factors or in the business climate;
(cid:129) an adverse action or assessment by a regulator;
(cid:129) successful efforts by our competitors to gain market share in our markets;
(cid:129) disruptions to the Company’s business;
(cid:129) inability to effectively integrate acquired businesses;
(cid:129) unexpected or unplanned changes in the use of assets or entity structure; and
(cid:129) business divestitures.
If management’s estimates of future operating results change or if there are changes to other
assumptions due to these factors, the estimate of the fair values may change significantly. Such change
could result in impairment charges in future periods, which could have a significant impact on our
operating results and financial condition.
Business Combinations and Purchase Accounting
We account for business combinations using the acquisition method of accounting, and accordingly,
the assets and liabilities of the acquired business are recorded at their respective fair values. The excess
of the purchase price over the estimated fair value of assets and liabilities is recorded as goodwill.
Assigning fair market values to the assets acquired and liabilities assumed at the date of an acquisition
requires knowledge of current market values, the values of assets in use, and often requires the
application of judgment regarding estimates and assumptions. While the ultimate responsibility resides
with management, for material acquisitions we retain the services of certified valuation specialists to
assist with assigning estimated values to certain acquired assets and assumed liabilities, including
intangible assets and tangible long-lived assets. Acquired intangible assets, excluding goodwill, are
valued using certain discounted cash flow methodologies based on future cash flows specific to the type
of intangible asset purchased. This methodology incorporates various estimates and assumptions, the
most significant being projected revenue growth rates, profit margins, and forecasted cash flows based
on the discount rate and terminal growth rate. Refer to Note 1, ‘‘Description of Business,’’ to the
consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further
information on the Company’s business acquisitions.
Income Taxes
We account for income taxes in accordance with ASC 740, Income Taxes. Our estimate of income
taxes payable, deferred income taxes and the effective tax rate is based on an analysis of many factors
including interpretations of federal, state and international income tax laws; the difference between tax
and financial reporting bases of assets and liabilities; estimates of amounts currently due or owed in
various jurisdictions; and current accounting standards. We review and update our estimates on a
quarterly basis as facts and circumstances change and actual results are known.
In assessing the realizability of the deferred tax assets on our balance sheet, we consider whether it
is more likely than not that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable income
during the years in which those temporary differences become deductible. We consider the taxable
income in prior carryback years, scheduled reversal of deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment.
Refer to Note 15, ‘‘Income Taxes’’ to the consolidated financial statements in Item 8 of this
Annual Report on Form 10-K for further information on the Company’s income taxes.
49
New Accounting Standards
For information with respect to new accounting pronouncements and the impact of these
pronouncements on our consolidated financial statements, refer to Note 2, ‘‘Significant Accounting
Policies—New Accounting Pronouncements,’’ to the consolidated financial statements in Item 8 of this
Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from changes in foreign currency exchange rates, commodity prices
and interest rates. To reduce the risk from these changes, we use financial instruments from time to
time. We do not hold or issue financial instruments for trading purposes.
Foreign Currency
We are exposed to foreign currency exchange risk as a result of transactions denominated in
currencies other than the U.S. Dollar, as well as operating businesses in foreign countries. Periodically,
we utilize foreign currency forward purchase and sales contracts to manage the volatility associated with
certain foreign currency purchases and sales in the normal course of business. Contracts typically have
maturities of twelve months or less. Realized gains and losses on transactions denominated in foreign
currency are recorded as a component of cost of goods sold in the statements of comprehensive
income.
The following is a summary of the forty-three foreign currency contracts outstanding as of
December 31, 2019 (notional amount in thousands):
Currency Denomination
Trade Dates
Effective Dates
Notional Amount
Expiration Date
GBP . . . . . . . . . . . . . . .
USD . . . . . . . . . . . . . . .
AUD . . . . . . . . . . . . . . .
11/11/19 - 12/16/19
10/24/19 - 12/16/19
11/25/19 - 12/16/19
11/11/19 - 12/16/19
10/24/19 - 12/16/19
11/25/19 - 12/16/19
$5,110
$6,300
$4,800
1/15/20 - 4/30/20
1/15/20 - 2/19/20
1/29/20 - 2/19/20
Commodity Prices
We are a purchaser of commodities and components manufactured from commodities including
steel, aluminum, copper and others. As a result, we are exposed to fluctuating market prices for those
commodities. While such materials are typically available from numerous suppliers, commodity raw
materials are subject to price fluctuations. We generally buy these commodities and components based
upon market prices that are established with the supplier as part of the purchase process. Depending
on the supplier, these market prices may reset on a periodic basis based on negotiated lags and
calculations. To the extent that commodity prices increase and we do not have firm pricing from our
suppliers, or our suppliers are not able to honor such prices, we may experience a decline in our gross
margins to the extent we are not able to increase selling prices of our products or obtain manufacturing
efficiencies or supply chain savings to offset increases in commodity costs.
Periodically, we engage in certain commodity risk management activities to mitigate the impact of
potential price fluctuations on our financial results. These derivatives typically have maturities of less
than eighteen months. As of December 31, 2019, we had no commodity forward contracts outstanding.
50
Interest Rates
As of December 31, 2019, all of the outstanding debt under our Term Loan and ABL Facility was
subject to floating interest rate risk. As of December 31, 2019, we had the following interest rate swap
contracts outstanding (notional amount in thousands of US dollars):
Hedged Item
Contract Date
Effective Date
Notional Amount
Fixed LIBOR Rate
Expiration Date
June 19, 2017
Interest Rate . . . . .
June 19, 2017
Interest Rate . . . . .
June 19, 2017
Interest Rate . . . . .
June 19, 2017
Interest Rate . . . . .
June 30, 2017
Interest Rate . . . . .
June 30, 2017
Interest Rate . . . . .
June 30, 2017
Interest Rate . . . . .
June 30, 2017
Interest Rate . . . . .
August 9, 2017
Interest Rate . . . . .
August 9, 2017
Interest Rate . . . . .
August 9, 2017
Interest Rate . . . . .
Interest Rate . . . . .
August 9, 2017
Interest Rate . . . . . August 30, 2017
Interest Rate . . . . . August 30, 2017
Interest Rate . . . . . August 30, 2017
Interest Rate . . . . . August 30, 2017
July 1, 2019
July 1, 2020
July 1, 2021
July 1, 2022
July 1, 2019
July 1, 2020
July 1, 2021
July 1, 2022
July 1, 2019
July 1, 2020
July 1, 2021
July 1, 2022
July 1, 2019
July 1, 2020
July 1, 2021
July 1, 2022
125,000
125,000
125,000
125,000
125,000
125,000
125,000
125,000
125,000
125,000
125,000
125,000
125,000
125,000
125,000
125,000
1.9053%
2.1263%
2.2733%
2.3673%
1.9750%
2.2062%
2.3717%
2.5000%
1.8598%
2.0740%
2.2367%
2.2948%
1.7553%
1.9737%
2.1508%
2.2998%
July 1, 2020
July 1, 2021
July 1, 2022
May 31, 2023
July 1, 2020
July 1, 2021
July 1, 2022
May 31, 2023
July 1, 2020
July 1, 2021
July 1, 2022
May 31, 2023
July 1, 2020
July 1, 2021
July 1, 2022
May 31, 2023
In conjunction with the December amendment to our term loan, we also amended the interest
swaps to remove the LIBOR floor, which resulted in minor reductions to our future dated swap rates.
At December 31, 2019, the fair value of these interest rate swaps was a liability of $10.6 million. Even
after giving effect to these swaps, we are exposed to risks due to changes in interest rates with respect
to the portion of our Term Loan and ABL Facility that is not covered by the swaps. A hypothetical
change in the LIBOR interest rate of 100 basis points would have changed annual cash interest expense
by approximately $4.0 million (or, without the swaps in place, $9.0 million) in 2019.
For additional information on the Company’s foreign currency and commodity forward contracts
and interest rate swaps, including amounts charged to the statement of comprehensive income during
2019, 2018, and 2017, refer to Note 5, ‘‘Derivative Instruments and Hedging Activities,’’ and Note 6,
‘‘Accumulated Other Comprehensive Loss,’’ to our consolidated financial statements in Item 8 of this
Annual Report on Form 10-K.
51
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the stockholders and the Board of Directors of Generac Holdings Inc.
Waukesha, WI
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Generac Holdings Inc. and
subsidiaries (the ‘‘Company’’) as of December 31, 2019 and 2018, the related consolidated statements
of comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period
ended December 31, 2019, and the related notes (collectively referred to as the ‘‘financial statements’’).
In our opinion, the financial statements present fairly, in all material respects, the financial position of
the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2019, in conformity with accounting
principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as
of December 31, 2019, based on criteria established in Internal Control—Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report
dated February 25, 2020, expressed an unqualified opinion on the Company’s internal control over
financial reporting.
Change in Accounting Principle
As discussed in Note 10 to the financial statements, effective January 1, 2019, the Company
adopted FASB Accounting Standards Update 2016-02, Leases (Topic 842), using the modified
retrospective approach.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of
the financial statements that were communicated or required to be communicated to the audit
committee and that (1) relate to accounts or disclosures that are material to the financial statements
and (2) involved our especially challenging, subjective, or complex judgments. The communication of
52
critical audit matters does not alter in any way our opinion on the financial statements, taken as a
whole, and we are not, by communicating the critical audit matters below, providing separate opinions
on the critical audit matters or on the accounts or disclosures to which they relate.
Acquisitions—Neurio and Pika—Intangible Assets—Refer to Note 3 to the consolidated financial statements.
Critical Audit Matter Description
As discussed in Note 3 to the consolidated financial statements, on March 12, 2019, the Company
acquired Neurio for a purchase price of $59.1 million. The Company accounted for the acquisition
under the acquisition method of accounting for business combinations. Accordingly, the purchase price
was allocated based on the estimates of the fair value of the acquired assets and assumed liabilities. As
a result, the Company recorded approximately $58.8 million of intangible assets, including $17.9 million
of goodwill as of the acquisition date.
On April 26, 2019, the Company acquired Pika for a purchase price of $49.1 million. The
Company accounted for the acquisition under the acquisition method of accounting for business
combinations. Accordingly, the purchase price was allocated based on the estimates of the fair value of
the acquired assets and assumed liabilities. As a result, the Company recorded approximately
$58.2 million of intangible assets, including $19.9 million of goodwill as of the acquisition date.
For both acquisitions, acquired intangible assets, excluding goodwill, were valued using certain
discounted cash flow methodologies based on future cash flows specific to the type of intangible asset
purchased. This methodology incorporated various estimates and assumptions, the most significant
being projected revenue growth rates, earnings margins, and forecasted cash flows based on a discount
rate and terminal growth rate.
The principle consideration for our determination that the purchase accounting for these
acquisitions is a critical audit matter is that there is a high degree of auditor effort, judgment and
subjectivity involved in designing and performing procedures to evaluate the reasonableness of
management’s estimates and assumptions related to the projected revenue growth rates, earnings
margins and forecasted cash flows based on the discount rate and terminal growth rate.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the projected revenue growth rates, earnings margins, and
forecasted cash flows and the selection of the discount rate and terminal growth rate for the intangible
assets included the following, among others:
(cid:129) We tested the effectiveness of controls over management’s process to estimate the fair value of
the intangible assets, including those over projected revenue growth rates, earnings margins and
forecasted cash flows based on the discount rate and terminal growth rate.
(cid:129) We assessed the reasonableness of management’s future cash flow projections and terminal
growth rate by comparing the projections to historical results and relevant industry data.
(cid:129) With the assistance of our fair value specialists, we evaluated the reasonableness of the
(1) valuation methodology and (2) discount rate selected, including testing the source
information underlying the determination of the discount rate, testing the mathematical accuracy
of the calculation, and developing a range of independent estimates and comparing those to the
discount rate selected by management.
(cid:129) We evaluated whether the estimated future cash flows were consistent with evidence obtained in
other areas of the audit, including impairment analyses and tax projections.
53
Goodwill—Refer to Note 9 to the financial statements.
Critical Audit Matter Description
The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of
each reporting unit to its carrying value. The Company’s estimate for each reporting unit is based on
the present value of estimated future cash flows attributable to the respective reporting unit. This
requires management to make significant estimates and assumptions including estimates of future
growth rates and inflation rates and discount rates based on the estimated weighted average cost of
capital for the business. Changes in the assumptions could have a significant impact on the fair value,
which could result in an impairment charge. The Company performed their annual impairment
assessment of its reporting units as of October 31, 2019. In the October 31, 2019 impairment test
calculation, the Latin America reporting unit had an estimated fair value that exceeded its carrying
value by approximately 10%. Because the estimated fair value exceeded the carrying value, no
impairment was recorded. The carrying value of the Company’s Latin America reporting unit goodwill
was approximately $48.1 million. Key financial assumptions utilized to determine the fair value of the
reporting unit include revenue growth levels that reflect recovering end markets, an expanding
customer and project pipeline, increased sales of service parts and service contracts, improving profit
margins, a 3% terminal growth rate and an 11.1% discount rate.
The principle consideration for our determination that the evaluation of goodwill is a critical audit
matter is that there is a high degree of auditor effort, judgment and subjectivity involved in designing
and performing procedures to evaluate the reasonableness of management’s key financial assumptions
utilized to determine the fair value of the Latin America reporting unit.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasts of future revenue growth rates, improving profit
margins, the terminal growth rate and the selection of the discount rate for the Latin America
reporting unit included the following, among others:
(cid:129) Evaluated the design and effectiveness of the controls over management’s goodwill impairment
evaluation, including those over the determination of the fair value of the reporting unit, such as
controls related to management’s forecast and the selection of the discount rate.
(cid:129) Obtained the Company’s discounted cash flow model and evaluated the valuation analysis for
mathematical accuracy.
(cid:129) Utilized fair value specialists to evaluate whether the valuation techniques applied by
management were appropriate.
(cid:129) Assessed management’s historical ability to accurately forecast the Company’s results of
operations.
(cid:129) Assessed management’s intent and/or ability to take specific actions included in the discounted
cash flow model.
(cid:129) Evaluated the reasonableness of management’s forecasts by comparing the forecasts to
(1) historical results, (2) internal communications to the Board of Directors, and (3) forecasted
information included in industry reports.
(cid:129) Independently calculated a discount rate and compared it to the rate utilized by the Company.
/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin
February 25, 2020
We have served as the Company’s auditor since 2016.
54
Report of Independent Registered Public Accounting Firm
To the stockholders and the Board of Directors of Generac Holdings Inc.
Waukesha, Wisconsin
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Generac Holdings Inc. and
subsidiaries (the ‘‘Company’’) as of December 31, 2019, based on criteria established in Internal
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2019, based on criteria established
in Internal Control—Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year
ended December 31, 2019, of the Company and our report dated February 25, 2020, expressed an
unqualified opinion on those financial statements and included an explanatory paragraph regarding the
Company’s adoption of FASB Accounting Standards Update 2016-02, Leases (Topic 842), using the
modified retrospective approach.
As described in Management’s Report on Internal Control over Financial Reporting, management
excluded from its assessment the internal control over financial reporting at Neurio Technology Inc.
(Neurio), which was acquired in March 2019, and Pika Energy, Inc (Pika), which was acquired in April
2019, and whose financial statements constitute 5.0% and 2.8% of net and total assets, respectively,
0.4% of net sales, and (2.2)% of net income of the consolidated financial statement amounts as of and
for the year ended December 31, 2019. Accordingly, our audit did not include the internal control over
financial reporting at Neurio and Pika.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
55
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin
February 25, 2020
56
Generac Holdings Inc.
Consolidated Balance Sheets
(U.S. Dollars in Thousands, Except Share and Per Share Data)
December 31,
2019
2018
Current assets:
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, less allowance for doubtful accounts of $6,968 and $4,873
at December 31, 2019 and 2018, respectively . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 322,883
$ 224,482
319,538
522,024
31,384
326,133
544,750
25,404
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,195,829
1,120,769
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer lists, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patents and technology, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tradenames, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
316,976
55,552
85,546
8,259
148,377
805,284
2,933
46,913
278,929
61,194
29,970
3,043
152,283
764,655
163
15,308
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,665,669
$2,426,314
Current liabilities:
Liabilities and stockholders’ equity
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued wages and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term borrowings and finance lease obligations . . . . . . .
$
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term borrowings and finance lease obligations . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease and other long-term liabilities
58,714
261,977
41,361
132,629
2,383
497,064
837,767
96,328
140,432
$
45,583
328,091
40,819
144,236
1,977
560,706
876,396
71,300
95,647
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,571,591
1,604,049
Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61,227
61,004
Stockholders’ equity:
Common stock, par value $0.01, 500,000,000 shares authorized, 71,667,726 and
71,186,418 shares issued at December 31, 2019 and 2018, respectively . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost, 9,103,013 and 9,047,060 shares at December 31,
2019 and 2018, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess purchase price over predecessor basis . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity attributable to Generac Holdings Inc.
. . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
717
498,866
712
476,116
(324,551)
(202,116)
1,084,383
(24,917)
1,032,382
469
(321,473)
(202,116)
831,123
(23,813)
760,549
712
761,261
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,032,851
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,665,669
$2,426,314
See notes to consolidated financial statements.
57
Generac Holdings Inc.
Consolidated Statements of Comprehensive Income
(U.S. Dollars in Thousands, Except Share and Per Share Data)
Year Ended December 31,
2019
2018
2017
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,204,336
1,406,584
$ 2,023,464
1,298,424
$ 1,679,373
1,094,587
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
797,752
725,040
584,786
Operating expenses:
Selling and service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development
. . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . .
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (expense) income:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . .
Loss on pension settlement . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before provision for income taxes . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . .
Net income attributable to Generac Holdings Inc.
. . . . . . . .
Other comprehensive income (loss):
Foreign currency translation adjustment . . . . . . . . . . . . . .
Net unrealized gain (loss) on derivatives . . . . . . . . . . . . . .
Pension liability adjustment . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . . . . . .
Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income (loss) attributable to noncontrolling
217,683
68,394
110,868
28,644
425,589
372,163
(41,544)
2,767
(926)
(10,920)
(1,933)
(52,556)
319,607
67,299
252,308
301
252,007
2,210
(13,855)
10,541
(1,104)
$
$
191,887
50,019
103,841
22,112
367,859
357,181
(40,956)
1,893
(1,332)
—
(5,710)
(46,105)
311,076
69,856
241,220
2,963
174,841
42,869
87,581
28,861
334,152
250,634
(42,667)
298
—
—
(4,566)
(46,935)
203,699
44,142
159,557
1,749
$
$
238,257
$
157,808
(5,976) $
2,924
437
(2,615)
15,191
3,712
62
18,965
251,204
238,605
178,522
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(635)
1,647
5,549
Comprehensive income attributable to Generac
Holdings Inc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
251,839
$
236,958
$
172,973
Net income attributable to common shareholders per
common share—basic: . . . . . . . . . . . . . . . . . . . . . . . .
. .
Weighted average common shares outstanding—basic:
$
4.09
61,926,986
$
3.57
61,662,031
$
2.56
62,040,704
Net income attributable to common shareholders per
common share—diluted: . . . . . . . . . . . . . . . . . . . . . .
Weighted average common shares outstanding—diluted: .
$
4.03
62,865,446
$
3.54
62,233,225
$
2.53
62,642,872
See notes to consolidated financial statements.
58
l
a
t
o
T
t
s
e
r
e
t
n
I
y
t
i
u
q
E
g
n
i
l
l
o
r
t
n
o
c
n
o
N
’
s
r
e
d
l
o
h
k
c
o
t
S
e
v
i
s
n
e
h
e
r
p
m
o
C
)
s
s
o
L
(
e
m
o
c
n
I
d
e
n
i
a
t
e
R
s
g
n
i
n
r
a
E
l
a
t
o
T
d
e
t
a
l
u
m
u
c
c
A
r
e
h
t
O
.
c
n
I
s
g
n
i
d
l
o
H
c
a
r
e
n
e
G
s
s
e
c
x
E
e
c
i
r
P
e
s
a
h
c
r
u
P
r
e
v
O
k
c
o
t
S
y
r
u
s
a
e
r
T
s
i
s
a
B
r
o
s
s
e
c
e
d
e
r
P
t
n
u
o
m
A
s
e
r
a
h
S
l
a
n
o
i
t
i
d
d
A
n
I
-
d
i
a
P
l
a
t
i
p
a
C
t
n
u
o
m
A
s
e
r
a
h
S
k
c
o
t
S
n
o
m
m
o
C
9
7
1
,
7
9
3
$
)
0
1
(
$
9
8
1
,
7
9
3
$
)
3
6
1
,
0
4
(
$
9
1
1
,
2
5
4
$
)
6
1
1
,
2
0
2
(
$
)
2
0
4
,
2
6
2
(
$
)
4
7
8
,
4
6
5
,
7
(
9
4
0
,
9
4
4
$
2
0
7
$
1
8
4
,
1
6
2
,
0
7
)
0
4
9
,
1
(
2
1
7
,
3
7
7
1
,
5
1
2
9
6
,
2
)
1
9
5
,
1
(
)
2
1
0
,
0
3
(
5
0
2
,
0
1
2
6
9
0
9
7
2
9
,
7
5
1
4
2
9
,
2
)
8
7
9
,
5
(
0
2
3
,
4
5
5
$
1
4
7
,
1
)
4
1
3
(
)
2
1
8
,
1
(
)
6
5
6
,
5
2
(
7
3
4
3
6
5
,
4
1
)
0
7
9
,
7
1
(
6
0
0
,
9
3
2
1
6
2
,
1
6
7
$
)
4
5
1
(
)
5
5
8
,
3
1
(
0
8
1
,
2
1
6
0
,
6
)
5
8
2
(
)
8
7
0
,
3
(
4
9
6
,
6
1
1
4
5
,
0
1
3
5
2
,
1
3
3
2
,
2
5
2
—
4
8
1
)
4
1
(
—
—
—
—
—
—
9
1
1
9
7
2
$
)
2
(
—
—
—
—
)
4
1
3
(
—
—
—
9
4
7
—
)
0
3
(
)
4
5
1
(
2
1
7
$
—
—
)
5
8
2
(
—
—
—
6
2
2
)
4
2
1
,
2
(
2
1
7
,
3
1
9
1
,
5
1
2
9
6
,
2
)
1
9
5
,
1
(
)
2
1
0
,
0
3
(
5
0
2
,
0
1
2
6
9
0
9
8
0
8
,
7
5
1
—
—
—
—
2
6
—
—
—
2
1
7
,
3
1
9
1
,
5
1
—
—
—
—
—
—
—
—
9
0
9
8
0
8
,
7
5
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
1
9
5
,
1
(
)
2
1
0
,
0
3
(
)
0
0
5
,
9
3
(
)
0
0
5
,
4
4
8
(
—
—
)
4
2
1
,
2
(
—
—
6
8
6
,
2
5
0
2
,
0
1
—
—
—
—
—
—
6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2
9
6
,
8
5
5
4
2
9
,
2
)
6
7
9
,
5
(
1
4
7
,
1
)
2
1
8
,
1
(
)
6
5
6
,
5
2
(
—
7
3
4
3
6
5
,
4
1
)
0
7
9
,
7
1
(
7
5
2
,
8
3
2
4
2
9
,
2
)
6
7
9
,
5
(
—
—
—
—
—
—
—
7
3
4
—
—
—
—
—
—
—
—
)
0
7
9
,
7
1
(
7
5
2
,
8
3
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
2
1
8
,
1
(
)
6
5
6
,
5
2
(
)
6
8
1
,
8
3
(
)
0
0
0
,
0
6
5
(
—
—
—
—
—
7
3
7
,
1
3
6
5
,
4
1
—
—
—
—
—
4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5
4
2
,
6
6
3
1
4
0
,
4
5
5
$
)
8
9
1
,
1
2
(
$
6
3
8
,
0
1
6
$
)
6
1
1
,
2
0
2
(
$
)
5
0
0
,
4
9
2
(
$
)
4
7
8
,
8
4
4
,
8
(
6
1
8
,
9
5
4
$
8
0
7
$
3
7
1
,
0
2
8
,
0
7
9
4
5
,
0
6
7
$
)
3
1
8
,
3
2
(
$
3
2
1
,
1
3
8
$
)
6
1
1
,
2
0
2
(
$
)
3
7
4
,
1
2
3
(
$
)
0
6
0
,
7
4
0
,
9
(
6
1
1
,
6
7
4
$
2
1
7
$
8
1
4
,
6
8
1
,
1
7
—
0
1
2
,
2
)
5
5
8
,
3
1
(
—
1
6
0
,
6
)
8
7
0
,
3
(
4
9
6
,
6
1
1
4
5
,
0
1
3
5
2
,
1
7
0
0
,
2
5
2
—
0
1
2
,
2
)
5
5
8
,
3
1
(
—
—
—
—
—
—
1
4
5
,
0
1
—
—
—
—
—
—
—
—
3
5
2
,
1
7
0
0
,
2
5
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
8
7
0
,
3
(
)
3
5
9
,
5
5
(
—
—
—
—
—
—
—
—
6
5
0
,
6
4
9
6
,
6
1
—
—
—
5
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8
0
3
,
1
8
4
1
5
8
,
2
3
0
,
1
$
9
6
4
$
2
8
3
,
2
3
0
,
1
$
)
7
1
9
,
4
2
(
$
3
8
3
,
4
8
0
,
1
$
)
6
1
1
,
2
0
2
(
$
)
1
5
5
,
4
2
3
(
$
)
3
1
0
,
3
0
1
,
9
(
6
6
8
,
8
9
4
$
7
1
7
$
6
2
7
,
7
6
6
,
1
7
.
c
n
I
s
g
n
i
d
l
o
H
c
a
r
e
n
e
G
y
t
i
u
q
E
’
s
r
e
d
l
o
h
k
c
o
t
S
f
o
s
t
n
e
m
e
t
a
t
S
d
e
t
a
d
i
l
o
s
n
o
C
)
a
t
a
D
e
r
a
h
S
t
p
e
c
x
E
,
s
d
n
a
s
u
o
h
T
n
i
s
r
a
l
l
o
D
.
.
S
U
(
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
7
2
0
,
1
$
f
o
x
a
t
f
o
t
e
n
,
s
p
a
w
s
e
t
a
r
t
s
e
r
e
t
n
i
n
o
n
i
a
g
d
e
z
i
l
a
e
r
n
U
.
.
.
.
f
o
t
e
n
,
s
n
a
l
p
e
v
i
t
n
e
c
n
i
y
t
i
u
q
e
r
e
d
n
u
d
e
u
s
s
i
k
c
o
t
s
n
o
m
m
o
C
.
.
.
.
.
.
e
c
i
r
p
e
k
i
r
t
s
d
n
a
s
e
x
a
t
e
e
y
o
p
m
e
l
r
o
f
d
l
e
h
h
t
i
w
s
e
r
a
h
s
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
s
a
h
c
r
u
p
e
r
k
c
o
t
S
s
d
r
a
w
a
k
c
o
t
s
d
e
t
c
i
r
t
s
e
r
f
o
t
n
e
m
e
l
t
t
e
s
e
r
a
h
s
t
e
N
.
.
.
.
.
.
.
.
.
t
n
e
m
t
s
u
d
a
j
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
y
r
a
i
d
i
s
b
u
s
f
o
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
o
t
d
i
a
p
s
d
n
e
d
i
v
i
d
h
s
a
C
4
8
3
,
2
$
f
o
x
a
t
f
o
t
e
n
,
s
p
a
w
s
e
t
a
r
t
s
e
r
e
t
n
i
n
o
n
i
a
g
d
e
z
i
l
a
e
r
n
U
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
r
a
h
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
n
i
e
g
n
a
h
C
.
.
.
.
.
.
6
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
.
.
.
.
.
.
.
.
.
f
o
t
e
n
,
s
n
a
l
p
e
v
i
t
n
e
c
n
i
y
t
i
u
q
e
r
e
d
n
u
d
e
u
s
s
i
k
c
o
t
s
n
o
m
m
o
C
.
.
.
.
.
.
.
.
.
t
n
e
m
t
s
u
d
a
j
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
c
i
r
p
e
k
i
r
t
s
d
n
a
s
e
x
a
t
e
e
y
o
p
m
e
l
r
o
f
d
l
e
h
h
t
i
w
s
e
r
a
h
s
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
d
r
a
w
a
k
c
o
t
s
d
e
t
c
i
r
t
s
e
r
f
o
t
n
e
m
e
l
t
t
e
s
e
r
a
h
s
t
e
N
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
1
2
$
f
o
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
s
a
h
c
r
u
p
e
r
k
c
o
t
S
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
e
r
a
h
S
x
a
t
f
o
t
e
n
,
t
n
e
m
t
s
u
d
a
j
y
t
i
l
i
b
a
i
l
n
o
i
s
n
e
P
.
.
.
.
.
.
.
.
.
.
.
.
t
n
e
m
t
s
u
d
a
j
e
u
l
a
v
n
o
i
t
p
m
e
d
e
R
.
.
.
.
.
.
.
.
.
.
.
e
m
o
c
n
i
t
e
N
7
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
59
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
4
5
1
$
f
o
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
x
a
t
f
o
t
e
n
,
t
n
e
m
t
s
u
d
a
j
y
t
i
l
i
b
a
i
l
n
o
i
s
n
e
P
.
.
.
.
.
.
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
e
r
a
h
S
.
.
.
.
.
.
.
.
.
.
.
.
t
n
e
m
t
s
u
d
a
j
e
u
l
a
v
n
o
i
t
p
m
e
d
e
R
.
.
.
.
.
.
.
.
.
.
.
e
m
o
c
n
i
t
e
N
8
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
e
r
a
h
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
n
i
e
g
n
a
h
C
)
7
7
8
,
4
$
(
f
o
x
a
t
f
o
t
e
n
,
s
p
a
w
s
e
t
a
r
t
s
e
r
e
t
n
i
n
o
s
s
o
l
d
e
z
i
l
a
e
r
n
U
.
.
.
.
.
.
.
.
.
.
.
.
f
o
t
e
n
,
s
n
a
l
p
e
v
i
t
n
e
c
n
i
y
t
i
u
q
e
r
e
d
n
u
d
e
u
s
s
i
k
c
o
t
s
n
o
m
m
o
C
.
.
.
.
.
.
.
.
.
t
n
e
m
t
s
u
d
a
j
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
.
.
.
.
e
c
i
r
p
e
k
i
r
t
s
d
n
a
s
e
x
a
t
e
e
y
o
p
m
e
l
r
o
f
d
l
e
h
h
t
i
w
s
e
r
a
h
s
.
.
.
s
d
r
a
w
a
k
c
o
t
s
d
e
t
c
i
r
t
s
e
r
f
o
t
n
e
m
e
l
t
t
e
s
e
r
a
h
s
t
e
N
y
r
a
i
d
i
s
b
u
s
f
o
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
n
o
n
o
t
d
i
a
p
s
d
n
e
d
i
v
i
d
h
s
a
C
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
x
a
t
f
o
.
.
.
.
.
.
.
.
.
.
.
.
.
t
e
n
,
t
n
e
m
e
l
t
t
e
s
d
n
a
t
n
e
m
t
s
u
d
a
j
y
t
i
l
i
b
a
i
l
n
o
i
s
n
e
P
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
e
r
a
h
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
t
n
e
m
t
s
u
d
a
j
e
u
l
a
v
n
o
i
t
p
m
e
d
e
R
.
.
.
.
.
.
.
.
.
.
.
e
m
o
c
n
i
t
e
N
9
1
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
l
a
B
Generac Holdings Inc.
Consolidated Statements of Cash Flows
(U.S. Dollars in Thousands)
Operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of original issue discount and deferred financing costs . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on pension settlement
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes in operating assets and liabilities, net of acquisitions:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued wages and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefits from equity awards . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2019
2018
2017
$ 252,308
$ 241,220
$ 159,557
32,265
28,644
4,712
926
10,920
18,733
16,694
1,086
8,231
26,369
(358)
(69,404)
(3,724)
(16,252)
(2,263)
25,296
22,112
4,749
1,332
—
23,600
14,563
2,474
(43,243)
(152,594)
(6,362)
86,359
12,626
16,972
(1,877)
23,127
28,861
3,516
—
—
19,502
10,205
410
(32,857)
(22,986)
(14,783)
42,788
6,105
37,029
(3,152)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
308,887
247,227
257,322
Investing activities
Proceeds from sale of property and equipment . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from beneficial interest in securitization transactions
. . . . . . . . . . . .
Expenditures for property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of business, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . .
95
2,630
(60,802)
(112,001)
214
3,933
(47,601)
(65,440)
82
3,794
(33,261)
1,257
Net cash used in investing activities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(170,078)
(108,894)
(28,128)
Financing activities
Proceeds from short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of long-term borrowings and finance lease obligations
. . . . . . . . .
Stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of contingent acquisition consideration . . . . . . . . . . . . . . . . . . . . . .
Payment of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid to noncontrolling interest of subsidiary . . . . . . . . . . . . . .
Taxes paid related to equity awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . .
73,340
1,660
(59,518)
(53,049)
—
(5,550)
(1,473)
(285)
(6,438)
9,395
53,965
51,425
(27,880)
(101,827)
(25,656)
—
(1,702)
(314)
(5,659)
5,614
101,991
3,069
(114,874)
(117,475)
(30,012)
—
(3,901)
—
(5,892)
6,951
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(41,918)
(52,034)
(160,143)
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . .
1,510
(289)
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . .
98,401
224,482
86,010
138,472
2,149
71,200
67,272
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . .
$ 322,883
$ 224,482
$ 138,472
Supplemental disclosure of cash flow information
Cash paid during the period
Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 35,465
61,767
$ 41,007
41,044
$ 41,105
23,836
See notes to consolidated financial statements.
60
Generac Holdings Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
1. Description of Business
Founded in 1959, Generac Holdings Inc. (the Company) is a leading global designer and
manufacturer of a wide range of energy technology solutions. The Company provides power generation
equipment, energy storage systems, and other power products serving the residential, light commercial
and industrial markets. Generac’s power 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.
Over the years, the Company has executed a number of acquisitions that support its strategic plan
(refer to Item 1 in this Annual Report on Form 10-K for discussion of our Powering Our Future
strategic plan). A summary of acquisitions affecting the reporting periods presented include:
(cid:129) In January 2017, the Company acquired Motortech GmbH (Motortech), headquartered in Celle,
Germany. Motortech is a leading manufacturer of gaseous-engine control systems and
accessories, which are sold primarily to European gas-engine manufacturers and to aftermarket
customers.
(cid:129) In June 2018, the Company acquired Selmec Equipos Industriales, S.A. de C.V. (Selmec),
headquartered in Mexico City, Mexico. Selmec is a designer and manufacturer of industrial
generators ranging from 10kW to 2,750kW. Selmec offers a market-leading service platform and
specialized engineering capabilities, together with robust integration, project management and
remote monitoring services.
(cid:129) In February 2019, the Company acquired a majority share of Captiva Energy Solutions Private
Limited (Captiva). Captiva, founded in 2010 and headquartered in Kolkata, India, specializes in
customized industrial generators.
(cid:129) In March 2019, the Company acquired Neurio Technology Inc. (Neurio), founded in 2005 and
headquartered in Vancouver, British Columbia. Neurio is a leading energy data company focused
on metering technology and sophisticated analytics to optimize energy use within a home or
business.
(cid:129) In April 2019, the Company acquired Pika Energy, Inc. (Pika), founded in 2010 and located in
Westbrook, Maine. Pika is a manufacturer of battery storage technologies that capture and store
solar or grid power for homeowners and businesses and is also a manufacturer of advanced
power electronics, software and controls for smart energy storage and management.
2. Summary of Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries
that are consolidated in conformity with U.S. GAAP. All intercompany amounts and transactions have
been eliminated in consolidation.
61
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
2. Summary of Accounting Policies (Continued)
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
Concentration of Credit Risk
The Company maintains the majority of its domestic cash in one commercial bank in multiple
operating and investment accounts. Balances on deposit are insured by the Federal Deposit Insurance
Corporation (FDIC) up to specified limits. Balances in excess of FDIC limits are uninsured.
One customer accounted for approximately 9% and 11% of accounts receivable at December 31,
2019 and 2018, respectively. No one customer accounted for greater than 5%, 6%, and 6%, of net sales
during the years ended December 31, 2019, 2018, or 2017, respectively.
Accounts Receivable
Receivables are recorded at their face value amount less an allowance for doubtful accounts. The
Company estimates and records an allowance for doubtful accounts based on specific identification and
historical experience. The Company writes off uncollectible accounts against the allowance for doubtful
accounts after all collection efforts have been exhausted. Sales are generally made on an unsecured
basis, and certain balances are protected by credit insurance.
Inventories
Inventories are stated at the lower of cost or market, with cost determined generally using the
first-in, first-out method.
Property and Equipment
Property and equipment are recorded at cost and are being depreciated using the straight-line
method over the estimated useful lives of the assets, which are summarized below (in years). Costs of
leasehold improvements are amortized over the lesser of the term of the lease (including renewal
option periods) or the estimated useful lives of the improvements. Finance lease right of use assets are
included in property and equipment. Refer to Note 10, ‘‘Leases,’’ to the consolidated financial
statements for the Company’s lease disclosure.
Land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dies and tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office equipment and systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8 - 20
10 - 40
3 - 15
3 - 10
3 - 6
3 - 15
2 - 20
62
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
2. Summary of Accounting Policies (Continued)
Total depreciation expense was $32,265, $25,296, and $23,127 for the years ended December 31,
2019, 2018, and 2017, respectively.
Goodwill and Other Indefinite-Lived Intangible Assets
Goodwill represents the excess of the purchase price over fair value of identifiable net assets
acquired from business acquisitions. Goodwill is not amortized, but is reviewed for impairment on an
annual basis and between annual tests if indicators of impairment are present. The Company evaluates
goodwill for impairment annually as of October 31 or more frequently when an event occurs or
circumstances change that indicates the carrying value may not be recoverable. The Company has the
option to assess goodwill for impairment by performing either a qualitative assessment or quantitative
test. The qualitative assessment determines whether it is more likely than not that the fair value of a
reporting unit is less than its carrying amount. If the Company determines that it is not more likely
than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative
test is not required to be performed. If the Company determines that it is more likely than not that the
fair value of a reporting unit is less than its carrying amount, the Company is required to perform the
quantitative test. In the quantitative test, the calculated fair value of the reporting unit is compared to
its book value including goodwill. If the fair value of the reporting unit is in excess of its book value,
the related goodwill is not impaired. If the fair value of the reporting unit is less than its book value,
an impairment loss is recognized in an amount equal to that excess, limited to the total amount of
goodwill allocated to that reporting unit.
Other indefinite-lived intangible assets consist of certain tradenames. The Company tests the
carrying value of these tradenames annually as of October 31, or more frequently when an event occurs
or circumstances change that indicates the carrying value may not be recoverable, by comparing the
assets’ fair value to its carrying value. Fair value is measured using a relief-from-royalty approach,
which assumes the fair value of the tradename is the discounted cash flows of the amount that would
be paid had the Company not owned the tradename and instead licensed the tradename from another
company.
The Company performed the required annual impairment tests for goodwill and other indefinite-
lived intangible assets for the fiscal years 2019, 2018 and 2017, and found no impairment.
Impairment of Long-Lived Assets
The Company periodically evaluates the carrying value of long-lived assets (excluding goodwill and
indefinite-lived tradenames). Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. If the sum of the expected
future undiscounted cash flows is less than the carrying amount of an asset, a loss is recognized for the
difference between the fair value and carrying value of the asset.
Debt Issuance Costs
Debt discounts and direct costs incurred in connection with the issuance of long-term debt are
deferred and recorded as a reduction of outstanding debt and amortized to interest expense using the
63
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
2. Summary of Accounting Policies (Continued)
effective interest method over the terms of the related credit agreements. $4,712, $4,749, and $3,516 of
deferred financing costs and original issue discount were amortized to interest expense during fiscal
years 2019, 2018 and 2017, respectively. Excluding the impact of any future long-term debt issuances or
prepayments, estimated amortization to interest expense for the next five years is as follows:
2020 - $2,598; 2021 - $2,640; 2022 - $2,689; 2023 - $2,579; 2024 - $2,508.
Income Taxes
The Company is a C Corporation and therefore accounts for income taxes pursuant to the liability
method. Accordingly, the current or deferred tax consequences of a transaction are measured by
applying the provision of enacted tax laws to determine the amount of taxes payable currently or in
future years. Deferred income taxes are provided for temporary differences between the income tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes. In assessing
the realizability of deferred tax assets, the Company considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the years in which those
temporary differences become deductible. The Company considers taxable income in prior carryback
years, the scheduled reversal of deferred tax liabilities, projected future taxable income and tax
planning strategies, as appropriate, in making this assessment.
Revenue Recognition
The Company’s revenues primarily consist of product sales to its customers. The Company
considers the purchase orders, which in some cases are governed by master sales agreements, to be the
contracts with the customers. For each contract, the Company considers the commitment to transfer
products, each of which is distinct, to be the identified performance obligations. Revenue is measured
as the amount of consideration the Company expects to be entitled in exchange for the transfer of
product, which is generally the price stated in the contract specific for each item sold, adjusted for the
value of expected returns, discounts, rebates, or other promotional incentives or allowances offered to
our customers. Expected returns for damaged or defective product are estimated using the expected
value method based upon historical product return experience. Discounts and rebates offered to
customers are typically defined in the master sales agreements with customers and, therefore, are
recorded using the most likely amount method based on the terms of the contract. Promotional
incentives are defined programs offered for short, specific periods of time and are estimated using the
expected value method based upon historical experience. The Company does not expect the transaction
price for revenue recognized will be subject to a significant revenue reversal. As the Company’s product
sale contracts and standard payment terms have a duration of less than one year, it uses the practical
expedient applicable to such contracts and does not consider the time value of money. Sales, use, value
add and other similar taxes assessed by governmental authorities and collected concurrent with
revenue-producing activities are excluded from revenue. The Company has elected to recognize the cost
for freight activities when control of the product has transferred to the customer as an expense within
cost of goods sold in the consolidated statements of comprehensive income. Product revenues are
recognized at the point in time when control of the product is transferred to the customer, which
64
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
2. Summary of Accounting Policies (Continued)
typically occurs upon shipment or delivery to the customer. To determine when control has transferred,
the Company considers if there is a present right to payment and if legal title, physical possession, and
the significant risks and rewards of ownership of the asset has transferred to the customer. As
substantially all of the Company’s product revenues are recognized at a point in time, the amount of
unsatisfied performance obligations at each period end is not material. The Company’s contracts have
an original expected duration of one year or less. As a result, the Company has elected to use the
practical expedient to not disclose its remaining performance obligations.
At the request of certain customers, the Company will warehouse inventory billed to the customer
but not delivered. Unless all revenue recognition criteria have been met, the Company does not
recognize revenue on these transactions until the customer takes possession of the product.
While the Company’s standard payment terms are less than one year, the specific payment terms
and conditions in its customer contracts vary. In some cases, customers prepay for their goods; in other
cases, after appropriate credit evaluation, an open credit line is granted and payment is due in arrears.
Contracts with payment in arrears are recognized in the consolidated balance sheets as accounts
receivable upon revenue recognition, while contracts where customers pay in advance are recognized as
customer deposits and recorded in other accrued liabilities in the consolidated balance sheets until
revenue is recognized. The balance of customer deposits (contract liabilities) was $9,952 and $14,174 at
December 31, 2019 and December 31, 2018, respectively. During the year ended December 31, 2019,
the Company recognized revenue of $9,589 related to amounts included in the December 31, 2018
customer deposit balance. The Company typically recognizes revenue within one year of the receipt of
the customer deposit.
The Company offers standard warranty coverage on substantially all products that it sells and
accounts for this standard warranty coverage as an assurance warranty. As such, no transaction price is
allocated to the standard warranty, and the Company records a liability for product warranty
obligations at the time of sale to a customer based upon historical warranty experience. Refer to
Note 11, ‘‘Product Warranty Obligations,’’ to the consolidated financial statements for further
information regarding the Company’s standard warranties.
The Company also sells extended warranty coverage for certain products, which it accounts for as
service warranties. In most cases, the extended warranty is sold as a separate contract. As such,
extended warranty sales are considered a separate performance obligation, and the extended warranty
transaction is separate and distinct from the product. The extended warranty transaction price is
initially recorded as deferred revenue in the consolidated balance sheets and amortized on a
straight-line basis to net sales in the consolidated statements of comprehensive income over the life of
the contracts following the standard warranty period. For extended warranty contracts that the
Company sells under a third-party marketing agreement, it is required to pay fees to the third-party
service provider and classifies these fees as costs to obtain a contract. The contract costs are deferred
and recorded as other assets in the consolidated balance sheets. The deferred contract costs are
amortized to net sales in the consolidated statements of comprehensive income consistent with how the
related deferred revenue is recognized. Refer to Note 11, ‘‘Product Warranty Obligations,’’ to the
consolidated financial statements for further information regarding the Company’s extended warranties.
65
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
2. Summary of Accounting Policies (Continued)
In addition to extended warranties, the Company offers other services, including remote
monitoring, installation and maintenance services in limited circumstances. Total service revenues
account for less than three percent of revenue during the year ended December 31, 2019.
Refer to Note 7, ‘‘Segment Reporting,’’ to the consolidated financial statements for the Company’s
disaggregated revenue disclosure. The information discussed above is applicable to each of the
Company’s product classes.
Advertising and Co-Op Advertising
Expenditures for advertising, included in selling and service expenses in the consolidated
statements of comprehensive income, are expensed as incurred. Expenditures for advertising production
costs are expensed when the related advertisement is first run. Total expenditures for advertising were
$44,153, $34,792, and $45,926 for the years ended December 31, 2019, 2018, and 2017, respectively.
Research and Development
The Company expenses research and development costs as incurred. Total expenditures incurred
for research and development were $68,394, $50,019, and $42,869 for the years ended December 31,
2019, 2018, and 2017, respectively.
Foreign Currency Translation and Transactions
Balance sheet amounts for non-U.S. Dollar functional currency businesses are translated into U.S.
Dollars at the rates of exchange in effect at the end of the fiscal year. Income and expenses incurred in
a foreign currency are translated at the average rates of exchange in effect during the year. The related
translation adjustments are made directly to accumulated other comprehensive loss, a component of
stockholders’ equity, in the consolidated balance sheets. Gains and losses from foreign currency
transactions are recognized as incurred in the consolidated statements of comprehensive income.
Fair Value of Financial Instruments
ASC 820-10, Fair Value Measurement, defines fair value, establishes a consistent framework for
measuring fair value, and expands disclosure for each major asset and liability category measured at
fair value on either a recurring basis or nonrecurring basis. ASC 820-10 clarifies that fair value is an
exit price, representing the amount that would be received in the sale of an asset or paid to transfer a
liability in an orderly transaction between market participants. As such, fair value is a market-based
measurement that should be determined based on assumptions that market participants would use in
pricing an asset or liability. As a basis for considering such assumptions, the pronouncement establishes
a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
(Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the
quoted prices in active markets, that are observable either directly or indirectly; and (Level 3)
unobservable inputs in which there is little or no market data, which require the reporting entity to
develop its own assumptions.
66
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
2. Summary of Accounting Policies (Continued)
The Company believes the carrying amount of its financial instruments (cash and cash equivalents,
accounts receivable, accounts payable, accrued liabilities, short-term borrowings and ABL facility
borrowings), excluding Term Loan borrowings, approximates the fair value of these instruments based
upon their short-term nature. The fair value of Term Loan borrowings, which have an aggregate
carrying value of $812,953, was approximately $833,092 (Level 2) at December 31, 2019, as calculated
based on independent valuations whose inputs and significant value drivers are observable.
For the fair value of the assets and liabilities measured on a recurring basis, refer to the fair value
table in Note 5, ‘‘Derivative Instruments and Hedging Activities,’’ to the consolidated financial
statements. The fair value of all derivative contracts is classified as Level 2. The valuation techniques
used to measure the fair value of derivative contracts, all of which have counterparties with high credit
ratings, were based on quoted market prices or model driven valuations using significant inputs derived
from or corroborated by observable market data. The fair value of derivative contracts considers the
Company’s credit risk in accordance with ASC 820-10.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial
statements, and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Derivative Instruments and Hedging Activities
The Company records all derivatives in accordance with ASC 815, Derivatives and Hedging, which
requires derivative instruments be reported in the consolidated balance sheets at fair value and
establishes criteria for designation and effectiveness of hedging relationships. The Company is exposed
to market risk such as changes in commodity prices, foreign currencies and interest rates. The
Company does not hold or issue derivative financial instruments for trading purposes. Refer to Item 7A
of this Annual Report on Form 10-K for further information on the Company’s derivatives.
Share-Based Compensation
Share-based compensation expense, including stock options and restricted stock awards, is
generally recognized on a straight-line basis over the vesting period based on the fair value of awards
which are expected to vest. The fair value of all share-based awards is estimated on the date of grant.
Refer to Note 17, ‘‘Share Plans,’’ to the consolidated financial statements for further information on
the Company’s share-based compensation plans and accounting.
67
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
2. Summary of Accounting Policies (Continued)
New Accounting Pronouncements
New Accounting Standards Not Yet Adopted
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments, which represents a new credit loss standard that will change the impairment
model for most financial assets and certain other financial instruments. Specifically, this guidance will
require entities to utilize a new ‘‘expected loss’’ model as it relates to trade and other receivables. In
addition, entities will be required to recognize an allowance for estimated credit losses on
available-for-sale debt securities, regardless of the length of time that a security has been in an
unrealized loss position. This guidance will be effective for annual reporting periods beginning after
December 15, 2019, including interim periods within those annual reporting periods, and early adoption
is permitted. The Company has established a project plan and an implementation team to adopt and
apply the new standard. The Company is in the process of implementing necessary changes to
accounting policies, processes, and controls to enable compliance with this new standard. The Company
continues to evaluate the impact the adoption of this standard will have on its consolidated financial
statements, and does not believe this new standard will have a material impact.
There are several other new accounting pronouncements issued by the FASB. Each of these
pronouncements, as applicable, has been or will be adopted by the Company. Management does not
believe any of these accounting pronouncements has had or will have a material impact on the
Company’s consolidated financial statements.
Recently Adopted Accounting Standards
On January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842). This guidance was
issued to increase transparency and comparability among organizations by requiring the recognition of
lease assets and lease liabilities in the balance sheet and by disclosing key information about leasing
arrangements. The Company adopted this standard using the modified retrospective approach as of the
date of adoption, meaning no prior period balances were impacted by the adoption. Additionally, the
Company elected to adopt the standard using the package of practical expedients permitted under the
standard’s transition guidance, which allowed the Company to carry forward its historical lease
classifications, and embedded lease and initial direct cost assessments. The adoption of the standard
had a material impact on the Company’s consolidated balance sheet primarily related to the recognition
of right-of-use (ROU) assets and lease liabilities for operating leases. However, the adoption did not
have a material impact on the consolidated statement of comprehensive income and statement of cash
flows. Refer to Note 10, ‘‘Leases,’’ for further information regarding the Company’s leases.
On January 1, 2019, the Company adopted ASU 2018-02, Reclassification of Certain Tax Effects
from Accumulated Other Comprehensive Income. This guidance was issued to address the impact of the
change in the U.S. federal corporate income tax rate from the 2017 U.S. Tax Cuts and Jobs Act (the
‘‘Tax Act’’) on items recorded as a component of accumulated other comprehensive income (AOCI).
This guidance allows companies to reclassify to retained earnings the stranded tax effects lodged in
AOCI as a result of the Tax Act. Upon adoption of the ASU, the Company elected to not reclassify the
stranded income tax effects from AOCI to retained earnings.
68
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
2. Summary of Accounting Policies (Continued)
On January 1, 2019, the Company adopted ASU 2017-12, Derivatives and Hedging—Targeted
Improvements to Accounting for Hedging Activities. This guidance was issued to improve the financial
reporting of hedging relationships to better portray the economic results of an entity’s risk management
activities in its financial statements and to make certain targeted improvements to simplify the
application of the hedge accounting guidance. The adoption of this standard did not have an impact on
the Company’s hedging strategies, and did not have a material impact on the Company’s results of
operations and financial position.
On April 1, 2019, the Company adopted ASU 2018-15, Intangibles—Goodwill and Other—
Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement That is a Service Contract. This guidance was issued to address the diversity in practice
related to the accounting for costs of implementation activities performed in a cloud computing
arrangement that is a service contract. The Company adopted this standard prospectively, impacting all
implementation costs incurred after adoption. The adoption did not have a material impact on the
Company’s results of operations and financial position.
3. Acquisitions
Acquisition of Pika
On April 26, 2019, the Company acquired Pika for a purchase price, net of cash acquired, of
$49,068. The acquisition purchase price was funded solely through cash on hand.
The Company recorded a preliminary purchase price allocation during the second quarter of 2019,
which was trued-up in the fourth quarter of 2019, based upon its estimates of the fair value of the
acquired assets and assumed liabilities. As a result, the Company recorded approximately $58,196 of
intangible assets, including $19,896 of goodwill recorded in the Domestic segment, as of the acquisition
date. The goodwill ascribed to the acquisition is not deductible for tax purposes. The accompanying
consolidated financial statements include the results of Pika from the date of acquisition through
December 31, 2019. The preliminary allocation of the purchase price is based on a preliminary
valuation performed to determine the fair value of the net assets as of the acquisition date. The
purchase price allocation is subject to further analysis and review, primarily around the review and final
valuation of acquired intangible assets.
Acquisition of Neurio
On March 12, 2019, the Company acquired Neurio for a purchase price of $59,071, net of cash
acquired and inclusive of a deferred payment of $7,922 which was made during the third quarter of
2019. The acquisition purchase price was funded solely through cash on hand.
The Company recorded a preliminary purchase price allocation in the second quarter of 2019,
which was trued-up in the fourth quarter of 2019, based upon its estimates of the fair value of the
acquired assets and assumed liabilities. As a result, the Company recorded approximately $58,762 of
intangible assets, including $17,862 of goodwill recorded in the Domestic segment, as of the acquisition
date. Substantially all of the goodwill and other intangible assets ascribed to this acquisition are
69
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
3. Acquisitions (Continued)
deductible for tax purposes. The accompanying consolidated financial statements include the results of
Neurio from the date of acquisition through December 31, 2019. The preliminary allocation of the
purchase price is based on a preliminary valuation performed to determine the fair value of the net
assets as of the acquisition date. The purchase price allocation is subject to further analysis and review,
primarily around the review and final valuation of acquired intangible assets.
Acquisition of Selmec
On June 1, 2018, the Company acquired Selmec for a purchase price of $79,972, net of cash
acquired and inclusive of earnout payments of $14,902. Changes in the fair value of the earnout liability
during 2019 of $(977), which included interest accretion of $2,740 and other fair value remeasurement
adjustments of $(3,717), were recognized as a component of operating income in the Company’s
consolidated statements of comprehensive income for the year ended December 31, 2019. The
acquisition purchase price was funded solely through cash on hand.
The Company finalized the Selmec purchase price allocation during the second quarter of 2019
based upon its estimates of the fair value of the acquired assets and assumed liabilities. The final
purchase price allocation as of the June 1, 2018 opening balance sheet date was as follows:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expense and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 1, 2018
$ 14,302
8,000
4,323
5,572
33,631
46,196
3,252
597
Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
115,873
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued wages and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,216
397
13,671
10,974
3,643
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 79,972
The goodwill ascribed to the acquisition is not deductible for tax purposes. The accompanying
consolidated financial statements include the results of Selmec from the date of acquisition through
December 31, 2019.
70
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
3. Acquisitions (Continued)
Pro Forma Information
The following unaudited pro forma information of the Company gives effect to all acquisitions as
though the transactions had occurred on January 1, 2017. Refer to Note 1, ‘‘Description of Business,’’
for further information on the acquisitions included in the table.
Year Ended December 31,
2019
2018
2017
Net Sales:
As reported . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . .
$2,204,336
2,206,952
$2,023,464
2,067,737
$1,679,373
1,755,358
Net income attributable to Generac
Holdings Inc.:
As reported . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Generac
$ 252,007
248,335
$ 238,257
230,379
$ 157,808
151,764
Holdings Inc. per common share—diluted
As reported . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
4.03
3.97
$
3.54
3.41
2.53
2.44
This unaudited pro forma information is presented for informational purposes only and is not
necessarily indicative of the results of operations that actually would have been achieved had the
acquisitions been consummated on January 1, 2017.
4. Redeemable Noncontrolling Interest
On March 1, 2016, the Company acquired a 65% ownership interest in PR Industrial S.r.l. and its
subsidiaries (Pramac). The 35% noncontrolling interest in Pramac had an acquisition date fair value of
$34,253, and was recorded as a redeemable noncontrolling interest in the consolidated balance sheet, as
the noncontrolling interest holder had within its control the right to require the Company to redeem its
interest in Pramac. In February 2019, the Company amended its agreement with the noncontrolling
interest holder of Pramac, extending the agreement by five years, allowing the Company to exercise its
call option rights in partial increments at certain times during the five year period, and providing that
the noncontrolling interest holder no longer holds the right to put its shares to the Company until
April 1, 2021.
On February 1, 2019, the Company acquired a 51% ownership interest in Captiva Energy
Solutions, Ltd (Captiva). The 49% noncontrolling interest in Captiva has an acquisition date fair value
of $3,165, and was recorded as a redeemable noncontrolling interest in the consolidated balance sheet,
as the noncontrolling interest holder had within its control the right to require the Company to redeem
its interest in Captiva. The noncontrolling interest holder has a put option to sell his interest to the
Company any time after five years from the date of acquisition, or earlier upon the occurrence of
certain circumstances. The put option price is based on a multiple of earnings, subject to the terms of
the acquisition. Further, the Company has a call option that it may redeem any time after five years
71
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
4. Redeemable Noncontrolling Interest (Continued)
from the date of acquisition, or earlier upon the occurrence of certain circumstances. The call option
price is based on a multiple of earnings, subject to the terms of the acquisition.
For both transactions, the redeemable noncontrolling interest is recorded at the greater of the
initial fair value, increased or decreased for the noncontrolling interests’ share of comprehensive
income (loss), or the estimated redemption value, with any adjustments to the redemption value
impacting retained earnings, but not net income. However, the redemption value adjustments are
reflected in the earnings per share calculation, as detailed in Note 14, ‘‘Earnings Per Share,’’ to the
consolidated financial statements. The following table presents the changes in the redeemable
noncontrolling interest:
Year Ended December 31,
2019
2018
2017
Balance at beginning of period . . . . . . . . . . . . . . . . . .
Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . .
Redemption value adjustment . . . . . . . . . . . . . . . . .
$61,004
3,165(1)
75
(1,764)
(1,253)
$43,929
—
2,214
(3,109)
17,970
$33,138
1,540(2)
1,631
8,529
(909)
Balance at end of period . . . . . . . . . . . . . . . . . . . . . .
$61,227
$61,004
$43,929
(1) Represents the noncontrolling interest of Captiva Energy calculated at the date of
acquisition, February 1, 2019.
(2) Represents the additional noncontrolling interest of Pramac resulting from a common
control transaction between Generac Mobile Products S.r.l. and Pramac UK Limited legal
entities.
5. Derivative Instruments and Hedging Activities
Commodities
The Company is exposed to price fluctuations in commodities including steel, copper and
aluminum and periodically utilizes commodity derivatives to mitigate the impact of these potential price
fluctuations on its financial results. These derivatives typically have maturities of less than eighteen
months. At December 31, 2019 and 2018, the Company had no commodity contracts outstanding.
Because these contracts do not qualify for hedge accounting, the related gains and losses are
recorded in cost of goods sold in the Company’s consolidated statements of comprehensive income. Net
pre-tax gains (losses) recognized were $(174), $(874), and $377 for the years ended December 31, 2019,
2018, and 2017, respectively.
72
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
5. Derivative Instruments and Hedging Activities (Continued)
Foreign Currencies
The Company is exposed to foreign currency exchange risk as a result of transactions denominated
in currencies other than the U.S. Dollar. The Company periodically utilizes foreign currency forward
purchase and sales contracts to manage the volatility associated with certain foreign currency purchases
and sales in the normal course of business. Contracts typically have maturities of twelve months or less.
As of December 31, 2019 and 2018, the Company had forty-three and forty foreign currency contracts
outstanding, respectively.
Because these contracts do not qualify for hedge accounting, the related gains and losses are
recorded in ‘‘other, net’’ in the Company’s consolidated statements of comprehensive income. Net
pre-tax gains (losses) recognized for the years ended December 31, 2019, 2018, and 2017 were $(1,195),
$(653), and $697, respectively.
Interest Rate Swaps
In 2017, the Company entered into twenty interest rate swap agreements. In December 2019, in
conjunction with the amendment to its term loan, the Company amended those interest rate swaps to
remove the LIBOR floor, which also resulted in minor reductions to the future dated swap fixed rates.
The Company formally documented all relationships between interest rate hedging instruments and the
related hedged items, as well as its risk-management objectives and strategies for undertaking these
hedge transactions. These interest rate swap agreements qualify as cash flow hedges and therefore, the
effective portions of the gains or losses are reported as a component of accumulated other
comprehensive loss (AOCL) in the consolidated balance sheets. The amount of gains (losses)
recognized for the years ended December 31, 2019, 2018, and 2017 were $(13,855), $2,924, and $3,712,
respectively. The cash flows of the swaps are recognized as adjustments to interest expense each period.
The ineffective portions of the derivatives’ changes in fair value, if any, are immediately recognized in
earnings.
Fair Value
The following table presents the fair value of the Company’s derivatives:
December 31,
2019
December 31,
2018
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency contracts . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6
31
(10,425)
$ (160)
(117)
8,307
The fair value of the commodity and foreign currency contracts are included in prepaid expenses
and other current assets, and the fair value of the interest rate swaps are included in other accrued
liabilities and other long-term liabilities in the consolidated balance sheet as of December 31, 2019. The
fair value of the commodity and foreign currency contracts are included in other accrued liabilities, and
the fair value of the interest rate swaps are included in other assets in the consolidated balance sheet
as of December 31, 2018. Excluding the impact of credit risk, the fair value of the derivative contracts
73
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
5. Derivative Instruments and Hedging Activities (Continued)
as of December 31, 2019 and 2018 is a liability of $10,588 and an asset of $8,220, respectively, which
represents the amount the Company would pay or receive upon exit of the agreements on those dates.
6. Accumulated Other Comprehensive Loss
The following presents a tabular disclosure of changes in AOCL during the years ended
December 31, 2019 and 2018, net of tax:
Foreign
Currency
Translation
Adjustments
Defined
Benefit
Pension Plan
Unrealized
Gain (Loss)
on Cash Flow
Hedges
Total
Beginning Balance—January 1, 2019 . . . . . . . . . .
$(18,832)
$(10,541)
$
5,560
$(23,813)
Other comprehensive income (loss) before
reclassifications . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from AOCL . . . . . . . . . . .
2,210
—
1,474(1)
9,067(3)
(13,855)(2) (10,171)
9,067
—
Net current-period other comprehensive income
(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,210
10,541
(13,855)
(1,104)
Ending Balance—December 31, 2019 . . . . . . . . . .
$(16,622)
$
—
$
(8,295)
$(24,917)
Foreign
Currency
Translation
Adjustments
Defined
Benefit
Pension Plan
Unrealized
Gain (Loss)
on Cash Flow
Hedges
Total
Beginning Balance—January 1, 2018 . . . . . . . . . . .
$(12,856)
$(10,978)
$2,636
$(21,198)
Other comprehensive income (loss) before
reclassifications . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from AOCL . . . . . . . . . . .
(5,976)
—
(156)(4)
593(6)
2,924(5)
—
(3,208)
593
Net current-period other comprehensive income
(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,976)
437
Ending Balance—December 31, 2018 . . . . . . . . . .
$(18,832)
$(10,541)
2,924
$5,560
(2,615)
$(23,813)
(1) Represents unrecognized actuarial gains of $1,992 net of tax effect of $(518), included in the
computation of net periodic pension cost for the year ended December 31, 2019. Refer to Note 16,
‘‘Benefit Plans,’’ to the consolidated financial statements for additional information.
(2) Represents unrealized losses of $(18,732), net of tax effect of $4,877 for the year ended
December 31, 2019.
74
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
6. Accumulated Other Comprehensive Loss (Continued)
(3) Details of reclassifications from AOCL during 2019 are as follows:
Loss on pension settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,920
843
Total before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,763
(2,696)
Amounts reclassified from AOCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,067
Amounts
reclassified
from AOCL
(4) Represents unrecognized actuarial losses of $(211), net of tax benefit of $55, included in the
computation of net periodic pension cost for the year ended December 31, 2018. Refer to Note 16,
‘‘Benefit Plans,’’ to the consolidated financial statements for additional information.
(5) Represents unrealized gains of $3,951, net of tax effect of $(1,027) for the year ended
December 31, 2018.
(6) Represents actuarial losses of $802, net of tax effect of $(209), amortized to net periodic pension
cost for the year ended December 31, 2018. Refer to Note 16, ‘‘Benefit Plans,’’ to the consolidated
financial statements for additional information.
7. Segment Reporting
The Company has two reportable segments for financial reporting purposes—Domestic and
International. The Domestic segment includes the legacy Generac business, (excluding its traditional
Latin American export operations), and the acquisitions that are based in the U.S. and Canada, all of
which have revenues that are substantially derived from the U.S. and Canada. The International
segment includes the legacy Generac business’s Latin American export operations, and the
Ottomotores, Tower Light, Pramac, Motortech and Selmec acquisitions, all of which have revenues that
are substantially derived from outside the U.S and Canada. Both reportable segments design and
manufacture a wide range of power generation equipment, energy technology solutions, and other
power products. The Company has multiple operating segments, which it aggregates into the two
reportable segments, based on materially similar economic characteristics, products, production
processes, classes of customers, distribution methods and regional considerations.
75
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
7. Segment Reporting (Continued)
The Company’s product offerings consist primarily of power generation equipment, energy
technology solutions, and other power products geared for varying end customer uses. Residential
products and commercial & industrial (C&I) products are each a similar class of products based on
similar power output and end customer. The breakout of net sales between residential, C&I, and other
products by reportable segment is as follows:
Product Classes
Net Sales by Segment
Year Ended December 31, 2019
Domestic
International
Total
Residential products . . . . . . . . . . . . . . . . . . .
Commercial & industrial products . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,086,019
513,482
143,397
$ 57,704
358,113
45,621
$1,143,723
871,595
189,018
Total net sales . . . . . . . . . . . . . . . . . . . . . .
$1,742,898
$461,438
$2,204,336
Product Classes
Year Ended December 31, 2018
Domestic
International
Total
Residential products . . . . . . . . . . . . . . . . . . .
Commercial & industrial products . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 980,707
461,415
124,398
$ 62,032
358,855
36,057
$1,042,739
820,270
160,455
Total net sales . . . . . . . . . . . . . . . . . . . . . .
$1,566,520
$456,944
$2,023,464
Product Classes
Year Ended December 31, 2017
Domestic
International
Total
Residential products . . . . . . . . . . . . . . . . . . .
Commercial & industrial products . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 796,237
372,635
102,806
$ 74,253
311,718
21,724
$ 870,490
684,353
124,530
Total net sales . . . . . . . . . . . . . . . . . . . . . .
$1,271,678
$407,695
$1,679,373
Residential products consist primarily of automatic home standby generators ranging in output
from 6kW to 60kW, portable generators, energy storage and monitoring solutions, and other outdoor
power equipment. These products are sold through independent residential dealers, national and
regional retailers, e-commerce merchants, electrical/HVAC/solar wholesalers, solar installers, and
outdoor power equipment dealers. The residential products revenue consists of the sale of the product
to our distribution partners, which in turn sell or rent the product to the end consumer, including
installation and maintenance services. In some cases, residential products are sold direct to the end
consumer. Substantially all of the residential products revenues are transferred to the customer at a
point in time.
C&I products consist of larger output stationary generators used in C&I applications and fueled by
diesel, natural gas, liquid propane and bi-fuel, with power outputs ranging from 10kW up to 3,250kW.
Also included in C&I products are mobile generators, light towers, mobile heaters and mobile pumps.
76
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
7. Segment Reporting (Continued)
These products are sold through industrial distributors and dealers, equipment rental companies and
equipment distributors. The C&I products revenue consists of the sale of the product to our
distribution partners, which in turn sell or rent the product to the end customer, including installation
and maintenance services. In some cases, C&I products are sold direct to the end customer.
Substantially all of the C&I products revenues are transferred to the customer at a point in time.
Other products consist primarily of aftermarket service parts and product accessories sold to our
dealers, the amortization of extended warranty deferred revenue, and remote monitoring subscription
revenue. The aftermarket service parts and product accessories are generally transferred to the
customer at a point in time, while the extended warranty and subscription revenue are recognized over
the life of the contract.
Management evaluates the performance of its segments based primarily on Adjusted EBITDA,
which is reconciled to Income before provision for income taxes below. The computation of Adjusted
EBITDA is based on the definition that is contained in the Company’s credit agreements.
Adjusted EBITDA
Year Ended December 31,
2019
2018
2017
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
International
$428,667
25,448
$388,495
36,057
$282,450
34,850
Total adjusted EBITDA . . . . . . . . . . . . . . . . . . . .
$454,115
$424,552
$317,300
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . .
Non-cash write-down and other adjustments(1) . . .
Non-cash share-based compensation expense(2) . . .
Loss on extinguishment of debt(3) . . . . . . . . . . . . .
Loss on pension settlement(4) . . . . . . . . . . . . . . . .
Transaction costs and credit facility fees(5) . . . . . . .
Business optimization expenses(6) . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(41,544)
(60,767)
(240)
(16,694)
(926)
(10,920)
(2,724)
(1,572)
879
(40,956)
(47,408)
(3,532)
(14,563)
(1,332)
—
(3,883)
(952)
(850)
(42,667)
(51,988)
(2,923)
(10,205)
—
—
(2,145)
(2,912)
(761)
Income before provision for income taxes . . . . . . .
$319,607
$311,076
$203,699
(1) Includes certain foreign currency and purchase accounting related adjustments, gains/
losses on disposal of assets and unrealized mark-to-market adjustments on commodity
contracts.
(2) Represents share-based compensation expense to account for stock options, restricted
stock and other stock awards over their respective vesting periods.
(3) Represents the non-cash write-off of original issue discount and deferred financing costs
due to a voluntary prepayment of Term Loan debt.
77
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
7. Segment Reporting (Continued)
(4) Represents pre-tax settlement charges related to the termination of the Company’s
domestic pension plan in the fourth quarter of 2019.
(5) Represents transaction costs incurred directly in connection with any investment, as
defined in our credit agreement, equity issuance, debt issuance or refinancing, together
with certain fees relating to our senior secured credit facilities.
(6) Represents severance and other non-recurring restructuring charges related to the
consolidation of certain of our facilities.
In the fourth quarter of 2019, management has determined that the Latin American export
operations of the legacy Generac business (GPS LATAM) should have been included in the
International reportable segment beginning in 2018. Previously, GPS LATAM was reported in the
Domestic segment, in amounts that were not material. This change is to reflect the current leadership
structure as well as how the Company makes financial decisions and allocates resources for the overall
Latin America reporting unit. To reflect this change, management has chosen to correct the net sales
and adjusted EBITDA by segment included in this Form 10-K for the years ended December 31, 2019,
2018, and 2017. The following table details the amounts adjusted from the Domestic segment to the
International segment.
Year Ended December 31,
2019
2018
2017
Residential Products . . . . . . . . . . . . . . . . . . .
Commericial & industrial products . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Net Sales . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . .
$
$
$
7,129
5,724
998
13,851
984
$
$
$
9,924
2,651
1,230
13,805
190
$
$
$
18,888
12,940
—
31,828
7,840
There was no impact to the Company’s reporting of total assets, depreciation and amortization,
and capital expenditures by segment as a result of this change.
The following tables summarize additional financial information by reportable segment:
Assets
Year Ended December 31,
2019
2018
2017
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . .
$2,123,251
542,418
$1,868,554
557,760
$1,612,607
413,358
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,665,669
$2,426,314
$2,025,965
78
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
7. Segment Reporting (Continued)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$46,145
14,764
$35,586
11,822
$37,962
14,026
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$60,909
$47,408
$51,988
Depreciation and Amortization
Year Ended December 31,
2019
2018
2017
Capital Expenditures
Year Ended December 31,
2019
2018
2017
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$36,007
24,795
$38,242
9,359
$29,258
4,003
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$60,802
$47,601
$33,261
The Company’s sales in the United States represent approximately 75%, 74%, and 74% of total
sales for the years ended December 31, 2019, 2018 and 2017, respectively. Approximately 80% of the
Company’s identifiable long-lived assets are located in the United States as of December 31, 2019 and
2018.
8. Balance Sheet Details
Inventories consist of the following:
Raw material
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$328,021
10,387
183,616
$348,980
6,971
188,799
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$522,024
$544,750
December 31,
2019
2018
As of December 31, 2019 and 2018, inventories totaling $18,684 and $8,488, respectively, were on
consignment at customer locations.
79
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
8. Balance Sheet Details (Continued)
Property and equipment consists of the following:
December 31,
2019
2018
Land and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
Dies and tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office equipment and systems . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 18,252
177,079
117,114
22,040
3,955
99,124
4,293
36,299
$ 15,975
163,161
103,726
28,198
2,070
82,638
2,137
26,543
Gross property and equipment . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . .
478,156
(161,180)
424,448
(145,519)
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 316,976
$ 278,929
Total property and equipment included finance leases of $20,158 at December 31, 2018, primarily
made up of buildings and improvements. Amortization of finance lease right of use assets is recorded
within depreciation expense in the consolidated statements of comprehensive income. The initial
measurement of new finance lease right of use assets is accounted for as a non-cash item in the
consolidated statement of cash flows. Refer to Note 10, ‘‘Leases,’’ for further information regarding the
Company’s accounting for leases under ASC 842, Leases, in 2019.
9. Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by reportable segment for the years ended
December 31, 2019 and 2018 are as follows:
Balance at December 31, 2017 . . . . . . . . . . . . . .
Acquisitions of businesses, net . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . .
Balance at December 31, 2018 . . . . . . . . . . . . . .
Acquisitions of businesses, net . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . .
Domestic
International
Total
$621,451
—
—
621,451
37,758
—
$100,072
46,788
(3,656)
143,204
3,078
(207)
$721,523
46,788
(3,656)
764,655
40,836
(207)
Balance at December 31, 2019 . . . . . . . . . . . . . .
$659,209
$146,075
$805,284
Refer to Note 3, ‘‘Acquisitions,’’ to the consolidated financial statements for further information
regarding the Company’s acquisitions.
80
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
9. Goodwill and Intangible Assets (Continued)
The details of the gross goodwill applicable to each reportable segment at December 31, 2019 and
2018 are as follows:
Year Ended December 31, 2019
Year Ended December 31, 2018
Gross
Accumulated
Impairment
Net
Gross
Accumulated
Impairment
Net
Domestic . . . . . . . . . . . . . . .
International . . . . . . . . . . . .
$1,162,402
150,686
$(503,193) $659,209
146,075
(4,611)
$1,124,644
147,815
$(503,193) $621,451
143,204
(4,611)
Total . . . . . . . . . . . . . . . .
$1,313,088
$(507,804) $805,284
$1,272,459
$(507,804) $764,655
The following table summarizes intangible assets by major category as of December 31, 2019 and
2018:
Weighted
Average
Amortization
Years
December 31, 2019
December 31, 2018
Gross
Accumulated Net Book
Amortization
Value
Gross
Accumulated Net Book
Amortization
Value
Finite-lived intangible assets:
Tradenames . . . . . . . . . . .
Customer lists . . . . . . . . .
Patents . . . . . . . . . . . . . .
Developed technology . . .
Software . . . . . . . . . . . . .
Non-compete/other . . . . .
Total finite-lived
9
12
13
9
—
4
$ 56,669 $ (36,613) $ 20,056 $ 56,378 $ (32,416) $ 23,962
61,194
369,932
29,970
131,086
1,111
82,886
—
1,046
1,932
12,063
(307,149)
(101,060)
(12,058)
(1,046)
(1,897)
(314,380)
(110,554)
(17,872)
(1,046)
(3,804)
368,343
131,030
13,169
1,046
3,829
55,552
20,532
65,014
—
8,259
intangible assets . . . .
$653,682 $(484,269) $169,413 $573,795 $(455,626) $118,169
Indefinite-lived
tradenames . . . . . . . . .
128,321
— 128,321
128,321
— 128,321
Total intangible assets . . . . .
$782,003 $(484,269) $297,734 $702,116 $(455,626) $246,490
Amortization of intangible assets was $28,644, $22,112 and $28,861 in 2019, 2018 and 2017,
respectively. Excluding the impact of any future acquisitions, the Company estimates amortization
expense for the next five years will be as follows: 2020—$31,237; 2021—$29,473; 2022—$22,226; 2023—
$18,344; 2024—$16,156.
10. Leases
The Company determines if an arrangement is or contains a lease at contract inception. The
Company recognizes a right of use (‘‘ROU’’) asset and lease liability at the lease commencement date
based on the present value of the lease payments over the lease term. As the Company’s leases
generally do not provide an implicit rate, the incremental borrowing rate is used to determine the
present value of lease payments. The incremental borrowing rate is a collateralized rate determined
based on the lease term, the Company’s credit rating, and other market information available at the
81
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
10. Leases (Continued)
commencement date. The ROU asset also includes any lease payments made prior to the
commencement date and is reduced by any lease incentives. The lease term may include options to
extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
Lease expense for operating leases is recognized on a straight-line basis over the lease term, while lease
expense for finance leases is recognized as depreciation and interest expense using the effective interest
method. The Company’s variable lease expense generally consists of property tax and insurance
payments that are variable in nature, however, these amounts are immaterial to the consolidated
financial statements.
The Company has lease agreements with both lease and nonlease components, which it elected to
account for as a single lease component. However, the Company did not elect to apply the recognition
exception for short-term leases. The Company is applying these elections to all asset classes.
The Company leases certain manufacturing facilities, distribution centers, office space, warehouses,
automobiles, machinery and computer equipment globally under both finance and operating leases. The
Company’s leases have remaining lease terms of up to 20 years, of which certain leases, primarily
within the buildings and improvements asset class, include options to extend the leases for up to
10 additional years. Further, the Company leases certain buildings from a noncontrolling interest
holder, which the Company has determined to be arms’ length transactions.
The Company is a lessor of one building that it leases to a third party. The lease income related to
this arrangement is not material to the consolidated financial statements.
The Company records its operating lease cost and amortization of finance lease ROU assets within
cost of goods sold or operating expenses in the consolidated statements of comprehensive income
depending on the cost center of the underlying asset. The Company records its finance lease interest
cost within interest expense in the consolidated statements of comprehensive income.
The components of total lease cost consist of the following:
Operating lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease cost:
Amortization of ROU assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,647
2,531
2,227
Total lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14,405
Twelve Months
Ended December 31,
2019
Prior to the adoption of ASC 842, lease expense consisted of payments on operating leases. Total
rent expense related to operating leases for the years ended December 31, 2018 and 2017 was
approximately $10,739 and $10,845, respectively.
As of January 1, 2019, the date of the adoption of ASU 2016-02, the Company recognized ROU
assets and lease liabilities related to operating leases of $42,024 and $42,056, respectively, and there
82
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
10. Leases (Continued)
was no cumulative effect adjustment made to retained earnings. Supplemental balance sheet
information related to the Company’s leases is as follows:
December 31, 2019
Operating Leases
Operating lease ROU assets(1) . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities—current(2) . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities—noncurrent(3) . . . . . . . . . . . . . . . . . .
Total operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Finance Leases
Finance lease ROU assets, gross . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation—finance lease ROU assets . . . . . . . . .
Finance lease ROU assets, net(4) . . . . . . . . . . . . . . . . . . . . . .
Finance lease liabilities—current(5) . . . . . . . . . . . . . . . . . . . . . .
Finance lease liabilities—noncurrent(6) . . . . . . . . . . . . . . . . . . .
Total finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
$35,950
$ 7,231
29,778
$37,009
$29,142
(3,079)
$26,063
$ 1,830
24,132
$25,962
(1) Recorded in the operating lease and other assets line within the consolidated balance
sheets
(2) Recorded in the other accrued liabilities line within the consolidated balance sheets
(3) Recorded in the operating lease and other long-term liabilities line within the
consolidated balance sheets
(4) Recorded in the property and equipment, net line within the consolidated balance sheets
(5) Recorded in the current portion of long-term borrowings and finance lease obligations
line within the consolidated balance sheets
(6) Recorded in the long-term borrowings and finance lease obligations line within the
consolidated balance sheets
83
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
10. Leases (Continued)
Supplemental cash flow information related to the Company’s leases is as follows:
Three Months
Ended December 31,
2019
Twelve Months
Ended December 31,
2019
Cash paid for amounts included in the measurement of lease
liabilities
Operating cash flows from operating leases . . . . . . . . . . . . . . .
Operating cash flows from finance leases . . . . . . . . . . . . . . . .
Financing cash flows from finance leases . . . . . . . . . . . . . . . .
ROU assets obtained in exchange for lease liabilities
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,174
471
976
239
632
$10,125
1,864
3,237
4,021
8,797
Weighted average remaining lease term and discount rate information related to the Company’s
leases is as follows:
December 31, 2019
Weighted average remaining lease term (in years)
Operating Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.90
13.87
Weighted average discount rate
Operating Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.59%
7.83%
The maturities of the Company’s lease liabilities are as follows:
As of December 31,
2019
Finance
Leases
Operating
Leases
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
After 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,769
3,352
3,536
2,659
2,650
29,371
$ 9,086
7,029
5,472
4,629
4,288
14,232
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest component
45,337
(19,375)
44,736
(7,727)
Present value of minimum lease payments . . . . . . . . . . . . . . . .
$ 25,962
$37,009
84
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
11. Product Warranty Obligations
The Company records a liability for standard product warranty obligations accounted for as
assurance warranties at the time of sale to a customer based upon historical warranty experience. The
Company also records a liability for specific warranty matters when they become known and are
reasonably estimable. The following is a tabular reconciliation of the Company’s standard product
warranty liability accounted for as an assurance warranty:
Year Ended December 31,
2019
2018
2017
Balance at beginning of period . . . . . . . . . . . . . . . .
Product warranty reserve assumed in acquisition . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for warranty issued . . . . . . . . . . . . . . . . .
Changes in estimates for pre-existing warranties . . .
$ 41,785
1,062
(26,096)
32,060
505
$ 35,422
—
(20,029)
26,910
(518)
$ 31,695
43
(18,861)
21,347
1,198
Balance at end of period . . . . . . . . . . . . . . . . . . . .
$ 49,316
$ 41,785
$ 35,422
Additionally, the Company sells extended warranty coverage for certain products, which it accounts
for as a service warranty. The sales of extended warranties are recorded as deferred revenue, and
typically have a duration of five to ten years. The deferred revenue related to extended warranty
coverage is amortized over the duration of the extended warranty contract period, following the
standard warranty period, using the straight-line method. The Company believes the straight-line
method is appropriate because the performance obligation is satisfied based on the passage of time.
The amortization of deferred revenue is recorded to net sales in the consolidated statements of
comprehensive income. The following is a tabular reconciliation of the deferred revenue related to
extended warranty coverage:
Year Ended December 31,
2019
2018
2017
Balance at beginning of period . . . . . . . . . . . . . . . .
Deferred revenue contracts issued . . . . . . . . . . . . . .
Amortization of deferred revenue contracts . . . . . . .
$ 68,340
24,483
(14,085)
$ 57,854
21,440
(10,954)
$36,139
29,262
(7,547)
Balance at end of period . . . . . . . . . . . . . . . . . . . . .
$ 78,738
$ 68,340
$57,854
The timing of recognition of the Company’s deferred revenue balance related to extended
warranties at December 31, 2019 is as follows:
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
After 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,535
16,798
14,705
11,367
20,333
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$78,738
85
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
11. Product Warranty Obligations (Continued)
In 2017, the Company launched a post-sale extended warranty marketing program with a third
party. In the program’s agreement, the Company is required to pay fees to the third-party service
provider based on the number of extended warranty contracts that they sell, which it classifies as costs
to obtain a contract. The contract costs are deferred and recorded as other assets in the consolidated
balance sheets. The deferred contract costs are amortized to net sales in the consolidated statements of
comprehensive income over the same period that the underlying deferred revenue is recognized. The
balance of deferred contract costs as of December 31, 2019 and 2018 was $6,190 and $4,782,
respectively. Amortization of deferred contract costs recorded during the years ended December 31,
2019, 2018 and 2017 was $869, $615 and $193, respectively.
Standard product warranty obligations and extended warranty related deferred revenues are
included in the consolidated balance sheets as follows:
December 31,
2019
2018
Product warranty liability
Current portion—other accrued liabilities . . . . . . . . . . . . . . . .
Long-term portion—other long-term liabilities . . . . . . . . . . . .
$27,885
21,431
$25,396
16,389
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$49,316
$41,785
Deferred revenue related to extended warranties
Current portion—other accrued liabilities . . . . . . . . . . . . . . . .
Long-term portion—other long-term liabilities . . . . . . . . . . . .
$15,519
63,219
$13,646
54,694
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$78,738
$68,340
12. Credit Agreements
Short-term borrowings are included in the consolidated balance sheets as follows:
ABL facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other lines of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$30,961
27,753
$18,459
27,124
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$58,714
$45,583
December 31,
2019
2018
86
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
12. Credit Agreements (Continued)
Long-term borrowings are included in the consolidated balance sheets as follows:
December 31,
2019
2018
Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Original issue discount and deferred financing costs . . . . . . . .
ABL facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$830,000
(18,048)
—
25,962
2,236
$879,000
(22,440)
—
20,171
1,642
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current portion of debt . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current portion of finance lease obligation . . . . . . . . . . .
840,150
553
1,830
878,373
1,075
902
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$837,767
$876,396
Maturities of long-term borrowings outstanding at December 31, 2019, excluding finance lease
obligations as their maturities are disclosed in Note 10, ‘‘Leases,’’ and before considering original issue
discount and deferred financing costs, are as follows:
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
After 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
553
1,683
—
—
830,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$832,236
The Company’s credit agreements originally provided for a $1,200,000 term loan B credit facility
(Term Loan) and currently include a $300,000 uncommitted incremental term loan facility. The
maturity date of the Term Loan is currently December 13, 2026. The Term Loan is guaranteed by all of
the Company’s wholly-owned domestic restricted subsidiaries, and is secured by associated collateral
agreements which pledge a first priority lien on virtually all of the Company’s assets, including fixed
assets and intangibles, other than all cash, trade accounts receivable, inventory, and other current assets
and proceeds thereof, which are secured by a second priority lien. The Term Loan initially bore interest
at rates based upon either a base rate plus an applicable margin of 1.75% or adjusted LIBOR rate plus
an applicable margin of 2.75%, subject to a LIBOR floor of 0.75%. Beginning in the second quarter of
2014, and measured each quarterly period thereafter, the applicable margin related to base rate loans
was reduced to 1.50% and the applicable margin related to LIBOR rate loans was reduced to 2.50%, in
each case, if the Company’s net debt leverage ratio, as defined in the Term Loan, fell below 3.00 to
1.00 for that measurement period.
In May 2017, the Company amended its Term Loan, modifying the pricing of the facility by
reducing the applicable margin rates to base rate plus a fixed applicable margin of 1.25% or adjusted
LIBOR rate plus a fixed applicable margin of 2.25%. Further, the amendment removed the pricing grid
87
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
12. Credit Agreements (Continued)
that would reduce the applicable margin if a net debt leverage ratio of 3.00 to 1.00 was achieved. As a
result, the Company does not anticipate any future catch-up gains or losses resulting from changes in
contractual interest rates to be recorded in the statements of comprehensive income. At the time, the
amended Term Loan pricing was still subject to the 0.75% LIBOR floor. In connection with this
amendment and in accordance with ASC 470-50, Debt Modifications and Extinguishments, the Company
capitalized $1,432 of fees paid to creditors as deferred financing costs on long-term borrowings and
expensed $85 of transaction fees in the second quarter of 2017.
In December 2017, the Company amended the Term Loan, which further reduced the applicable
margin rates to base rate plus a fixed applicable margin of 1.00% or adjusted LIBOR rate plus a fixed
applicable margin of 2.00%. Additionally, the amendment eliminated the Excess Cash Flow payment
requirement for 2017, and will eliminate future requirements if the Company’s secured leverage ratio is
maintained below 3.75 to 1.00 times. In connection with this amendment and in accordance with
ASC 470-50, the Company capitalized $2,346 of fees paid to creditors as original issue discount and
deferred financing costs on long-term borrowings and expensed $38 of transaction fees in the fourth
quarter of 2017.
In June 2018, the Company amended the Term Loan, which further reduced the applicable margin
rates to base rate plus a fixed applicable margin of 0.75% or adjusted LIBOR rate plus a fixed
applicable margin of 1.75%. In connection with this amendment and in accordance with ASC 470-50,
the Company capitalized $829 of fees paid to creditors as deferred financing costs on long-term
borrowings and expensed $118 of transaction fees in the second quarter of 2018.
In December 2019, the Company amended its Term Loan to extend the maturity date from
May 31, 2023 to December 13, 2026, as well as removed the LIBOR floor of 0.75% from the adjusted
LIBOR rate. In connection with this amendment and in accordance with ASC 470-50, the Company
capitalized $1,247 of fees paid to creditors as deferred financing costs on long-term borrowings and
expensed $432 of transaction fees in the fourth quarter of 2019. Additionally, the Company made a
voluntary prepayment of $49,000 on the term loan, which resulted in the write-off of $926 of original
issue discount and capitalized debt issuance costs as a loss on extinguishment of debt in the
consolidated statements of comprehensive income.
The Term Loan does not require an Excess Cash Flow payment if the Company’s net secured
leverage ratio is maintained below 3.75 to 1.00 times. As of December 31, 2019, the Company’s net
secured leverage ratio was 1.50 to 1.00 times, and the Company was in compliance with all covenants of
the Term Loan. There are no financial maintenance covenants on the Term Loan.
The Company’s credit agreements also originally provided for a senior secured ABL revolving
credit facility (ABL Facility). The maturity date of the ABL Facility is currently June 12, 2023.
Borrowings under the ABL Facility are guaranteed by all of the Company’s wholly-owned domestic
restricted subsidiaries, and are secured by associated collateral agreements which pledge a first priority
lien on all cash, trade accounts receivable, inventory, and other current assets and proceeds thereof,
and a second priority lien on all other assets, including fixed assets and intangibles of the Company and
certain domestic subsidiaries. ABL Facility borrowings initially bore interest at rates based upon either
88
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
12. Credit Agreements (Continued)
a base rate plus an applicable margin of 1.00% or adjusted LIBOR rate plus an applicable margin of
2.00%, in each case, subject to adjustments based upon average availability under the ABL Facility.
In June 2018, the Company amended the ABL Facility; increasing it from $250,000 to $300,000
and extending the maturity date to June 12, 2023. In addition, the ABL Facility amendment modified
the pricing by reducing certain applicable interest rates to either a base rate plus an applicable margin
of 0.375% or an adjusted LIBOR rate plus an applicable margin of 1.375%. In connection with this
amendment and in accordance with ASC 470-50, the Company capitalized $755 of new debt issuance
costs as deferred financing costs on long-term borrowings and wrote-off $34 of capitalized debt issuance
costs as a loss on extinguishment of debt in the second quarter of 2018.
In June 2018, the Company borrowed $50,000 under the ABL Facility, the proceeds of which were
used as a voluntary prepayment of the Term Loan. As a result of the prepayment of the Term Loan,
the Company wrote-off $1,298 of original issue discount and capitalized debt issuance costs during the
second quarter of 2018 as a loss on extinguishment of debt in the consolidated statements of
comprehensive income. In October 2018, the Company repaid the $50,000 outstanding ABL Facility
balance with cash on hand.
As of December 31, 2019, there was $30,961 outstanding under the ABL Facility, leaving $268,608
of availability, net of outstanding letters of credit.
As of December 31, 2019 and December 31, 2018, short-term borrowings consisted of borrowings
by the Company’s foreign subsidiaries on local lines of credit and the ABL Facility, which totaled
$58,714 and $45,583, respectively.
13. Stock Repurchase Programs
In August 2015, the Company’s Board of Directors approved a $200,000 stock repurchase program,
which the Company completed in the third quarter of 2016. In October 2016, the Company’s Board of
Directors approved a new $250,000 stock repurchase program, which expired in the fourth quarter of
2018. In September 2018, the Company’s Board of Directors approved another stock repurchase
program, which commenced in October 2018, and under which the Company may repurchase an
additional $250,000 of its common stock over the following 24 months. The Company may repurchase
its common stock from time to time, in amounts and at prices the Company deems appropriate, subject
to market conditions and other considerations. The repurchases may be executed using open market
purchases, privately negotiated agreements or other transactions. The actual timing, number and value
of shares repurchased under the program will be determined by management at its discretion and will
depend on a number of factors, including the market price of the Company’s common stock and
general market and economic conditions, applicable legal requirements, and compliance with the terms
of the Company’s outstanding indebtedness. The repurchases may be funded with cash on hand,
available borrowings or proceeds from potential debt or other capital markets sources. The stock
repurchase program may be suspended or discontinued at any time without prior notice. During the
year ended December 31, 2019, the Company did not repurchase any shares of its common stock.
During the years ended December 31, 2018 and 2017, the Company repurchased 560,000 and 844,500
shares of its common stock, respectively, for $25,656 and $30,012, respectively, all funded with cash on
89
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
13. Stock Repurchase Programs (Continued)
hand. Since the inception of the above noted programs, the Company has repurchased 8,676,706 shares
of its common stock for $305,547 (at an average cost per share of $35.21), all funded with cash on
hand.
14. Earnings Per Share
Basic earnings per share is calculated by dividing net income attributable to the common
shareholders of the Company by the weighted average number of common shares outstanding during
the period, exclusive of restricted shares. Except where the result would be anti-dilutive, diluted
earnings per share is calculated by assuming the vesting of unvested restricted stock and the exercise of
stock options. Refer to Note 4, ‘‘Redeemable Noncontrolling Interest,’’ to the consolidated financial
statements for further information regarding the accounting for redeemable noncontrolling interests.
The following table reconciles the numerator and the denominator used to calculate basic and
diluted earnings per share:
Numerator
Net income attributable to Generac Holdings Inc.
Redeemable noncontrolling interest redemption value
. . . . . . . .
Year Ended December 31,
2019
2018
2017
$
252,007
$
238,257
$
157,808
adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,253
(17,970)
909
Net income attributable to common shareholders . . . . . . . . .
$
253,260
$
220,287
$
158,717
Denominator
Weighted average shares, basic . . . . . . . . . . . . . . . . . . . . . .
Dilutive effect of stock compensation awards(1) . . . . . . . . . .
61,926,986
938,460
61,662,031
571,194
62,040,704
602,168
Diluted shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62,865,446
62,233,225
62,642,872
Net income attributable to common shareholders per share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
4.09
4.03
$
$
3.57
3.54
$
$
2.56
2.53
(1) Excludes approximately 26,100 and 147,400 stock options for the years ended December 31, 2018
and 2017, respectively, as the impact of such awards was anti-dilutive. There were no awards with
an anti-dilutive impact for the year ended December 31, 2019.
90
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
15. Income Taxes
The Company’s provision for income taxes consists of the following:
Year Ended December 31,
2019
2018
2017
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$41,686
4,211
2,660
$32,072
9,639
4,546
$15,753
1,775
4,585
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . .
48,557
46,257
22,113
19,393
1,390
(1,263)
19,520
(778)
22,225
1,910
479
24,614
(1,015)
18,213
4,139
(2,777)
19,575
2,454
Provision for income taxes . . . . . . . . . . . . . . . . . . . . .
$67,299
$69,856
$44,142
The Company files U.S federal, U.S. state and foreign jurisdiction tax returns which are subject to
examination up to the expiration of the statute of limitations. The Company believes the tax positions
taken on its returns would be sustained upon an exam, or where a position is uncertain, adequate
reserves have been recorded. As of December 31, 2019, the Company is no longer subject to income
tax examinations for United States federal income taxes for tax years prior to 2016. Due to the
carryforward of net operating losses and research & development credits, the Company’s Wisconsin
state income tax returns for tax years 2009 through 2018 remain open. In addition, the Company is
subject to audit by various foreign taxing jurisdictions for the tax years 2013 through 2018.
The Company is regularly under examination in the various jurisdictions in which we operate. The
Company is actively managing the examinations and working to address any open matters. While the
Company does not believe any material taxes or penalties are due, there is a possibility that the
ultimate tax outcome of an examination may result in differences from what was recorded. Such
differences may affect the provision for income taxes in the period in which the determination is made,
and could impact the Company’s financial results.
91
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
15. Income Taxes (Continued)
Significant components of deferred tax assets and liabilities are as follows:
December 31,
2019
2018
Deferred tax assets:
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss and credit carryforwards
. . . . . . . . . . . . . . .
Bad debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 21,053
14,697
9,879
—
7,490
28,356
1,094
4,275
(5,024)
$ 16,745
12,418
8,500
1,062
5,960
25,585
1,363
2,516
(5,802)
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81,820
68,347
Deferred tax liabilities:
Goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt refinancing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
142,159
27,864
4,119
1,073
108,899
25,429
4,206
950
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
175,215
139,484
Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (93,395) $ (71,137)
As of December 31, 2019 and 2018, deferred tax assets of $2,933 and $163, and deferred tax
liabilities of $96,328 and $71,300, respectively, were reflected on the consolidated balance sheets.
The Company maintains a valuation allowance against the deferred tax assets of an entity when it
is uncertain the entity will generate sufficient taxable income to utilize the asset. During 2019, the
valuation allowance decreased by $778 primarily due to an increase in income allowing for a utilization
of tax credits, partially offset by current losses in certain foreign subsidiaries.
At December 31, 2019, the Company had various state research & development and state
manufacturing tax credit carryforwards of approximately $8,291 and $12,747, respectively, which expire
between 2020 and 2034. The Company believes it will generate sufficient taxable income in these
jurisdictions to fully utilize the credits prior to their expiration.
92
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
15. Income Taxes (Continued)
Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and
penalties, were as follows:
Unrecognized tax benefit, beginning of period . . . . . . . . . . . . . . .
Increase in unrecognized tax benefit for positions taken in prior
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in unrecognized tax benefit for positions taken in current
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statute of limitation expirations . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2019
2018
$5,635
$ 7,122
633
495
(43)
—
—
580
(1,818)
(249)
Unrecognized tax benefit, end of period . . . . . . . . . . . . . . . . . . .
$6,720
$ 5,635
The unrecognized tax benefit as of December 31, 2019 and 2018, if recognized, would favorably
impact the effective tax rate.
As of December 31, 2019 and 2018, total accrued interest of approximately $71 and $37,
respectively, and accrued penalties of approximately $195 and $136, respectively, associated with net
unrecognized tax benefits are included in the consolidated balance sheets. Interest and penalties are
recorded as a component of income tax expense.
The Company does not expect a significant increase or decrease to the total amounts of
unrecognized tax benefits related to continuing operations during the fiscal year ending December 31,
2020.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly
referred to as the Tax Cuts and Jobs Act (the ‘‘Tax Act’’). The Tax Act includes a mandatory one-time
tax on accumulated earnings of foreign subsidiaries, and as a result, all previously unremitted earnings
for which no U.S. deferred tax liability had been accrued have now been subject to U.S. tax.
Notwithstanding the U.S. taxation of these amounts, the Company intends to continue to invest these
earnings, as well as the capital in these subsidiaries, indefinitely outside of the U.S. and do not expect
to incur any significant additional taxes related to such amounts.
93
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
15. Income Taxes (Continued)
A reconciliation of the statutory tax rates and the effective tax rates for the years ended
December 31, 2019, 2018 and 2017 are as follows:
Year Ended
December 31,
2019
2018
2017
21.0% 21.0% 35.0%
U.S. statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.3
4.7
State taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1.0) —
State tax rate differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1.3)
(0.8)
Research and development credits . . . . . . . . . . . . . . . . . . . . . .
(1.0)
(1.0)
State credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation(1) . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.5)
(0.6)
Tax Act impact(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (0.2)
(0.2)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.1
—
(1.4)
(0.2)
(1.4)
(13.9)
(0.9)
(0.8)
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21.1% 22.5% 21.3%
(1) With the adoption of ASU 2016-09 in 2017, excess tax benefits from equity awards are
reflected within the provision for income taxes rather than within the consolidated
balance sheet.
(2) As a result of the Tax Act, we recognized a one-time, non-cash benefit of $28.4 million in
the fourth quarter of 2017 primarily from the impact of the revaluation of our net
deferred tax liabilities. This non-cash benefit resulted primarily from the Federal rate
reduction from 35% to 21%.
16. Benefit Plans
Medical and Dental Plan
The Company maintains medical and dental benefit plans covering its full-time domestic
employees and their dependents. Certain plans are partially or fully self-funded under which participant
claims are obligations of the plan. These plans are funded through employer and employee
contributions at a level sufficient to pay for the benefits provided by the plan. The Company’s
contributions to the plans were $18,290, $14,660, and $14,992 for the years ended December 31, 2019,
2018, and 2017, respectively.
The Company’s foreign subsidiaries participate in government sponsored medical benefit plans. In
certain cases, the Company purchases supplemental medical coverage for certain employees at these
foreign locations. The expenses related to these plans are not material to the Company’s consolidated
financial statements.
94
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
16. Benefit Plans (Continued)
Savings Plan
The Company maintains a defined-contribution 401(k) savings plan for eligible domestic
employees. Under the plan, employees may defer receipt of a portion of their eligible compensation.
The Company may contribute a matching contribution of 50% of the first 6% of eligible compensation
of employees. The Company may also contribute a non-elective contribution for eligible employees
employed on December 31, 2008 that were impacted by the freezing of the Company’s pension plans.
The Company’s matching contributions are subject to vesting. Forfeitures may be applied against plan
expenses and company contributions. The Company recognized $4,791, $4,193 and $3,600 of expense
related to these plans in 2019, 2018 and 2017, respectively.
Pension Plans
Historically, the Company maintained frozen noncontributory salaried and hourly pension plans
(Pension Plans) covering certain domestic employees. The Pension Plans were frozen effective
December 31, 2008. Effective December 31, 2018, the Pension Plans were merged into the same plan
(Pension Plan), resulting in no change to benefits for participants. The benefits under the salaried plan
were based upon years of service and the participants’ defined final average monthly compensation.
The benefits under the hourly plan were based on a unit amount at the date of termination multiplied
by the participant’s years of credited service.
In 2019, the Company completed the termination of its Pension Plan. In connection with the
Company’s activities to terminate the plan, lump sum distributions were made in the fourth quarter of
2019 to individuals who elected lump sum distributions, including rolling over their accounts to the
Company’s 401(k) savings plan. Also in the fourth quarter of 2019, annuity contracts were purchased to
settle obligations for the remaining participants. Upon settlement of the pension liability, the Company
reclassified related unrecognized pension losses recorded in AOCL to the consolidated statements of
comprehensive income. As a result, the Company recorded pre-tax settlement charges of $10,920 in the
fourth quarter of 2019.
The Company’s historical funding policy for the Pension Plans was to contribute amounts at least
equal to the minimum annual amount required by applicable regulations. In the year ended
December 31, 2018, the Company made a voluntary pension prepayment of $9,400. In the year ended
December 31, 2019, the Company made required contributions of $1,017 in connection with the plan
termination. No additional contributions will be required in future years as the pension plan
termination was finalized in 2019.
95
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
16. Benefit Plans (Continued)
The following table provides a reconciliation of benefit obligations, plan assets and funded status
of the Pension Plan based on a December 31 measurement date:
Year Ended
December 31,
2019
2018
Accumulated benefit obligation at end of period . . . . . . . . . . .
$
— $ 65,978
Change in projected benefit obligation
Projected benefit obligation at beginning of period . . . . . . . . .
Interest cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annuities purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 65,978
2,401
3,452
(31,321)
(40,510)
$ 72,631
2,575
(6,820)
(2,408)
—
Projected benefit obligation at end of period . . . . . . . . . . . . . .
$
— $ 65,978
Change in plan assets
Fair value of plan assets at beginning of period . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Company contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annuities purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets at end of period . . . . . . . . . . . . . . . .
Funded status: accrued pension liability included in other
long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts recognized in accumulated other comprehensive loss
Net actuarial loss, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 61,870
8,944
1,017
(31,321)
(40,510)
$ 58,014
(3,507)
9,771
(2,408)
—
$
$
$
— $ 61,870
— $ (4,108)
— $(10,541)
The actuarial loss for the Pension Plan that was amortized from AOCL into net periodic pension
cost during 2019 was $843.
The actuarial assumption used in the determination of the benefit obligation of the above data is:
Weighted average discount rate . . . . . . . . . . . . . . . . . . . . . . .
N/A
4.24%
2019
2018
96
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
16. Benefit Plans (Continued)
The following table sets forth the components of net periodic pension cost (benefit) for the years
ended December 31, 2019, 2018 and 2017:
Year Ended December 31,
2019
2018
2017
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . .
Amortization of net loss . . . . . . . . . . . . . . . . . . . . . . .
Loss on pension settlement . . . . . . . . . . . . . . . . . . . . .
$ 2,401
(3,500)
843
10,920
$ 2,575
(3,525)
802
—
$ 2,688
(3,011)
883
—
Net periodic pension cost (benefit) . . . . . . . . . . . . . . .
$10,664
$ (148) $
560
Weighted-average assumptions used to determine net periodic pension cost (benefit) are as follows:
Discount Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term rate of return on plan assets . . . . .
Rate of compensation increase(1) . . . . . . . . . . . . . . . .
4.24% 3.60% 4.14%
6.60% 6.19% 6.58%
N/A
N/A
N/A
Year Ended December 31,
2019
2018
2017
(1) No compensation increase was assumed as the Pension Plan was frozen effective
December 31, 2008.
To determine the long-term rate of return assumption for the plans’ assets, the Company studied
historical markets and preserved the long-term historical relationship between equities and fixed-income
securities consistent with the widely accepted capital market principle that assets with higher volatility
generate a greater return over the long run. The Company evaluated current market factors such as
inflation and interest rates before it determined long-term capital market assumptions and reviewed
peer data and historical returns to check for reasonableness and appropriateness.
The fair value of the qualified pension plan assets was $0 at December 31, 2019 and $61,870 at
December 31, 2018.
97
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
16. Benefit Plans (Continued)
The Pension Plan’s weighted-average asset allocation at December 31, 2018, by asset category, is as
follows:
Target Allocation
December 31,
2018
Asset Category
Minimum
Maximum
Dollars
%
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic equity . . . . . . . . . . . . . . . . . . . . . . . . .
International equity . . . . . . . . . . . . . . . . . . . . . . .
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.0%
36.5%
17.0%
7.0%
25.0%
61.5%
25.0%
15.0%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,257
30,731
12,380
6,502
61,870
20%
50%
20%
10%
100%
The fair values of the Pension Plans’ assets at December 31, 2018 were as follows:
Quoted Prices in
Active Markets
for Identical Asset
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . .
$51,736
10,134
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$61,870
$51,736
—
$51,736
$—
—
$—
$ —
10,134
$10,134
A reconciliation of beginning and ending balances for Level 3 assets for the year ended
December 31, 2018 is as follows:
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended
December 31
2018
$ 9,700
3,805
(3,795)
424
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,134
Mutual Funds—This category includes investments in mutual funds that encompass both equity and
fixed income securities that are designed to provide a diverse portfolio. The plans’ mutual funds are
designed to track exchange indices, and invest in diverse industries. Some mutual funds are classified as
regulated investment companies. Investment managers have the ability to shift investments from value
to growth strategies, from small to large capitalization funds, and from U.S. to international
investments. These investments are valued at the closing price reported on the active market on which
the individual securities are traded. These investments are classified within Level 1 of the fair value
hierarchy.
98
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
16. Benefit Plans (Continued)
Other Investments—This category includes investments in limited partnerships and are valued at
estimated fair value, as determined with the assistance of each respective limited partnership, based on
the net asset value of the investment as of the balance sheet date, which is subject to judgment, and
therefore is classified within Level 3 of the fair value hierarchy.
The Company’s historical target allocation for equity securities and real estate was generally
between 75% to 85%, with the remainder allocated primarily to fixed income (bonds). The Company
regularly reviewed its actual asset allocation and periodically rebalanced its investments to the targeted
allocation when considered appropriate.
Certain of the Company’s foreign subsidiaries participate in local statutory defined benefit or other
post-employment benefit plans. These plans provide benefits that are generally based on years of
credited service and a percentage of the employee’s eligible compensation earned throughout the
applicable service period. Liabilities recorded under these plans are included in other long-term
liabilities in the Company’s consolidated balance sheets and are not material.
17. Share Plans
The Company adopted an equity incentive plan (Plan) on February 10, 2010 in connection with its
initial public offering. The Plan, as amended, allows for granting of up to 9.1 million share-based
awards to executives, directors and employees. Awards available for grant under the Plan include stock
options, stock appreciation rights, restricted stock, other share-based awards and performance-based
compensation awards. Total share-based compensation expense related to the Plan, net of estimated
forfeitures, was $15,738, $14,563 and $10,205 for the years ended December 31, 2019, 2018 and 2017,
respectively, which is recorded in operating expenses in the consolidated statements of comprehensive
income.
On June 13, 2019, the stockholders of Generac Holdings Inc. approved the Company’s 2019 Equity
Incentive Plan (2019 Plan). The 2019 Plan allows for granting of up to 2.7 million share-based awards
to executives, directors and employees. Awards available for grant under the Plan include stock options,
stock appreciation rights, restricted stock, other share-based awards and performance-based
compensation awards. Total share-based compensation expense related to the 2019 Plan, net of
estimated forfeitures, was $956 for the year ended December 31, 2019, which is recorded in operating
expenses in the consolidated statements of comprehensive income.
Stock Options—Stock options granted in 2019 have an exercise price of $52.07 per share; stock
options granted in 2018 have an exercise price between $43.88 per share and $45.29 per share; and
stock options granted in 2017 have an exercise price between $40.12 per share and $48.98 per share.
Stock options vest in equal installments over four years, subject to the grantee’s continued employment
or service and expire ten years after the date of grant.
Stock option exercises can be net-share settled such that the Company withholds shares with value
equivalent to the exercise price of the stock option awards plus the employees’ minimum statutory
obligation for the applicable income and other employment taxes. Total shares withheld were 32,211,
63,817 and 9,033 in 2019, 2018 and 2017, respectively, and were based on the value of the stock on the
99
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
17. Share Plans (Continued)
exercise dates. The net-share settlement has the effect of share repurchases by the Company as they
reduce the number of shares that would have otherwise been issued.
Employees can also utilize a cashless for cash exercise of stock options, such that all exercised
shares will be sold in the market immediately. Cash equivalent to the exercise price of the awards plus
the employees’ minimum statutory tax obligations is remitted to the Company, with the remaining cash
being transferred to the employee. Total net proceeds from the cashless for cash exercise of stock
options were $9,395, $5,614 and $6,951 in 2019, 2018 and 2017, respectively, and are reflected as a
financing activity in the consolidated statement of cash flows.
Total payments made by the Company to the taxing authorities for the employees’ tax obligations
related to stock option exercises were $3,360, $3,846 and $4,301 in 2019, 2018 and 2017, respectively,
and are reflected as a financing activity in the consolidated statements of cash flows.
The grant-date fair value of each option grant is estimated using the Black-Scholes-Merton option
pricing model. The fair value is then amortized on a straight-line basis over the requisite service period
of the awards, which is generally the vesting period. Use of a valuation model requires management to
make certain assumptions with respect to selected model inputs. Expected volatility is calculated based
on an analysis of historic volatility of the Company’s stock price. The average expected life is based on
the contractual term of the option using the simplified method. The risk-free interest rate is based on
U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date
of grant. The compensation expense recognized is net of estimated forfeitures. Forfeitures are
estimated based on actual share option forfeiture history.
The weighted-average assumptions used in the Black-Scholes-Merton option pricing model for
2019, 2018 and 2017 are as follows:
Weighted average grant date fair value . . . . . . . . . . . .
Assumptions:
Expected stock price volatility . . . . . . . . . . . . . . . . . .
Risk free interest rate . . . . . . . . . . . . . . . . . . . . . . . .
Expected annual dividend per share . . . . . . . . . . . . . .
Expected life of options (years) . . . . . . . . . . . . . . . . .
2019
2018
2017
$19.33
$17.86
$16.84
33%
40%
37%
2.52% 2.60% 1.92%
$ — $ — $ —
6.25
6.25
6.25
100
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
17. Share Plans (Continued)
A summary of the Company’s stock option activity and related information for the years ended
December 31, 2019, 2018 and 2017 is as follows:
Outstanding as of December 31, 2016 . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-
Average
Remaining
Contractual
Term (in years)
Aggregate
Intrinsic Value
($ in thousands)
7.5
$23,840
Number of
Options
1,482,964
346,421
(287,375)
(69,880)
Weighted-
Average
Exercise
Price
$27.49
40.13
10.58
41.12
Outstanding as of December 31, 2017 . . . . . . . . .
1,472,130
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
366,231
(267,909)
(49,285)
Outstanding as of December 31, 2018 . . . . . . . . .
1,521,167
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
369,779
(263,250)
(35,010)
Outstanding as of December 31, 2019 . . . . . . . . .
1,592,686
Exercisable as of December 31, 2019 . . . . . . . . . .
726,817
33.11
43.88
19.90
43.34
37.70
52.07
30.75
43.79
42.04
37.78
7.3
$25,281
7.0
$19,212
6.9
5.3
$93,242
$45,649
As of December 31, 2019, there was $10,649 of total unrecognized compensation cost, net of
expected forfeitures, related to unvested options. The cost is expected to be recognized over the
remaining service period, having a weighted-average period of 2.5 years. Total share-based
compensation cost related to the stock options for 2019, 2018 and 2017 was $5,597, $4,998 and $4,503,
respectively, which is recorded in operating expenses in the consolidated statements of comprehensive
income.
Restricted Stock—Restricted stock awards vest in equal installments over three years, subject to the
grantee’s continued employment or service. Certain restricted stock awards also include performance
shares, which were awarded in the years 2014 through 2019. The number of performance shares that
can be earned are contingent upon Company performance measures over a three-year period.
Performance measures are based on a weighting of a number of financial metrics, from which grantees
may earn from 0% to 200% of their target performance share award. The performance period for the
2017 awards covers the years 2017 through 2019, the performance period for the 2018 awards covers
the years 2018 through 2020, and the performance period for the 2019 awards covers the years 2019
through 2021. The Company estimates the number of performance shares that will vest based on
projected financial performance. The fair value of restricted awards is determined based on the market
value of the Company’s shares on the grant date. The fair market value of the restricted awards at the
101
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
17. Share Plans (Continued)
time of the grant is amortized to expense over the period of vesting. The compensation expense
recognized for restricted share awards is net of estimated forfeitures.
Restricted stock vesting is net-share settled such that, upon vesting, the Company withholds shares
with value equivalent to the employees’ minimum statutory tax obligation, and then pays the cash to
the taxing authorities on behalf of the employees. In effect, the Company repurchases these shares and
classifies them as treasury stock. Total shares withheld were 55,953, 38,186 and 39,500 in 2019, 2018
and 2017, respectively, and were based on the value of the stock on the vesting dates. Total payments
made by the Company to the taxing authorities for the employees’ tax obligations related to restricted
stock vesting were $3,078, $1,812 and $1,591 in 2019, 2018 and 2017, respectively, and are reflected as a
financing activity within the consolidated statements of cash flows.
A summary of the Company’s restricted stock activity for the years ended December 31, 2019, 2018
and 2017 is as follows:
Non-vested as of December 31, 2016 . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares
361,403
211,769
(133,796)
(47,100)
Non-vested as of December 31, 2017 . . . . . . . . . . . . . . . .
392,276
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
208,803
(128,433)
(46,650)
Non-vested as of December 31, 2018 . . . . . . . . . . . . . . . .
425,996
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
265,255
(184,628)
(14,986)
Non-vested as of December 31, 2019 . . . . . . . . . . . . . . . .
491,637
Weighted-
Average
Grant-Date
Fair Value
$38.18
39.91
40.60
42.48
37.77
44.49
39.03
39.43
40.50
62.38
38.78
44.23
52.84
As of December 31, 2019, there was $16,165 of unrecognized compensation cost, net of expected
forfeitures, related to non-vested restricted stock awards. That cost is expected to be recognized over
the remaining service period, having a weighted-average period of 1.9 years. Total share-based
compensation cost related to the restricted stock for 2019, 2018 and 2017, inclusive of performance
shares, was $11,097, $9,565 and $5,702, respectively, which is recorded in operating expenses in the
consolidated statements of comprehensive income.
During 2019, 2018 and 2017, 22,544, 33,419 and 34,095 shares of stock, respectively, were granted
to certain members of the Company’s Board of Directors as a component of their compensation for
their service on the Board, of which 22,544, 33,419 and 22,762 shares, respectively, were fully vested at
102
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
17. Share Plans (Continued)
time of grant. Non-employee directors can elect to receive his or her director fees in the form of
deferred stock units, which voluntarily defers the issuance of the related shares granted until the
director separates from the Company or a triggering event occurs. 16,604, 22,675, and 11,333 of
deferred stock units are included in the shares of stock granted to certain members of the Company’s
Board of Directors for the years 2019, 2018, and 2017, respectively. Total share-based compensation
cost for these share grants in 2019, 2018 and 2017 was $1,391, $1,718 and $1,133, respectively, which is
recorded in operating expenses in the consolidated statements of comprehensive income.
18. Commitments and Contingencies
The Company has an arrangement with a finance company to provide floor plan financing for
certain dealers. The Company receives payment from the finance company after shipment of product to
the dealer. The Company participates in the cost of dealer financing up to certain limits and has agreed
to repurchase products repossessed by the finance company, but does not indemnify the finance
company for any credit losses they incur. The amount financed by dealers which remained outstanding
under this arrangement at December 31, 2019 and 2018 was approximately $49,600 and $47,200,
respectively.
In the normal course of business, the Company is named as a defendant in various lawsuits in
which claims are asserted against the Company. In the opinion of management, the liabilities, if any,
which may result from such lawsuits are not expected to have a material adverse effect on the financial
position, results of operations, or cash flows of the Company.
19. Quarterly Financial Information (Unaudited)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . .
Net income attributable to Generac Holdings Inc.
Net income attributable to common shareholders per
common share—basic: . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to common shareholders per
common share—diluted:
. . . . . . . . . . . . . . . . . . . . . . .
Quarters Ended 2019
Q1
Q2
Q3
Q4
$470,353
162,175
71,173
44,861
$541,916
195,838
90,926
61,958
$601,135
217,517
105,556
75,574
$590,932
222,222
104,508
69,614
$
$
0.77
0.76
$
$
0.99
0.98
$
$
1.20
1.18
$
$
1.14
1.12
103
Generac Holdings Inc.
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 2019, 2018, and 2017
(U.S. Dollars in Thousands, Except Share and Per Share Data)
19. Quarterly Financial Information (Unaudited) (Continued)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Generac Holdings Inc.
. . . . . .
Net income attributable to common shareholders per
common share—basic: . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to common shareholders per
common share—diluted:
. . . . . . . . . . . . . . . . . . . . . . .
20. Valuation and Qualifying Accounts
For the years ended December 31, 2019, 2018 and 2017:
Quarters Ended 2018
Q1
Q2
Q3
Q4
$400,091
141,927
56,347
33,645
$497,581
178,473
85,467
53,261
$562,388
200,334
106,519
75,776
$563,404
204,306
108,848
75,575
$
$
0.42
0.42
$
$
0.83
0.82
$
$
1.12
1.11
$
$
1.21
1.20
Balance at
Beginning
of Year
Additions
Charged to
Earnings
Charges to
Reserve,
Net(1)
Reserves
Established for
Acquisitions
Balance at
End of Year
Year ended December 31, 2019
Allowance for doubtful accounts . . . . . .
Reserves for inventory . . . . . . . . . . . . .
Valuation of deferred tax assets . . . . . .
$ 4,873
23,140
5,802
$ 3,086
4,821
—
$(1,033)
(3,867)
—
Year ended December 31, 2018
Allowance for doubtful accounts . . . . . .
Reserves for inventory . . . . . . . . . . . . .
Valuation of deferred tax assets . . . . . .
$ 4,805
15,987
6,817
$ 1,941
10,004
478
$(2,123)
(3,720)
—
$
42
199
(778)
$
250
869
(1,493)
Year ended December 31, 2017
Allowance for doubtful accounts . . . . . .
Reserves for inventory . . . . . . . . . . . . .
Valuation of deferred tax assets . . . . . .
$ 5,642
13,031
4,362
$
346
6,164
2,455
$(1,842)
(4,036)
—
$
659
828
—
$ 6,968
$24,293
$ 5,024
$ 4,873
23,140
5,802
$ 4,805
15,987
6,817
(1) Deductions from the allowance for doubtful accounts equal accounts receivable written off against
the allowance, less recoveries. Deductions from the reserves for inventory excess and obsolete
items equal inventory written off against the reserve as items were disposed of.
21. Subsequent Events
The Company performed an evaluation of subsequent events through the date these financial
statements were issued and no such events were identified.
104
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no changes in, or disagreements with, accountants reportable herein.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure
that information required to be disclosed by us in reports we file or submit under the Securities
Exchange Act of 1934 (Exchange Act), is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that such
information is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required
disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial
Officer, has conducted an evaluation of the design and operation of our disclosure controls and
procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the
period covered by this report on Form 10-K. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures were effective in
providing reasonable assurance that the information required to be disclosed in this report on
Form 10-K has been recorded, processed, summarized and reported as of the end of the period
covered by this report on Form 10-K.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal
control over financial reporting is designed under the supervision of our Chief Executive Officer and
Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the consolidated financial statements in accordance with U.S. GAAP.
Internal control over financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of the financial statements in accordance with U.S. GAAP,
and that receipts and expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
Company’s assets that could have a material effect on the Company’s financial statements.
There are inherent limitations to the effectiveness of any internal control over financial reporting,
including the possibility of human error or the circumvention or overriding of the controls. Accordingly,
even an effective internal control over financial reporting can provide only reasonable assurance of
achieving its objective. Because of its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate, because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our Chief Executive Officer and Chief
Financial Officer, our management conducted an assessment of the effectiveness of internal control
over financial reporting as of December 31, 2019 based on the criteria established in the 2013 Internal
Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway
105
Commission (COSO). Based on this assessment, our management has concluded that our internal
control over financial reporting was effective as of December 31, 2019. In conducting this assessment,
our management excluded Neurio Technology Inc., which was acquired in March 2019, and Pika
Energy, Inc., which was acquired in April 2019, and whose financial statements constitute 5.0% and
2.8% of net and total assets, respectively, 0.4% of net sales, and (2.2)% of net income of the
consolidated financial statement amounts as of and for the year ended December 31, 2019.
Deloitte & Touche LLP, the Company’s independent registered public accounting firm, issued an
attestation report on the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2019, which is included herein.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during
the three months ended December 31, 2019 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by Item 10 not already provided herein under ‘‘Item 1—Business—
Information About Our Executive Officers’’, will be included in our 2020 Proxy Statement and is
incorporated herein by reference.
Item 11. Executive Compensation
The information required by this item will be included in our 2020 Proxy Statement and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this item, including under the heading ‘‘Securities Authorized for
Issuance Under Equity Compensation Plans,’’ will be included in our 2020 Proxy Statement and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be included in our 2020 Proxy Statement and is
incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this item will be included in our 2020 Proxy Statement and is
incorporated herein by reference.
106
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Financial Statements
Included in Part II of this report:
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated balance sheets as of December 31, 2019 and 2018 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated statements of comprehensive income for years ended December 31, 2019, 2018 and
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated statements of stockholders’ equity for years ended December 31, 2019, 2018 and
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated statements of cash flows for the years ended December 31, 2019, 2018 and 2017 . . .
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
55
57
58
59
60
61
(a)(2) Financial Statement Schedules
All financial statement schedules have been omitted, since the required information is not
applicable or is not present in amounts sufficient to require submission of the schedule, or because the
information required is included in the consolidated financial statements and notes thereto.
(a)(3) Exhibits
The below exhibits index is the list of the exhibits being filed or furnished with or incorporated by
reference into this Annual Report on Form 10-K:
Exhibits
Number
Description
3.1 Third Amended and Restated Certificate of Incorporation of Generac Holdings Inc.
(incorporated by reference to Exhibit 3.1 of the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2009).
3.2 Amended and Restated Bylaws of Generac Holdings Inc. (incorporated by reference to
Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on
February 16, 2016).
4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the
Registration Statement on Form S-1 filed with the SEC on January 25, 2010).
4.2* Description of Securities
10.1 Credit Agreement, Dated as of February 9, 2012, As Amended and Restated as of May 30,
2012, As Further Amended and Restated as of May 31, 2013, among Generac Power
Systems, Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase Bank,
N.A., as Administrative Agent and Bank of America, N.A. and Goldman Sachs Bank USA,
as syndication agent (incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed with the SEC on June 4, 2013), as amended by the First
Amendment dated as of May 18, 2015.
107
Exhibits
Number
Description
10.2 Replacement Term Loan Amendment dated as of November 2, 2016, among Generac Power
Systems, Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase Bank,
N.A., as Administrative Agent, and the other agents named therein (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC
on November 3, 2016).
10.3
10.4
10.5
10.6
2017 Replacement Term Loan Amendment dated as of May 11, 2017, among Generac Power
Systems, Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase Bank,
N.A., as Administrative Agent, and the other agents named therein (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC
on May 15, 2017).
2017-2 Replacement Term Loan Amendment dated as of December 8, 2017, among Generac
Power Systems, Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase
Bank, N.A., as Administrative Agent, and the other agents named therein (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC
on December 11, 2017).
2018 Replacement Term Loan Amendment, dated as of June 8, 2018, among Generac Power
Systems, Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase Bank,
N.A., as Administrative Agent, and the other agents named therein (incorporated by
reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the SEC on June 14,
2018).
2019 Replacement Term Loan Amendment, dated as of December 13, 2019, among Generac
Power Systems, Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase
Bank, N.A., as Administrative Agent, and the other agents named therein (incorporated by
reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the SEC on
December 16, 2019).
10.7 Restatement Agreement, dated as of May 31, 2013, to that certain Credit Agreement, dated
as of February 9, 2012, as amended and restated as of May 30, 2012, among Generac Power
Systems, Inc., Generac Acquisition Corp., the lenders party thereto, JPMorgan Chase Bank,
N.A., as Administrative Agent, and Bank of America, N.A. and Goldman Sachs Bank USA,
as syndication agents (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed with the SEC on June 4, 2013).
10.8 Guarantee and Collateral Agreement, dated as of February 9, 2012, as amended and
restated as of May 30, 2012, among Generac Holdings Inc., Generac Acquisition Corp.,
Generac Power Systems, Inc., certain subsidiaries of Generac Power Systems, Inc. and
JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to
Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on May 31,
2012).
10.9 First Amendment to Guarantee and Collateral Agreement dated as of May 31, 2013, among
Generac Holdings Inc., Generac Acquisition Corp., Generac Power Systems, Inc., certain
subsidiaries of Generac Power Systems, Inc. and JPMorgan Chase Bank, N.A., as
Administrative Agent (incorporated by reference to Exhibit 10.3 to the Company’s Current
Report on Form 8-K filed with the SEC on June 4, 2013).
108
Exhibits
Number
Description
10.10 Credit Agreement, dated as of May 30, 2012, among Generac Power Systems, Inc., its
Domestic Subsidiaries listed as Borrowers on the signature pages thereto, Generac
Acquisition Corp., the lenders party thereto, Bank of America, N.A. as Administrative
Agent, JPMorgan Chase Bank, N.A. and Goldman Sachs Bank USA, as syndication agents,
and Wells Fargo Bank, National Association, as Documentation Agent (incorporated by
reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC
on May 31, 2012).
10.11 Amendment No. 1 dated as of May 31, 2013, among Generac Power Systems, Inc., its
Domestic Subsidiaries listed as Borrowers on the signature pages thereto, Generac
Acquisition Corp., the lenders party thereto, Bank of America, N.A. as Administrative
Agent, JPMorgan Chase Bank, N.A. and Goldman Sachs Bank USA, as syndication agents,
and Wells Fargo Bank, National Association, as Documentation Agent (incorporated by
reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC
on June 4, 2013).
10.12 Amendment No. 2 dated as of May 29, 2015, among Generac Power Systems, Inc., its
Domestic Subsidiaries listed as Borrowers on the signature pages thereto, Generac
Acquisition Corp., the lenders party thereto, Bank of America, N.A. as Administrative
Agent, and the other agents named therein (incorporated by reference to Exhibit 10.1 of the
Company’s Current Report on Form 8-K filed with the SEC on June 1, 2015).
10.13
Second Amended and Restated Credit Agreement, dated as of June 12, 2018, among
Generac Power Systems, Inc., its Subsidiaries listed as Borrowers on the signature pages
thereto, Generac Acquisition Corp., the lenders party thereto, Bank of America, N.A. as
Administrative Agent, JPMorgan Chase Bank, N.A., as Syndication Agent, and Wells Fargo
Bank, National Association, as Documentation Agent (incorporated by reference to
Exhibit 10.2 of the Current Report on Form 8-K filed with the SEC on June 14, 2018).
10.14 Guarantee and Collateral Agreement, dated as of May 30, 2012, among Generac
Holdings Inc., Generac Acquisition Corp., Generac Power Systems, Inc., certain subsidiaries
of Generac Power Systems, Inc. and Bank of America, N.A., as Administrative Agent
(incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K
filed with the SEC on May 31, 2012).
10.15 First Amendment to Guarantee and Collateral Agreement dated as of May 31, 2013, among
Generac Holdings Inc., Generac Acquisition Corp., Generac Power Systems, Inc., certain
subsidiaries of Generac Power Systems, Inc. and Bank of America, N.A., as Administrative
Agent (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on
Form 8-K filed with the SEC on June 4, 2013).
10.16+ 2009 Executive Management Incentive Compensation Program (incorporated by reference to
Exhibit 10.46 of the Registration Statement on Form S-1 filed with the SEC on
December 17, 2009).
10.17+ Generac Holdings Inc. Amended and Restated 2010 Equity Incentive Plan (incorporated by
reference to Appendix A to the Definitive Proxy Statement on Schedule 14A of the
Company filed with the SEC on April 27, 2012)
10.18+ Generac Holdings Inc. Annual Performance Bonus Plan (incorporated by reference to
Exhibit 10.63 of the Registration Statement on Form S-1 filed with the SEC on January 25,
2010).
109
Exhibits
Number
Description
10.19+ Amended and Restated Employment Agreement, dated November 5, 2018, between Generac
and Aaron Jagdfeld (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly
Report on Form 10-Q filed with the SEC on November 6, 2018).
10.20 Form of Confidentiality, Non-Competition and Intellectual Property Agreement
(incorporated by reference to Exhibit 10.40 of the Registration Statement on Form S-1 filed
with the SEC on November 24, 2009).
10.21+ Form of Nonqualified Stock Option Award Agreement (incorporated by reference to
Exhibit 10.45 of the Registration Statement on Form S-1 filed with the SEC on January 25,
2010).
10.22+ Amended Form of Restricted Stock Award Agreement pursuant to the 2010 Equity
Incentive Plan (incorporated by reference to Exhibit 10.3 of the Quarterly Report on
Form 10-Q filed with the SEC on May 8, 2012).
10.23+ Amended Form of Nonqualified Stock Option Award Agreement pursuant to the 2010
Equity Incentive Plan (incorporated by reference to Exhibit 10.4 of the Quarterly Report on
Form 10-Q filed with the SEC on May 8, 2012).
10.24+ Amended Form of Restricted Stock Award Agreement with accelerated vesting pursuant to
the 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 of the Quarterly
Report on Form 10-Q filed with the SEC on May 8, 2012).
10.25+ Amended Form of Nonqualified Stock Option Award Agreement pursuant to the 2010
Equity Incentive Plan (incorporated by reference to Exhibit 10.24 of the Annual Report on
Form 10-K filed with the SEC on February 26, 2019).
10.26+ Amended Form of Restricted Stock Award Agreement pursuant to the 2010 Equity
Incentive Plan (incorporated by reference to Exhibit 10.25 of the Annual Report on
Form 10-K filed with the SEC on February 26, 2019).
10.27 Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.51 of
the Registration Statement on Form S-1 filed with the SEC on January 11, 2010).
10.28 Form of Officer Indemnification Agreement (incorporated by reference to Exhibit 10.52 of
the Registration Statement on Form S-1 filed with the SEC on January 11, 2010).
10.29+ Form of Performance Share Award Agreement (incorporated by reference to Exhibit 10.1 of
the Quarterly Report on Form 10-Q filed with the SEC on May 8, 2014).
10.30+ Amended Form of Performance Share Award Agreement pursuant to the 2010 Equity
Incentive Plan (incorporated by reference to Exhibit 10.29 of the Annual Report on
Form 10-K filed with the SEC on February 26, 2019).
10.31*+ Generac Holdings Inc. Non-Employee Director Compensation Policy
10.32+ Generac Power Systems, Inc. Executive Change in Control Policy, effective November 5,
2018 (incorporated by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q filed
with the SEC on November 6, 2018).
10.33+ Generac Holdings Inc. 2019 Equity Incentive Plan (incorporated by reference to Appendix A
to the Definitive Proxy Statement on Schedule 14A of the Company filed with the SEC on
April 26, 2019).
110
Exhibits
Number
Description
10.34+ Form of Restricted Stock Award Agreement pursuant to the Generac Holdings Inc. 2019
Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of the Quarterly Report on
Form 10-Q filed with the SEC on November 5, 2019).
10.35+ Form of Nonqualified Stock Option Award Agreement pursuant to the Generac
Holdings Inc. 2019 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 of the
Quarterly Report on Form 10-Q filed with the SEC on November 5, 2019).
10.36+ Form of Performance Share Unit Award Agreement pursuant to the Generac Holdings Inc.
2019 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 of the Quarterly
Report on Form 10-Q filed with the SEC on November 5, 2019).
21.1* List of Subsidiaries of Generac Holdings Inc.
23.1* Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
31.1* Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)
and 15d-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)
and 15d-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1** Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2** Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002.
101* The following financial information from the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2019, filed with the SEC on February 25, 2020,
formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) Consolidated
Balance Sheets at December 31, 2019 and December 31, 2018; (ii) Consolidated Statements
of Comprehensive Income for the Fiscal Years Ended December 31, 2019, December 31,
2018 and December 31, 2017; (iii) Consolidated Statements of Stockholders’ Equity for the
Fiscal Years Ended December 31, 2019, December 31, 2018 and December 31, 2017;
(iv) Consolidated Statements of Cash Flows for the Fiscal Years Ended December 31, 2019,
December 31, 2018 and December 31, 2017; (v) Notes to Consolidated Financial Statements.
104 Cover Page Interactive Data File (embedded within the inline XBRL document).
*
Filed herewith.
** Furnished herewith.
+ Indicates management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary
None.
111
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SIGNATURES
GENERAC HOLDINGS INC.
By:
/s/ AARON JAGDFELD
Aaron Jagdfeld
Chairman, President and Chief Executive Officer
Dated: February 25, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons and on behalf of the Registrant in the capacities and on the dates
indicated.
Signature
Title
Date
/s/ AARON JAGDFELD
Aaron Jagdfeld
Chairman, President and Chief
Executive Officer
February 25, 2020
/s/ YORK A. RAGEN
York A. Ragen
Chief Financial Officer and Chief
Accounting Officer
February 25, 2020
/s/ BENNETT MORGAN
Bennett Morgan
/s/ MARCIA J. AVEDON
Marcia J. Avedon
/s/ JOHN D. BOWLIN
John D. Bowlin
/s/ ROBERT D. DIXON
Robert D. Dixon
/s/ WILLIAM JENKINS
William Jenkins
Lead Director
February 25, 2020
Director
February 25, 2020
Director
February 25, 2020
Director
February 25, 2020
Director
February 25, 2020
112
Signature
Title
Date
/s/ ANDREW G. LAMPEREUR
Andrew G. Lampereur
Director
February 25, 2020
/s/ DAVID A. RAMON
David A. Ramon
/s/ KATHRYN ROEDEL
Kathryn Roedel
/s/ DOMINICK ZARCONE
Dominick Zarcone
Director
February 25, 2020
Director
February 25, 2020
Director
February 25, 2020
113
(This page has been left blank intentionally.)
GENERAC HOLDINGS INC. - BOARD OF DIRECTORS
Marcia J. Avedon (2)
Chief Human Resources, Marketing &
Communications Officer,
Trane Technologies (previously Ingersoll Rand, plc)
Director since 2019
John D. Bowlin (2)
Former President and Chief Executive
Officer, Miller Brewing Company
Director since 2006
Robert D. Dixon (1) (3)
Former Chief Executive Officer,
Natural Systems Utilities LLC
Director since 2012
EXECUTIVE OFFICERS
Aaron P. Jagdfeld (4)
President and Chief Executive Officer
Generac Holdings Inc.
Director since 2006
William “BJ” Jenkins (2)
President and Chief Executive Officer
Barracuda Networks
Director since 2017
Andrew G. Lampereur (1)
Former Executive Vice President and Chief
Financial Officer, Actuant Corporation
Director since 2014
Bennett Morgan (2) (3) (5)
Former President and Chief Operating Officer,
Polaris Industries Inc.
Director since 2013
David A. Ramon (1)
Former Chief Executive Officer
Diversified Maintenance
Director since 2010
Kathryn Roedel (3)
Former Executive Vice President and Chief Services
and Fulfillment Officer, Select Comfort Corporation
Director since 2016
Dominick Zarcone (1)
President and Chief Executive Officer
LKQ Corporation
Director since 2017
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Nominating and Corporate Governance Committee
(4) Executive Chairman
(5) Lead Director
Aaron P. Jagdfeld – 25 years of service
Chairman, President and Chief Executive Officer
Russell Minick – 9 years of service
Chief Marketing Officer
Patrick Forsythe – 12 years of service
Executive Vice President, Global Engineering
York A. Ragen – 14 years of service
Chief Financial Officer
Tom Pettit – 1 year of service
Chief Operations Officer
Raj Kanuru – 7 years of service
Executive Vice President, General Counsel & Secretary
Erik Wilde – 4 years of service
Executive Vice President, Industrial, Americas
GENERAC HOLDINGS INC. - SHAREHOLDER INFORMATION
STOCK EXCHANGE
Generac Holdings Inc. common
stock is listed on the New York
Stock Exchange under the ticker
symbol GNRC.
FORWARD-
LOOKING
STATEMENTS
This annual report
contains forward-
looking statements that
are subject to risks
and uncertainties. For
important information
about our use of forward-
looking statements
and limitations thereof,
please see Part I of our
Annual Report on Form
10-K for the year ended
December 31, 2019,
which is included with
this annual report.
ANNUAL MEETING
The 2020 annual meeting
of stockholders of Generac
Holdings Inc. will be held on
Thursday, June 18, 2020,
at 9:00 a.m. central time, at
Generac’s corporate office.
CORPORATE OFFICE
Generac Holdings Inc.
S45 W29290 Hwy. 59
Waukesha, WI 53189
262-544-4811
www.generac.com
TRANSFER AGENT
AND REGISTRAR
Computershare, Inc.
P.O. Box 43078
Providence, RI 02940-3078
United States of America
Telephone: 1-800-942-5909
Fax: (312) 601-2312
https://www-us.computershare.
com/investor/Contact
www.computershare.com/investor
INVESTOR RELATIONS
CONTACT
Michael Harris
Vice President – Corporate
Development & Investor Relations
Generac Holdings Inc.
S45 W29290 Hwy. 59
Waukesha, WI 53189
262-506-6064
investorrelations@generac.com
INDEPENDENT AUDITORS
Deloitte & Touche LLP
555 East Wells Street, Suite 1400
Milwaukee, WI 53202
FORM 10-K
Our annual report on Form 10-K
was filed with the Securities and
Exchange Commission and is
available online, or upon written
request to Generac Holdings Inc.
Investor Relations.
2
0
1
9
G
E
N
E
R
A
C
A
N
N
U
A
L
R
E
P
O
R
T
Generac Holdings Inc.
S45 W29290 Hwy. 59
Waukesha, WI 53189
1-888-GENERAC (1-888-436-3722)
©2020 Generac Holdings Inc. All rights reserved.