●

Net sales were $311.8 million during the first quarter of 2015 as compared to $342.0 million in the prior-year first quarter.

-

Residential product sales were $156.8 million during the first quarter as compared to $164.0 million in the prior-year quarter, primarily due to lower portable generator shipments resulting from a decline in power outage severity compared to the prior year.

-

Commercial & Industrial (C&I) product sales were $133.8 million during the first quarter as compared to $157.4 million in the prior-year quarter, primarily due to a decline in shipments to telecom national account customers and, to a lesser extent, oil & gas markets.

●

Net income during the first quarter of 2015 was $19.7 million, or $0.28 per share, as compared to $34.7 million, or $0.50 per share, for the same period of 2014. Adjusted net income, as defined in the accompanying reconciliation schedules, was $34.1 million, or $0.49 per share, as compared to $50.7 million, or $0.72 per share, in the first quarter of 2014.

●

Adjusted EBITDA, as defined in the accompanying reconciliation schedules, was $57.1 million as compared to $77.5 million in the first quarter last year.

●

Cash flow from operations in the first quarter of 2015 was $25.3 million as compared to $36.4 million in the prior year quarter. Free cash flow, as defined in the accompanying reconciliation schedules, was $18.7 million as compared to $31.4 million in the first quarter of 2014.

●

For the trailing four quarters, including the first quarter of 2015, net sales were $1.431 billion; net income was $159.6 million; adjusted EBITDA was $316.9 million; cash flow from operations was $241.9 million; and free cash flow was $205.6 million.

●

During the first quarter of 2015, the Company made a voluntary pre-payment of term loan debt of $50 million. Total liquidity at March 31, 2015 was strong with cash and cash equivalents on hand of $150.1 million and approximately $150 million available on the Company’s ABL revolving credit facility. Total net debt to adjusted EBITDA, as defined in the accompanying reconciliation schedules, at the end of the first quarter was 2.8 times.

●

demand for Generac products;

●

frequency and duration of power outages;

●

availability, cost and quality of raw materials and key components used in producing Generac products;

●

the impact on our results of possible fluctuations in interest rates and foreign currency exchange rates;

●

the possibility that the expected synergies, efficiencies and cost savings of our acquisitions will not be realized, or will not be realized within the expected time period;

●

the risk that our acquisitions will not be integrated successfully;

●

difficulties Generac may encounter as its business expands globally;

●

competitive factors in the industry in which Generac operates;

●

Generac's dependence on its distribution network;

●

Generac's ability to invest in, develop or adapt to changing technologies and manufacturing techniques;

●

loss of key management and employees;

●

increase in product and other liability claims or recalls; and

●

changes in environmental, health and safety laws and regulations.

Generac Holdings Inc.

Condensed Consolidated Statements of Comprehensive Income

(U.S. Dollars in Thousands, Except Share and Per Share Data)

(Unaudited)

Three Months Ended March 31,

2015

2014

Net sales

Costs 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

Other (expense) income:

Interest expense

Investment income

Loss on extinguishment of debt

–

Other, net

Total other expense, net

Income before provision for income taxes

Provision for income taxes

Net income

Net income per common share - basic:

Weighted average common shares outstanding - basic:

Net income per common share - diluted:

Weighted average common shares outstanding - diluted:

Comprehensive income

Generac Holdings Inc.

Condensed Consolidated Balance Sheets

(U.S. Dollars in Thousands, Except Share and Per Share Data)

March 31,

December 31,

2015

2014

(Unaudited)

(Audited)

Assets

Current assets:

Cash and cash equivalents

Accounts receivable, less allowance for doubtful accounts

Inventories

Deferred income taxes

Prepaid expenses and other assets

Total current assets

Property and equipment, net

Customer lists, net

Patents, net

Other intangible assets, net

Trade names, net

Goodwill

Deferred financing costs, net

Deferred income taxes

Other assets

Total assets

Liabilities and Stockholders’ Equity

Current liabilities:

Short-term borrowings

Accounts payable

Accrued wages and employee benefits

Other accrued liabilities

Current portion of long-term borrowings and capital lease obligations

Total current liabilities

Long-term borrowings and capital lease obligations

Deferred income taxes

Other long-term liabilities

Total liabilities

Stockholders’ equity:

Common stock, par value $0.01, 500,000,000 shares authorized, 69,405,617 and 69,122,271 shares issued at March 31, 2015 and December 31, 2014, respectively

Additional paid-in capital

Treasury stock, at cost

Excess purchase price over predecessor basis

Retained earnings

Accumulated other comprehensive loss

Total stockholders’ equity

Total liabilities and stockholders’ equity

Generac Holdings Inc.

Condensed Consolidated Statements of Cash Flows

(U.S. Dollars in Thousands)

(Unaudited)

Three Months Ended March 31,

2015

2014

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

Amortization of deferred financing costs

Loss on extinguishment of debt

–

Provision for losses on accounts receivable

Deferred income taxes

Loss on disposal of property and equipment

Share-based compensation expense

Net changes in operating assets and liabilities:

Accounts receivable

Inventories

Other assets

Accounts payable

Accrued wages and employee benefits

Other accrued liabilities

Excess tax benefits from equity awards

Net cash provided by operating activities

Investing Activities

Proceeds from sale of property and equipment

Expenditures for property and equipment

Acquisition of business

–

Net cash used in investing activities

Financing Activities

Proceeds from short-term borrowings

Repayments of short-term borrowings

Repayments of long-term borrowings and capital lease obligations

Payment of debt issuance costs

–

Cash dividends paid

Taxes paid related to the net share settlement of equity awards

Excess tax benefits from equity awards

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Generac Holdings Inc.

Reconciliation Schedules

(U.S. Dollars in Thousands, Except Share and Per Share Data)

Net income to Adjusted EBITDA reconciliation

Three Months Ended March 31,

2015

2014

(unaudited)

(unaudited)

Net income

Interest expense

Depreciation and amortization

Provision for income taxes

Non-cash write-down and other adjustments (1)

Non-cash share-based compensation expense (2)

Loss on extinguishment of debt (3)

Transaction costs and credit facility fees (4)

Other

Adjusted EBITDA

(1) Includes losses on disposals of assets, unrealized mark-to-market adjustments on commodity contracts and foreign currency related adjustments. A full description of these and the other reconciliation adjustments contained in these schedules is included in Generac's SEC filings.

(2) Represents share-based compensation expense to account for stock options, restricted stock and other stock awards over their respective vesting periods.

(3) Represents the write-off of original issue discount and capitalized debt issuance costs due to a voluntary debt prepayment.

(4) Represents transaction costs incurred directly in connection with any investment, as defined in our credit agreement, equity issuance or debt issuance or refinancing, together with certain fees relating to our senior secured credit facilities.

Net income to Adjusted net income reconciliation

Three Months Ended March 31,

2015

2014

(unaudited)

(unaudited)

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

Loss on extinguishment of debt (5)

Transaction costs and other purchase accounting adjustments (6)

Adjusted net income before provision for income taxes

Cash income tax expense (7)

Adjusted net income

Adjusted net income per common share - diluted:

Weighted average common shares outstanding - diluted:

(5) Represents the write-off of original issue discount and capitalized debt issuance costs due to a voluntary debt prepayment.

(6) Represents transaction costs incurred directly in connection with any investment, as defined in our credit agreement, equity issuance or debt issuance or refinancing and certain purchase accounting adjustments.

(7) Amount for the three months ended March 31, 2015 is based on an anticipated cash income tax rate of approximately 17% for the full year-ended 2015. Amount for the three months ended March 31, 2014 is based on an anticipated cash income tax rate of approximately 19% for the full year-ended 2014.

Free cash flow reconciliation

Three Months Ended March 31,

2015

2014

(unaudited)

(unaudited)

Net cash provided by operating activities

Expenditures for property and equipment

Free cash flow

LTM March 31,

2015

(unaudited)

2014 net cash provided by operating activities, as reported

Add: March 2015 net cash provided by operating activities, as reported

Less: March 2014 net cash provided by operating activities, as reported

LTM net cash provided by operating activities

2014 expenditures for property and equipment, as reported

Include: March 2015 expenditures for property and equipment, as reported

Exclude: March 2014 expenditures for property and equipment, as reported

LTM expenditures for property and equipment

Free cash flow

LTM March 31,

2015

(unaudited)

2014 Adjusted EBITDA, as reported

Add: March 2015 Adjusted EBITDA, as reported

Less: March 2014 Adjusted EBITDA, as reported

Adjusted EBITDA

Net Debt to Adjusted EBITDA Ratio

March 31,

March 31,

2015

2014

(Unaudited)

(Unaudited)

Short-term borrowings

Current portion of long-term borrowings and capital lease obligations

Long-term borrowings and capital lease obligations

Less: Cash

Net debt

Adjusted EBITDA (LTM)

Net debt to adjusted EBITDA ratio