Generac Reports Record Third Quarter 2020 Results

Rhea-AI Summary

Generac Holdings Inc. (GNRC) reported a strong third quarter in 2020, with net sales at $701 million, a 17% increase from $601 million in Q3 2019. Residential product sales surged by 37% to $459 million, while C&I product sales declined by 18% to $176 million. Net income rose to $115 million ($1.82 per share) from $76 million ($1.18 per share) year-over-year. The company raised its full-year revenue growth guidance to 10-12%, up from 5-8%. Gross profit margin improved to 39.4%. This success is attributed to increased demand for home standby generators amid rising power outages, driven by extreme weather conditions.

Positive

• Net sales up 17% to $701 million in Q3 2020.
• Residential product sales surged 37% to $459 million.
• Net income increased to $115 million, or $1.82 per share.
• Free cash flow rose to $148 million compared to $101 million in 2019.
• Gross profit margin improved to 39.4%, up 320 basis points year-over-year.
• Full-year revenue growth guidance increased to 10-12%.

Negative

• C&I product sales decreased by 18% to $176 million.
• International segment sales declined by 11.1% to $94.5 million.

All-time record results driven by unprecedented residential product demand; 2020 outlook further increased due to continued strength from key mega-trends

WAUKESHA, Wis., Oct. 28, 2020 (GLOBE NEWSWIRE) -- Generac Holdings Inc. (NYSE: GNRC) (“Generac” or the “Company”), a leading global designer and manufacturer of energy technology solutions and other power products, today reported financial results for its third quarter ended September 30, 2020 and provided an update on its outlook for the full year 2020.     

Third Quarter 2020 Highlights

• Net sales increased approximately 17% to $701 million during the third quarter of 2020 as compared to $601 million in the prior-year third quarter. Core sales growth, which excludes both the impact of acquisitions and foreign currency, increased approximately 16%.
  • Residential product sales increased 37% to $459 million as compared to $335 million last year.
  • Commercial & Industrial (“C&I”) product sales decreased 18% to $176 million as compared to $215 million in the prior year.  
• Net income attributable to the Company during the third quarter was $115 million, or $1.82 per share, as compared to $76 million, or $1.18 per share, for the same period of 2019.
• Adjusted net income attributable to the Company, as defined in the accompanying reconciliation schedules, was $133 million, or $2.08 per share, as compared to $90 million, or $1.43 per share, in the third quarter of 2019.
• Adjusted EBITDA before deducting for noncontrolling interests, as defined in the accompanying reconciliation schedules, was $179 million, or 25.5% of net sales, as compared to $126 million, or 21.0% of net sales, in the prior year.
• Cash flow from operations was $155 million as compared to $111 million in the prior year. Free cash flow, as defined in the accompanying reconciliation schedules, was $148 million as compared to $101 million for 2019. The increase was primarily due to higher sales volumes and resulting net income.
• The Company is increasing its full-year 2020 sales growth guidance to now be approximately 10 to 12% of year-over-year growth, which is an increase from the baseline growth guidance of 5 to 8% previously expected. Adjusted EBITDA margin, before deducting for non-controlling interests, is now expected to be approximately 22.5 to 23.0%, which is an increase from the 21.5 to 22.0% previously expected.
• On July 1^st, 2020, the Company closed on the acquisition of Energy Systems, its industrial distributor located in Northern California.
• As previously announced on September 1^st, 2020, the Company acquired the assets of Mean Green Products, LLC. Headquartered in Ross, Ohio, Mean Green is a leading manufacturer of an innovative commercial line of battery powered turf care products.
• On October 7^th, we closed on the acquisition of Enbala Power Networks Inc. (“Enbala”). Based in Denver, Colorado, Enbala is one of the leading providers of distributed energy optimization and control software needed to ensure the operational stability of the world’s power grids.

“Third quarter revenue and adjusted EBITDA far exceeded all-time records led by dramatic growth in sales of home standby and portable generators,” said Aaron Jagdfeld, President and Chief Executive Officer. “Power outage activity was much higher during the quarter driven by more extreme and severe weather. When combined with the “Home as a Sanctuary” trend that we began seeing at the onset of the COVID-19 pandemic, demand for home standby generators reached unprecedented levels during the quarter. Shipments of our PWRcell energy storage systems recovered during the third quarter and increased significantly from lower levels in the second quarter, which were impacted by a slowdown in solar installations due to the pandemic. As expected, our C&I products were also negatively impacted, however, we realized some meaningful benefits from our recent cost-reduction efforts that were initiated in the second quarter.”

Jagdfeld continued, “We announced several strategic acquisitions in recent months that enable us to enter exciting new markets. In July, we closed on the acquisition of our industrial distributor in Northern California, Energy Systems, to enhance our ability to serve this very large, rapidly growing power generation market. In September, we entered the battery-powered commercial mower market with Mean Green Products, which will help accelerate the electrification of our chore products. In October, we entered the emerging market for “grid services” through the acquisition of Enbala Power Networks, which plays into another secular trend involving the evolution of the traditional electric utility model and further advances our capabilities as an energy technology solutions company.”

Additional Third Quarter 2020 Consolidated Highlights

Gross profit margin improved 320 basis points to 39.4% compared to 36.2% in the prior-year third quarter. The increase was primarily driven by favorable sales mix from significantly higher shipments of residential products and a lower mix of C&I products.

Operating expenses increased $8.6 million, or 7.6%, as compared to the third quarter of 2019. The increase was primarily driven by incremental spend related to clean energy products and higher incentive compensation. These increases were partially offset by lower advertising and promotional costs, along with a reduction in operating expenses for the International segment as a result of restructuring actions initiated in the second quarter of 2020.

Provision for income taxes for the current year quarter was $32.1 million, or an effective tax rate of 21.8%, as compared to $20.1 million, or a 21.1% effective tax rate, for the prior year. The increase in effective tax rate was primarily due to the prior year having more favorable discrete tax items compared to the current year quarter, which was partially offset by an overall more favorable mix of pretax income in the current year quarter.

Business Segment Results

Domestic Segment

Domestic segment sales increased 22.6% to $606.9 million as compared to $494.8 million in the prior year quarter. As a result of the heightened awareness of the need for backup power, shipments of home standby generators experienced very strong growth during the quarter. In addition, significant power outage activity also drove elevated shipments of portable generators and aftermarket service parts. Shipments of the recently launched PWRcell energy storage system also had a strong impact on growth following the expected recovery in the solar market during the third quarter. This residential products growth was partially offset by continued weakness in sales of C&I mobile products following the onset of the COVID-19 pandemic and lower oil prices.

Adjusted EBITDA for the segment was $171.4 million, or 28.2% of net sales, as compared to $120.8 million in the prior year, or 24.4% of net sales. This margin increase was driven by favorable sales mix and higher operating leverage from the significant revenue growth.

International Segment

International segment sales decreased 11.1% to $94.5 million as compared to $106.3 million in the prior year quarter. The decline was driven by continued broad-based weakness in global C&I product demand caused by the COVID-19 pandemic.  

Adjusted EBITDA for the segment, before deducting for noncontrolling interests, was $7.4 million, or 7.9% of net sales, as compared to $5.1 million, or 4.8% of net sales, in the prior year. Decreased operating leverage on the lower sales volumes was more than offset by lower operating expenses as a result of the restructuring activities initiated in the second quarter of 2020.

Updated 2020 Outlook

Given the higher power outage environment thus far in second half of 2020, along with increased production rates in the fourth quarter for home standby generators, the Company is raising its prior guidance for revenue growth for full-year 2020, and now expects an increase of approximately 10 to 12% compared to the prior year. This compares to the previous baseline guidance of 5 to 8% revenue growth.

As a result of the higher revenue expectations, net income margin, before deducting for non-controlling interests, is now expected to be approximately 13.0 to 13.5% for the full-year 2020, which is an increase from the prior expectation of between 12.0% to 12.5%. The corresponding adjusted EBITDA margin is now expected to be approximately 22.5 to 23.0%, which is an increase from the 21.5% to 22.0% previously expected.

Conference Call and Webcast

Generac management will hold a conference call at 10:00 a.m. EDT on Wednesday, October 28, 2020 to discuss third quarter 2020 operating results. The conference call can be accessed by dialing (866) 415-3113 (domestic) or +1 (678) 509-7544 (international) and entering passcode 2669599.

The conference call will also be webcast simultaneously on Generac's website (http://www.generac.com), accessed under the Investor Relations link. The webcast link will be made available on the Company’s website prior to the start of the call within the Events section of the Investor Relations website.

Following the live webcast, a replay will be available on the Company's website. A telephonic replay will also be available approximately two hours after the call and can be accessed by dialing (855) 859-2056 (domestic) or +1 (404) 537-3406 (international) and entering passcode 2669599. The telephonic replay will be available for 7 days.
        
About Generac

Founded in 1959, Generac is a leading global designer and manufacturer of a wide range of energy technology solutions and other power products.   As an industry leader serving residential, light commercial, and industrial markets, Generac's products and solutions are available globally through a broad network of independent dealers, distributors, retailers, e-commerce partners, wholesalers and equipment rental companies, as well as sold direct to certain end user customers.  

Forward-looking Information

Certain statements contained in this news release, as well as other information provided from time to time by Generac Holdings Inc. or its employees, may contain forward looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. Forward-looking statements give Generac's current expectations and projections relating to the Company's financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate," "estimate," "expect," "forecast," "project," "plan," "intend," "believe," "confident," "may," "should," "can have," "likely," "future," “optimistic” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

Any such forward looking statements are not guarantees of performance or results, and involve risks, uncertainties (some of which are beyond the Company's control) and assumptions. Although Generac believes any forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect Generac's actual financial results and cause them to differ materially from those anticipated in any forward-looking statements, including:

• frequency and duration of power outages impacting demand for our products;
• availability, cost and quality of raw materials and key components from our global supply chain and labor needed in producing our products;
• the impact on our results of possible fluctuations in interest rates, foreign currency exchange rates, commodities, product mix and regulatory tariffs;
• the possibility that the expected synergies, efficiencies and cost savings of our acquisitions will not be realized, or will not be realized within the expected time period;
• the risk that our acquisitions will not be integrated successfully;
• difficulties we may encounter as our business expands globally or into new markets;
• our dependence on our distribution network;
• our ability to invest in, develop or adapt to changing technologies and manufacturing techniques;
• loss of our key management and employees;
• increase in product and other liability claims or recalls;
• failures or security breaches of our networks or information technology systems;
• changes in environmental, health and safety, or product compliance laws and regulations affecting our products or operations; and
• the duration and scope of the impacts of the COVID-19 pandemic are uncertain and may or will continue to adversely affect our operations, supply chain, distribution, and demand for certain of our products and services.
  

Should one or more of these risks or uncertainties materialize, Generac's actual results may vary in material respects from those projected in any forward-looking statements. In the current environment, some of the above factors have materialized and may or will continue to be impacted by the COVID-19 pandemic, which may cause actual results to vary from these forward-looking statements. A detailed discussion of these and other factors that may affect future results is contained in Generac's filings with the U.S. Securities and Exchange Commission (“SEC”), particularly in the Risk Factors section of the 2019 Annual Report on Form 10-K and in its periodic reports on Form 10-Q. Stockholders, potential investors and other readers should consider these factors carefully in evaluating the forward-looking statements.

Any forward-looking statement made by Generac in this press release speaks only as of the date on which it is made.  Generac undertakes no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Non-GAAP Financial Metrics

Core Sales

The Company references core sales to further supplement Generac's condensed consolidated financial statements presented in accordance with U.S. GAAP. Core sales excludes the impact of acquisitions and fluctuations in foreign currency translation. Management believes that core sales facilitates easier and more meaningful comparison of net sales performance with prior and future periods.

Adjusted EBITDA

The computation of adjusted EBITDA attributable to the Company and adjusted EBITDA margin is based on the definition of EBITDA contained in Generac's credit agreement dated as of May 31, 2013, as amended. To supplement the Company's condensed consolidated financial statements presented in accordance with U.S. GAAP, Generac provides a summary to show the computation of adjusted EBITDA, which excludes the impact of noncontrolling interests, taking into account certain charges and gains that were recognized during the periods presented.

Adjusted Net Income

To further supplement Generac's condensed consolidated financial statements presented in accordance with U.S. GAAP, the Company provides a summary to show the computation of adjusted net income attributable to the Company. Adjusted net income attributable to the Company is defined as net income before noncontrolling interests and provision for income taxes adjusted for the following items: cash income tax expense, amortization of intangible assets, amortization of deferred financing costs and original issue discount related to the Company's debt, intangible impairment charges, certain transaction costs and other purchase accounting adjustments, losses on extinguishment of debt, business optimization expenses, certain other non-cash gains and losses, and adjusted net income attributable to non-controlling interests.

Free Cash Flow

In addition, we reference free cash flow to further supplement Generac's condensed consolidated financial statements presented in accordance with U.S. GAAP. Free cash flow is defined as net cash provided by operating activities, plus proceeds from beneficial interests in securitization transactions, less expenditures for property and equipment, and is intended to be a measure of operational cash flow taking into account additional capital expenditure investment into the business.

The presentation of this additional information is not meant to be considered in isolation of, or as a substitute for, results prepared in accordance with U.S. GAAP.  Please see the accompanying Reconciliation Schedules and our SEC filings for additional discussion of the basis for Generac's reporting of Non-GAAP financial measures, which includes why the Company believes these measures provide useful information to investors and the additional purposes for which management uses the non-GAAP financial information.

SOURCE: Generac Holdings Inc.

CONTACT:
Michael W. Harris
Vice President – Corporate Development & Investor Relations
(262) 506-6064
InvestorRelations@generac.com

Generac Holdings Inc.
Condensed Consolidated Statements of Comprehensive Income
(U.S. Dollars in Thousands, Except Share and Per Share Data)
(Unaudited)
	Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Net sales	$	701,355			$	601,135			$	1,724,118			$	1,613,404
Costs of goods sold		425,206				383,618				1,066,666				1,037,874
Gross profit		276,149				217,517				657,452				575,530
Operating expenses:
Selling and service		60,901				59,356				178,566				158,954
Research and development		20,658				17,603				58,762				48,906
General and administrative		31,061				27,596				88,732				80,016
Amortization of intangibles		7,892				7,406				23,340				19,999
Total operating expenses		120,512				111,961				349,400				307,875
Income from operations		155,637				105,556				308,052				267,655
Other (expense) income:
Interest expense		(8,096	)			(10,704	)			(25,081	)			(31,428	)
Investment income		301				523				1,921				1,889
Other, net		(557	)			(414	)			(2,687	)			(1,868	)
Total other expense, net		(8,352	)			(10,595	)			(25,847	)			(31,407	)
Income before provision for income taxes		147,285				94,961				282,205				236,248
Provision for income taxes		32,050				20,064				59,967				53,876
Net income		115,235				74,897				222,238				182,372
Net (loss) income attributable to noncontrolling interests		265				(677	)			(3,337	)			(21	)
Net income attributable to Generac Holdings Inc.	$	114,970			$	75,574			$	225,575			$	182,393
Net income attributable to Generac Holdings Inc. per common share - basic:	$	1.86			$	1.20			$	3.59			$	2.95
Weighted average common shares outstanding - basic:		62,353,473				61,973,447				62,244,872				61,878,500
Net income attributable to Generac Holdings Inc. per common share - diluted:	$	1.82			$	1.18			$	3.51			$	2.92
Weighted average common shares outstanding - diluted:		63,761,380				62,770,592				63,546,132				62,519,205
Comprehensive income attributable to Generac Holdings Inc.	$	123,887			$	64,904			$	187,548			$	161,828

Generac Holdings Inc.
Condensed Consolidated Balance Sheets
(U.S. Dollars in Thousands, Except Share and Per Share Data)
(Unaudited)
	September 30,				December 31,
		2020				2019
Assets
Current assets:
Cash and cash equivalents	$	513,944			$	322,883
Accounts receivable, less allowance for credit losses		398,240				319,538
Inventories		532,952				522,024
Prepaid expenses and other assets		35,200				31,384
Total current assets		1,480,336				1,195,829
Property and equipment, net		321,360				316,976
Customer lists, net		47,702				55,552
Patents and technology, net		73,260				85,546
Other intangible assets, net		9,216				8,259
Tradenames, net		145,977				148,377
Goodwill		815,624				805,284
Deferred income taxes		3,596				2,933
Operating lease and other assets		77,004				46,913
Total assets	$	2,974,075			$	2,665,669
Liabilities and stockholders’ equity
Current liabilities:
Short-term borrowings	$	44,800			$	58,714
Accounts payable		272,745				261,977
Accrued wages and employee benefits		52,915				41,361
Other accrued liabilities		182,377				132,629
Current portion of long-term borrowings and finance lease obligations		3,421				2,383
Total current liabilities		556,258				497,064
Long-term borrowings and finance lease obligations		841,341				837,767
Deferred income taxes		105,520				96,328
Operating lease and other long-term liabilities		177,515				140,432
Total liabilities		1,680,634				1,571,591
Redeemable noncontrolling interest		63,545				61,227
Stockholders’ equity:
Common stock, par value $0.01, 500,000,000 shares authorized, 72,011,902 and 71,667,726
shares issued at September 30, 2020 and December 31, 2019, respectively		720				717
Additional paid-in capital		518,610				498,866
Treasury stock, at cost		(331,513	)			(324,551	)
Excess purchase price over predecessor basis		(202,116	)			(202,116	)
Retained earnings		1,306,530				1,084,383
Accumulated other comprehensive loss		(62,039	)			(24,917	)
Stockholders’ equity attributable to Generac Holdings Inc.		1,230,192				1,032,382
Noncontrolling interests		(296	)			469
Total stockholders’ equity		1,229,896				1,032,851
Total liabilities and stockholders’ equity	$	2,974,075			$	2,665,669

Generac Holdings Inc.
Condensed Consolidated Statements of Cash Flows
(U.S. Dollars in Thousands)
(Unaudited)
	Nine Months Ended September 30,
	2020				2019
Operating activities
Net income	$	222,238			$	182,372
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		26,747				22,842
Amortization of intangible assets		23,340				19,999
Amortization of original issue discount and deferred financing costs		1,940				3,597
Deferred income taxes		15,433				19,514
Share-based compensation expense		14,327				11,477
Other non-cash charges		6,414				557
Net changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(85,474	)			(45,543	)
Inventories		(14,604	)			27,190
Other assets		2,543				1,488
Accounts payable		11,624				(83,174	)
Accrued wages and employee benefits		11,793				(7,517	)
Other accrued liabilities		38,211				(17,092	)
Excess tax benefits from equity awards		(6,222	)			(1,908	)
Net cash provided by operating activities		268,310				133,802
Investing activities
Proceeds from sale of property and equipment		26				83
Proceeds from beneficial interests in securitization transactions		1,998				2,036
Expenditures for property and equipment		(33,940	)			(45,447	)
Acquisition of business, net of cash acquired		(22,815	)			(120,863	)
Net cash used in investing activities		(54,731	)			(164,191	)
Financing activities
Proceeds from short-term borrowings		198,087				68,802
Proceeds from long-term borrowings		297				–
Repayments of short-term borrowings		(210,854	)			(45,437	)
Repayments of long-term borrowings and finance lease obligations		(3,584	)			(3,110	)
Payment of contingent acquisition consideration		(4,000	)			–
Cash dividends paid to noncontrolling interest of subsidiary		–				(285	)
Taxes paid related to equity awards		(13,533	)			(5,749	)
Proceeds from the exercise of stock options		11,991				7,957
Net cash (used in) provided by financing activities		(21,596	)			22,178
Effect of exchange rate changes on cash and cash equivalents		(922	)			(233	)
Net increase (decrease) in cash and cash equivalents		191,061				(8,444	)
Cash and cash equivalents at beginning of period		322,883				224,482
Cash and cash equivalents at end of period	$	513,944			$	216,038

Generac Holdings Inc.
Segment Reporting and Product Class Information
(U.S. Dollars in Thousands)
(Unaudited)
		Net Sales
		Three Months Ended September 30,						Nine Months Ended September 30,
Reportable Segments			2020			2019			2020			2019
Domestic (1)		$	606,875		$	494,810		$	1,443,680		$	1,272,840
International (1)			94,480			106,325			280,438			340,564
Total net sales		$	701,355		$	601,135		$	1,724,118		$	1,613,404
Product Classes
Residential products		$	458,877		$	335,029		$	1,057,848		$	821,233
Commercial & industrial products			176,200			214,905			503,156			654,458
Other			66,278			51,201			163,114			137,713
Total net sales		$	701,355		$	601,135		$	1,724,118		$	1,613,404
		Adjusted EBITDA
		Three Months Ended September 30,						Nine Months Ended September 30,
			2020			2019			2020			2019
Domestic (1)		$	171,359		$	120,833		$	374,065		$	305,747
International (1)			7,419			5,120			13,877			19,220
Total adjusted EBITDA (2)		$	178,778		$	125,953		$	387,942		$	324,967
(1) In the fourth quarter of 2019, management determined that the Latin American export operations of the legacy Generac business (GPS LATAM) should have been included in the International reportable segment. Previously, GPS LATAM was reported in the Domestic segment, in amounts that were not material. To reflect this change, management has chosen to correct the net sales and adjusted EBITDA by segment as follows: For the three and nine months ended September 30, 2019, net sales of $3,353 and $10,509, and adjusted EBITDA of $384 and $976, respectively, were moved from the Domestic segment to the International segment.
(2) See reconciliation of Adjusted EBITDA to Net income attributable to Generac Holdings Inc. on the following reconciliation schedule.

Generac Holdings Inc.
Reconciliation Schedules
(U.S. Dollars in Thousands, Except Share and Per Share Data)
(Unaudited)
Net income to Adjusted EBITDA reconciliation
				Three Months Ended September 30,								Nine Months Ended September 30,
					2020				2019				2020				2019
Net income attributable to Generac Holdings Inc.				$	114,970			$	75,574			$	225,575			$	182,393
Net (loss) income attributable to noncontrolling interests					265				(677	)			(3,337	)			(21	)
Net income					115,235				74,897				222,238				182,372
Interest expense					8,096				10,704				25,081				31,428
Depreciation and amortization					17,168				15,494				50,087				42,841
Provision for income taxes					32,050				20,064				59,967				53,876
Non-cash write-down and other adjustments (1)					477				347				1,868				673
Non-cash share-based compensation expense (2)					4,353				3,549				14,327				11,477
Transaction costs and credit facility fees (3)					568				358				1,160				2,047
Business optimization and other charges (4)					531				567				12,503				809
Other					300				(27	)			711				(556	)
Adjusted EBITDA					178,778				125,953				387,942				324,967
Adjusted EBITDA attributable to noncontrolling interests					920				909				950				3,722
Adjusted EBITDA attributable to Generac Holdings Inc.				$	177,858			$	125,044			$	386,992			$	321,245
(1) Includes gains/losses on disposals of assets, unrealized mark-to-market adjustments on commodity contracts, and certain 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 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.
(4) For the three and nine months ended September 30, 2020, represents severance, non-cash asset write-downs, and other charges to address the impact of the COVID-19 pandemic and decline in oil prices. For the three and nine months ended September 30, 2019, represents severance and other charges related to the consolidation of certain of our facilities.
Net income to Adjusted net income reconciliation
				Three Months Ended September 30,								Nine Months Ended September 30,
					2020				2019				2020				2019
Net income attributable to Generac Holdings Inc.				$	114,970			$	75,574			$	225,575			$	182,393
Net (loss) income attributable to noncontrolling interests					265				(677	)			(3,337	)			(21	)
Net income					115,235				74,897				222,238				182,372
Provision for income taxes					32,050				20,064				59,967				53,876
Income before provision for income taxes					147,285				94,961				282,205				236,248
Amortization of intangible assets					7,892				7,406				23,340				19,999
Amortization of deferred finance costs and original issue discount					654				1,221				1,940				3,597
Transaction costs and other purchase accounting adjustments (5)					381				165				612				1,373
Business optimization and other charges (4)					531				567				12,503				809
Adjusted net income before provision for income taxes					156,743				104,320				320,600				262,026
Cash income tax expense (6)					(23,620	)			(15,083	)			(44,842	)			(39,698	)
Adjusted net income					133,123				89,237				275,758				222,328
Adjusted net income attributable to noncontrolling interests					198				(738	)			(725	)			958
Adjusted net income attributable to Generac Holdings Inc.				$	132,925			$	89,975			$	276,483			$	221,370
Adjusted net income per common share attributable to Generac Holdings Inc. - diluted:				$	2.08			$	1.43			$	4.35			$	3.54
Weighted average common shares outstanding - diluted:					63,761,380				62,770,592				63,546,132				62,519,205
(5) 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.
(6) Amounts for the three and nine months ended September 30, 2020 are now based on an anticipated cash income tax rate of approximately 16% for the year ending December 31, 2020. Amounts for the three and nine months ended September 30, 2019 were based on an anticipated cash income tax rate of approximately 17% for the year ended December 31, 2019. Cash income tax expense for the respective periods is based on the projected taxable income and corresponding cash tax rate for the full year after considering the effects of current and deferred income tax items, and is calculated for each respective period by applying the derived full year cash tax rate to the period’s pretax income.
Free Cash Flow Reconciliation
				Three Months Ended September 30,								Nine Months Ended September 30,
					2020				2019				2020				2019
Net cash provided by operating activities				$	155,196			$	111,188			$	268,310			$	133,802
Proceeds from beneficial interests in securitization transactions					674				640				1,998				2,036
Expenditures for property and equipment					(7,608	)			(11,071	)			(33,940	)			(45,447	)
Free cash flow				$	148,262			$	100,757			$	236,368			$	90,391
GAAP Earnings Per Share
				Three Months Ended September 30,								Nine Months Ended September 30,
					2020				2019				2020				2019
Numerator
Net income attributable to Generac Holdings Inc.				$	114,970			$	75,574			$	225,575			$	182,393
Redeemable noncontrolling interest redemption value adjustment					811				(1,485	)			(2,281	)			191
Net income attributable to common shareholders				$	115,781			$	74,089			$	223,294			$	182,584
Denominator
Weighted average shares, basic					62,353,473				61,973,447				62,244,872				61,878,500
Dilutive effect of stock compensation awards					1,407,907				797,145				1,301,260				640,705
Diluted shares					63,761,380				62,770,592				63,546,132				62,519,205
Net income attributable to common shareholders per share
Basic				$	1.86			$	1.20			$	3.59			$	2.95
Diluted				$	1.82			$	1.18			$	3.51			$	2.92

FAQ

What were Generac's third quarter 2020 financial results?

Generac reported net sales of $701 million, a 17% increase, with net income rising to $115 million.

How did residential product sales perform in Q3 2020 for GNRC?

Residential product sales increased by 37% to $459 million in Q3 2020.

What is Generac's updated revenue growth outlook for 2020?

Generac has raised its full-year revenue growth guidance to 10-12%, up from 5-8%.

What impact did the COVID-19 pandemic have on Generac's C&I products?

C&I product sales decreased 18% year-over-year due to the pandemic's effects.

How much free cash flow did Generac generate in Q3 2020?

Generac generated free cash flow of $148 million, an increase from $101 million in Q3 2019.