●

Net sales increased by 7.4% to $404.0 million as compared to $376.2 million in the prior-year fourth quarter.

-

Commercial & Industrial (C&I) product sales increased 17.1% to $185.0 million as compared to $157.9 million in the fourth quarter of 2013. The increase in sales was primarily driven by strength in oil & gas markets and the contributions from recent acquisitions, partially offset by a decline in shipments to certain telecom customers.

-

Residential product sales declined slightly to $194.9 million from $199.1 million for the fourth quarter of 2013, as the current-year quarter faced a strong prior-year comparison that still benefited from the afterglow period of demand from Superstorm Sandy. Residential product sales for the fourth quarter of 2014 improved 6.1% on a sequential basis from $183.7 million in the third quarter of 2014.

●

Net income during the fourth quarter of 2014 was $49.4 million, or $0.70 per share, as compared to $48.5 million, or $0.69 per share, for the same period of 2013. Adjusted net income, as defined in the accompanying reconciliation schedules, was $68.4 million, or $0.98 per share, as compared to $77.5 million, or $1.11 per share, in the fourth quarter of 2013.

●

Adjusted EBITDA, as defined in the accompanying reconciliation schedules, was $92.2 million as compared to $103.6 million in the fourth quarter last year.

●

Cash flow from operations in the fourth quarter of 2014 was $110.5 million as compared to $104.7 million in the prior year quarter. Free cash flow, as defined in the accompanying reconciliation schedules, was a quarterly record of $98.5 million as compared to $88.2 million in the fourth quarter of 2013.

●

Total liquidity at December 31, 2014 was strong with cash and cash equivalents of $189.8 million and approximately $150 million available on the Company’s ABL revolving credit facility. Total net debt to adjusted EBITDA, as defined in the accompanying reconciliation schedules, at the end of the fourth quarter was 2.7 times.

●

Net sales were $1.461 billion during 2014 as compared to $1.486 billion in 2013.

-

Residential product sales were $722.2 million as compared to $843.7 million in the prior year. The prior year benefited from approximately $140 million in incremental shipments as a result of satisfying the extended lead times that resulted from Superstorm Sandy, which did not repeat during 2014. Excluding this benefit in the prior year, residential product sales increased approximately 3%.

-

Commercial & Industrial product sales increased 14.4% to $652.2 million as compared to $569.9 million in 2013. The increase was primarily due to the contributions from recent acquisitions along with strength in oil & gas markets, partially offset by reduced capital spending with certain telecom customers and overall softness within Latin America.

●

Net income during 2014 was $174.6 million, or $2.49 per share, as compared to $174.5 million or $2.51 per share for 2013. Adjusted net income was $234.2 million, or $3.34 per share, as compared to $301.7 million, or $4.33 per share, in 2013.

●

Adjusted EBITDA for 2014 was $337.3 million as compared to $402.6 million last year.

●

Cash flow from operations during 2014 was $253.0 million as compared to $259.9 million in the prior year. Free cash flow was $218.3 million as compared to $229.2 million in 2013.

●

The Company acquired Pramac America, LLC in early September, resulting in the ownership of the Powermate trade name and the right to license the DeWalt brand name for certain residential engine powered tools. In addition, the Company acquired MAC, Inc. and its related entities in early October, a leading manufacturer of premium-grade commercial and industrial mobile heaters within the U.S. and Canada.

●

Uses of cash during 2014 included $34.7 million for capital expenditures, $61.2 million related to acquisitions and $87.0 million for the pre-payment of term loan debt, including a $25.0 million payment made during the fourth quarter.

●

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; and

●

changes in environmental, health and safety laws and regulations.

Three Months Ended December 31,

Year Ended December 31,

2014

2013

2014

2013

(Unaudited)

(Unaudited)

(Unaudited)

(Audited)

Net sales

Costs of goods sold

Gross profit

Operating expenses:

Selling and service

Research and development

General and administrative

Amortization of intangibles

Gain on remeasurement of contingent consideration

–

–

–

Total operating expenses

Income from operations

Other (expense) income:

Interest expense

Loss on extinguishment of debt

–

Investment income

Gain on change in contractual interest rate

–

–

–

Costs related to acquisition

–

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:

Dividends declared per share

$ –

$ –

Other comprehensive income (loss):

Amortization of unrealized loss on interest rate swaps

$ –

$ –

$ –

Foreign currency translation adjustment

Net unrealized gain (loss) on derivatives

Pension liability adjustment

Other comprehensive income (loss)

Comprehensive income

December 31,

2014

2013

(Unaudited)

(Audited)

Assets

Current assets:

Cash and cash equivalents

Restricted cash

–

Accounts receivable, less allowance for doubtful accounts of $2,275 at December 31, 2014 and $2,658 at December 31, 2013

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

Deferred financing costs, net

Trade names, net

Goodwill

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

Other long-term liabilities

Total liabilities

Stockholders’ equity:

Common stock, par value $0.01, 500,000,000 shares authorized, 69,122,271 and 68,767,367 shares issued at December 31, 2014 and 2013, respectively

Additional paid-in capital

Treasury stock, at cost, 198,312 and 163,458 shares at December 31, 2014 and 2013, respectively

Excess purchase price over predecessor basis

Retained earnings

Accumulated other comprehensive loss

Total stockholders’ equity

Total liabilities and stockholders’ equity

Year Ended December 31,

2014

2013

(Unaudited)

(Audited)

Operating activities

Net income

Adjustment 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

Amortization of unrealized loss on interest rate swaps

–

Loss on extinguishment of debt

Gain on change in contractual interest rate

–

Gain on remeasurement of contingent consideration

–

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

Proceeds from sale of business, net

–

Acquisition of business, net of cash acquired

Net cash used in investing activities

Financing activities

Proceeds from short-term borrowings

Proceeds from long-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

Proceeds from exercise of stock options

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information

Cash paid during the period

Interest

Income taxes

Net income to Adjusted EBITDA reconciliation

Three Months Ended December 31,

Year Ended December 31,

2014

2013

2014

2013

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net income

Interest expense

Depreciation and amortization

Income taxes provision

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

Non-cash share-based compensation expense (2)

Loss on extinguishment of debt (3)

–

Gain on change in contractual interest rate (4)

–

–

Transaction costs and credit facility fees (5)

Other

Adjusted EBITDA

(1) Includes losses (gains) on disposals of assets and unrealized mark-to-market adjustments on commodity contracts. Additionally, the year ended December 31, 2014 includes adjustments to certain earn-out obligations in connection with acquisitions ($4.9 million). A full description of these and the other reconciliation adjustments contained in these schedules is included in Generac's SEC filings.

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

(3) For the year ended December 31, 2013, relates to the May 2013 credit agreement refinancing and other debt prepayments, resulting in a loss on extinguishment of debt. For the three months and year ended December 31, 2014, relates to the write-off of original issue discount and capitalized debt issuance costs due to voluntary debt prepayments.

(4) Non-cash gain relating to a 25 basis point reduction in borrowing costs, effective second quarter 2014, as a result of the credit agreement leverage ratio falling below 3.0 times.

(5) 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 December 31,

Year Ended December 31,

2014

2013

2014

2013

(Unaudited)

(Unaudited)

(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 (6)

–

Gain on change in contractual interest rate (7)

–

–

Transaction costs and other purchase accounting adjustments (8)

Adjusted net income before provision for income taxes

Cash income tax expense (9)

Adjusted net income

Adjusted net income per common share - diluted:

Weighted average common shares outstanding - diluted:

(6) For the year ended December 31, 2013, relates to the May 2013 credit agreement refinancing and other debt prepayments, resulting in a loss on extinguishment of debt. For the three months and year ended December 31, 2014, relates to the write-off of original issue discount and capitalized debt issuance costs due to voluntary debt prepayments.

(7) Non-cash gain relating to a 25 basis point reduction in borrowing costs, effective second quarter 2014, as a result of the credit agreement leverage ratio falling below 3.0 times.

(8) Represents transaction costs incurred directly in connection with any investment, as defined in our credit agreement, equity issuance or debt issuance or refinancing. The year ended December 31, 2014 also includes certain purchase accounting adjustments and adjustments to certain earn-out obligations in connection with acquisitions ($4.9 million).

(9) Amounts for the twelve months ended December 31, 2014 and 2013 are based on actual cash income taxes paid during the full year ended 2014 and 2013, respectively, which equates to a cash income tax rate of 13.3% and 9.3%, respectively, for each year.

Three Months Ended December 31,

Year Ended December 31,

2014

2013

2014

2013

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Net cash provided by operating activities

Expenditures for property and equipment

Free Cash Flow

Year Ended December 31,

2014

2013

(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

Net debt to adjusted EBITDA ratio