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Generac Provides Update On Third Quarter 2012 Results And Raises Outlook For Full-Year 2012

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.

Reconciliations to GAAP Financial Metrics

Adjusted EBITDA

The computation of adjusted EBITDA is based on the definition of EBITDA contained in Generac's credit agreement, dated as of May 30, 2012. To supplement the Company's condensed consolidated financial statements presented in accordance with US GAAP, Generac provides a summary to show the computation of adjusted EBITDA, taking into account certain charges and gains that were taken during the periods presented.

Adjusted Net Income

To further supplement Generac's condensed consolidated financial statements presented in accordance with US GAAP, the Company provides a summary to show the computation of adjusted net income. Adjusted net income is defined as net income before provision (benefit) for income taxes adjusted for the following items: cash income tax (expense) benefit, 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, and certain non-cash gains and losses.

Unlevered Free Cash Flow

In addition, we reference unlevered free cash flow to further supplement Generac's condensed consolidated financial statements presented in accordance with US GAAP. Unlevered free cash flow is defined as net cash provided by operating activities less expenditures for property and equipment plus cash interest expense. This additional financial metric is intended to be a measure of operational cash flow excluding the impact of the Company’s cash debt service costs and 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 US GAAP. Please see our SEC filings for additional discussion of the basis for Generac's reporting of Non-GAAP financial measures.
Generac Holdings Inc.
Reconciliation Schedules
(Dollars in Thousands, Except Share and Per Share Data)
       
Anticipated net income to Adjusted EBITDA reconciliation
Three Months Ended September 30, 2012 Year Ended December 31, 2012
Low High Low High
(unaudited) (unaudited) (unaudited) (unaudited)
 
Net income $ 21,500 $ 25,000 $ 71,000 $ 75,000
Interest expense 17,900 17,000 51,000 50,000
Depreciation and amortization 15,200 14,600 55,500 55,000
Income taxes provision 14,200 15,400 46,000 48,000
Non-cash share-based compensation expense (1) 3,000 2,800 11,500 11,000
Loss on extinguishment of debt - - 15,000 14,500
Transaction costs and credit facility fees (2) - - 2,000 1,500
Other   200       200     1,000       1,000  
Adjusted EBITDA $ 72,000     $ 75,000   $ 253,000     $ 256,000  
 
(1) Includes share-based compensation expense to account for stock options, restricted stock and other stock awards over their respective vesting periods.
 
(2) 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.
 
Anticipated net income to Adjusted net income reconciliation
Three Months Ended September 30, 2012 Year Ended December 31, 2012
Low High Low High
(unaudited) (unaudited) (unaudited) (unaudited)
 
Net income $ 21,500 $ 25,000 $ 71,000 $ 75,000
Provision for income taxes   14,200       15,400     46,000       48,000  
Income before provision for income taxes 35,700 40,400 117,000 123,000
Amortization of intangible assets 13,000 12,600 47,000 46,000
Amortization of deferred financing costs and original issue discount 1,700 1,500 4,400 4,000
Transaction costs and other purchase accounting adjustments (3) 200 - 2,100 1,700
Loss on extinguishment of debt   -       -     15,000       14,500  
Adjusted net income before provision for income taxes 50,600 54,500 185,500 189,200
Cash income tax expense   (1,100 )     (1,500 )   (2,100 )     (2,300 )
Adjusted net income $ 49,500     $ 53,000   $ 183,400     $ 186,900  
 
Adjusted net income per common share - diluted: $ 0.72 $ 0.77 $ 2.65 $ 2.70
 
Weighted average common shares outstanding - diluted: 68,900,000 68,850,000 69,300,000 69,100,000
 
(3) Represents transaction costs and other purchase accounting adjustments incurred directly in connection with any investment, as defined in our credit agreement, equity issuance or debt issuance or refinancing.
 
 
Anticipated unlevered free cash flow reconciliation

Year Ended December 31,
2012 2011
(unaudited)
 
Net cash provided by operating activities $ 185,000 $ 169,712
Expenditures for property and equipment   (19,000 )     (12,060 )
Free cash flow $ 166,000 $ 157,652
Cash interest   34,000       24,262  
Unlevered free cash flow $ 200,000     $ 181,914  
 

SOURCE: Generac Holdings Inc.

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