Generac (US:GNRC)2021-02-22 16:00Investment and Growth - The company has invested in manufacturing capacity through automation and acquisitions, ensuring sufficient capacity to meet near-to-intermediate term business goals[63]. - The company has made significant acquisitions, including Pika Energy and Neurio Technologies, to bolster its capabilities in energy storage and monitoring markets[64]. - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[1]. - The Company executed several acquisitions to support its strategic plan, including Selmec in June 2018, Captiva in February 2019, Neurio in March 2019, and Pika in April 2019, enhancing its product offerings and market reach[313][314]. - In July 2020, the Company acquired West Coast Energy Systems, improving its service capabilities in the west coast markets for both commercial and residential products[318]. - The Company acquired Enbala for a purchase price of $41,982 on October 7, 2020, funded solely through cash on hand[354]. - The acquisition of Energy Systems in July 2020 and Mean Green in September 2020 had a combined purchase price of $22,815, also funded through cash on hand[357]. Financial Performance - Net sales for the year ended December 31, 2020, were $2,485.2 million, an increase of 12.7% from $2,204.3 million in 2019[304]. - Gross profit for 2020 was $957.7 million, representing a gross margin of 38.5%, compared to $797.8 million in 2019[304]. - Net income attributable to Generac Holdings Inc. for 2020 was $350.6 million, up 39.1% from $252.0 million in 2019[305]. - Operating income for 2020 was $479.1 million, a 28.7% increase from $372.2 million in 2019[305]. - The company reported a basic net income per share of $5.61 for 2020, compared to $4.09 in 2019, reflecting a 37.0% increase[305]. - Pro forma net sales for 2020 were $2,512,017, compared to $2,204,336 in 2019, reflecting an increase of 13.9%[367]. - Pro forma net income attributable to Generac Holdings Inc. for 2020 was $339,317, compared to $239,925 in 2019, representing an increase of 41.4%[367]. - The company’s total revenue for 2020 was $1,432,565,000, up from $1,084,383,000 in 2019, indicating a growth of approximately 32.1%[310]. Research and Development - The research and development team consists of over 500 engineers focused on power generation, energy storage, and grid services, aiming to enhance product competitiveness and reduce manufacturing costs[64]. - Research and development expenses increased to $80.3 million in 2020, a rise of 17.3% from $68.4 million in 2019, reflecting the company's commitment to innovation[305]. - Research and development expenditures for the years ended December 31, 2020, 2019, and 2018 were $80,251, $68,394, and $50,019 respectively, showing a significant increase of 17.1% from 2019 to 2020[342]. Market Position and Competition - The company has a diverse product offering in the generator market, focusing on standby, portable, and mobile generators, which provides a competitive edge[69]. - The company faces competition from major players like Caterpillar and Cummins in the power generation and energy storage markets[72]. - The company is focused on clean energy products, which has introduced new competitors in the market[70]. Financial Risks and Liabilities - The company is exposed to market risks from foreign currency exchange rates, commodity prices, and interest rates, and uses financial instruments to mitigate these risks[269]. - The company is exposed to fluctuating commodity prices, particularly for steel, aluminum, and copper, which may impact gross margins if prices increase without corresponding selling price adjustments[272][274]. - All outstanding debt under the Term Loan and ABL Facility was subject to floating interest rate risk, with a total notional amount of $1,500 thousand across various interest rate swap contracts[276]. - A hypothetical change in the LIBOR interest rate of 100 basis points would have changed annual cash interest expense by approximately $3.3 million in 2020[276]. - The fair value of interest rate swaps was a liability of $29.9 million as of December 31, 2020[276]. Assets and Liabilities - Total assets as of December 31, 2020, were $3,235.4 million, compared to $2,665.7 million at the end of 2019, marking a growth of 21.4%[302]. - Total liabilities increased to $1,779.0 million in 2020 from $1,571.6 million in 2019, indicating a rise of 13.2%[302]. - The company’s total long-term borrowings stood at $845,911 as of December 31, 2020, slightly up from $840,150 in 2019[408]. - The company reported an accumulated other comprehensive loss of $(34,254) as of December 31, 2020, reflecting significant unrealized losses on cash flow hedges[378]. Employee and Operational Insights - The company has a workforce of 6,797 employees, with 3,705 directly involved in manufacturing[80]. - The company is committed to employee health and safety, with programs designed to support wellness and compliance with safety standards[76]. - The Company recorded a product warranty liability of $59,218 as of December 31, 2020, up from $49,316 in 2019, reflecting a 20% increase year-over-year[405]. Tax and Compliance - The company's provision for income taxes for 2020 was $98,973, compared to $67,299 in 2019, reflecting an increase of 47.3%[423]. - The effective tax rate for 2020 was 22.2%, compared to 21.1% in 2019[432]. - The unrecognized tax benefit increased to $7,613 as of December 31, 2020, from $6,720 in 2019[429].