Generac Reports Second Quarter 2023 Results

Generac Holdings Inc

WAUKESHA, Wis., Aug. 02, 2023 (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 second quarter ended June 30, 2023 and provided an update on its outlook for the full year 2023.

Second Quarter 2023 Highlights

• Net sales decreased 23% to $1.00 billion during the second quarter of 2023 as compared to $1.29 billion in the prior-year second quarter. Core sales growth, which excludes both the impact of acquisitions and foreign currency, decreased approximately 26%.

  • Residential product sales declined 44% to $499 million as compared to $896 million last year.

  • Commercial & Industrial (“C&I”) product sales increased 24% to $384 million as compared to $309 million in the prior year.

• Net income attributable to the Company during the second quarter was $45 million, or $0.70 per share, as compared to $156 million, or $2.21 per share, for the same period of 2022.

• Adjusted net income attributable to the Company, as defined in the accompanying reconciliation schedules, was $68 million, or $1.08 per share, as compared to $185 million, or $2.86 per share, in the second quarter of 2022.

• Adjusted EBITDA before deducting for noncontrolling interests, as defined in the accompanying reconciliation schedules, was $137 million, or 13.6% of net sales, as compared to $271 million, or 21.0% of net sales, in the prior year.

• Cash flow from operations was $83 million during the second quarter, as compared to $24 million in the prior year. Free cash flow, as defined in the accompanying reconciliation schedules, was $54 million as compared to $6 million in the second quarter of 2022. The increase in free cash flow was due to significantly lower working capital investment in the current year quarter, partially offset by lower operating earnings, higher interest payments, and higher capital expenditures.
  

“As expected, overall second quarter sales declined from a strong prior year comparable period that included the significant benefit of excess backlog reduction for home standby generators,” said Aaron Jagdfeld, President and Chief Executive Officer. “While leading indicators of end market demand remain strong and we continue to make progress in reducing field inventory levels, residential product sales were modestly lower than our expectations in the quarter as a softer consumer environment for home improvement impacted shipments of home standby generators and chore products. However, global C&I product shipments remained strong at all-time record levels and were better than expected with broad-based growth across nearly all regions and channels.”

Jagdfeld continued, “While our expectations for the consumer environment are now softer than previously projected, we believe the long-term mega-trends that are driving awareness for backup power solutions are as compelling as ever. Homeowners and businesses are increasingly sensitive to the growing energy supply-demand imbalances and intensifying impacts of extreme weather, and to address these opportunities, we are further investing in the build out of our suite of products and solutions to position ourselves as a leader in energy technology.”

Additional Second Quarter 2023 Consolidated Highlights

Gross profit margin was 32.8% as compared to 35.4% in the prior-year second quarter. This decline in margin was primarily due to the significant impact of unfavorable sales mix, partially offset by higher pricing and lower input costs.

Operating expenses increased $2.3 million, or 1.0%, as compared to the second quarter of 2022. The increase was primarily driven by increased employee and marketing costs and the impact of recurring operating expenses from recent acquisitions, mostly offset by lower variable operating expenses.

Provision for income taxes for the current year quarter was $15.9 million, or an effective tax rate of 25.9%, as compared to $45.8 million, or a 22.5% effective tax rate, for the prior year. The increase in the effective tax rate was primarily due to a lower benefit from equity compensation in the current year quarter as compared to the prior year.

Business Segment Results

Domestic Segment

Domestic segment total sales (including inter-segment sales) decreased 28% to $815.3 million as compared to $1.13 billion in the prior year quarter, with the impact of acquisitions contributing approximately 3% revenue growth for the quarter. The decline in core sales was driven by lower residential product shipments, primarily due to a decline in home standby and clean energy shipments, partially offset by growth in smart thermostat sales. The overall weakness in residential products was partially offset by continued strength in C&I products, highlighted by an increase in shipments to direct customers for “beyond standby” applications, industrial distributors, and the national rental equipment channel.

Adjusted EBITDA for the segment was $103.2 million, or 12.7% of total sales, as compared to $241.9 million in the prior year, or 21.5% of total sales. This margin decline was primarily driven by the significant impact of unfavorable sales mix and reduced operating leverage on lower shipments. The impact of acquisitions and continued investments for future growth also negatively affected margins during the quarter. These headwinds were partially offset by favorable price and cost benefits.

International Segment

International segment total sales (including inter-segment sales) increased 10% to $223.7 million as compared to $203.3 million in the prior year quarter, with the net impact of acquisitions and foreign currency contributing approximately 4% revenue growth for the quarter. The core sales growth for the segment was highlighted by strength in nearly all regions around the world.

Adjusted EBITDA for the segment, before deducting for noncontrolling interests, was $33.3 million, or 14.9% of total sales, as compared to $29.5 million, or 14.5% of total sales, in the prior year. This stronger margin performance was primarily driven by favorable price and cost benefits.

2023 Outlook Update

As a result of the softer-than-expected consumer environment, the Company now anticipates lower residential product sales during the second half relative to prior expectations. Partially offsetting this lower outlook, C&I product sales are now expected to grow at a mid-teens rate during 2023 compared to the previous guidance of a mid to high-single digit increase. Accordingly, the Company now anticipates its full-year 2023 net sales to decline between -10 to -12% as compared to the prior year, which includes approximately 2% of net favorable impact from acquisitions and foreign currency. This compares to the previous guidance range of a decline between -6 to -10%.

Additionally, due to the revised sales outlook, the Company now expects net income margin, before deducting for non-controlling interests, to be approximately 6.0 to 7.0% for the full-year 2023 compared to the previous guidance range of 7.5 to 8.5%. The corresponding EBITDA margin is now expected to be approximately 15.5 to 16.5% compared to the previous guidance range of 17.0 to 18.0%.

Operating and free cash flow generation are still expected to return to strong levels for the full year, with conversion of adjusted net income to free cash flow expected to be well over 100%.

Conference Call and Webcast

Generac management will hold a conference call at 10:00 a.m. EDT on Wednesday, August 2, 2023 to discuss second quarter 2023 operating results. The conference call can be accessed at the following link: https://register.vevent.com/register/BI782af2dcf8804d9491b4bc440ee60103. Individuals who wish to listen via telephone will be given dial-in information.

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 for 12 months.

About Generac

Generac is a leading energy technology company that provides backup and prime power systems for home and industrial applications, solar + battery storage solutions, smart home energy management devices and energy services, advanced power grid software platforms and engine- & battery-powered tools and equipment. Founded in 1959, Generac introduced the first affordable backup generator and later created the category of automatic home standby generator. The Company is committed to sustainable, cleaner energy products poised to revolutionize the 21st century electrical grid.

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;

• fluctuations in cost and quality of raw materials required to manufacture our products;

• availability of both labor and key components from our manufacturing operations and global supply chain, including single-sourced components and contract manufacturers, needed in producing our products;

• 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;

• the impact on our results of possible fluctuations in interest rates, foreign currency exchange rates, commodities, product mix, logistics costs and regulatory tariffs;

• difficulties we may encounter as our business expands globally or into new markets;

• our dependence on our distribution network;

• our ability to remain competitive by investing in, developing or adapting to changing technologies and manufacturing techniques, as well as protecting our intellectual property rights;

• loss of our key management and employees;

• increase in product and other liability claims or recalls;

• failures or security breaches of our networks, information technology systems, or connected products;

• changes in laws and regulations regarding environmental, health and safety, product compliance, or international trade that affect our products, operations, or customer demand;

• significant legal proceedings, claims, lawsuits or government investigations; and

• changes in durable goods spending by consumers and businesses or other macroeconomic conditions, impacting demand for our products.
  

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 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 2022 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

To supplement our condensed consolidated financial statements presented in accordance with U.S. GAAP, the Company provides the computation of Adjusted EBITDA attributable to the Company, which is defined as net income before noncontrolling interest adjusted for the following items: interest expense, depreciation expense, amortization of intangible assets, income tax expense, certain non-cash gains and losses including purchase accounting and contingent consideration adjustments, share-based compensation expense, losses on extinguishment of debt, certain transaction costs and credit facility fees, business optimization expenses, certain specific provisions, and adjusted EBITDA attributable to noncontrolling interests, as set forth in the reconciliation table below.

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 adjusted for the following items: 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 and other charges, certain specific provisions, 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
Senior 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 June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
Net sales	$	1,000,420			$	1,291,391			$	1,888,330			$	2,427,247
Costs of goods sold		671,999				834,406				1,287,410				1,609,514
Gross profit		328,421				456,985				600,920				817,733
Operating expenses:
Selling and service		115,743				120,066				216,431				218,309
Research and development		43,942				41,599				85,762				81,343
General and administrative		56,371				52,600				116,056				94,572
Amortization of intangibles		26,393				25,876				52,216				51,930
Total operating expenses		242,449				240,141				470,465				446,154
Income from operations		85,972				216,844				130,455				371,579
Other (expense) income:
Interest expense		(25,160	)			(10,235	)			(48,155	)			(19,789	)
Investment income		941				92				1,629				169
Loss on extinguishment of debt		-				(3,743	)			-				(3,743	)
Other, net		(331	)			505				(497	)			751
Total other expense, net		(24,550	)			(13,381	)			(47,023	)			(22,612	)
Income before provision for income taxes		61,422				203,463				83,432				348,967
Provision for income taxes		15,907				45,826				23,756				74,434
Net income		45,515				157,637				59,676				274,533
Net income (loss) attributable to noncontrolling interests		317				1,278				2,048				4,316
Net income attributable to Generac Holdings Inc.	$	45,198			$	156,359			$	57,628			$	270,217
Net income attributable to common shareholders per common share - basic:	$	0.70			$	2.24			$	0.76			$	3.85
Weighted average common shares outstanding - basic:		61,721,614				63,662,510				61,645,341				63,607,711
Net income attributable to common shareholders per common share - diluted:	$	0.70			$	2.21			$	0.75			$	3.78
Weighted average common shares outstanding - diluted:		62,348,184				64,713,748				62,429,911				64,799,002
Comprehensive income attributable to Generac Holdings Inc.	$	69,060			$	120,864			$	104,422			$	243,229

Generac Holdings Inc.
Condensed Consolidated Balance Sheets
(U.S. Dollars in Thousands, Except Share and Per Share Data)
(Unaudited)
	June 30,				December 31,
		2023				2022
Assets
Current assets:
Cash and cash equivalents	$	192,768			$	132,723
Accounts receivable, less allowance for credit losses of $29,610 and $27,664 at June 30, 2023 and December 31, 2022, respectively		540,332				522,458
Inventories		1,436,619				1,405,384
Prepaid expenses and other current assets		103,334				121,783
Total current assets		2,273,053				2,182,348
Property and equipment, net		505,026				467,604
Customer lists, net		200,478				206,987
Patents and technology, net		438,148				454,757
Other intangible assets, net		34,515				41,719
Tradenames, net		223,229				227,251
Goodwill		1,430,283				1,400,880
Deferred income taxes		13,953				12,746
Operating lease and other non-current assets		203,286				175,170
Total assets	$	5,321,971			$	5,169,462
Liabilities and stockholders’ equity
Current liabilities:
Short-term borrowings	$	77,889			$	48,990
Accounts payable		454,727				446,050
Accrued wages and employee benefits		53,417				45,741
Accrued product warranty		74,025				89,141
Other accrued liabilities		254,700				349,389
Current portion of long-term borrowings and finance lease obligations		22,069				12,733
Total current liabilities		936,827				992,044
Long-term borrowings and finance lease obligations		1,523,310				1,369,085
Deferred income taxes		114,990				125,691
Operating lease and other long-term liabilities		319,400				312,916
Total liabilities		2,894,527				2,799,736
Redeemable noncontrolling interest		5,688				110,471
Stockholders’ equity:
Common stock, par value $0.01, 500,000,000 shares authorized, 73,097,016 and 72,701,257
shares issued at June 30, 2023 and December 31, 2022, respectively		732				728
Additional paid-in capital		1,053,759				1,016,138
Treasury stock, at cost, 10,858,348 and 11,284,350 shares at June 30, 2023 and December 31, 2022, respectively		(779,892	)			(808,491	)
Excess purchase price over predecessor basis		(202,116	)			(202,116	)
Retained earnings		2,363,015				2,316,224
Accumulated other comprehensive loss		(16,216	)			(65,102	)
Stockholders’ equity attributable to Generac Holdings Inc.		2,419,282				2,257,381
Noncontrolling interests		2,474				1,874
Total stockholders’ equity		2,421,756				2,259,255
Total liabilities and stockholders’ equity	$	5,321,971			$	5,169,462

Generac Holdings Inc.
Condensed Consolidated Statements of Cash Flows
(U.S. Dollars in Thousands)
(Unaudited)
	Six Months Ended June 30,
		2023				2022
Operating activities
Net income	$	59,676			$	274,533
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation		28,982				25,629
Amortization of intangible assets		52,216				51,930
Amortization of original issue discount and deferred financing costs		1,921				1,287
Loss on extinguishment of debt		-				3,743
Deferred income taxes		(14,152	)			(61,625	)
Share-based compensation expense		20,379				16,562
Gain on disposal of assets		(532	)			(587	)
Other noncash (gains) charges		735				(2,037	)
Net changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(15,535	)			(143,308	)
Inventories		(15,897	)			(158,232	)
Other assets		16,333				1,637
Accounts payable		(2,449	)			(54,583	)
Accrued wages and employee benefits		6,694				(11,876	)
Other accrued liabilities		(72,743	)			86,616
Excess tax benefits from equity awards		(1,040	)			(15,996	)
Net cash provided by operating activities		64,588				13,693
Investing activities
Proceeds from sale of property and equipment		1,801				1,883
Proceeds from sale of investment		-				1,308
Proceeds from beneficial interests in securitization transactions		1,472				1,843
Contribution to equity method investment		(6,627	)			(10,229	)
Purchase of long-term investment		(2,000	)			-
Expenditures for property and equipment		(53,900	)			(46,503	)
Acquisition of business, net of cash acquired		(16,188	)			(11,421	)
Net cash used in investing activities		(75,442	)			(63,119	)
Financing activities
Proceeds from short-term borrowings		45,989				216,681
Proceeds from long-term borrowings		317,975				935,000
Repayments of short-term borrowings		(21,125	)			(208,244	)
Repayments of long-term borrowings and finance lease obligations		(160,557	)			(538,401	)
Payment of contingent acquisition consideration		(4,979	)			-
Payment of debt issuance costs		-				(10,330	)
Purchase of additional ownership interest		(104,844	)			(375	)
Taxes paid related to equity awards		(9,186	)			(38,347	)
Proceeds from the exercise of stock options		6,223				10,383
Net cash provided by financing activities		69,496				366,367
Effect of exchange rate changes on cash and cash equivalents		1,403				2,860
Net increase in cash and cash equivalents		60,045				319,801
Cash and cash equivalents at beginning of period		132,723				147,339
Cash and cash equivalents at end of period	$	192,768			$	467,140

Generac Holdings Inc.
Segment Reporting and Product Class Information
(U.S. Dollars in Thousands)
(Unaudited)
		Total Sales by Reportable Segment
		Three Months Ended June 30, 2023											Three Months Ended June 30, 2022
		External Net Sales			Intersegment Sales				Total Sales				External Net Sales			Intersegment Sales				Total Sales
Domestic		$	804,539		$	10,713			$	815,252			$	1,107,431		$	18,987			$	1,126,418
International			195,881			27,842				223,723				183,960			19,334				203,294
Intercompany elimination			-			(38,555	)			(38,555	)			-			(38,321	)			(38,321	)
Total net sales		$	1,000,420		$	-			$	1,000,420			$	1,291,391		$	-			$	1,291,391
		Total Sales by Reportable Segment
		Six Months Ended June 30, 2023											Six Months Ended June 30, 2022
		External Net Sales			Intersegment Sales				Total Sales				External Net Sales			Intersegment Sales				Total Sales
Domestic		$	1,508,927		$	26,320			$	1,535,247			$	2,072,105		$	29,257			$	2,101,362
International			379,403			60,784				440,187				355,142			33,659				388,801
Intercompany elimination			-			(87,104	)			(87,104	)			-			(62,916	)			(62,916	)
Total net sales		$	1,888,330		$	-			$	1,888,330			$	2,427,247		$	-			$	2,427,247
		External Net Sales by Product Class
		Three Months Ended June 30,							Six Months Ended June 30,
			2023			2022				2023				2022
Residential products		$	498,587		$	896,013			$	917,450			$	1,672,957
Commercial & industrial products			384,353			309,348				747,343				588,077
Other			117,480			86,030				223,537				166,213
Total net sales		$	1,000,420		$	1,291,391			$	1,888,330			$	2,427,247
		Adjusted EBITDA
		Three Months Ended June 30, 2023							Six Months Ended June 30,
			2023			2022				2023				2022
Domestic		$	103,202		$	241,928			$	170,863			$	412,349
International			33,343			29,534				65,757				55,526
Total adjusted EBITDA (1)		$	136,545		$	271,462			$	236,620			$	467,875
(1) 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 June 30,								Six Months Ended June 30,
					2023				2022				2023				2022
Net income attributable to Generac Holdings Inc.				$	45,198			$	156,359			$	57,628			$	270,217
Net income attributable to noncontrolling interests					317				1,278				2,048				4,316
Net income					45,515				157,637				59,676				274,533
Interest expense					25,160				10,235				48,155				19,789
Depreciation and amortization					41,247				39,098				81,198				77,559
Provision for income taxes					15,907				45,826				23,756				74,434
Non-cash write-down and other adjustments (1)					(4,152	)			4,607				(7,312	)			(3,185	)
Non-cash share-based compensation expense (2)					10,045				7,735				20,379				16,562
Loss on extinguishment of debt (3)					-				3,743				-				3,743
Transaction costs and credit facility fees (4)					1,149				1,592				2,240				2,581
Business optimization and other charges (5)					1,760				1,590				2,860				2,749
Provision for regulatory charges (6)					-				-				5,800				-
Other					(86	)			(601	)			(132	)			(890	)
Adjusted EBITDA					136,545				271,462				236,620				467,875
Adjusted EBITDA attributable to noncontrolling interests					520				3,742				3,653				7,167
Adjusted EBITDA attributable to Generac Holdings Inc.				$	136,025			$	267,720			$	232,967			$	460,708
(1) Includes gains/losses on the disposition of assets and sales of certain investments, unrealized mark-to-market adjustments on commodity contracts, certain foreign currency related adjustments, and certain purchase accounting and contingent consideration 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 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.
(5) Represents severance and other restructuring charges.
(6) The amount recorded in the first quarter 2023 represents a provision of $5.8 million for a matter with the Consumer Product Safety Commission (CPSC) concerning the imposition of civil fines for allegedly failing to timely submit a report under the Consumer Product Safety Act (CPSA) in relation to certain portable generators that were subject to a voluntary recall previously announced on July 29, 2021. On May 25, 2023, the Company and the CPSC entered into a final mutual settlement agreement resolving this matter.
Net income to Adjusted net income reconciliation
				Three Months Ended June 30,								Six Months Ended June 30,
					2023				2022				2023				2022
Net income attributable to Generac Holdings Inc.				$	45,198			$	156,359			$	57,628			$	270,217
Net income attributable to noncontrolling interests					317				1,278				2,048				4,316
Net income					45,515				157,637				59,676				274,533
Amortization of intangible assets					26,393				25,876				52,216				51,930
Amortization of deferred finance costs and original issue discount					967				650				1,921				1,287
Loss on extinguishment of debt (3)					-				3,743				-				3,743
Transaction costs and other purchase accounting adjustments (7)					669				5,710				1,387				(46	)
(Gain)/loss attributable to business or asset dispositions (8)					-				-				(119	)			(229	)
Business optimization and other charges (5)					1,760				1,590				2,860				2,749
Provision for regulatory charges (6)					-				-				5,800				-
Tax effect of add backs (9)					(7,459	)			(8,448	)			(14,590	)			(15,764	)
Adjusted net income					67,844				186,758				109,151				318,203
Adjusted net income (loss) attributable to noncontrolling interests					317				1,678				2,048				5,168
Adjusted net income attributable to Generac Holdings Inc.				$	67,527			$	185,080			$	107,103			$	313,035
Adjusted net income attributable to Generac Holdings Inc. per
common share - diluted:				$	1.08			$	2.86			$	1.72			$	4.83
Weighted average common shares outstanding - diluted:					62,348,184				64,713,748				62,429,911				64,799,002
(7) 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 and contingent consideration adjustments.
(8) Represents gains and losses attributable to the disposition of a business or assets occurring in other than ordinary course, as defined in our credit agreement.
(9) In the third quarter of 2022, management determined that certain add-backs in 2022 should be reported net of tax. Add-backs in the second quarter of 2022 were not reported net of tax, and we reported adjusted net income attributable to Generac Holdings Inc. for the three months ended June 30, 2022 of $193,528 or $2.99 and six months ended June 30, 2022 of $328,799 or $5.07. Taking into account the tax effect on certain add-backs, the revised reported adjusted net income attributable to Generac Holdings Inc. for the three months ended June 30, 2022 is $185,080 or $2.86, and six months ended June 30, 2022 is $313,035 or $4.83.
Free Cash Flow Reconciliation
				Three Months Ended June 30,								Six Months Ended June 30,
					2023				2022				2023				2022
Net cash provided by operating activities				$	83,147			$	23,835			$	64,588			$	13,693
Proceeds from beneficial interests in securitization transactions					677				270				1,472				1,843
Expenditures for property and equipment					(29,923	)			(18,303	)			(53,900	)			(46,503	)
Free cash flow				$	53,901			$	5,802			$	12,160			$	(30,967	)