Generac Holdings (GNRC) 10-K risk factor changes: FY2019 vs FY2018

_Demand for_ _the majority of_ _our products is significantl__y affected by unpredictable_ [removed: _power-outage_] [added: _power_ _outage_] _activity_ _that can lead to substantial variations in, and uncertainties regarding, our financial results from period to period._

Sales of our products are subject to consumer buying patterns, and demand for the majority of our products is affected by power outage events caused by thunderstorms, hurricanes, ice storms, [removed: blackouts] [added: blackouts, public safety power shutoffs,] and other power grid reliability issues.

The lack of major [removed: power-outage] [added: power outage] events and fluctuations to the baseline levels of [removed: power-outage] [added: power outage] activity are part of managing our business, and these fluctuations could have an adverse effect on our net sales and profits.

_Decreases in the availability and quality, or increases in the cost, of raw [removed: materials, key components and labor we] [added: materials__,_ _key components_ _and labor_ _we] use could materially reduce our earnings._

Also, our ability to continue to obtain quality materials and components is subject to the continued reliability and viability of our suppliers, including in some cases, suppliers who are the sole source of certain important [removed: components.][added: components, including diesel engines.]

Also, our ability to successfully realize our growth strategy is dependent in part on our ability to identify, attract and retain new distributors at all layers of our distribution platform, [added: including increasing the number of energy storage distributors,] and we cannot be certain that we will be successful in these efforts.

Our products are subject to extensive statutory and regulatory requirements governing, among other things, emissions, noise, [removed: and] [added: labeling, transport,] product content, [added: and data privacy,] including standards imposed by the EPA, CARB and other regulatory agencies around the world.

Additionally, the United Kingdom’s [removed: status on] [added: exit from] EU membership, and discussions regarding its exit from the EU, [removed: has] [added: have] caused and may continue to cause significant volatility in global stock markets, currency exchange rate fluctuations and global economic uncertainty.

If we determine these have become [removed: impaired, net] [added: impaired,_ _our_ _net] income could be materially adversely affected._

At December 31, [removed: 2018,] [added: 2019,] goodwill and other indefinite-lived intangibles totaled [removed: $891.8] [added: $933.6] million.

Over the past [removed: three] [added: four] years, we have implemented a new ERP system for a majority of our business as part of our ongoing efforts to improve and strengthen our operational and financial processes and our reporting systems.

Our IT [removed: systems] [added: systems, our connected products,] and our confidential information may be vulnerable to damage or intrusion from a variety of attacks including computer viruses, worms or other malicious software programs.

The risk of such attacks may increase as we integrate newly acquired [removed: companies.][added: companies or develop new connected products and related software.]

These attacks pose a risk to the security of [removed: the] [added: our] products, systems and networks [added: and those] of our customers, suppliers and third-party service providers, as well as to the confidentiality of our information and the integrity and availability of our data.

While we attempt to mitigate these risks through board oversight, controls, due diligence, employee training and communication, third party intrusion testing, system hardening, email and web filters, regular patching, [removed: surveillance] [added: surveillance, encryption,] and other measures, we remain vulnerable to information security [removed: threats.][added: threats]

Despite the precautions we take, an intrusion or infection of our systems [added: or connected products] could result in the disruption of our business, or a loss of proprietary or confidential information.

Similarly, an attack on our IT systems [added: or connected products] could result in theft or disclosure of trade secrets or other intellectual [removed: property or] [added: property,] a breach of confidential customer or employee [removed: information.][added: information, or product failure or misuse.]

While we may change this policy at some point in the future, we cannot assure [added: you] that we will make such a change.

As of December 31, [removed: 2018] [added: 2019] we had total indebtedness of [removed: $924.0] [added: $898.9] million.

While we maintain interest rate swaps covering a portion of our outstanding debt, our interest expense could increase if interest rates increase because debt under our credit facilities bears interest at a variable rate [removed: once above a certain] [added: based on] LIBOR [removed: floor.][added: or other base rate.]

Also, the availability of renewable energy mandates and investment tax credits and other subsidies can have an impact on the demand for energy storage systems.

For example, in December 2019, a strain of coronavirus was reported to have surfaced in Wuhan, China, resulting in temporary closures or production delays at certain of our suppliers.

At this point, the extent to which the coronavirus may impact our results is uncertain.

Also, as we increase our connectivity with our products and customers, we may be required to comply with additional data privacy and cybersecurity regulations.

For example, starting in 2018 and continuing through 2019, we experienced increased tariffs on many of our products and product components, although these tariffs did not ultimately have a material adverse effect on our results due to the implementation of various mitigation efforts in conjunction with our supply chain and end market partners.

Refer to the Critical Accounting Policies in Item 7 of this Annual Report on Form 10-K for further information regarding the Company’s process for evaluating its goodwill for impairment.

_Certain current favorable tax attributes may no longer be realized in the future, resulting in less cash on hand available to invest in other business activities._

As of December 31, 2019, we had approximately $225 million of tax-deductible goodwill and intangible asset amortization remaining from our acquisition by CCMP Capital Advisors, LLC in 2006 that we expect to generate aggregate cash tax savings of approximately $57 million through 2021, assuming continued profitability of our U.S. business and a combined federal and state tax rate of 25.3%.

The recognition of the tax benefit associated with these assets for tax purposes is expected to be $122 million annually in 2020 and $102 million in 2021, which generates annual cash tax savings of $31 million in 2020 and $26 million in 2021.

Based on current business plans, we believe that our cash tax obligations through 2021 will be significantly reduced by these tax attributes, after which our cash tax obligation will increase.

Other domestic acquisitions have resulted in additional tax deductible goodwill and intangible assets that will generate tax savings, but are not material to the Company’s consolidated financial statements.

In connection with our term loan amendment in December 2019, language was added to the agreement to include a benchmark replacement rate, selected by the administrative agent and the borrower, as a replacement to LIBOR that would take affect at the time LIBOR ceases.

The Company plans to work with its lenders in the near future to amend other LIBOR based debt agreements to add a replacement rate should the use of LIBOR cease.

[removed: We are a leading global designer and manufacturer of a wide range of] [added: The Company provides] power generation [removed: equipment] [added: equipment, energy storage systems,] and other power products serving the residential, light commercial and industrial markets.

Power generation is [removed: our primary] [added: a key] focus, which differentiates us from our main competitors that also have broad operations outside of the power equipment market.

Business Drivers and Operational [removed: Factors][added: Factors]

Our performance is affected by the demand for reliable power generation products, [removed: mobile product solutions] [added: energy storage systems,] and other power products by our customer base.

In addition, the installed base of backup power for telecommunications infrastructure is still increasing due to [added: a variety of factors including] the [added: impending rollout of next-generation 5G wireless networks enabling new technologies and the] growing importance for [added: critical communications and other] uninterrupted voice and data services.

We believe by expanding our distribution network, continuing to develop our product [removed: line,] [added: lines,] and targeting our marketing efforts, we can continue to build awareness and increase penetration for our standby generators for residential, commercial and industrial purposes.

_Impact of residential investment cycle._    The market for residential generators [added: and energy storage systems] is also affected by the residential investment cycle and overall consumer confidence and sentiment.

These trends can have an impact on demand for residential [removed: generators.][added: generators and energy storage systems.]

Trends in the new housing market highlighted by residential housing starts can also impact demand for [removed: our residential generators.][added: these products.]

_Impact of business capital investment [added: and other economic] cycle__s__._    The global market for our commercial and industrial products is affected by different capital investment cycles, which can vary across the numerous regions around the world in which we participate.

These markets include non-residential building construction, durable goods and infrastructure [removed: spending] [added: spending,] as well as investments in the exploration and production of oil & gas, as businesses or organizations either add new locations or make investments to upgrade existing locations or equipment.

[removed: Also, acquisitions] [added: Acquisitions] in recent years have further expanded our commercial and operational presence outside of the United States.

These international acquisitions, along with our existing global supply chain, expose us to fluctuations in foreign currency exchange rates and regulatory tariffs that can [added: also] have a material impact on our results of operations.

_Seasonality._    Although there is demand for our products throughout the year, in each of the past five [removed: years] [added: years,] approximately 20% to 24% of our net sales occurred in the first quarter, 22% to 25% in the second quarter, [removed: 24%] [added: 26%] to 28% in the third quarter and 27% to 29% in the fourth quarter, with different seasonality depending on the occurrence, timing and severity of major power outage activity in each year.

Refer to Note [removed: 10,] [added: 12,] “Credit Agreements,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information.

_Factors influencing provision for income taxes and cash_ _income_ _taxes paid._    On December 22, 2017, the U.S. government enacted the Tax Act, which significantly [removed: changes] [added: changed] how the U.S. taxes corporations.

At December 31, [removed: 2018,] [added: 2019,] we consider the tax expense recorded for [added: the impact of] Tax Reform to be complete.

As of December 31, [removed: 2018,] [added: 2019,] we had approximately [removed: $347] [added: $225] million of tax-deductible goodwill and intangible asset amortization remaining from our acquisition by CCMP Capital Advisors, LLC in 2006 that we expect to generate aggregate cash tax savings of approximately [removed: $90] [added: $57] million through 2021, assuming continued profitability of our U.S. business and a combined federal and state tax rate of [removed: 26%.][added: 25.3%.]

The recognition of the tax benefit associated with these assets for tax purposes is expected to be $122 million [removed: annually through] [added: in] 2020 and $102 million in 2021, which generates annual cash tax savings of [removed: $32] [added: $31] million [removed: through] [added: in] 2020 and $26 million in 2021.

Other domestic acquisitions have resulted in additional tax deductible goodwill and intangible assets that will generate tax savings, but are not material to [removed: the Company’s] [added: our] consolidated financial statements.

[removed: A summary of the recent acquisitions can be found in] [added: Refer to] Note [removed: 1, “Description of Business,”] [added: 7, “Segment Reporting,”] to the consolidated financial statements in Item 8 of this Annual Report on Form [removed: 10-K.][added: 10-K for further information regarding this correction.]

This includes sales of our power generation [removed: equipment] [added: equipment, energy storage systems,] and other power products to the residential, light commercial and industrial markets, as well as service parts to our dealer network.

However, these services accounted for less than [removed: two] [added: three] percent of our net sales for the year ended December 31, [removed: 2018.][added: 2019.]

We are not dependent on any one channel or customer for our net sales, with no single customer representing more than [removed: 6%] [added: 5%] of our sales, and our top ten customers representing less than [removed: 22%] [added: 19%] of our net sales for the year ended December 31, [removed: 2018.][added: 2019.]

The principal elements of costs of goods sold [removed: in our manufacturing operations] are component parts, raw materials, factory overhead and labor.

Component parts and raw materials comprised approximately [removed: 77%] [added: 75%] of costs of goods sold for the year ended December 31, [removed: 2018.][added: 2019.]

The principal component parts are [removed: engines] [added: engines, alternators,] and [removed: alternators.][added: batteries.]

We design and manufacture air-cooled engines for certain of our generators up to 22kW, along with certain [removed: liquid-cooled] [added: liquid-cooled, natural gas] engines.

We design [added: and manufacture] many of the alternators for our [removed: units and either manufacture or source alternators for certain of our] units.

We are also impacted by foreign currency [removed: fluctuations.][added: fluctuations given our global supply chain.]

These expenses include personnel costs such as salaries, bonuses, employee benefit [removed: costs and] [added: costs,] taxes, and [added: share-based compensation cost, and] are classified into three categories: selling and service, research and development, and general and administrative.

_Selling and service._    Our selling and service expenses consist primarily of personnel expense, marketing expense, standard [added: assurance] warranty expense and other sales expenses.

Marketing expenses are generally related to the launch of new product offerings, participation in trade shows and other events, [removed: and] opportunities to create market awareness for [removed: home standby generators in areas impacted by heightened power outage activity.][added: our products, and general brand awareness marketing efforts.]

We operate engineering facilities with extensive capabilities at many locations globally and employ over [removed: 400] [added: 500] personnel with focus on new product development, existing product improvement and cost containment.

_Amortization of intangibles._    Our amortization of intangibles expense includes the straight-line amortization of finite-lived tradenames, customer lists, patents and [added: technology, and] other intangibles assets.

Other (expense) income also includes other financial items such as losses on extinguishment of debt, gains (losses) on changes in contractual interest rate, [added: loss on pension settlement,] and [removed: interest] [added: investment] income earned on our cash and cash equivalents.

_Year ended Decemb__er 31, [removed: 201__8_] [added: 201__9_] _compared_ _to year ended December 3__1, [removed: 201__7_][added: 201__8_]

| Net sales | | $ | 2,023,464 | | | $ | 1,679,373 | | | [added: $] | 344,091 | | | | 20.5 | % |

| Net income attributable to Generac Holdings Inc. | | $ | 238,257 | | | $ | 157,808 | | | [added: $] | 80,449 | | | | 51.0 | % |

| | | Net [removed: Sales] [added: Sales by Segment] | | | | | | | | | | | | | | |

We are a leading global designer and manufacturer of a wide range of energy technology solutions.

A key strategic focus for the Company in recent years has been leveraging our leading position in the growing market for cleaner burning, more cost effective natural gas fueled generators to expand into applications beyond standby power.

We have also been focused on “connecting” the equipment we manufacture to the users of that equipment, helping to drive additional value to our customers and our distribution partners over the product lifecycle.

During 2019, we began providing energy storage systems as a clean energy solution for residential use that capture and store electricity from solar panels or other power sources and help reduce home energy costs while also protecting homes from brief power outages.

We estimate that penetration rates for home standby generators are only approximately 4.75% of the addressable market of homes in the United States.

_Energy storage and monitoring markets developing quickly._    During 2019, we entered the rapidly developing energy storage and monitoring markets with the acquisitions of Pika Energy and Neurio Technologies.

We believe the electric power landscape will undergo significant changes in the decade ahead as a result of rising utility rates, grid instability and power utility quality issues, environmental concerns, and the continuing performance and cost improvements in renewable energy and batteries.

On-site power generation from solar, wind, geothermal, and natural gas generators is projected to become more prevalent as will the need to manage, monitor and store this power – potentially developing into a significant market opportunity annually.

The capabilities provided by Pika and Neurio have enabled us to bring an efficient and intelligent energy-savings solution to the energy storage and monitoring markets which we believe will position Generac as a key participant going forward.

Although very different from the emergency backup power space we serve today, we believe this market will develop similarly as the home standby generator market has over the past two decades.

Our efforts to develop a cost-effective global supply chain, omni-channel distribution, targeted consumer-based marketing content, and proprietary in-home sales tools have played a critical role in creating the market for home standby generators, and we intend to leverage our expertise and capabilities in these areas as we work to grow the energy storage and monitoring markets.

_California market for backup power increasing._    During 2019, the largest utility in the state of California along with other utilities announced their intention and ultimately executed a number of Public Safety Power Shutoff (PSPS) events in large portions of their service areas.

These events were pro-active measures to prevent their equipment from potentially causing catastrophic wildfires during the dry and windy season of the year.

The occurrence of these events, along with the utilities warning these actions could continue in the future as they upgrade their transmission and distribution infrastructure, have resulted in significant awareness and increased demand for our generators in California, where penetration rates of home standby generators stand at approximately 1%.

We have a significant focus on expanding distribution in California and are working together with local regulators, inspectors, and gas utilities to increase their bandwidth and sense of urgency around approving and providing the infrastructure necessary for home standby and other backup power products.

Our efforts in this part of the country will also be helpful in developing the market for energy storage and monitoring where the installed base of solar and other renewable sources of electricity are some of the highest in the U.S., and the regulatory environment is mandating renewable energy on new construction starting in 2020.

Finally, the existence of renewable energy mandates and investment tax credits and other subsidies can also have an impact on the demand for energy storage systems.

In connection with our term loan amendment in December 2019, language was added to the agreement to include a benchmark replacement rate, selected by the administrative agent and the borrower, as a replacement to LIBOR that would take affect at the time LIBOR ceases.

We plan to work with our lenders in the future to amend other LIBOR based debt agreements to add a replacement rate should the use of LIBOR cease.

Interest expense increased slightly during 2019 compared to 2018, primarily due to increased borrowings by our foreign subsidiaries.

They also support our connectivity, remote monitoring, and energy monitoring initiatives.

| Net sales | | $ | 2,204,336 | | | $ | 2,023,464 | | | $ | 180,872 | | | | 8.9 | % |

| Cost of goods sold | | | 1,406,584 | | | | 1,298,424 | | | | 108,160 | | | | 8.3 | % |

| Gross profit | | | 797,752 | | | | 725,040 | | | | 72,712 | | | | 10.0 | % |

| Selling and service | | | 217,683 | | | | 191,887 | | | | 25,796 | | | | 13.4 | % |

| Research and development | | | 68,394 | | | | 50,019 | | | | 18,375 | | | | 36.7 | % |

| General and administrative | | | 110,868 | | | | 103,841 | | | | 7,027 | | | | 6.8 | % |

| Amortization of intangible assets | | | 28,644 | | | | 22,112 | | | | 6,532 | | | | 29.5 | % |

| Total operating expenses | | | 425,589 | | | | 367,859 | | | | 57,730 | | | | 15.7 | % |

| Income from operations | | | 372,163 | | | | 357,181 | | | | 14,982 | | | | 4.2 | % |

| Total other expense, net | | | (52,556 | ) | | | (46,105 | ) | | | (6,451 | ) | | | 14.0 | % |

| Income before provision for income taxes | | | 319,607 | | | | 311,076 | | | | 8,531 | | | | 2.7 | % |

| Provision for income taxes | | | 67,299 | | | | 69,856 | | | | (2,557 | ) | | | \-3.7 | % |

| Net income | | | 252,308 | | | | 241,220 | | | | 11,088 | | | | 4.6 | % |

| Net income attributable to Generac Holdings Inc. | | $ | 252,007 | | | $ | 238,257 | | | $ | 13,750 | | | | 5.8 | % |

| Domestic | | $ | 1,742,898 | | | $ | 1,566,520 | | | $ | 176,378 | | | | 11.3 | % |

| International | | | 461,438 | | | | 456,944 | | | | 4,494 | | | | 1.0 | % |

| Total net sales | | $ | 2,204,336 | | | $ | 2,023,464 | | | $ | 180,872 | | | | 8.9 | % |

| | | 2019 | | | | 2018 | | | | $ Change | | | | % Change | | |

| Domestic | | $ | 428,667 | | | $ | 388,495 | | | $ | 40,172 | | | | 10.3 | % |

We estimate that penetration rates for home standby generators are only approximately 4.5% of U.S. single-family detached, owner-occupied households with a home value of over $100,000, as defined by the U.S. Census Bureau's 2017 American Housing Survey for the United States.

We believe the passage of the Tax Act in 2017 will continue to have a favorable impact on future demand within many of the end markets that we serve, as the improved cash flow, liquidity and business sentiment may lead to further investments in equipment, facilities and infrastructure in the United States.

Interest expense decreased during 2018 compared to 2017, primarily due to lower interest rate spreads resulting from Term Loan and ABL Facility amendments, new interest rate swaps beginning in 2018, and the repayments of Term Loan and ABL Facility borrowings.

These factors are partially offset by an increase in the market LIBOR rate.

_Acquisitions__._ Over the years, we have executed a number of acquisitions that supported our strategic plan.

| Domestic | | $ | 1,580,325 | | | $ | 1,303,506 | | | | 276,819 | | | | 21.2 | % |

| International | | | 443,139 | | | | 375,867 | | | | 67,272 | | | | 17.9 | % |

| Domestic | | $ | 388,685 | | | $ | 290,290 | | | | 98,395 | | | | 33.9 | % |

| International | | | 35,867 | | | | 27,010 | | | | 8,857 | | | | 32.8 | % |

The improvement was primarily due to increased leverage of fixed operating costs on the higher organic sales, and favorable mix.

| Net sales | | $ | 1,679,373 | | | $ | 1,447,743 | | | | 231,630 | | | | 16.0 | % |

| Cost of goods sold | | | 1,094,587 | | | | 935,322 | | | | 159,265 | | | | 17.0 | % |

| Gross profit | | | 584,786 | | | | 512,421 | | | | 72,365 | | | | 14.1 | % |

| Selling and service | | | 174,841 | | | | 164,860 | | | | 9,981 | | | | 6.1 | % |

| Research and development | | | 42,869 | | | | 37,163 | | | | 5,706 | | | | 15.4 | % |

| General and administrative | | | 87,581 | | | | 74,693 | | | | 12,888 | | | | 17.3 | % |

| Amortization of intangible assets | | | 28,861 | | | | 32,953 | | | | (4,092 | ) | | | \-12.4 | % |

| Total operating expenses | | | 334,152 | | | | 309,669 | | | | 24,483 | | | | 7.9 | % |

| Income from operations | | | 250,634 | | | | 202,752 | | | | 47,882 | | | | 23.6 | % |

| Total other expense, net | | | (46,935 | ) | | | (49,055 | ) | | | 2,120 | | | | \-4.3 | % |

| Income before provision for income taxes | | | 203,699 | | | | 153,697 | | | | 50,002 | | | | 32.5 | % |

| Provision for income taxes | | | 44,142 | | | | 56,519 | | | | (12,377 | ) | | | \-21.9 | % |

| Net income | | | 159,557 | | | | 97,178 | | | | 62,379 | | | | 64.2 | % |

| Net income attributable to Generac Holdings Inc. | | $ | 157,808 | | | $ | 97,154 | | | | 60,654 | | | | 62.4 | % |

| Domestic | | $ | 1,303,506 | | | $ | 1,176,849 | | | | 126,657 | | | | 10.8 | % |

| International | | | 375,867 | | | | 270,894 | | | | 104,973 | | | | 38.8 | % |

| Total net sales | | $ | 1,679,373 | | | $ | 1,447,743 | | | | 231,630 | | | | 16.0 | % |

| | | | | | | | | | | | | | | | | |

| | | 2017 | | | | 2016 | | | | $ Change | | | | % Change | | |

| Domestic | | $ | 290,290 | | | $ | 259,563 | | | | 30,727 | | | | 11.8 | % |

| International | | | 27,010 | | | | 16,959 | | | | 10,051 | | | | 59.3 | % |

| Total Adjusted EBITDA | | $ | 317,300 | | | $ | 276,522 | | | | 40,778 | | | | 14.7 | % |

| Residential products | | $ | 870,491 | | | $ | 769,176 | | | | 101,315 | | | | 13.2 | % |

| Commercial & industrial products | | | 684,352 | | | | 558,468 | | | | 125,884 | | | | 22.5 | % |

| Other | | | 124,530 | | | | 120,099 | | | | 4,431 | | | | 3.7 | % |

The growth was also due to increased organic shipments of both C&I and residential products within the European and Latin America regions.

_Gross profit._ Gross profit margin for the year ended December 31, 2017 was 34.8% compared to 35.4% for the year ended December 31, 2016, which included $2.7 million of business optimization and restructuring costs classified within cost of goods sold to address the significant and extended downturn for capital spending within the oil & gas industry, as well as $4.2 million of expense relating to the purchase accounting adjustment for the step-up in value of inventories relating to the Pramac acquisition.

The year ended December 31, 2017 included $2.0 million of business optimization and non-recurring plant consolidation costs.

Excluding the impact of these charges, pro-forma gross margins were 34.9% and 35.9% in 2017 and 2016, respectively.

The pro-forma decrease in gross margins was primarily due to unfavorable sales mix attributable to higher organic sales within the International segment and of mobile products relative to 2016, which carry lower gross margins relative to the consolidated average.

Realized gains and losses on transactions denominated in foreign currency are recorded as a component of cost of goods sold [removed: on] [added: in] the statements of comprehensive income.

The following is a summary of the [removed: forty] [added: forty-three] foreign currency contracts outstanding as of December 31, [removed: 2018] [added: 2019] (notional amount in thousands):

| Currency Denomination | | Trade Dates | | Effective Dates | | [removed: Notional Amount |] [added: Notional Amount] | | Expiration Date |

As of December 31, [removed: 2018,] [added: 2019,] we had the following [removed: commodity forward] [added: interest rate swap] contracts outstanding (notional amount in [removed: thousands):][added: thousands of US dollars):]

| Hedged Item | | Contract Date | | Effective Date | | [removed: Notional Amount | | |] [added: Notional Amount] | [removed: Fixed Price] | [added: Fixed LIBOR Rate] | | Expiration Date |

As of December 31, [removed: 2018,] [added: 2019,] all of the outstanding debt under our Term Loan and ABL Facility was subject to floating interest rate risk.

| Interest Rate | | June 19, 2017 | | July [removed: 2, 2018 | |] [added: 1, 2019] | | 125,000 | | [removed: | | 1.6543%] [added: 1.9053%] | | July 1, [removed: 2019] [added: 2020] |

| Interest Rate | | June [removed: 19,] [added: 30,] 2017 | | July 1, 2019 | | [removed: | |] 125,000 | | [removed: | | 1.9053%] [added: 1.9750%] | | July 1, 2020 |

| Interest Rate | | June 19, 2017 | | July 1, 2020 | | [removed: | |] 125,000 | | [removed: | | 2.1328%] [added: 2.1263%] | | July 1, 2021 |

| Interest Rate | | June 19, 2017 | | July 1, 2021 | | [removed: | |] 125,000 | | [removed: | | 2.3453%] [added: 2.2733%] | | July 1, 2022 |

| Interest Rate | | June 19, 2017 | | July 1, 2022 | | [removed: | |] 125,000 | | [removed: | | 2.4828%] [added: 2.3673%] | | May 31, 2023 |

| Interest Rate | | June 30, 2017 | | July 1, [removed: 2018 | |] [added: 2020] | | 125,000 | | [removed: | | 1.7090%] [added: 2.2062%] | | July 1, [removed: 2019] [added: 2021] |

| Interest Rate | | [removed: June 30,] [added: August 9,] 2017 | | July 1, 2019 | | [removed: | |] 125,000 | | [removed: | | 1.9750%] [added: 1.8598%] | | July 1, 2020 |

| Interest Rate | | June 30, 2017 | | July 1, [removed: 2020 | |] [added: 2021] | | 125,000 | | [removed: | | 2.2170%] [added: 2.3717%] | | July 1, [removed: 2021] [added: 2022] |

| Interest Rate | | [removed: June 30,] [added: August 9,] 2017 | | July 1, 2021 | | [removed: | |] 125,000 | | [removed: | | 2.4360%] [added: 2.2367%] | | July 1, 2022 |

| Interest Rate | | June 30, 2017 | | July 1, 2022 | | [removed: | |] 125,000 | | [removed: | | 2.5910%] [added: 2.5000%] | | May 31, 2023 |

| Interest Rate | | August [removed: 9,] [added: 30,] 2017 | | July 1, [removed: 2018 | |] [added: 2019] | | 125,000 | | [removed: | | 1.6298%] [added: 1.7553%] | | July 1, [removed: 2019] [added: 2020] |

| Interest Rate | | August 9, 2017 | | July 1, [removed: 2019 | |] [added: 2020] | | 125,000 | | [removed: | | 1.8598%] [added: 2.0740%] | | July 1, [removed: 2020] [added: 2021] |

| Interest Rate | | August [removed: 9,] [added: 30,] 2017 | | July 1, 2020 | | [removed: | |] 125,000 | | [removed: | | 2.0848%] [added: 1.9737%] | | July 1, 2021 |

| Interest Rate | | August [removed: 9,] [added: 30,] 2017 | | July 1, 2021 | | [removed: | |] 125,000 | | [removed: | | 2.3010%] [added: 2.1508%] | | July 1, 2022 |

| Interest Rate | | August 9, 2017 | | July 1, 2022 | | [removed: | |] 125,000 | | [removed: | | 2.4848%] [added: 2.2948%] | | May 31, 2023 |

| Interest Rate | | August 30, 2017 | | July 1, [removed: 2018 | |] [added: 2022] | | 125,000 | | [removed: | | 1.5503%] [added: 2.2998%] | | [removed: July 1, 2019] [added: May 31, 2023] |

At December 31, [removed: 2018,] [added: 2019,] the fair value of these interest rate swaps was [removed: an asset] [added: a liability] of [removed: $8.4] [added: $10.6] million.

A hypothetical change in the LIBOR interest rate of 100 basis points would have changed annual cash interest expense by approximately [removed: $3.8] [added: $4.0] million (or, without the swaps in place, [removed: $8.8] [added: $9.0] million) in [removed: 2018.][added: 2019.]

For additional information on the Company’s foreign currency and commodity forward [removed: contracts,] [added: contracts] and interest rate swaps, including amounts charged to the statement of comprehensive income during [added: 2019,] 2018, [removed: 2017,] and [removed: 2016,] [added: 2017,] refer to Note [removed: 4,] [added: 5,] “Derivative Instruments and Hedging Activities,” and Note [removed: 5,] [added: 6,] “Accumulated Other Comprehensive Loss,” to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| GBP | | 11/11/19 - 12/16/19 | | 11/11/19 - 12/16/19 | | $ 5,110 | | 1/15/20 - 4/30/20 |

| USD | | 10/24/19 - 12/16/19 | | 10/24/19 - 12/16/19 | | $ 6,300 | | 1/15/20 - 2/19/20 |

| AUD | | 11/25/19 - 12/16/19 | | 11/25/19 - 12/16/19 | | $ 4,800 | | 1/29/20 - 2/19/20 |

As of December 31, 2019, we had no commodity forward contracts outstanding.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

In conjunction with the December amendment to our term loan, we also amended the interest swaps to remove the LIBOR floor, which resulted in minor reductions to our future dated swap rates.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| GBP | | 11/12/18 - 12/17/18 | | 11/12/18 - 12/17/18 | | | 4,066 | | 1/16/19 - 6/19/19 |

| USD | | 11/12/18 - 12/14/18 | | 11/12/18 - 12/14/18 | | | 10,165 | | 1/16/19 - 3/6/19 |

| AUD | | 11/12/18 - 11/19/18 | | 11/12/18 - 11/19/18 | | | 1,900 | | 1/16/19 - 1/23/19 |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Copper | | February 12, 2018 | | February 1, 2018 | | $ | 3,776 | | | | $3.114 per LB | | December 31, 2018 |

| Copper | | March 8, 2018 | | March 9, 2018 | | $ | 3,427 | | | | $3.109 per LB | | December 31, 2018 |

| Copper | | March 20, 2018 | | March 21, 2018 | | $ | 3,418 | | | | $3.101 per LB | | December 31, 2018 |

| Copper | | March 20, 2018 | | March 21, 2018 | | $ | 1,697 | | | | $3.079 per LB | | December 31, 2018 |

| Copper | | March 26, 2018 | | April 1, 2018 | | $ | 3,003 | | | | $3.027 per LB | | December 31, 2018 |

As of December 31, 2018, we had the following interest rate swap contracts outstanding (notional amount in thousands):

| Hedged Item | | Contract Date | | Effective Date | | | Notional Amount | | | | Fixed LIBOR Rate | | | Expiration Date |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Interest Rate | | August 30, 2017 | | July 1, 2019 | | | | 125,000 | | | | 1.7553% | | July 1, 2020 |

| Interest Rate | | August 30, 2017 | | July 1, 2020 | | | | 125,000 | | | | 1.9803% | | July 1, 2021 |

| Interest Rate | | August 30, 2017 | | July 1, 2021 | | | | 125,000 | | | | 2.2228% | | July 1, 2022 |

| Interest Rate | | August 30, 2017 | | July 1, 2022 | | | | 125,000 | | | | 2.4153% | | May 31, 2023 |

Founded in 1959, Generac Holdings Inc. (the Company or Generac) is a leading global designer and manufacturer of a wide range of [removed: power generation equipment and other power products serving the residential, light commercial and industrial markets.][added: energy technology solutions.]

Power generation is [removed: our primary focus,] [added: a key focus of the Company,] which differentiates us from our [removed: main] competitors [removed: that] [added: who] also have broad operations outside of the power equipment market.

As the only significant market participant focused predominantly on these products, we [removed: have] [added: maintain] one of the leading market positions in the power equipment market in North America and an expanding presence internationally.

We design, manufacture, source and modify engines, alternators, transfer switches and other components necessary for our [added: power] products, which are fueled by natural gas, liquid propane, gasoline, diesel and Bi-Fuel™.

Our products are available globally through a broad network of independent dealers, distributors, retailers, [added: ecommerce partners,] wholesalers and equipment rental companies under a variety of brand names.

We believe that our leading market position is largely attributable to our strategy of providing a broad product line of high-quality, innovative and affordable products through our extensive and multi-layered distribution network to whom we offer comprehensive support [added: programs,] and [removed: programs] [added: leads] from the factory.

Other engine powered products [added: and solutions] that we [removed: design and manufacture] [added: provide] include light towers, mobile heaters, power washers and water pumps, along with a broad line of outdoor power equipment.

We classify our products into three categories based on similar range of power output geared for varying end customer uses: Residential products, Commercial & Industrial (C&I) products and Other [removed: products.][added: products & services.]

[removed: _Residential_ _P__roducts_][added: _Residential_ _P__roducts_]

Liquid-cooled engine generators serve as emergency backup for larger homes and small businesses and range in output from 22kW to [removed: 60kW.][added: 150kW.]

[removed: We also provide a] [added: This] remote monitoring [removed: system for] [added: capability is a standard, WiFi-enabled feature on every] home standby [removed: generators called _Mobile_ _Link_™, which] [added: generator that we offer, and] allows our customers to check the status of their generator conveniently [removed: from a desktop PC, tablet computer or smartphone,] [added: online,] and also provides the capability to [added: similarly] receive maintenance and service alerts.

[removed: Further, we] [added: We also] provide a broad product line of outdoor power equipment that includes [added: water pumps,] trimmer & brush mowers, log splitters, lawn & leaf vacuums, and chipper shredders for the property maintenance needs of [removed: larger-acreage] residences, commercial properties, municipalities and farms.

These products are largely sold in North America through [removed: on-line] [added: online] catalogs, retail hardware stores and outdoor power equipment dealers primarily under the DR® brand name.

Residential products comprised [removed: 51.5%, 51.8%] [added: 51.9%, 51.5%] and [removed: 53.1%,] [added: 51.8%,] respectively, of total net sales in [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016.][added: 2017.]

[removed: _Commercial] [added: _Commercial] & [removed: Industrial_ _P__roducts_][added: Industrial_ _P__roducts_]

We [added: design and] manufacture a broad product line of standard and configured stationary generators and related transfer switches for various industrial standby, continuous-duty and prime rated applications.

Our industrial standby generators are primarily used as emergency backup for larger applications in the healthcare, telecom, datacom, commercial office, [added: retail,] municipal and manufacturing markets.

We manufacture commercial mobile pumps [removed: which utilize wet] and [removed: dry-priming pump systems] [added: dust-suppression equipment] for a wide variety of [removed: wastewater] applications.

C&I products comprised [removed: 40.6%, 40.8%] [added: 39.5%, 40.6%] and [removed: 38.6%] [added: 40.8%] respectively, of total net sales in [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016.][added: 2017.]

[removed: _Other_ _P__roducts_][added: _Other_ _P__roducts_ _and Services_]

Our “Other [removed: Products”] [added: Products and Services”] category primarily consists of aftermarket service parts and product accessories sold to our [removed: dealers, and] [added: customers,] the amortization of extended warranty deferred [removed: revenue.][added: revenue, and the service offerings in various parts of our business, including integration, project management, remote monitoring services, and energy monitoring services.]

Other products comprised [removed: 7.9%, 7.4%] [added: 8.6%, 7.9%] and [removed: 8.3%,] [added: 7.4%,] respectively, of total net sales in [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016.][added: 2017.]

We distribute our products through a variety of different distribution channels to increase awareness of our product categories and brands, and to ensure our products reach a [removed: broad] [added: broad, global] customer base.

This distribution network includes independent residential dealers, industrial distributors and dealers, national and regional retailers, e-commerce partners, [removed: electrical and] [added: electrical,] HVAC [added: and solar] wholesalers (including certain private label arrangements), catalogs, equipment rental [removed: companies and] [added: companies,] equipment [removed: distributors.][added: distributors, and solar installers.]

We believe our [added: global] distribution network is a competitive advantage that has strengthened over the years as a result of adding, expanding and developing the various distribution channels through which we sell our products.

We offer a broad set of tools, [removed: programs and] [added: programs,] factory [removed: support] [added: support, and leads] to help our distribution partners be successful.

Our network is well balanced with no customer providing more than [removed: 6%] [added: 5%] of our sales in [removed: 2018.][added: 2019.]

[removed: Our overall dealer network located around the world is] [added: At over 6,000 strong, we have] the industry's largest network of factory direct independent generator [removed: contractors] [added: dealers] in North America.

Our industrial distributors and dealers [added: help] maintain the local relationships with commercial electrical contractors, specifying engineers and national account regional buying offices.

[removed: Our wholesaler network distributes our residential and light-commercial generators, and] [added: The channel] consists of selling branches of both national and local distribution houses for [removed: electrical and] [added: electrical,] HVAC [added: and solar] products on a wholesale basis.

They typically sell to electrical [removed: contractors] [added: dealers and solar installers] who are not in our dealer network.

In addition, international acquisitions [removed: over the years] have provided access to numerous independent distributors in over 150 countries.

We sell direct to certain national and regional account customers that are the end users of our products covering a number of end market verticals, including telecommunication, retail, banking, [added: energy, healthcare,] convenience stores, grocery stores and other light commercial applications.

As we continue to move our strategic plan into the future, we are focused on a number of initiatives that are driven by the following four key objectives, which are [removed: now] called “Powering Our Future”:

[removed: _Growing] [added: _Growing] the residential standby generator [removed: market_.] [added: market._] As the leader in the home standby generator market, it is incumbent upon us to continue to drive growth and increase the penetration rate of these products in households across the world.

Ongoing power outage [removed: activity,] [added: activity due to more severe weather and an aging electrical grid,] combined with expanding [added: and developing] our residential/light commercial dealer base and overall distribution in affected regions, are key drivers in elevating the awareness of home standby generators over the long term.

In addition, we intend to continue to focus on innovation in this growing product category and introduce new products [added: and solutions] into the marketplace.

With only approximately [removed: 4.5%] [added: 4.75%] penetration of the addressable market of homes in the United States (which we define as single-family detached, owner-occupied households with a home value of over [removed: $100,000,] [added: $125,000,] as defined by the U.S. Census Bureau's 2017 American Housing Survey for the United States), we believe there are opportunities to further penetrate the residential standby generator market both domestically and internationally.

[added: _Gaining market share and entering new markets._] We continue to put a strong focus on improving our share of the power equipment markets in which we participate around the world by emphasizing our innovation and continually expanding our product lines and services.

We design and build a wide range of products from portable, stationary and mobile generators, [removed: power washers,] light towers, mobile heaters, pumps, brush mowers and trimmers, and other engine powered equipment.

The Company provides power generation equipment, energy storage systems, and other power products serving the residential, light commercial and industrial markets.

A key strategic focus for the Company in recent years has been leveraging our leading position in the growing market for cleaner burning, more cost-effective natural gas fueled generators to expand into applications beyond standby power.

We have also been focused on “connecting” the equipment we manufacture to the users of that equipment, helping to drive additional value to our customers and our distribution partners over the product lifecycle.

During 2019, we began providing energy storage systems as a clean energy solution for residential use that capture and store electricity from solar panels or other power sources and help reduce home energy costs while also protecting homes from brief power outages.

We also design, source, modify and integrate batteries, inverters, power electronics, controls, energy monitoring devices and other components into our energy storage systems.

As we enter the rapidly developing market for energy storage, we offer energy storage systems ranging in configurations up to 34kWh, and expect to gain share by leveraging our capabilities that we have developed to grow the residential standby generator market.

We now have a complete line of energy storage systems and energy monitoring solutions as we enter the clean energy markets.

We also provide a remote monitoring system with various options for home standby generators called _Mobile_ _Link_™.

Our remote monitoring platform also allows our distribution partners to monitor their installed base of customers through a feature that we call “_Fleet_”, enabling them to offer a more proactive experience to service a customer’s generator.

The acquisitions of Neurio Technology Inc. in March 2019 and Pika Energy, Inc. in April 2019 accelerated our entrance into the energy storage and energy monitoring markets.

Late in 2019 we began selling complete energy storage systems – marketed under the names PWRcellTM and PWRviewTM.

This clean energy solution consists of a system of batteries, an inverter, power electronic controls, energy monitoring hardware & software, and other components.

These systems capture and store electricity from solar panels or the electric grid and help reduce home energy costs while also protecting homes from brief power outages, and range in size from 8kWh up to 34kWh.

During 2018, we introduced a new 750kW gaseous-fueled generator, our largest and most powerful generator to date, with plans going forward to expand these cleaner-fuel generators into larger applications.

We also offer a full line of industrial transfer switches to meet varying needs from light industrial applications all the way to the most demanding critical installations.

Generac’s industry-leading feature set and flexible platforms offer a variety of switching technologies for customized solutions to meet any project needs.

These initiatives have helped to improve lead quality and develop our dealers, thereby increasing close rates and lowering our cost per lead.

We intend to leverage these practices to grow the rapidly developing markets for energy storage and energy monitoring.

Our wholesaler network distributes our residential and light-commercial generators, and now our energy storage systems.

Business Strategy

Our strategic plan centers around a number of key mega-trends that we believe will drive significant secular growth opportunities for our business.

Significant changes in the energy landscape, climate change, the abundance of natural gas globally, an aging infrastructure, and 5G telecommunications are all major themes that we believe will drive future long-term growth.

As the energy landscape continues to change and favor on-site renewable power, we intend to leverage our significant experience and competencies developed over the past two decades in growing the residential standby generator market to accelerate our recent entrance into the emerging residential energy storage and monitoring markets.

We are also focused on expanding our addressable market opportunities by entering new markets, be it with new products or new geographies around the world.

Given the abundance of natural gas as a global source for base-load power, we also intend to explore new gaseous generator related market opportunities, including increasing our product capabilities for applications beyond standby generation including continuous-duty, prime rated, distributed generation, demand response and combined heat and power.

This includes an important emphasis on improving the end-user experience and helping customers to lower utility costs.

The Pika Energy and Neurio Technologies acquisitions have built out resources and expertise in the energy storage and energy monitoring markets.

They provide advanced capabilities with power electronics and battery management software, along with proprietary inverter technologies and hardware and software for energy monitoring and management.

| Tom Pettit | | 51 | | Chief Operations Officer |

Tom Pettit began serving as our Chief Operations Officer in February 2020.

Since 2017, Mr. Pettit was Executive Vice President and Chief Integrated Supply Chain Officer of nVent Electric plc, a leading global provider of electrical connection and protection solutions and a former subsidiary of Pentair plc (“Pentair”), a global industrial company.

Mr. Pettit previously served as the Operations Vice President of Pentair since 2015, and as the Chief Operating Officer for BioScrip, Inc., a provider of infusion and home care management solutions, from 2014-2015.

Mr. Pettit holds a B.S. in General Engineering from West Point Military Academy and an MBA from the University of Hawaii.

Additionally, we offer a product line of water pumps built to meet the water removal needs of homeowners, farmers, construction crews and other end-user applications.

The acquisition of Selmec in June 2018 increased our industrial generator market share within the Latin American markets, as well as added specialized engineering capabilities.

The acquisition of Selmec added a service platform, including robust integration, project management and remote monitoring services.

Business Strategy

_Gaining market share_.

Being number one or number two in all of these categories globally is our goal.

| Jeffrey Mueller | | 50 | | President / General Manager – Consumer Power |

| Roger F. Pascavis | | 58 | | Executive Vice President, Strategic Global Sourcing |

Jeffrey Mueller joined Generac as our President / General Manager – Consumer Power in November 2017.

Mr. Mueller was Group President for Broan-Nutone, a producer of residential ventilation and air quality products, from 2014 prior to joining Generac.

Prior to his time at Broan, Mr. Mueller was at Kohler Company, a manufacturer of bath and kitchen equipment, from 1991 where he held various U.S. and international executive-level positions in the Kitchen & Bath & Interiors Group, including President of Kohler’s faucet business globally.

He is a Marquette University alumnus where he earned an Executive MBA with an international focus and a Bachelor of Science degree in Mechanical Engineering.

Roger Pascavis has served as our Executive Vice President, Strategic Global Sourcing since March 2013.

Prior to becoming Executive Vice President of Strategic Global Sourcing, he served as the Senior Vice President of Operations since January 2008.

Mr. Pascavis joined Generac in 1995 and has served as Director of Materials and Vice President of Operations.

Prior to joining Generac, Mr. Pascavis was a Plant Manager for MTI Electronics in Waukesha, Wisconsin.

Mr. Pascavis holds a B.S. in Industrial Technology from the University of Wisconsin-Stout and an M.B.A. from Lake Forest Graduate School of Management.

As of December 31, [removed: 2018,] [added: 2019,] we believe that there is no litigation pending that would have a material effect on our results of operations or financial condition.

Item 4.

Mine Safety Disclosures

Not Applicable.

PART II

UNITED STATES SECURITIES AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: WASHINGTON,] [added: WASHINGTON,] D.C. 20549

| For the fiscal year ended December 31, [removed: 2018] [added: 2019] Or | |

| [removed: DELAWARE] [added: Delaware] (State or other jurisdiction of incorporation or organization) | [added: | |] 20-5654756 (IRS Employer Identification No.) | [added: | |]

| S45 W29290 Hwy 59, Waukesha, WI (Address of principal executive offices) | [added: | |] 53189 (Zip Code) | [added: | |]

| (262) 544-4811 (Registrant’s telephone number, including area code) | | [added: | | | |]

[removed: | SECURITIES REGISTERED PURSUANT TO SECTION] [added: Securities registered pursuant to Section] 12(b) [removed: OF THE ACT: | |][added: of the Act:]

| Common Stock, $0.01 par value [removed: (Title of class)] | [added: GNRC |] New York Stock Exchange [removed: (Name of exchange on which registered)] |

| SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None | [removed: |]

| Large accelerated filer [removed: ☑] [added: ☒] | Accelerated filer ☐ |

The aggregate market value of the voting common equity held by non-affiliates of the registrant on June [removed: 29, 2018,] [added: 28, 2019,] the last business day of the registrant’s most recently completed second fiscal quarter, was approximately [removed: $3,115,194,826] [added: $4,191,188,195] based upon the closing price reported for such date on the New York Stock Exchange.

As of February 19, [removed: 2019, 62,129,621] [added: 2020, 62,567,525] shares of registrant's common stock were outstanding.

Portions of the registrant’s Annual Report to Stockholders for the year ended December 31, [removed: 2018] [added: 2019] furnished to the Securities and Exchange Commission are incorporated by reference into Part II of this Form 10-K.

Portions of the registrant’s Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders (the [removed: “2019] [added: “2020] Proxy Statement”), which will be filed by the registrant on or prior to 120 days following the end of the registrant’s fiscal year ended December 31, [removed: 2018,] [added: 2019,] are incorporated by reference into Part III of this Form 10-K.

[removed: 2018] [added: 2019] FORM 10-K ANNUAL REPORT

| [removed: PART I] [added: [PART I](#part1)] | | |

| Item 1. | [removed: [Business](#business)] [added: [Business](#item1)] | [removed: 1] [added: 2] |

| Item 1A. | [Risk [removed: Factors](#risk)] [added: Factors](#item1a)] | 8 |

| Item 1B. | [Unresolved Staff [removed: Comments](#unresolved)] [added: Comments](#item1b)] | [removed: 15] [added: 16] |

| Item 2. | [removed: [Properties](#properties)] [added: [Properties](#item2)] | 16 |

| Item 3. | [Legal [removed: Proceedings](#legal)] [added: Proceedings](#item3)] | [removed: 16] [added: 17] |

| Item 4. | [Mine Safety [removed: Disclosures](#mine)] [added: Disclosures](#item4)] | [removed: 16] [added: 17] |

| [removed: PART II] [added: [PART II](#part2)] | | |

| Item 5. | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#market)] [added: Securities](#item5)] | [removed: 16] [added: 17] |

| Item 6. | [Selected Financial [removed: Data](#selected)] [added: Data](#item6)] | [removed: 18] [added: 19] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#mgmtdisc)] [added: Operations](#item7)] | [removed: 23] [added: 24] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#quant)] [added: Risk](#item7a)] | [removed: 35] [added: 36] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#finstate)] [added: Data](#item8)] | 37 |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#changes)] [added: Disclosure](#item9)] | [removed: 70] [added: 72] |

| Item 9A. | [Controls and [removed: Procedures](#controls)] [added: Procedures](#item9a)] | [removed: 70] [added: 72] |

| Item 9B. | [Other [removed: Information](#other)] [added: Information](#item9b)] | [removed: 71] [added: 73] |

| [removed: PART III] [added: [PART III](#part3)] | | |

| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#directors)] [added: Governance](#item10)] | [removed: 71] [added: 73] |

| Item 11. | [Executive [removed: Compensation](#execcomp)] [added: Compensation](#item11)] | [removed: 71] [added: 73] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#security)] [added: Matters](#item12)] | [removed: 71] [added: 73] |

| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#certain)] [added: Independence](#item13)] | [removed: 72] [added: 73] |

| Item 14. | [Principal Accountant Fees and [removed: Services](#principal)] [added: Services](#item14)] | [removed: 72] [added: 73] |

| [removed: PART IV] [added: [PART IV](#part4)] | | |

| Item 15. | [Exhibits and Financial Statement [removed: Schedules](#exhibits)] [added: Schedules](#item15)] | [removed: 72] [added: 73] |

| Item 16. | [Form 10-K [removed: Summary](#formsummary)] [added: Summary](#item16)] | [removed: 74] [added: 77] |

| --- | --- | --- | --- | --- | --- |

| | | | | | |

| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |

| --- |

| --- | --- | --- |

10-K 1 gnrc20181231_10k.htm FORM 10-K

| --- | --- |

| | |

Item 2.

Properties

We own or lease manufacturing, distribution and office facilities globally totaling over five million square feet.

We also have inventory warehouses that accommodate material storage and rapid response requirements of our customers.

The following table provides information about our principal facilities exceeding 20,000 square feet:

| Location | | Owned/ Leased | | Activities | | Segment |

| --- | --- | --- | --- | --- | --- | --- |

| Waukesha, WI | | Owned | | Corporate headquarters, R&D | | Domestic |

| Eagle, WI | | Owned | | Manufacturing, office, training | | Domestic |

| Whitewater, WI | | Owned | | Manufacturing, office, distribution | | Domestic |

| Oshkosh, WI | | Owned | | Manufacturing, office, warehouse, R&D | | Domestic |

| Berlin, WI | | Owned | | Manufacturing, office, warehouse, R&D | | Domestic |

| Jefferson, WI | | Owned | | Manufacturing, distribution, R&D | | Domestic |

| Janesville, WI | | Leased | | Distribution | | Domestic |

| Various WI | | Leased | | Warehouse | | Domestic |

| Maquoketa, IA | | Owned | | Storage, rental property | | Domestic |

| South Burlington, VT | | Leased | | Office | | Domestic |

| Vergennes, VT | | Leased | | Office | | Domestic |

| Winooski, VT | | Leased | | Distribution, storage | | Domestic |

| Charlotte, VT | | Leased | | Distribution, storage | | Domestic |

| Mexico City, Mexico | | Owned | | Manufacturing, sales, distribution, warehouse, office, R&D | | International |

| Mexico City, Mexico | | Leased | | Office, manufacturing, warehouse | | International |

| Guadalajara, Mexico | | Owned | | Sales, office | | International |

| Milan, Italy | | Leased | | Manufacturing, sales, distribution, warehouse, office, R&D | | International |

| Casole d’Elsa, Italy | | Leased | | Manufacturing, office, warehouse, R&D | | International |

| Balsicas, Spain | | Leased | | Manufacturing, office, warehouse, R&D | | International |

| Foshan, China | | Owned | | Manufacturing, office, warehouse, R&D | | International |

| Changzhou, China | | Leased | | Manufacturing, office, warehouse, R&D | | International |

| Saint-Nizier-sous-Charlieu, France | | Leased | | Sales, office, warehouse | | International |

| Ribeirao Preto, Brazil | | Leased | | Manufacturing, office, warehouse | | International |

| Stoke-on-Trent, United Kingdom | | Leased | | Sales, office, warehouse | | International |

| Sydney, Australia | | Leased | | Sales, office, warehouse | | International |

| Celle, Germany | | Owned | | Manufacturing, office, warehouse, R&D | | International |

| Charzyno, Poland | | Owned | | Manufacturing | | International |

In addition to the countries represented above, the Company has other operations or sales offices in the United Arab Emirates, India, Singapore and the Dominican Republic, as well as several other countries throughout Europe.

As of December 31, 2018, substantially all of our domestically-owned and a portion of our internationally-owned properties are subject to collateral provisions under our senior secured credit facilities.

We own or lease manufacturing, distribution and office facilities globally totaling over five million square feet.

We also have inventory warehouses that accommodate material storage and rapid response requirements of our customers.

The following table provides information about our principal facilities exceeding 20,000 square feet:

| Location | | Owned/ Leased | | Activities | | Segment |

| --- | --- | --- | --- | --- | --- | --- |

| Waukesha, WI | | Owned | | Corporate headquarters, R&D | | Domestic |

| Eagle, WI | | Owned | | Manufacturing, office, training | | Domestic |

| Whitewater, WI | | Owned | | Manufacturing, office, distribution | | Domestic |

| Oshkosh, WI | | Owned | | Manufacturing, office, warehouse, R&D | | Domestic |

| Berlin, WI | | Owned | | Manufacturing, office, warehouse, R&D | | Domestic |

| Jefferson, WI | | Owned | | Manufacturing, distribution, R&D | | Domestic |

| Janesville, WI | | Leased | | Distribution | | Domestic |

| Various WI | | Leased | | Warehouse | | Domestic |

| Maquoketa, IA | | Owned | | Storage, rental property | | Domestic |

| South Burlington, VT | | Leased | | Office | | Domestic |

| Mexico City, Mexico | | Owned | | Manufacturing, sales, distribution, warehouse, office, R&D | | International |

| Mexico City, Mexico | | Leased | | Storage, warehouse | | International |

| San Mateo Cuautepec, Mexico | | Leased | | Storage, manufacturing | | International |

| Hidalgo, Mexico | | Owned | | Manufacturing, sales, distribution, warehouse, office, R&D | | International |

| Milan, Italy | | Leased | | Manufacturing, sales, distribution, warehouse, office, R&D | | International |

| Casole d’Elsa, Italy | | Leased | | Manufacturing, office, warehouse, R&D | | International |

| Balsicas, Spain | | Leased | | Manufacturing, office, warehouse, R&D | | International |

| Foshan, China | | Owned | | Manufacturing, office, warehouse, R&D | | International |

| Saint-Nizier-sous-Charlieu, France | | Leased | | Sales, office, warehouse | | International |

| Ribeirao Preto, Brazil | | Leased | | Manufacturing, office, warehouse | | International |

| Stoke-on-Trent, United Kingdom | | Leased | | Sales, office, warehouse | | International |

| Sydney, Australia | | Leased | | Sales, office, warehouse | | International |

| Celle, Germany | | Owned | | Manufacturing, office, warehouse, R&D | | International |

| Charzyno, Poland | | Owned | | Manufacturing | | International |

| West Bengal, India | | Leased | | Manufacturing, warehouse | | International |

In addition to the countries represented above, the Company has other operations or sales offices in the United Arab Emirates, Singapore, Canada and the Dominican Republic, as well as several other countries throughout Europe.

As of December 31, 2019, substantially all of our domestically-owned and a portion of our internationally-owned properties are subject to collateral provisions under our senior secured credit facilities.

Not Applicable.

PART II

The following table summarizes the stock repurchase activity for the three months ended December 31, [removed: 2018,] [added: 2019,] which consisted of the withholding of shares upon the vesting of restricted stock awards to pay related withholding taxes on behalf of the recipient:

| | | [removed: Total] [added: Total] Number [removed: of Shares Purchased] [added: of Shares Purchased] | | | | [removed: Average Price Paid] [added: Average Price Paid] per [removed: Share] [added: Share] | | | | [removed: Total] [added: Total] Number [removed: Of Shares Purchased As] [added: Of Shares Purchased As] Part Of [removed: Publicly Announced] [added: Publicly Announced] Plans [removed: Or Programs] [added: Or Programs] | | | | [removed: Approximate Dollar Value] [added: Approximate Dollar Value] Of [removed: Shares That] [added: Shares That] May Yet [removed: Be Purchased Under The] [added: Be Purchased Under The] Plans [removed: Or Programs] [added: Or Programs] | | |

| [removed: 11/01/18] [added: 10/01/19] - [removed: 11/30/18] [added: 10/31/19] | | | [removed: 1,213] [added: \-] | | | [removed: $] | [removed: 55.05] [added: \-] | | | | \- | | | $ | 250,000,000 | |

For equity compensation plan information, refer to Note [removed: 15,] [added: 17,] “Share Plans,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

For information on the Company’s stock repurchase plans, refer to Note [removed: 11,] [added: 13,] “Stock Repurchase [removed: Program,”] [added: Programs,”] to the consolidated financial statements.

The line graph below compares the cumulative total stockholder return on our common stock with the cumulative total return of the Standard & Poor’s S&P 500 Index, the S&P 500 Industrials Index and the Russell 2000 Index for the five-year period ended December 31, [removed: 2018.][added: 2019.]

The graph and table assume that $100 was invested on December 31, [removed: 2013] [added: 2014] in each of our common stock, the S&P 500 Index, the S&P [removed: 500 Industrials] [added: MidCap 400] Index and the Russell 2000 Index, and that all dividends were reinvested.

[removed: ][added: ]

| Company / Market / Peer Group | | [removed: 12/31/2013 | | | |] 12/31/2014 | | | | 12/31/2015 | | | | 12/31/2016 | | | | 12/31/2017 | | | | 12/31/2018 | | | [added: | 12/31/2019 | | |]

As of February 19, [removed: 2019,] [added: 2020,] there were 194 registered holders of record of Generac’s common stock.

| 11/01/19 - 11/30/19 | | | 1,409 | | | $ | 93.38 | | | | \- | | | $ | 250,000,000 | |

| 12/01/19 - 12/31/19 | | | 682 | | | | 98.11 | | | | \- | | | $ | 250,000,000 | |

| Total | | | 2,091 | | | $ | 95.54 | | | | | | | | | |

| Generac Holdings Inc. | | $ | 100.00 | | | $ | 63.67 | | | $ | 87.13 | | | $ | 105.90 | | | $ | 106.29 | | | $ | 215.12 | |

| S&P 500 Index - Total Returns | | | 100.00 | | | | 101.38 | | | | 113.51 | | | | 138.29 | | | | 132.23 | | | | 173.86 | |

| S&P MidCap 400 Index | | | 100.00 | | | | 96.29 | | | | 114.33 | | | | 130.85 | | | | 114.50 | | | | 142.04 | |

| Russell 2000 Index | | | 100.00 | | | | 95.59 | | | | 115.95 | | | | 132.94 | | | | 118.30 | | | | 148.49 | |

| 10/01/18 - 10/31/18 | | | \- | | | | \- | | | | \- | | | $ | 144,453,228 | |

| 12/01/18 - 12/31/18 | | | 170 | | | | 52.79 | | | | \- | | | $ | 250,000,000 | |

| Total | | | 1,383 | | | $ | 54.77 | | | | | | | | | |

| Generac Holdings Inc. | | $ | 100.00 | | | $ | 82.56 | | | $ | 52.56 | | | $ | 71.93 | | | $ | 87.43 | | | $ | 87.75 | |

| S&P 500 Index - Total Returns | | | 100.00 | | | | 113.69 | | | | 115.26 | | | | 129.05 | | | | 157.22 | | | | 150.33 | |

| S&P 500 Industrials Index | | | 100.00 | | | | 109.83 | | | | 107.04 | | | | 127.23 | | | | 153.99 | | | | 133.53 | |

| Russell 2000 Index | | | 100.00 | | | | 104.89 | | | | 100.26 | | | | 121.63 | | | | 139.44 | | | | 124.09 | |

The selected historical consolidated financial data for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] are derived from our audited consolidated financial statements included elsewhere in this annual report.

The selected historical consolidated financial data for the years ended December 31, [removed: 2015] [added: 2016] and [removed: 2014] [added: 2015] is derived from our audited historical consolidated financial statements not included in this annual report.

This information should be read together with “Item [removed: 7—Management's] [added: 7 - Management's] Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto in Item 8 of this Annual Report on Form 10-K.

| | | [removed: Year] [added: Year] Ended December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | |

| (U.S. Dollars in thousands, except per share data) | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Net sales | | $ | [removed: 2,023,464] [added: 2,204,336] | | | $ | [removed: 1,679,373] [added: 2,023,464] | | | $ | [removed: 1,447,743] [added: 1,679,373] | | | $ | [removed: 1,317,299] [added: 1,447,743] | | | $ | [removed: 1,460,919] [added: 1,317,299] | |

| Costs of goods sold | | | [removed: 1,298,424] [added: 1,406,584] | | | | [removed: 1,094,587] [added: 1,298,424] | | | | [removed: 935,322] [added: 1,094,587] | | | | [removed: 857,349] [added: 935,322] | | | | [removed: 944,700] [added: 857,349] | |

| Gross profit | | | [removed: 725,040] [added: 797,752] | | | | [removed: 584,786] [added: 725,040] | | | | [removed: 512,421] [added: 584,786] | | | | [removed: 459,950] [added: 512,421] | | | | [removed: 516,219] [added: 459,950] | |

| Selling and service | | | [removed: 191,887] [added: 217,683] | | | | [removed: 174,841] [added: 191,887] | | | | [removed: 164,860] [added: 174,841] | | | | [removed: 130,242] [added: 164,860] | | | | [removed: 120,408] [added: 130,242] | |

| Research and development | | | [removed: 50,019] [added: 68,394] | | | | [removed: 42,869] [added: 50,019] | | | | [removed: 37,163] [added: 42,869] | | | | [removed: 32,922] [added: 37,163] | | | | [removed: 31,494] [added: 32,922] | |

| General and administrative | | | [removed: 103,841] [added: 110,868] | | | | [removed: 87,581] [added: 103,841] | | | | [removed: 74,693] [added: 87,581] | | | | [removed: 52,947] [added: 74,693] | | | | [removed: 54,795] [added: 52,947] | |

| Amortization of intangibles (1) | | | [removed: 22,112] [added: 28,644] | | | | [removed: 28,861] [added: 22,112] | | | | [removed: 32,953] [added: 28,861] | | | | [removed: 23,591] [added: 32,953] | | | | [removed: 21,024] [added: 23,591] | |

| Tradename and goodwill impairment (2) | | | \- | | | | \- | | | | \- | | | | [removed: 40,687] [added: \-] | | | | [removed: \-] [added: 40,687] | |

| Total operating expenses | | | [removed: 367,859] [added: 425,589] | | | | [removed: 334,152] [added: 367,859] | | | | [removed: 309,669] [added: 334,152] | | | | [removed: 280,389] [added: 309,669] | | | | [removed: 222,844] [added: 280,389] | |

| Income from operations | | | [removed: 357,181] [added: 372,163] | | | | [removed: 250,634] [added: 357,181] | | | | [removed: 202,752] [added: 250,634] | | | | [removed: 179,561] [added: 202,752] | | | | [removed: 293,375] [added: 179,561] | |

| Interest expense | | | [removed: (40,956] [added: (41,544] | ) | | | [removed: (42,667] [added: (40,956] | ) | | | [removed: (44,568] [added: (42,667] | ) | | | [removed: (42,843] [added: (44,568] | ) | | | [removed: (47,215] [added: (42,843] | ) |

| Investment income | | | [removed: 1,893] [added: 2,767] | | | | [removed: 298] [added: 1,893] | | | | [removed: 44] [added: 298] | | | | [removed: 123] [added: 44] | | | | [removed: 130] [added: 123] | |

| Loss on extinguishment of debt [removed: (4)] [added: (3)] | | | [removed: (1,332] [added: (926] | ) | | | [removed: \-] [added: (1,332] | [added: )] | | | [removed: (574] [added: \-] | [removed: )] | | | [removed: (4,795] [added: (574] | ) | | | [removed: (2,084] [added: (4,795] | ) |

| [removed: Gain (loss)] [added: Loss] on change in contractual interest rate (5) | | | \- | | | | \- | | | | [removed: (2,957] [added: \-] | [removed: )] | | | [removed: (2,381] [added: (2,957] | ) | | | [removed: 16,014] [added: (2,381] | [added: )] |

| Other, net | | | [removed: (5,710] [added: (1,933] | ) | | | [removed: (4,566] [added: (5,710] | ) | | | [removed: (1,000] [added: (4,566] | ) | | | [removed: (6,682] [added: (1,000] | ) | | | [removed: (1,858] [added: (6,682] | ) |

| Total other expense, net | | | [removed: (46,105] [added: (52,556] | ) | | | [removed: (46,935] [added: (46,105] | ) | | | [removed: (49,055] [added: (46,935] | ) | | | [removed: (56,578] [added: (49,055] | ) | | | [removed: (35,013] [added: (56,578] | ) |

| Income before provision for income taxes | | | [removed: 311,076] [added: 319,607] | | | | [removed: 203,699] [added: 311,076] | | | | [removed: 153,697] [added: 203,699] | | | | [removed: 122,983] [added: 153,697] | | | | [removed: 258,362] [added: 122,983] | |

| Provision for income taxes (6) | | | [removed: 69,856] [added: 67,299] | | | | [removed: 44,142] [added: 69,856] | | | | [removed: 56,519] [added: 44,142] | | | | [removed: 45,236] [added: 56,519] | | | | [removed: 83,749] [added: 45,236] | |

| Net income | | | [removed: 241,220] [added: 252,308] | | | | [removed: 159,557] [added: 241,220] | | | | [removed: 97,178] [added: 159,557] | | | | [removed: 77,747] [added: 97,178] | | | | [removed: 174,613] [added: 77,747] | |

| Net income attributable to noncontrolling interests | | | [removed: 2,963] [added: 301] | | | | [removed: 1,749] [added: 2,963] | | | | [removed: 24] [added: 1,749] | | | | [removed: \-] [added: 24] | | | | \- | |

| Net income attributable to Generac Holdings Inc. | | $ | [removed: 238,257] [added: 252,007] | | | $ | [removed: 157,808] [added: 238,257] | | | $ | [removed: 97,154] [added: 157,808] | | | $ | [removed: 77,747] [added: 97,154] | | | $ | [removed: 174,613] [added: 77,747] | |

| Net income attributable to common shareholders per common share - diluted: | | $ | [removed: 3.54] [added: 4.03] | | | $ | [removed: 2.53] [added: 3.54] | | | $ | [removed: 1.47] [added: 2.53] | | | $ | [removed: 1.12] [added: 1.47] | | | $ | [removed: 2.49] [added: 1.12] | |

| Depreciation | | $ | [removed: 25,296] [added: 32,265] | | | $ | [removed: 23,127] [added: 25,296] | | | $ | [removed: 21,465] [added: 23,127] | | | $ | [removed: 16,742] [added: 21,465] | | | $ | [removed: 13,706] [added: 16,742] | |

| Amortization of intangible assets | | | [removed: 22,112] [added: 28,644] | | | | [removed: 28,861] [added: 22,112] | | | | [removed: 32,953] [added: 28,861] | | | | [removed: 23,591] [added: 32,953] | | | | [removed: 21,024] [added: 23,591] | |

| Expenditures for property and equipment | | | [removed: (47,601] [added: (60,802] | ) | | | [removed: (33,261] [added: (47,601] | ) | | | [removed: (30,467] [added: (33,261] | ) | | | [removed: (30,651] [added: (30,467] | ) | | | [removed: (34,689] [added: (30,651] | ) |

| Adjusted EBITDA attributable to Generac Holdings Inc. (7) | | $ | [removed: 416,793] [added: 449,150] | | | $ | [removed: 311,225] [added: 416,793] | | | $ | [removed: 272,738] [added: 311,225] | | | $ | [removed: 270,816] [added: 272,738] | | | $ | [removed: 337,283] [added: 270,816] | |

| Adjusted net income attributable to Generac Holdings Inc. (8) | | | [removed: 292,213] [added: 317,822] | | | | [removed: 211,869] [added: 292,213] | | | | [removed: 195,572] [added: 211,869] | | | | [removed: 198,436] [added: 195,572] | | | | [removed: 234,165] [added: 198,436] | |

| (U.S. Dollars in thousands) | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Current assets | | $ | [removed: 1,120,769] [added: 1,195,829] | | | $ | [removed: 824,557] [added: 1,120,769] | | | $ | [removed: 687,794] [added: 824,557] | | | $ | [removed: 632,017] [added: 687,794] | | | $ | [removed: 707,637] [added: 632,017] | |

| Property and equipment, net | | | [removed: 278,929] [added: 316,976] | | | | [removed: 230,380] [added: 278,929] | | | | [removed: 212,793] [added: 230,380] | | | | [removed: 184,213] [added: 212,793] | | | | [removed: 168,821] [added: 184,213] | |

| Goodwill | | | [removed: 764,655] [added: 805,284] | | | | [removed: 721,523] [added: 764,655] | | | | [removed: 704,640] [added: 721,523] | | | | [removed: 669,719] [added: 704,640] | | | | [removed: 635,565] [added: 669,719] | |

| Other intangibles and other assets [added: (9)] | | | [removed: 261,961] [added: 347,580] | | | | [removed: 249,505] [added: 261,961] | | | | [removed: 260,742] [added: 249,505] | | | | [removed: 292,686] [added: 260,742] | | | | [removed: 352,396] [added: 292,686] | |

| Total assets | | $ | [removed: 2,426,314] [added: 2,665,669] | | | $ | [removed: 2,025,965] [added: 2,426,314] | | | $ | [removed: 1,865,969] [added: 2,025,965] | | | $ | [removed: 1,778,635] [added: 1,865,969] | | | $ | [removed: 1,864,419] [added: 1,778,635] | |

| Total current liabilities | | $ | [removed: 560,706] [added: 497,064] | | | $ | [removed: 396,423] [added: 560,706] | | | $ | [removed: 347,926] [added: 396,423] | | | $ | [removed: 213,224] [added: 347,926] | | | $ | [removed: 240,522] [added: 213,224] | |

| Long-term borrowings, less current portion | | | [removed: 876,396] [added: 837,767] | | | | [removed: 906,548] [added: 876,396] | | | | [removed: 1,006,758] [added: 906,548] | | | | [removed: 1,037,132] [added: 1,006,758] | | | | [removed: 1,065,858] [added: 1,037,132] | |

Over the years, we have executed a number of acquisitions that support our strategic plan.

A summary of the recent acquisitions can be found in Note 1, “Description of Business,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

In addition, in August 2015, we closed the Country Home Products acquisition, and in March 2016, we acquired a majority ownership interest in PR Industrial S.r.l.

and its subsidiaries (Pramac).

| Loss on pension settlement (4) | | | (10,920 | ) | | | \- | | | | \- | | | | \- | | | | \- | |

(4) Represents pre-tax settlement charges related to the termination of the Company’s domestic pension plan in the fourth quarter of 2019.

Refer to Note 16, “Benefit Plans,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information regarding the Company’s pension plans.

(9) On January 1, 2019, the Company adopted ASU 2016-02, _Leases_.

The Company adopted this standard using the modified retrospective approach as of the date of adoption, meaning no prior period balances were impacted by the adoption.

The adoption of the standard had a material impact on the Company’s consolidated balance sheet primarily related to the recognition of right-of-use (ROU) assets and lease liabilities for operating leases.

At December 31, 2019, the Company had $36.0 million in ROU assets included in other assets and $37.0 million in lease liabilities included in other liabilities.

Refer to Note 10, “Leases,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information regarding the Company’s leases.

| (U.S. Dollars in thousands) | | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | |

| Net income attributable to Generac Holdings Inc. | | $ | 252,007 | | | $ | 238,257 | | | $ | 157,808 | | | $ | 97,154 | | | $ | 77,747 | |

| Net income | | | 252,308 | | | | 241,220 | | | | 159,557 | | | | 97,178 | | | | 77,747 | |

| Loss on pension settlement (f) | | | 10,920 | | | | \- | | | | \- | | | | \- | | | | \- | |

Refer to Note 12, “Credit Agreements,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information on the losses on extinguishment of debt.

(f) Represents pre-tax settlement charges related to the termination of the Company’s domestic pension plan in the fourth quarter of 2019.

Refer to Note 16, “Benefit Plans,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information regarding the Company’s pension plans.

Refer to Note 12, “Credit Agreements,” to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for further information on the gains and losses on changes in the contractual interest rate.

| (U.S. Dollars in thousands) | | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | |

| Net income attributable to Generac Holdings Inc. | | $ | 252,007 | | | $ | 238,257 | | | $ | 157,808 | | | $ | 97,154 | | | $ | 77,747 | |

| Net income attributable to noncontrolling interests | | | 301 | | | | 2,963 | | | | 1,749 | | | | 24 | | | | \- | |

| Net income | | | 252,308 | | | | 241,220 | | | | 159,557 | | | | 97,178 | | | | 77,747 | |

| Provision for income taxes | | | 67,299 | | | | 69,856 | | | | 44,142 | | | | 56,519 | | | | 45,236 | |

| Income before provision for income taxes | | | 319,607 | | | | 311,076 | | | | 203,699 | | | | 153,697 | | | | 122,983 | |

| Amortization of intangible assets | | | 28,644 | | | | 22,112 | | | | 28,861 | | | | 32,953 | | | | 23,591 | |

| Loss on pension settlement | | | 10,920 | | | | \- | | | | \- | | | | \- | | | | \- | |

| Gain on remeasurement of contingent consideration (3) | | | \- | | | | \- | | | | \- | | | | \- | | | | (4,877 | ) |

(3) During the second quarter of 2014, we recorded a gain of $4.9 million related to an adjustment to a certain earn-out obligation in connection with the Tower Light acquisition.

| --- | --- | --- |

Additionally, the year ended December 31, 2014 includes a gain of $4.9 million related to an adjustment to an earn-out obligation in connection with the Tower Light acquisition.

| | ● | The adjustment to a certain earn-out obligation in connection with the Tower Light acquisition recorded in the year ended December 31, 2014, is a one-time adjustment that we believe does not reflect our ongoing operations. |

(f) For the year ended December 31, 2016, represents a non-cash loss relating to the continued 25 basis point increase in borrowing costs as a result of the credit agreement leverage ratio remaining above 3.0 times based on projections at that time.

For the year ended December 31, 2014, represents a non-cash gain relating to a 25 basis point reduction in borrowing costs as a result of the credit agreement leverage ratio falling below 3.0 times and expected to remain below 3.0 times based on projections at that time.

To the [removed: Stockholders] [added: stockholders] and [added: the] Board of Directors of Generac Holdings Inc.

Waukesha, [removed: Wisconsin][added: WI]

Opinion [removed: on] [added: on] the Financial Statements

We have audited the accompanying consolidated balance sheets of Generac Holdings Inc. and subsidiaries (the [removed: “Company”)] [added: "Company")] as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the related consolidated statements of  comprehensive income, [removed: stockholders’ equity] [added: stockholders' equity,] and cash [removed: flows] [added: flows,] for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] and the related [removed: notes, collectively] [added: notes (collectively] referred to as the [removed: “financial statements”.][added: "financial statements").]

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: _Internal] Control — Integrated Framework [removed: (2013)] [added: (2013)_] issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February [removed: 26, 2019,] [added: 25, 2020,] expressed an unqualified opinion on the Company's internal control over financial reporting.

Opinion [removed: on Internal Control over] [added: on Internal Control over] Financial Reporting

We have audited the internal control over financial reporting of Generac Holdings Inc. and [removed: its] subsidiaries (the [removed: "Company")] [added: “Company”)] as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: _Internal] Control — Integrated Framework [removed: (2013)] [added: (2013)_] issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: _Internal] Control — Integrated Framework [removed: (2013)] [added: (2013)_] issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, [removed: 2018,] [added: 2019,] of the Company and our report dated February [removed: 26, 2019,] [added: 25, 2020,] expressed an unqualified opinion on those financial [removed: statements.][added: statements and included an explanatory paragraph regarding the Company's adoption of FASB Accounting Standards Update 2016-02, _Leases_ (Topic 842), using the modified retrospective approach.]

As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at [removed: the Selmec Equipos Industriales, S.A. de C.V. (“Selmec”),] [added: Neurio Technology Inc. (Neurio),] which was acquired [removed: on June 1, 2018] [added: in March 2019,] and [added: Pika Energy, Inc (Pika), which was acquired in April 2019, and] whose financial statements constitute [removed: 11.1%] [added: 5.0%] and [removed: 5.3%] [added: 2.8%] of net and total assets, respectively, [removed: 1.5%] [added: 0.4%] of net sales, and [removed: 0.04%] [added: (2.2)%] of net income of the consolidated financial statement amounts as of and for the year ended December 31, [removed: 2018.][added: 2019.]

Accordingly, our audit did not include the internal control over financial reporting at [removed: Selmec.][added: Neurio and Pika.]

Definition and [removed: Limitations of] [added: Limitations of] Internal [removed: Control] [added: Control] over Financial Reporting

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that [removed: the] controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

| Generac Holdings Inc. | [removed: | | |]

| Consolidated Balance Sheets | [removed: | | |]

| _(U.S. Dollars in Thousands, Except Share and Per Share Data)_ | [removed: | | |]

| | | [removed: December 31,] [added: December 31,] | | | | | | |

| | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | [added: | 2017 | | |]

| Cash and cash equivalents [added: at beginning of period] | | [removed: $] | 224,482 | | | [removed: $] | 138,472 | | [added: | | 67,272 | |]

| Accounts receivable, less allowance for doubtful accounts of [removed: $4,873] [added: $6,968] and [removed: $4,805] [added: $4,873] at December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively | | | [removed: 326,133] [added: 319,538] | | | | [removed: 279,295] [added: 326,133] | |

| Inventories | | | [removed: 544,750] [added: 522,024] | | | | [removed: 387,049] [added: 544,750] | |

| Prepaid expenses and other assets | | | [removed: 25,404] [added: 31,384] | | | | [removed: 19,741] [added: 25,404] | |

| Total current assets | | | [removed: 1,120,769] [added: 1,195,829] | | | | [removed: 824,557] [added: 1,120,769] | |

| Property and equipment, net | | | [removed: 278,929] [added: 316,976] | | | | [removed: 230,380] [added: 278,929] | |

| Customer lists, net | | | [removed: 61,194] [added: 55,552] | | | | [removed: 41,064] [added: 61,194] | |

| [removed: Patents,] [added: Patents and technology,] net | | | [removed: 29,970] [added: 85,546] | | | | [removed: 39,617] [added: 29,970] | |

| Other intangible assets, net | | | [removed: 3,043] [added: 8,259] | | | | [removed: 2,401] [added: 3,043] | |

| Tradenames, net | | | [removed: 152,283] [added: 148,377] | | | | [removed: 152,683] [added: 152,283] | |

| Goodwill | | | [removed: 764,655] [added: 805,284] | | | | [removed: 721,523] [added: 764,655] | |

| Deferred income taxes | | | [removed: 163] [added: 2,933] | | | | [removed: 3,238] [added: 163] | |

| Other assets | | | [removed: 15,308 | | | | 10,502] [added: 597] | |

| Total [removed: assets] | | $ | [added: 2,665,669 | | | $ |] 2,426,314 | | | $ | 2,025,965 | |

| Short-term borrowings | | $ | [removed: 45,583] [added: 58,714] | | | $ | [removed: 20,602] [added: 45,583] | |

| Accounts payable | | | [removed: 328,091] [added: 261,977] | | | | [removed: 233,639] [added: 328,091] | |

| Accrued wages and employee benefits | | | [removed: 40,819] [added: 41,361] | | | | [removed: 27,992] [added: 40,819] | |

| Other accrued liabilities | | | [removed: 144,236] [added: 132,629] | | | | [removed: 112,618] [added: 144,236] | |

| Current portion of long-term borrowings and [removed: capital] [added: finance] lease obligations | | | [removed: 1,977] [added: 2,383] | | | | [removed: 1,572] [added: 1,977] | |

| Total current liabilities | | | [removed: 560,706] [added: 497,064] | | | | [removed: 396,423] [added: 560,706] | |

| Long-term borrowings and [removed: capital] [added: finance] lease obligations | | | [removed: 876,396] [added: 837,767] | | | | [removed: 906,548] [added: 876,396] | |

Change in Accounting Principle

As discussed in Note 10 to the financial statements, effective January 1, 2019, the Company adopted FASB Accounting Standards Update 2016-02, _Leases_ (Topic 842), using the modified retrospective approach.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

_Acquisitions –_ _Neurio and_ _Pika –_ _Intangible_ _Assets — Refer to Note 3_ _to the consolidated financial statements__._

_Critical Audit Matter Description_

As discussed in Note 3 to the consolidated financial statements, on March 12, 2019, the Company acquired Neurio for a purchase price of $59.1 million.

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

Accordingly, the purchase price was allocated based on the estimates of the fair value of the acquired assets and assumed liabilities.

On April 26, 2019, the Company acquired Pika for a purchase price of $49.1 million.

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

Accordingly, the purchase price was allocated based on the estimates of the fair value of the acquired assets and assumed liabilities.

As a result, the Company recorded approximately $58.2 million of intangible assets, including $19.9 million of goodwill as of the acquisition date.

For both acquisitions, acquired intangible assets, excluding goodwill, were valued using certain discounted cash flow methodologies based on future cash flows specific to the type of intangible asset purchased.

This methodology incorporated various estimates and assumptions, the most significant being projected revenue growth rates, earnings margins, and forecasted cash flows based on a discount rate and terminal growth rate.

The principle consideration for our determination that the purchase accounting for these acquisitions is a critical audit matter is that there is a high degree of auditor effort, judgment and subjectivity involved in designing and performing procedures to evaluate the reasonableness of management’s estimates and assumptions related to the projected revenue growth rates, earnings margins and forecasted cash flows based on the discount rate and terminal growth rate.

_How the Critical Audit Matter Was Addressed in the Audit_

Our audit procedures related to the projected revenue growth rates, earnings margins, and forecasted cash flows and the selection of the discount rate and terminal growth rate for the intangible assets included the following, among others:

| | ● | We tested the effectiveness of controls over management’s process to estimate the fair value of the intangible assets, including those over projected revenue growth rates, earnings margins and forecasted cash flows based on the discount rate and terminal growth rate. |

| | ● | We assessed the reasonableness of management’s future cash flow projections and terminal growth rate by comparing the projections to historical results and relevant industry data. |

| | ● | With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate selected, including testing the source information underlying the determination of the discount rate, testing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing those to the discount rate selected by management. |

| | ● | We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit, including impairment analyses and tax projections. |

_Goodwill – Refer to Note 9_ _to the financial statements__._

_Critical Audit Matter Description_

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value.

The Company’s estimate for each reporting unit is based on the present value of estimated future cash flows attributable to the respective reporting unit.

This requires management to make significant estimates and assumptions including estimates of future growth rates and inflation rates and discount rates based on the estimated weighted average cost of capital for the business.

Changes in the assumptions could have a significant impact on the fair value, which could result in an impairment charge.

The Company performed their annual impairment assessment of its reporting units as of October 31, 2019.

In the October 31, 2019 impairment test calculation, the Latin America reporting unit had an estimated fair value that exceeded its carrying value by approximately 10%.

Because the estimated fair value exceeded the carrying value, no impairment was recorded.

The carrying value of the Company’s Latin America reporting unit goodwill was approximately $48.1 million.

Key financial assumptions utilized to determine the fair value of the reporting unit include revenue growth levels that reflect recovering end markets, an expanding customer and project pipeline, increased sales of service parts and service contracts, improving profit margins, a 3% terminal growth rate and an 11.1% discount rate.

The principle consideration for our determination that the evaluation of goodwill is a critical audit matter is that there is a high degree of auditor effort, judgment and subjectivity involved in designing and performing procedures to evaluate the reasonableness of management’s key financial assumptions utilized to determine the fair value of the Latin America reporting unit.

_How the Critical Audit Matter Was Addressed in the Audit_

Our audit procedures related to the forecasts of future revenue growth rates, improving profit margins, the terminal growth rate and the selection of the discount rate for the Latin America reporting unit included the following, among others:

| | ● | Evaluated the design and effectiveness of the controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the reporting unit, such as controls related to management’s forecast and the selection of the discount rate. |

| | ● | Obtained the Company’s discounted cash flow model and evaluated the valuation analysis for mathematical accuracy. |

| | ● | Utilized fair value specialists to evaluate whether the valuation techniques applied by management were appropriate. |

February 26, 2019

| --- | --- | --- | --- | --- | --- |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | |

| Loss on change in contractual interest rate | | | – | | | | – | | | | (2,957 | ) |

| Balance at December 31, 2015 (previously reported) | | | 69,582,669 | | | $ | 696 | | | $ | 443,109 | | | | (3,567,575 | ) | | $ | (111,516 | ) | | $ | (202,116 | ) | | $ | 358,173 | | | $ | (22,475 | ) | | $ | 465,871 | | | $ | \- | | | $ | 465,871 | |

| Impact of adoption of certain accounting standards (Note 2) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (2,299 | ) | | | – | | | | (2,299 | ) | | | – | | | | (2,299 | ) |

| Balance at December 31, 2015 (as adjusted) | | | 69,582,669 | | | $ | 696 | | | $ | 443,109 | | | | (3,567,575 | ) | | $ | (111,516 | ) | | $ | (202,116 | ) | | $ | 355,874 | | | $ | (22,475 | ) | | $ | 463,572 | | | $ | \- | | | $ | 463,572 | |

| Acquisition of business | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 53 | | | | 53 | |

| Stock repurchases | | | – | | | | – | | | | – | | | | (3,968,706 | ) | | | (149,937 | ) | | | – | | | | – | | | | – | | | | (149,937 | ) | | | – | | | | (149,937 | ) |

| Net income | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 97,154 | | | | – | | | | 97,154 | | | | (76 | ) | | | 97,078 | |

| Loss on change in contractual interest rate | | | – | | | | – | | | | 2,957 | |

| Excess tax benefits from equity awards | | | (1,877 | ) | | | (3,152 | ) | | | (7,920 | ) |

| Deposit paid related to acquisition | | | – | | | | – | | | | (15,329 | ) |

| Excess tax benefits from equity awards | | | – | | | | – | | | | 7,920 | |

| | ● | In September 2014, the Company acquired the equity of Pramac America LLC (Powermate), resulting in the ownership of the Powermate trade name and the right to license the DeWalt brand name for certain residential engine powered tools. This acquisition expanded Generac’s residential product portfolio in the portable generator category. |

| | ● | In October 2014, the Company acquired MAC, Inc. (MAC). MAC is a leading manufacturer of premium-grade commercial and industrial mobile heaters for the United States and Canadian markets. The acquisition expanded the Company’s portfolio of mobile power products and provides increased access to the oil & gas market. |

| | ● | In August 2015, the Company acquired Country Home Products and its subsidiaries (CHP). CHP is a leading manufacturer of high-quality, innovative, professional-grade engine powered equipment used in a wide variety of property maintenance applications, which are primarily sold in North America under the DR® Power Equipment brand. The acquisition provided an expanded product lineup and additional scale to the Company’s residential engine powered products. |

| | ● | In March 2016, the Company acquired a majority ownership interest in PR Industrial S.r.l and its subsidiaries (Pramac). Headquartered in Siena, Italy, Pramac is a leading global manufacturer of stationary, mobile and portable generators primarily sold under the Pramac® brand. Pramac products are sold in over 150 countries through a broad distribution network. |

There were no reporting units with a carrying value at-risk of exceeding fair value as of the October 31, 2018 impairment test date.

The fair value of all derivative contracts is classified as Level 2.

In February 2016, the FASB issued ASU 2016-02, _Leases_.

The Company developed a comprehensive project plan and established a cross-functional implementation team to evaluate the impact of the standard, which included evaluating the Company’s lease portfolio, analyzing the standard’s impact on the Company’s various types of lease contracts, and identifying the reporting requirements of the standard.

The Company has completed its assessment of the impacts the standard will have on its financial statements, and determined that the impact to the statement of comprehensive income is not material.

However, the Company is anticipating to record a right of use asset and lease liability of approximately $65,000 to $75,000 in its balance sheet.

which represents both finance and operating lease assets and liabilities.

The Company adopted the standard January 1, 2019 using the modified retrospective approach as of the adoption date, elected the package of practical expedients (lease classification, embedded leases, and initial direct costs for existing leases need not be reassessed), and determined it would combine lease and nonlease components.

The standard is effective for the Company in 2019.

The guidance can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption, and is effective for the Company in 2020.

On January 1, 2018, the Company adopted ASU 2017-07, _Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost_.

The new standard requires presentation of certain components of net periodic pension cost as non-operating expense.

The changes in presentation of the components of net periodic pension cost were applied retrospectively to all periods presented.

On January 1, 2018, the Company adopted ASU 2016-15, _Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments_.

The changes in presentation of the proceeds from beneficial interests in securitization transactions were applied retrospectively to all periods presented.

On January 1, 2018, the Company adopted ASU 2014-09, _Revenue from Contracts with Customers_, and all related amendments (the “new revenue recognition standard”) using the full retrospective method, which requires application to all periods presented.

The impact of adopting the above standards on the Company’s previously reported consolidated financial statements is as follows:

| _Consolidated Balance Sheets_ | | December 31, 2017 | | | | | | | | | | |

| | | As Reported | | | | Impact of Adoption | | | | As Adjusted | | |

| Accounts receivable | | $ | 280,002 | | | $ | (707 | ) | | $ | 279,295 | |

| Inventories | | | 380,341 | | | | 6,708 | | | | 387,049 | |

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management conducted an assessment of the effectiveness of internal control over financial reporting as of December 31, [removed: 2018] [added: 2019] based on the criteria established in the 2013 _Internal Control – Integrated Framework_, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this assessment, our management has concluded that our internal control over financial reporting was effective as of December 31, [removed: 2018.][added: 2019.]

In conducting this assessment, our management excluded [removed: the Selmec Equipos Industriales, S.A. de C.V. business,] [added: Neurio Technology Inc.,] which was acquired [removed: on June 1, 2018] [added: in March 2019,] and [added: Pika Energy, Inc., which was acquired in April 2019, and] whose financial statements constitute [removed: 11.1%] [added: 5.0%] and [removed: 5.3%] [added: 2.8%] of net and total assets, respectively, [removed: 1.5%] [added: 0.4%] of net sales, and [removed: 0.04%] [added: (2.2)%] of net income of the [removed: total] consolidated financial statement amounts as of and for the year ended December 31, [removed: 2018.][added: 2019.]

Deloitte & Touche LLP, the Company’s independent registered public accounting firm, issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] which is included herein.

[removed: Other than the implementation of the new leases standard noted above, there] [added: There] have been no changes in our internal control over financial reporting that occurred during the [removed: quarter] [added: three months] ended December 31, [removed: 2018] [added: 2019] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In January 2019, we implemented ASU 2016-02, _Leases_.

As a result of the adoption, we implemented changes to our controls related to leases.

These included the development of new policies related to the capitalization of leases, enhanced lease terms and contract review requirements, and other ongoing monitoring activities.

These controls were designed to provide assurance at a reasonable level of the fair presentation of our consolidated financial statements and related disclosures.

The information required by Item 10 not already provided herein under “Item 1 – Business – [added: Information About Our] Executive Officers”, will be included in our [removed: 2019] [added: 2020] Proxy Statement and is incorporated herein by reference.

The information required by this item will be included in our [removed: 2019] [added: 2020] Proxy Statement and is incorporated herein by reference.

The information required by this item, including under the heading “Securities Authorized for Issuance Under Equity Compensation Plans,” will be included in our [removed: 2019] [added: 2020] Proxy Statement and is incorporated herein by reference.

The information required by this item will be included in our [removed: 2019] [added: 2020] Proxy Statement and is incorporated herein by reference.

The information required by this item will be included in our [removed: 2019] [added: 2020] Proxy Statement and is incorporated herein by reference.

| [removed: Reports] [added: [Reports] of Independent Registered Public Accounting [removed: Firms] [added: Firm](#auditor)] | 37 |

| [removed: Consolidated] [added: [Consolidated] balance sheets as of December 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018](#bs)] | [removed: 39] [added: 40] |

| [removed: Consolidated] [added: [Consolidated] statements of comprehensive income for years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017](#compinc)] | [removed: 40] [added: 41] |