Good morning, ladies and gentlemen, and welcome to the Generac Holdings, Inc. First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, York Ragen, Chief Financial Officer. You may begin. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Good morning, everyone, and welcome to our first quarter 2016 earnings call. I'd like to thank everyone for joining us this morning. With me today is Aaron Jagdfeld, our President and Chief Executive Officer. We'll begin our call today by commenting on forward-looking statements. Certain statements made during this presentation as well as other information provided from time to time by Generac or its employees may contain forward-looking statements and involve risks and uncertainties that could cause actual results to differ materially from those in these forward-looking statements. Please see our earnings release or our SEC filings for a list of words or expressions that identify such statements and the associated risk factors. In addition, we will make reference to certain non-GAAP measures during today's call. Additional information regarding these measures, including reconciliation to comparable U.S. GAAP measures, is available in our earnings release and SEC filings. I will now turn the call over to Aaron. Aaron P. Jagdfeld - Executive Chairman, President & CEO: Thanks, York. Good morning, everyone, and thank you for joining us today. Our overall financial performance for the first quarter exceeded our most recent guidance expectations as the increasing diversification of our business helped to offset the ongoing headwinds being experienced within oil and gas-related end markets. Shipments of our legacy residential products came…

Your first question comes from the line of Jeff Hammond from KeyBanc. Your line is open.

Hey, guys. This is James Picariello. Aaron P. Jagdfeld - Executive Chairman, President & CEO: Good morning.

A quick question. Good morning. So for the C&I guidance, you did take that down a bit from down low-teens organically to now down mid-teens. Can you just sort of flesh out the incremental weakness that you are obviously seeing in mobile versus the pickup in telecom that you did mention with respect to orders in the quarter? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yes. This is York. As we highlighted, we have seen continued weakness in oil and gas as we try to find a bottom there. We've reflected that in our organic C&I outlook. You're correct in terms of highlighting now expecting a decline – organic decline in C&I in the mid-teens range. There are offsets to that, though. We are seeing some outperformance on the Pramac outlook, which is helping to offset that. So if you recall, our as-reported C&I outlook is still up approximately 10%. So we are holding that. But the pieces inside that are organically down a little bit more because of oil and gas but offset by outperformance with Pramac. So that's where a lot of the puts and takes are relative to our previous guidance. Aaron P. Jagdfeld - Executive Chairman, President & CEO: I would just add that that previous guidance, when given, oil took another leg down during the first quarter, and I think that kind of continued to put a damper on the fleet purchases that normally happen in oil and gas. And then the spillover effect into the general rental markets that we are witnessing as a result of that I think is properly reflected in this updated guidance for the organic piece of C&I.

Got it. No, that's fair. I'm sorry, what? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yes. There is some contribution of increased telecom outlook in that number as well, but, as you pointed out.

Got it. And then can we just go back to the quarter to get a better sense of the organic assumptions or the organic growth rates broken out by resi and C&I? I mean, we know that residential is the smaller piece for Pramac. Can you provide just a little more detail as to what that breakout might be so we can get a stronger sense of the core growth in the quarter? York A. Ragen - Chief Financial Officer & Head-Investor Relations: If you're looking for core growth for resi, it's more – I mean, CHP is the biggest piece of that in terms of the acquisition contribution. There is a small amount for Pramac for resi. But if you're looking for just core growth, year-over-year for resi, it was down about 11%. And that is mainly from home standby for the reasons we talked about in terms of the prior-year headwinds with backlog and field inventory.

Okay. Thanks. I will get back in queue. Aaron P. Jagdfeld - Executive Chairman, President & CEO: Sure. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Thanks.

Your next question comes from the line of Brian Drab from William Blair. Your line is open. Brian P. Drab - William Blair & Co. LLC: Hey, good morning. Aaron P. Jagdfeld - Executive Chairman, President & CEO: Good morning, Brian. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Good morning. Brian P. Drab - William Blair & Co. LLC: Can you talk a little bit more about the seasonality from first quarter to second quarter? There is just a lot of moving parts here, including CHP, Pramac, just general seasonality in home standby and industrial, the Magnum tower light business. So there is a big step up I think in models in general from first quarter to second quarter, and it would be helpful if you could in any way kind of further quantify those factors. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yes, this is York. I mean getting specifics in terms of quantification, but you are right. We posted $286 million first quarter net sales, and second quarter our prepared remarks talked about $350 million to $360 million. So Pramac, in the first quarter there was only one month of contribution there. So we will have three months in second quarter. So right off the bat there you will get a large sequential increase just by getting a full quarter from Pramac. But beyond that, I mean there is some normal seasonality in our business that Q1 is always the lowest quarter for us in the year and it builds then up throughout the year. And especially – so CHP is where it hasn't quite annualized, but when you look at their business they are a spring and fall business. So you should expect - Aaron P. Jagdfeld - Executive Chairman, President…

Your next question comes from the line of Ross Gilardi from Bank of America. Your line is open.

Hey, good morning, guys. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Good morning, Ross. Aaron P. Jagdfeld - Executive Chairman, President & CEO: Good morning.

I am just trying to understand what the real message is just sort of on the current environment for standby, on one hand, core growth is down 11% but you are talking about activations. I wasn't really clear on what you are saying about field inventories there, so can you just flesh that out a little bit more? Is the overall environment getting better or worse? Aaron P. Jagdfeld - Executive Chairman, President & CEO: Yeah, it's a great question and one that is a bit – there is a lot of moving pieces in that, too, just looking at the quarter. But we look at – so we look at a couple of things, Ross, as you know. We look at kind of end user demand for us, we have real-time activation data so every machine that's installed we know exactly where it's installed and when it gets turned on for the first time. So we believe that gives us very good insight into what's going on in the end market. We saw activations year over year in the quarter were up and we think that that's primarily related to a milder winter, so more of those machines were able to get put in, and also power outage severity was – there was a little more in terms of outages in the quarter. Now, nothing relative to where we have been historically but over this kind of trough period over the last three years, it was kind of in line with that. So a little bit up from the really super-low levels from last year, so we think those two things – a milder winter and a little bit more power outage activity – drove activations higher. I think where the 11% decrease in the shipments comes from is…

Okay. Could you just explain the significance of the activation? My understanding is, at the time of the activation, you've already recognized the revenue from shipping to the dealer. Is the significance of the activation that that essentially moves that product out of dealer inventory? Aaron P. Jagdfeld - Executive Chairman, President & CEO: Correct. Correct, that's exactly what happened. So by the very nature of our shipments to distribution, we know how much inventory, if you will, is in the field very precisely up to the point when it is activated, and then effectively, as you are saying, it comes out of field inventory at that point.

Okay. Can you guys also just talk about the year-on-year increase in receivables and inventory? I think you mentioned that Pramac added $50 million of working capital, but I think even if you stripped that out you would be up, and maybe Country Home Products is contributing to that, too, but any help there. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yes. So I'll help you out there, Ross. So the Pramac opening balance sheet for AR will have about $56 million. So that then organically we'll have a decline in AR. Inventories was about $40 million inventory balance coming on from Pramac. So that would show an increase in inventories, and the highlight there is we were doing some strategic volume engine buys here in the first quarter, and that was the main driver for the organic increase in inventory. So that maybe helps you out a little bit more.

Got it. Thank you. And your operating expenses were a little bit higher, tied to these acquisitions. I imagine there is – part of the rationale in doing the Pramac deal is that you take out some SG&A. So how quickly do you think you can get that SG&A associated with that transaction down to more like Generac ratios? Aaron P. Jagdfeld - Executive Chairman, President & CEO: Yes. There's two things there, Ross. First, on the Pramac side, actually most of the synergies that we are looking at are going to come on the COGS side, in the cost of goods sold. So optimization of the manufacturing footprint, and then most of the synergies that we are targeting are going to come out of the combination of the global supply chains of the two businesses. On the SG&A side, their cost-to-serve as a global business with 14 branches worldwide, four plants worldwide, is a bit higher than what you would see for us. I mean, we have a fairly simple operating structure in North America here with core Generac in comparison. So there may be some opportunities as it relates to combinations with our Tower Light business over there. There might be some SG&A, but to be frank we are not putting a lot of math behind that. I think we are hoping to leverage that SG&A. We don't think it's going to grow a lot more in terms of raw dollars. We just think we're going to be able to leverage it as we work on the revenue synergy side of that, and then again the savings are going to come out of COGS. And then the second piece on the overall SG&A is the Country Home Products business, as a primarily direct-to-consumer business they have very good gross margins but then there is a high cost to serve as a result of that direct-to-consumer model. So there is no distribution channel. So the "costs" that would normally be borne by distribution are borne by, in this case, CHP directly, and that's reflected in the higher SG&A load as a percentage of sales.

Your next question comes from the line of Charley Brady from SunTrust Robinson Humphrey. Your line is open.

Thanks. Good morning, guys. Aaron P. Jagdfeld - Executive Chairman, President & CEO: Good morning, Charley.

On the $7.1 million optimization restructuring, I just wanted to understand that a little bit better. Can you remind me, you mentioned it but I missed it, when you are going to consolidate that plant, the Bismarck plant? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yeah, the Bismarck plant should, by the end of July, should be completed. So we announced that in the first quarter, and we are in the process of that transition as we speak. It should be completed by July.

Is the head count reduction piece of the restructuring completed? Aaron P. Jagdfeld - Executive Chairman, President & CEO: It's substantially completed at this point. There is a few – I mean, as we wind down the facility there is a few more heads there. And then there are some heads within the mobile business in totality, the broader business there, that we are continuing to work through here in the second quarter.

Okay. And on the asset write-down, was all of that from MAC, and can you quantify that? York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yeah. The vast majority was – we haven't provided the specific details on that, but the vast majority was on the MAC side. As you transition the inventory over from one plant to another, there is some inventory you just don't want to move. So there were some write-downs related to that. Most of that, you are correct, is inventory related to MAC.

Okay. And then I guess I don't know if I missed the answer or not, but on a prior question about the $4 million to $5 million that you had a run rate by Q4, I guess what I am trying to get to really, what's the run rate for Q2 and Q3 and the rest of the year? Obviously, as he said earlier, you're not going to get the full $4 million to $5 million until you're done with everything. But there is some percentage of that that you are going to get a piece of prior to the end of Q4. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yeah. That's fair. That is fair. However, the building is still there, so you are not going to get everything. But as volume comes down, you're going to get those savings. But to your point, Charley, there are some savings that get realized here in Q2 and Q3 as we are transitioning the MAC business into the Berlin location. Aaron P. Jagdfeld - Executive Chairman, President & CEO: But the biggest driver of the cost is the closure of the facility and the head count reduction. So Q3, although it won't happen until the end of July, so you are already into Q3, you will see a significant part of that quarterized version of that $4 million to $5 million. I don't know that it is quite $1 million at that point because you only have two months, but by the fourth quarter we will be pretty close to run rating that. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Yes.

Is that facility owned right now or leased? Aaron P. Jagdfeld - Executive Chairman, President & CEO: It is an owned facility.

Okay. So at some point presumably you're going to put it up for sale and there will be a gain or something on that at some point. Aaron P. Jagdfeld - Executive Chairman, President & CEO: At some point. We will evaluate after we get out of it just kind of what we want to do. It is an older facility. So to be frank, the value, both on the books and from a market standpoint, is pretty minimal. So I wouldn't expect any massive gains from that.

Your next question comes from the line of Jerry Revich from Goldman Sachs. Your line is open. Jerry Revich - Goldman Sachs & Co.: Hi, good morning, everyone. Aaron P. Jagdfeld - Executive Chairman, President & CEO: Good morning, Jerry. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Good morning, Jerry. Jerry Revich - Goldman Sachs & Co.: Aaron, can you talk about how the supply chain review is going at Pramac? I think you had mentioned a 90-day period that was a key milestone for where you folks would do – it would be fairly reasonably far along in terms of evaluating how the supply chain fits within the broader Generac purchase organization. And can you just give us an update how that review is going and what the cost-saving opportunity looks like today versus compared to when we last spoke on last quarter's call? Aaron P. Jagdfeld - Executive Chairman, President & CEO: Yeah. I think obviously it's a major area of focus for us, Jerry, given that we think that a lot of the opportunity in combining these businesses is in supply chain. It's front and center in the integration activities, so we're kind of call it maybe halfway through that process, 60 days into the 90 days that we've called out. What we're finding is that there is a lot of moving pieces, as you know, as you could expect with factories all over the world now trying to figure out just the optimized logistics spots of the supply base from one plant to another – from their plants, from the suppliers' plants, to our plants. So that's actually playing a bigger role in some of this analysis. And then, as it relates to things like Brazil, you've got imports, duties and other things…

Your next question comes from the line of Christopher Glynn from Oppenheimer. Your line is open. Christopher D. Glynn - Oppenheimer & Co., Inc. (Broker): Thanks. Good morning. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Good morning. Christopher D. Glynn - Oppenheimer & Co., Inc. (Broker): So Pramac certainly has a totally different scale relative to your prior acquisitions, if I am not mistaken. So congratulations on that step. And just wondering in terms of integration if that raises any interesting questions on the cultural integration side, and I know you already have some Italian blood going there with Tower Light, if I am not mistaken. Aaron P. Jagdfeld - Executive Chairman, President & CEO: Correct. No, that is a good question, Chris. I think there are two things that I'd point to. Clearly, just from the outside looking in, it is our biggest transaction to-date by a high percentage. It is a complex organization in terms of 14 sales branches, four manufacturing plants, 600 people. It is a global organization, which presents its own unique challenges with integration of systems, just within Pramac itself. So from the outside looking in, it's clearly a tough challenge. So there is two things I would point to, though, and what we have tried to do to mitigate the challenge that exists there in integration. The first is we don't own 100%. I think it is really important from an alignment standpoint, the founding family of this business is remaining a significant owner. And so they are a great partner for us. They are people that I have known for quite a long time in our industry – seven years, eight years and have worked with them on a number of things. And we have a very good relationship in…

Your next question comes from the line of John Quealy from Canaccord. Your line is open.

Hey. Good morning, folks. Thanks for fitting me in. Two quick questions. York A. Ragen - Chief Financial Officer & Head-Investor Relations: Hi, John.

How are you, York? I'm sorry if these are remedial here. First, on the telecom trends, I think you guys said they are firming up. What sort of evidence do you have for that or what gives you some conviction in there, if that is the right assumption? And then secondly, how is the early sell-in season look for CHP? Thanks. Aaron P. Jagdfeld - Executive Chairman, President & CEO: Yes. So on the issue of telecom, you know, John, I think for us we are just, again, I think it was a pretty poor year in 2015 in terms of the CapEx spending environment and it goes in cycles. So what we look at is obviously the discussions we are having with the customers in that channel have, I would say, have been decidedly more positive year-over-year in terms of their planning around projects. And so as they plan for projects, that doesn't necessarily mean it has materialized into orders, and it doesn't necessarily mean that they will spend those dollars. But the budgets – it appears to us that the budgets that they have set aside for purchases are greater this year than they were last year. So that's a big part of it I think in terms of just how we feel about the overall as it relates to telecom specifically. I don't – we are not saying it is going to be materially up year-over-year, but we just feel like it's a firmer environment in general and based on the kind of discussion. And then as far as sell-in on the CHP, that side of that question, because it is primarily a D&C business there is not a tremendous amount of sell into a channel, right. So I mean this 80% of what they do, more than 80% of what they do is direct-to-consumer. So a lot of that is transacted real-time and so – in fact, we are – it is pretty amazing actually how quickly they see changes in buying habits for end consumers. You know they – we don't have to wait for something to work through the channel. We don't have this discussion of field inventory and all these other things like we have in our core business. They actually see real-time kind of phone traffic and web traffic. It's really kind of real end demand, and it is real time, so kind of an interesting business that way. We have not had a direct-to-consumer channel before that we have been associated with, and this has been kind of interesting to watch how even simple things like moves in the stock market day to day have impacts on just how consumers feel about their household wealth and then what that translates into in terms of buying patterns on a day-to-day basis, week-to-week basis. So it is pretty interesting.

Okay. So there is no like precedent with your big-box relationships? I know obviously that is one step to the consumer, but I guess the broader question, Aaron, was just based on where we are with weather and economy and your comment about stock prices,.. Aaron P. Jagdfeld - Executive Chairman, President & CEO: Yeah.

...order trends shaping up like you thought they would have or – I know it is a smaller piece, but... Aaron P. Jagdfeld - Executive Chairman, President & CEO: Yes. So not a lot of retail channel there, so that is what I was referring to. But in terms of just kind of order trends or call it consumer sentiment around those types of products, housing remains very strong. And so new construction has been a bullish segment of the economy here and that obviously is good for all those types of products. And Q2 is kind of the peak season for this business, as we said, in terms of seasonality, and we believe that is going to play out. CHP had a nice first quarter for us. We like the trends. It is up year over year in terms of on a – even though we haven't annualized the acquisition yet, in terms of just looking at them, kind of their results year over year. They like the trends. They think the consumer feels pretty – is on solid footing with energy prices lower, housing up. Even though the stock market is – you can pick your number on where you think the market is going to end, but right now they feel very good about the consumer trends. As I said, I think the one thing that is interesting about this business is changes can happen pretty quickly in that end demand because of the direct nature of the channel. So it is kind of interesting to kind of watch the kind of pure consumer reaction as we go week to week in terms of order patterns. Weather does impact that as well. It has been a pretty decent spring so far around the country, and that also helps those types of products. So those are all positive factors as we go into Q2.

Great. Thanks, guys. Aaron P. Jagdfeld - Executive Chairman, President & CEO: You bet.

Thank you very much for that question. I am showing there are no further questions at this time. I would now like to turn the conference back over to Mr. Jagdfeld. Thank you. Aaron P. Jagdfeld - Executive Chairman, President & CEO: We want to thank everyone for joining us this morning, and we look forward to our second quarter 2016 earnings release, which we anticipate will be issued sometime in late July. With that, we will conclude our call. Thank you.