September 10 -- When the power goes out during a heavy rainstorm and the sump-pump stops working, a homeowner can feel awfully helpless against the possibility of basement flooding.
Ditto the feeling when a power outage occurs in a cold spell or blizzard, and the furnace ceases to function.
Yet only 2% of households in the U.S. have an automatic standby generator as a backup plan in case of a power failure, said Generac Holdings Inc. Chief Executive Aaron Jagdfeld.
The way Jagdfeld sees it, that leaves a very large market of potential customers for Town of Genesee-based Generac.
"Every outage that happens, whether large or small, certainly drives awareness for our type of products," Jagdfeld said. "We are a generator manufacturer, so at some level having people experience an outage - or the fear of an outage - is really what drives our demand."
Generac, which went public this year, is one of the newest stocks in the Wisconsin Ticker, a Bloomberg News program that analyzes the value of a hypothetical $1,000 investment in publicly traded shares of state-based companies over various periods of time.
Founded in 1959 by Robert Kern in Waukesha County, Generac makes residential, commercial and industrial generators. They range from 800-watt portable units that can be used for camping and tailgating all the way to 9 megawatts - "basically small power plants," Jagdfeld said.
Portables operate on gasoline, and automatic units generally run on natural gas, propane or diesel fuel.
While Generac sells its generators to customers from telecommunications companies to supermarkets to hospitals, the largest part of its business remains generators that protect the property of homeowners during power outages.
Over the last 10 years, more and more people have deemed standby generators that automatically kick in when the power goes out a good investment, Jagdfeld said.
"The automatic standby products have really been kind of the growth engine for the company over the last decade," Jagdfeld said.
In 2009, Generac posted net income of $43 million on sales of $588 million. In the first half of 2010, sales revenue was down about 6% from a year earlier and net income decreased about 8%.
Jagdfeld acknowledged the economy has slowed Generac's growth, but he said "a lot of our pain" from the downturn is in the past.
He and York Ragen, chief financial officer, said perhaps a bigger challenge for Generac than the economy will be to make sure it keeps its longtime entrepreneurial nature and culture of cost containment intact now that the stock is publicly traded and the company is subject to more rules by securities regulators.
Generac shares went public last February at $13 a share, raising money that allowed the company to pay off debt from a leveraged buyout in 2006, when Kern sold his interest in the company to a private equity firm. The shares closed Friday at $13.36.
"Through bureaucracy and other things, you don't want to kill the entrepreneurial spirit of the company and weigh it down with things that are non-value added," Jagdfeld said.
Ragen said being able to retire debt after going public allowed him and Jagdfeld "to think about the long-term potential and future of Generac as opposed to thinking about our credit agreement."
"It's just a world of difference after the IPO here," Ragen said.
Generac sells its products through a variety of channels, including electrical contractors and retailers.
Almost all of its 1,400 employees work at one of three plants in the Town of Genesee, Eagle and Whitewater. Among those employees are more than 100 engineers.
"We spend an inordinate amount of time designing our systems to be as foolproof as you can possibility make a mechanical product," Jagdfeld said.
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