WAUKESHA, WISCONSIN, (November 4, 2010) - Generac Holdings Inc., a leading designer and manufacturer of backup power generation products, today reported financial results for its third quarter ended September 30, 2010.
Third Quarter 2010 Highlights
- Net sales increased year-over-year by 11.4% to $160.7 million as compared to $144.3 million in the third quarter of 2009.
- Net income increased year-over-year by 60.6% to $23.0 million as compared to $14.3 million for the third quarter of 2009; Adjusted net income increased 35.3% to $36.7 million from $27.1 million in the third quarter of 2009.
- Net cash provided by operating activities improved 50.0% year-over-year, from $24.3 million to $36.5 million during the third quarter 2010.
- Diluted net income per common share was $0.34 per share; Adjusted diluted net income per common share was $0.55 per share.
- The Company successfully launched its new economy home standby product, CorePowerTM Series, establishing a new lower opening price for the category.
"Despite the difficult operating environment which persisted throughout the third quarter of 2010, we achieved a double digit year-over-year increase in net sales, driven by increased sales for both our residential and industrial products.
Although we have not had the benefit of major outage activity this summer, improved industrial market conditions and our ability to expand distribution and create awareness for our residential products have helped us drive strong revenue growth in our business." said Aaron Jagdfeld, President and Chief Executive Officer of Generac.
Residential product sales of $101.0 million increased 12.6% in the third quarter 2010 from $89.7 million in the third quarter last year. This year-over-year increase was driven primarily by our marketing programs for home standby generators, continued expansion of our residential products distribution network, and a shift towards in-season buying.
Industrial and commercial product sales of $49.6 million in the third quarter increased 7.6% from $46.0 million for the comparable period in 2009. This increase was driven by an improvement in our focused end markets and expansion of our distribution.
The Company has also announced the following strategic initiatives designed to improve Generac's long-term growth profile:
- In October 2010, the Company announced it had reached a licensing agreement with Honeywell to be the exclusive licensee of Honeywell branded standby and portable generators. By leveraging Generac's product offering and support network, the Honeywell brand will provide incremental access to underpenetrated channels for the Company including security and HVAC.
- At the recent 2011 Green Industry and Equipment (GIE) Expo in Louisville, KY, the Company announced plans to re-enter the market for residential and contractor grade pressure washers, allowing it to leverage its existing customer base, supply-chain and engineering expertise.
Overall, gross profit margin increased sequentially to 41.9% from 39.0% in the second quarter 2010, but was down from 44.7% in the same period last year.The year-over-year decline in gross margins was mostly attributable to increased commodity costs versus prior year and a higher mix of lower kilowatt residential products sold during the current quarter compared to the prior year quarter.
Operating expenses for the third quarter of 2010 increased 10.9% to $37.6 million compared to $33.9 million in third quarter of 2009. The year-over-year increase in operating expenses was attributable to increased administrative costs related to operating as a public company, non-cash stock compensation expenses, higher engineering and product development costs, and higher variable operating expenses on higher net sales versus prior year.
Adjusted EBITDA of $45.7 million was relatively flat compared to $46.1 million in the third quarter of 2009.Interest expense decreased in the third quarter of 2010 to $6.5 million, compared to $17.2 million in the same period last year due to debt repayments, lower LIBOR rates, and the termination of certain interest rate swap agreements.
Free cash flow generation remained strong, improving 51.1% year-over-year to $35.2 million during the third quarter 2010 from $23.3 million in the third quarter of 2009.
OUTLOOK
Mr. Jagdfeld concluded, "As we close out 2010, we expect to see continued year-over-year strength from our industrial and commercial products as demand in those markets continues to improve. However, more than offsetting this improvement, we see our fourth quarter 2010 residential product sales down year-over-year as certain customers have approached seasonal stocking for lower kilowatt products more conservatively this year versus last year.Despite this, we remain confident in our longer term growth initiatives including new product launches, continued expansion of our distribution network and our entry into new geographies and markets that will continue to drive sales growth and significant cash flow generation for our business."
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