WAUKESHA, Wis., Nov 01 -- Generac Holdings Inc., a leading designer and manufacturer of generators and other engine powered products, today reported financial results for its third quarter ended September 30, 2011.
Highlights - -- Total net sales increased year-over-year by 49.0% to $239.3 million as compared to $160.7 million in the third quarter of 2010. -- 60.5% year-over-year growth in Residential product sales.
-- Commercial & Industrial (C&I) product sales up 27.4% compared to prior year.
-- Net income increased year-over-year to $37.4 million as compared to $23.0 million for the third quarter of 2010; Adjusted net income increased 37.8% to $50.6 million from $36.7 million in the third quarter of 2010.
-- Diluted net income per common share was $0.55 per share as compared to $0.34 per share in the third quarter of 2010; Adjusted diluted net income per common share was $0.75 per share as compared to $0.55 per share in the third quarter of 2010.
-- Cash flow from operations in the third quarter 2011 increased 67.3% to $61.0 million as compared to $36.5 million in the prior year quarter.
-- On October 3, 2011, the Company acquired substantially all the assets and certain liabilities of Magnum Products, LLC, funded solely by cash on the balance sheet.
"The third quarter of 2011 was marked by a number of significant milestones for Generac," said Aaron Jagdfeld, President and Chief Executive Officer of Generac.
"We saw record shipments of our residential products following the major power outage events that occurred in the Midwest and along the East Coast during the third quarter. Our sustained efforts over the past three years to build a leading position in the market for portable generators resulted in a sharp increase in sales due to the increased demand for these products in the third quarter. We also saw increased demand for our home standby generators in the quarter and we expect that demand will grow over the next several quarters as homeowners look to protect themselves from future power outages."
"In addition to our record sales during the quarter, in early October we completed our acquisition of Magnum Products, a leading provider of light towers, mobile generators and pumps to the construction, energy and government markets. The Magnum Products business is an excellent strategic fit for Generac as it provides us an entry point into new adjacent power products, new customers and new end markets.
We have been disciplined with the use of our corporate cash having paid down nearly $100 million of debt over the last 12 months. In this acquisition, we saw an opportunity to use cash on our balance sheet to drive an even stronger return for our shareholders."
Residential product sales for the third quarter of 2011 increased 60.5% to $162.1 million from $101.0 million for the comparable period in 2010. Higher shipments of portable generators were the primary driver of this increase, as widespread power outages caused an immediate increase in the demand for back-up power. Following the outage events, sales of home standby generators also increased during the quarter.
Commercial & Industrial product sales for the third quarter of 2011 increased 27.4% to $63.1 million from $49.6 million for the comparable period in 2010.
This outperformance was predominantly driven by timing of larger shipments to certain national account customers given their capital spending requirements during the current year.
Gross profit margin for the third quarter of 2011 was 37.0% compared to 37.4% in the second quarter of 2011 and 41.9% in the same period last year. The majority of the gross margin decline from prior year was attributable to the significant shift in sales mix towards more portable generators in the current year quarter.
To a lesser extent, higher commodity costs versus the prior year also contributed to the year-over-year gross margin decline.
Operating expenses for the third quarter of 2011 increased by approximately $6.9 million or 18.3% as compared to the third quarter of 2010. This was primarily driven by increased variable operating expenses on the 49.0% year-over-year growth in sales, increased sales and engineering costs to support the strategic growth initiatives of the Company, and increased incentive compensation expenses as a result of the Company's financial performance during the quarter.
Adjusted EBITDA of $61.6 million in the third quarter 2011 increased from $45.7 million in the same period last year, resulting in a last-twelve-month's Adjusted EBITDA of $169.4 million.
Interest expense in the third quarter of 2011 declined to $5.9 million, compared to $6.5 million in the same period last year. This decline was a result of nearly $100 million of debt pre-payments that were made over the last 12 months.
Net cash provided by operating activities was $61.0 million in the third quarter of 2011, which was up from $36.5 million in the same period last year. Increased shipments helped to monetize inventory levels generating significant cash flow in the third quarter.
OUTLOOK
Mr. Jagdfeld continued, "Given the major outage events that occurred during the third quarter of 2011, we now expect that residential product sales in the fourth quarter will increase year-over-year by over 30%. We expect that higher residential sales will be primarily driven by increased shipments of home standby generators, as the demand for these products is expected to remain strong into fiscal 2012 in the regions impacted by recent outages.
With regards to C&I product sales, given the timing of certain larger shipments to national account customers in the third quarter of 2011, coupled with a short-term gap in certain Japanese component supply chain, we expect our C&I fourth quarter shipments to be roughly flat compared to the fourth quarter of 2010, excluding the impact of the Magnum Products acquisition."
Regarding the Magnum Products acquisition, Generac expects the transaction to be immediately accretive to earnings in the fourth quarter of 2011, with the opportunity for additional accretion thereafter as a result of anticipated cost synergies. Based on current projections, the acquisition should add approximately $25-$30 million in revenue and $0.03-$0.04 in adjusted diluted earnings per share in the fourth quarter of 2011, excluding certain purchase accounting adjustments.
Fourth quarter 2011 gross margins, excluding Magnum, are expected to sequentially improve from the third quarter due to a sales mix shift towards more home standby generator shipments and the realization of price increases, cost reductions, commodity cost moderation and improved manufacturing overhead absorption. The Company estimates that the inclusion of Magnum's results will reduce total Company gross margins by approximately 250 basis points during the fourth quarter given the current margin profile of the Magnum product line.
Gross margins for Magnum's products are expected to improve in 2012 as synergies are implemented during the year.
Mr. Jagdfeld concluded, "We are very pleased with our third quarter performance as our employees and distribution partners responded quickly to meet the strong demand for portable and home standby generators. With the relatively low penetration of home standby generators, we believe the events of the third quarter will create increased awareness and accelerate the adoption rate for these products.
Additionally, we have a number of initiatives in place through our Powering Ahead strategic plan that, together with our acquisition of Magnum, we believe will help us to gain industrial market share, diversify our end markets, and expand internationally. As a result of these efforts, we believe we are well positioned for 2012 and beyond."
About Generac Since 1959, Generac has been a leading designer and manufacturer of a wide range of generators and other engine powered products. As a leader in power equipment serving residential, light commercial, industrial and construction markets, Generac's power products are available through a broad network of independent dealers, retailers, wholesalers and equipment rental companies. The company markets and distributes its products primarily under its Generac and Magnum brand names.
No comments:
Post a Comment