WAUKESHA, Wis.-- Nov. 6,
2014-- Generac Holdings Inc., a leading designer and manufacturer of power
generation equipment and other engine powered products, today reported
financial results for its third quarter ended September 30, 2014.
Third
quarter 2014 Highlights
- Net sales were $352.3
million during the third quarter of 2014 as compared to $363.3
million in the prior-year third quarter.
- Residential product sales were $183.7
million during the third quarter as compared to $192.7 million in
the prior-year quarter, primarily due to a decline in portable generator
sales and, to a lesser extent, shipments of home standby generators.
- Commercial and Industrial (CandI)
product sales were $146.4 million during the third quarter as
compared to $151.5 million in the prior-year quarter. Contributions
from recent acquisitions and strength in oil and gas markets were more
than offset by a decline in shipments to telecom national account
customers.
- Net income during the third
quarter of 2014 was $36.5 million, or $0.52 per share, as
compared to $47.1 million, or $0.67 per share, for the same
period of 2013. Adjusted net income, as defined in the accompanying
reconciliation schedules, was $57.9 million, or $0.83 per
share, as compared to $73.7 million, or $1.06 per share, in
the third quarter of 2013.
- Adjusted EBITDA, as defined in
the accompanying reconciliation schedules, was $83.1 million as
compared to $100.1 million in the third quarter last year.
- Cash flow from operations in
the third quarter of 2014 was $57.2 million as compared to $80.9
million in the prior year quarter. Free cash flow, as defined in the
accompanying reconciliation schedules, was $47.8 million as
compared to $76.7 million in the third quarter of 2013.
- For the trailing four quarters,
including the third quarter of 2014, net sales were $1.433 billion;
net income was $173.7 million; adjusted EBITDA was $348.7
million; cash flow from operations was $247.2 million; and free cash
flow was $208.0 million.
- On September 1, 2014, the
Company acquired Pramac America, LLC, resulting in the ownership of
the Powermate trade name and the right to license the DeWalt brand name
for certain residential engine powered tools. The transaction also
included working capital associated with these products. This acquisition
helps to expand the Generac brand portfolio across its residential product
platform and increases its product offering in the portable generator
category.
- As previously announced, on October
1, 2014, the Company acquired MAC, Inc. and its related entities
(“MAC”), a leading manufacturer of premium-grade commercial and industrial
mobile heaters within the U.S. and Canada. The acquisition expands
the Company’s portfolio of mobile power products and provides increased
access to the oil and gas market.
“Home
standby generator sales improved at a solid rate as compared to the second
quarter of 2014, as we continue to build awareness and expand our leadership
position for this product category. Despite current market conditions where
power outage severity has been well below normal, we believe the penetration
opportunity that exists for home standby generators remains significant,” said Aaron Jagdfeld ,
President and Chief Executive Officer.
“Our CandI
product sales continued to experience good momentum within the oil and gas
market, while capital spending with certain telecom customers was lower in the
quarter resulting in reduced shipments to this end market. On the acquisition
front, we have been active in recent months by closing two transactions which
broaden our residential engine powered tool product line and expand our CandI
mobile products platform, while also increasing our exposure to the oil and gas
market.
We remain
focused on our “Powering Ahead” strategic plan by proactively executing on a
number of growth initiatives to drive a new and higher baseline of demand for
our products.”
Additional Third quarter 2014 Highlights
Residential product sales for the third quarter of 2014 improved
on a sequential basis to $183.7
million from $179.6 million in the second quarter of 2014,
driven by a solid increase in shipments of home standby generators partially
offset by a normal seasonal decline in power washer sales.
Residential
product sales declined on a year-over-year basis from $192.7 million for the third quarter of 2013
as the prior year was still benefiting from the afterglow period of demand from
Superstorm Sandy. Also, the third quarter of 2014 continued to experience a
power outage severity environment that remained below normalized levels. These
factors resulted in a year-over-year decline in portable generator sales and,
to a lesser extent, shipments of home standby generators.
CandI product sales for the third quarter of 2014 were $146.4 million as compared to $151.5 million for the comparable period in
2013. Shipments to telecom national account customers declined in the current
year quarter as compared to the prior year primarily resulting from reduced
capital spending by certain customers. This decline was partially offset by
contributions from recent acquisitions and strength in oil and gas markets.
Gross profit margin for the third quarter of 2014 was 37.0%
compared to 38.4% in the prior-year third quarter. The decline was primarily
driven by an increase in promotional activities during the current year quarter
along with the mix impact from recent acquisitions. These declines were
partially offset by a higher mix of home standby generators and lower mix of
organic CandI product shipments.
Operating expenses for the third quarter of 2014 increased $7.3 million , or 14.0%,
as compared to the third quarter of 2013. The increase was driven by a $5.6 million favorable adjustment to
warranty reserves in the third quarter of 2013 that did not repeat in the
current year, along with increased marketing and advertising expenses and the
addition of operating expenses associated with recent acquisitions.
Interest expense in the third quarter of 2014 was $12.3 million , which
was largely flat as compared to $12.5
million in the prior
year. During the third quarter of 2014, a voluntary $50 million pre-payment of term loan debt
was made which resulted in the recording of a $1.8
million loss on
extinguishment of debt.
2014 Outlook
The Company is revising its prior guidance for revenue growth and
adjusted EBITDA margins for full year 2014 resulting from a power outage
environment that remains well below normalized levels, a reduced level of
capital spending with certain telecom customers and the continued overall
economic softness in Latin
America .
For the
full-year 2014, the Company now expects net sales to decline in the mid-single
digit range over the prior year, and adjusted EBITDA margins are now expected
to be in the low-to-mid 20% range. Free cash flow is expected to remain strong
for the full year 2014 as a result of this strong margin profile, together with
a low cost of debt, favorable tax attributes and capital-efficient operating
model.
“Although current market conditions were below our expectations in
the third quarter of 2014, we believe the numerous long-term growth
opportunities that impact our business remain in place,” continued Mr.
Jagdfeld. “With our strong balance sheet and free cash flow generation profile,
we are confident in our ability to continue to invest in the future growth of
the business, both organically and through acquisitions. In doing this, we
expect to drive further penetration of standby generators as well as benefit
from being a more balanced and globally-focused company, as we further
implement our diversification and international expansion strategies.”
About
Since 1959, Generac has been a leading designer and
manufacturer of a wide range of power generation equipment and other engine
powered products. As a leader in power equipment serving residential, light
commercial, industrial, oil and gas, and construction markets, Generac's power products are available
globally through a broad network of independent dealers, retailers, wholesalers
and equipment rental companies, as well as sold direct to certain end user
customers.
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