Generac Holdings Inc. (NYSE: GNRC), a leading designer and
manufacturer of back-up power generation products, announced today
that one of its subsidiaries has acquired substantially all of the
assets and certain liabilities of Magnum Products, LLC and its
affiliates (collectively, Magnum Products) for $80 million in cash
and a modest earn-out based on future performance of a particular
product line currently in development. The execution of a
definitive agreement and the closing of the transaction occurred on
October 3, 2011.
Headquartered in Berlin, Wisconsin with 330 employees, Magnum
Products is a leading manufacturer of high-quality light towers
with an estimated 35% market share, and holds a strong and growing
share in the mobile generator market. Its products are sold
predominantly to industrial rental yards and government channels.
With over 20 years of experience, Magnum Products is a trusted
supplier to numerous end markets, including road construction,
commercial construction, energy, mining, and the military. For the
twelve months ended June 30, 2011, the Magnum Products business
generated unaudited revenues of approximately $108 million and
adjusted EBITDA of $14 million.
“Magnum Products is an excellent strategic fit for our business,
bringing new products and incremental revenue opportunities to our
commercial and industrial product offering, while also expanding
the channels and end markets where we distribute our products,”
said Aaron Jagdfeld, President and Chief Executive Officer of
Generac. “The acquisition of Magnum Products is directly in line
with our long-term “Powering Ahead” strategy as it helps to expand
our industrial market share, diversifies our end markets, and helps
us grow our business outside of North America. Further, this
acquisition allows us to balance our product portfolio as it
increases our commercial and industrial product sales mix.”
Jagdfeld continued, “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.”
The Magnum Products business was principally owned by Tom
Joseph, founder and Chairman of the company. Mr. Joseph will retire
from the company following the announced acquisition. Commenting on
the transaction, Mr. Joseph stated, “I am very pleased that Magnum
Products will become part of a true market leader like Generac.
Both companies do a tremendous job serving their respective end
markets and the combination of them will be very powerful. I see a
bright future for Magnum Products and Generac, and expect Magnum’s
strong leadership team to execute a seamless transition under
Generac’s ownership.” Magnum Products will continue to operate out
of its existing manufacturing facility in Berlin, Wisconsin and
Generac intends to maintain the Magnum brand separately, given the
company’s strong reputation in the markets that it serves.
Generac expects the transaction to be immediately accretive to
earnings in the fourth quarter of 2011, with the opportunity for
additional accretion thereafter based on anticipated cost
synergies. Based on current assumptions, the acquisition should add
approximately $25-$30 million in revenue and $0.03-$0.04 in
adjusted earnings per share in the fourth quarter of 2011,
excluding approximately $1 million in transaction costs. Future
cost synergies are targeted to total approximately $2 million on an
annual basis, and are expected to be phased in throughout fiscal
2012.
Jagdfeld concluded, “The Magnum brand is highly regarded by its
customers and stands for exceptional quality and customer service.
We are very excited about the incremental revenue opportunities
that we believe we can achieve through the combined efforts of
Magnum’s sales and engineering groups and those of our own.
Additionally, we see meaningful opportunities for improved
operating performance for the Magnum business by leveraging
Generac’s global sourcing and vertical manufacturing capabilities.
Overall, we believe that the cultures and core values of the two
organizations fit well together, and we look forward to achieving
great things together.”
Conference Call and
Webcast
Generac management will hold a conference call at 8:30 a.m. EDT
on October 4, 2011 to discuss the Magnum Products acquisition. The
conference call can be accessed by dialing (866) 730-5768
(domestic) or +1 (857) 350-1592 (international) and entering
passcode 69681163.
The conference call will also be webcast simultaneously on
Generac's website (http://www.generac.com), under the Investor
Relations link. The webcast link and supporting presentation will
be made available on the Company's website prior to the start of
the call.
Following the live webcast, a replay will be available on the
Company's web site. A telephonic replay will also be available
three hours after the call and can be accessed by dialing (888)
286-8010 (domestic) or +1 (617) 801-6888 (international) and
entering passcode 85377032. The telephonic replay will be available
for 30 days.
About Generac
Since 1959, Generac has been a leading designer and manufacturer
of a wide range of backup power generation products serving
residential, light commercial and industrial markets. Generac's
power systems range in output from 800 watts to 9 megawatts and are
available through a broad network of independent dealers,
retailers and wholesalers.
About Magnum Products, LLC
Magnum Products, LLC is a supplier of powerful, high quality
light towers, mobile generators, trash pumps, water trailers and
combination power units for a variety of industries and specialties
including construction, energy, mining, government, military, and
special events. The Company’s products have been distributed
through international, national and regional equipment rental
companies, equipment dealers and construction companies.
Forward-looking Information
Certain statements contained in this news release, as well as
other information provided from time to time by Generac Holdings
Inc. or its employees, may contain forward looking statements that
involve risks and uncertainties that could cause actual results to
differ materially from those in the forward looking statements.
Forward-looking statements give Generac's current expectations and
projections relating to the Company's financial condition, results
of operations, plans, objectives, future performance and business.
You can identify forward-looking statements by the fact that they
do not relate strictly to historical or current facts. These
statements may include words such as "anticipate," "estimate,"
"expect," "project," "plan," "intend," "believe," "confident,"
"may," "should," "can have," "likely," "future" and other words and
terms of similar meaning in connection with any discussion of the
timing or nature of future operating or financial performance or
other events.
Any such forward looking statements are not guarantees of
performance or results, and involve risks, uncertainties (some of
which are beyond the Company's control) and assumptions. Although
Generac believes any forward-looking statements are based on
reasonable assumptions, you should be aware that many factors could
affect Generac's actual financial results and cause them to differ
materially from those anticipated in any forward-looking
statements, including:
- demand for Generac products;
- frequency of major power outages;
- availability and cost of quality raw
materials and key components used in producing Generac
products;
- the possibility that the expected
synergies, efficiencies and cost savings of the acquisition of the
Magnum Products business will not be realized, or will not be
realized within the expected time period;
- the risk that the Magnum Products
business will not be integrated successfully;
- competitive factors in the industry in
which Generac operates;
- Generac's dependence on its
distribution network;
- Generac's ability to invest in, develop
or adapt to changing technologies and manufacturing
techniques;
- Generac's ability to adjust to
operating as a public company;
- loss of key management and
employees;
- increase in liability claims; and
- changes in environmental, health and
safety laws and regulations.
Should one or more of these risks or uncertainties materialize,
Generac's actual results may vary in material respects from those
projected in any forward-looking statements. A detailed discussion
of these and other factors that may affect future results is
contained in Generac's filings with the Securities and Exchange
Commission, or SEC.
Any forward-looking statement made by Generac in this press
release speaks only as of the date on which it is made. Generac
undertakes no obligation to update any forward-looking statement,
whether as a result of new information, future developments or
otherwise, except as may be required by law.
Non-GAAP Financial Measures
Adjusted EBITDA
The computation of Adjusted EBITDA is based on the definition of
EBITDA contained in Generac's credit agreement, dated as of
November 10, 2006. Included in Generac’s earnings releases, to
supplement the Company's financial results presented in accordance
with US GAAP, Generac provides a reconciliation to show the
computation of Adjusted EBITDA, taking into account certain charges
and gains that were taken during the periods presented. Transaction
costs, amortization of definite-lived intangible assets and the
write-up of inventory basis all related to the Magnum Products
transaction will be included in the Adjusted EBITDA reconciliation
and added back for Adjusted EBITDA purposes.
Adjusted Earnings Per Share
To further supplement Generac's financial results presented in
accordance with US GAAP, the Company provides a reconciliation to
show the computation of Adjusted Net Income and Adjusted Earnings
Per Share in its earnings releases. Adjusted net income is defined
as Net income before provision (benefit) for income taxes adjusted
for the following items: cash income tax (expense) benefit,
amortization of intangible assets, amortization of deferred loan
costs related to the Company's debt, intangible impairment charges,
and certain non-cash gains. Transaction costs, amortization of
definite-lived intangible assets and the write-up of inventory
basis all related to the Magnum Products transaction will be
included in the Adjusted Net Income reconciliation and added back
for Adjusted Net Income purposes.
The presentation of this additional information is not meant to
be considered in isolation of, or as a substitute for, results
prepared in accordance with US GAAP. Please see our earnings
releases and SEC filings for additional discussion of the basis for
Generac's reporting of Non-GAAP financial measures.
Generac company news is available 24 hours a
day, on-line at: http://www.generac.com.
SOURCE: Generac Holdings Inc.
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