Generac Holdings Inc. (NYSE: GNRC), a leading designer and
manufacturer of generators and other engine powered products, today
announced that it expects strong financial results for the third
quarter of 2012, and as a result is raising its outlook for
full-year 2012.
During the third quarter of 2012, the Company has experienced
increased demand for home standby and portable generators as a
result of the recent major power outage events as well as expanded
marketing and sales initiatives to increase home standby
penetration. As a result of the increased demand, net sales during
the third quarter of 2012 are expected to be in the range of $295.0
to $300.0 million. Net income is expected to be between $21.5 to
$25.0 million, with diluted net income per common share of $0.31 to
$0.36. Adjusted net income is expected to be between $49.5 to $53.0
million, with adjusted diluted net income per common share of $0.72
to $0.77. Adjusted EBITDA is expected to be in the range of $72.0
to $75.0 million.
Due to this outperformance for residential product sales,
full-year 2012 total net sales are now expected to increase in the
low-30% range over the prior year, which represents an increase
from the low-20% range growth rate previously expected. As a result
of this higher sales outlook, adjusted EBITDA for the full-year
2012 is now expected to increase in the mid-30% range over the
prior year, which is an increase from the mid-teens growth rate
previously expected. Diluted net income per common share for 2012
is expected to be in the range of $1.02 to $1.08, with adjusted
diluted net income per common share of $2.65 to $2.70. This updated
guidance continues to assume no material changes in the
macroeconomic environment, as well as no additional major power
outage events during the remainder of 2012.
Aaron Jagdfeld, President and Chief Executive Officer, said “We
initiated our Powering Ahead strategic plan in 2010 that focused on
growing the residential standby market, increasing our share of the
commercial and industrial market, diversifying our demand, and
expanding into new geographies. As a result of our team’s efforts,
we have consistently exceeded our own performance goals associated
with Powering Ahead and in fact reached many of those targets a
year earlier than we had originally planned. We are currently
resetting our goals for the next three years and we intend to share
those updated growth rates in the near future when we finalize our
long-term strategic plan.”
Since implementing the Powering Ahead plan in 2010, Generac’s
net sales in 2011 increased 34% compared to 2010 and are projected
to increase in the low-30% range for 2012 compared to 2011. This
revenue growth represents an acceleration relative to Generac’s
10-year annual sales growth rate of approximately 21% projected
through 2012. Likewise, adjusted EBITDA in 2011 increased 21%
compared to 2010 and is projected to increase in the mid-30% range
for 2012 compared to 2011. During 2011, the Company generated $182
million of unlevered free cash flow, and is expected to generate
approximately $200 million of unlevered free cash flow in 2012.
This strong cash flow generation has allowed the Company to fund
all of its internal growth initiatives and execute on other key
elements of its financial policy including debt paydown and making
acquisitions.
Consistent with the Powering Ahead plan, several key initiatives
have been contributors to the Company’s significant growth
including investments made in sales, marketing, and engineering to
further develop the emerging market for home standby generators.
Today, only an estimated 2.5% of homes in the U.S. have an
installed backup generator with every additional 1% of household
penetration representing approximately $2 billion of market
opportunity. With a leading share position of approximately 70% of
this growing market, the Company believes there is substantial
opportunity for future growth in this category.
The Company’s re-entry into the market for portable generators
four years ago has also contributed to significant growth and has
positioned the Generac brand as the market leader today.
Furthermore, the Magnum Products acquisition in the fourth quarter
of 2011 has expanded the Company’s share of its commercial and
industrial markets as well as diversified the end markets it
serves. Although early in its efforts, the Company has made
significant investments in distribution and product development to
support growth in Latin America and other international markets
which is expected to position Generac for future growth.
Generac expects to release its full third-quarter financial
results before the market opens on Wednesday, October 31, 2012, and
management will hold its customary call that morning to discuss
further details on financial results for third quarter and the
outlook for full-year 2012. The Company will also be hosting an
Investor Day on November 8, 2012.
The financial information for the fiscal quarter ended September
30, 2012 described above is preliminary and subject to revision
based on the completion of the accounting and financial reporting
procedures necessary to finalize our financial statements for the
period. We cannot assure you that, upon completion of this review
and procedures, we will not report results that are different from
those set forth above, and those differences could be material.
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.
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," “forecast,” "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 and duration of major power
outages;
- availability, cost and quality of raw
materials and key components used in producing Generac
products;
- the impact on our results of the
substantial increases in our outstanding indebtedness and related
interest expense due to the dividend recapitalization completed in
May 2012;
- 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;
- loss of key management and
employees;
- increase in product and other 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 U.S. Securities and
Exchange Commission (“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.
Reconciliations to GAAP Financial
Metrics
Adjusted EBITDA
The computation of adjusted EBITDA is based on the definition of
EBITDA contained in Generac's credit agreement, dated as of May 30,
2012. To supplement the Company's condensed consolidated financial
statements presented in accordance with US GAAP, Generac provides a
summary to show the computation of adjusted EBITDA, taking into
account certain charges and gains that were taken during the
periods presented.
Adjusted Net Income
To further supplement Generac's condensed consolidated financial
statements presented in accordance with US GAAP, the Company
provides a summary to show the computation of adjusted net income.
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 financing costs and original issue
discount related to the Company's debt, intangible impairment
charges, certain transaction costs and other purchase accounting
adjustments, and certain non-cash gains and losses.
Unlevered Free Cash Flow
In addition, we reference unlevered free cash flow to further
supplement Generac's condensed consolidated financial statements
presented in accordance with US GAAP. Unlevered free cash flow is
defined as net cash provided by operating activities less
expenditures for property and equipment plus cash interest expense.
This additional financial metric is intended to be a measure of
operational cash flow excluding the impact of the Company’s cash
debt service costs and taking into account additional capital
expenditure investment into the business.
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 SEC filings for
additional discussion of the basis for Generac's reporting of
Non-GAAP financial measures.
Generac Holdings Inc. Reconciliation Schedules (Dollars in
Thousands, Except Share and Per Share Data)
Anticipated net income to Adjusted EBITDA
reconciliation Three Months Ended September 30, 2012
Year Ended December 31, 2012 Low High
Low High (unaudited) (unaudited) (unaudited)
(unaudited) Net income $ 21,500 $ 25,000 $ 71,000 $ 75,000
Interest expense 17,900 17,000 51,000 50,000 Depreciation and
amortization 15,200 14,600 55,500 55,000 Income taxes provision
14,200 15,400 46,000 48,000 Non-cash share-based compensation
expense (1) 3,000 2,800 11,500 11,000 Loss on extinguishment of
debt - - 15,000 14,500 Transaction costs and credit facility fees
(2) - - 2,000 1,500 Other 200 200
1,000 1,000 Adjusted
EBITDA $ 72,000 $ 75,000 $ 253,000
$ 256,000 (1) Includes share-based
compensation expense to account for stock options, restricted stock
and other stock awards over their respective vesting periods.
(2) Represents transaction costs incurred directly in
connection with any investment, as defined in our credit agreement,
equity issuance or debt issuance or refinancing, together with
certain fees relating to our senior secured credit facilities.
Anticipated net income to Adjusted net income
reconciliation Three Months Ended September 30, 2012
Year Ended December 31, 2012 Low High
Low High (unaudited) (unaudited) (unaudited)
(unaudited) Net income $ 21,500 $ 25,000 $ 71,000 $ 75,000
Provision for income taxes 14,200
15,400 46,000 48,000
Income before provision for income taxes 35,700 40,400 117,000
123,000 Amortization of intangible assets 13,000 12,600 47,000
46,000 Amortization of deferred financing costs and original issue
discount 1,700 1,500 4,400 4,000 Transaction costs and other
purchase accounting adjustments (3) 200 - 2,100 1,700 Loss on
extinguishment of debt - -
15,000 14,500 Adjusted net
income before provision for income taxes 50,600 54,500 185,500
189,200 Cash income tax expense (1,100 )
(1,500 ) (2,100 ) (2,300 ) Adjusted net income
$ 49,500 $ 53,000 $ 183,400 $
186,900 Adjusted net income per common share -
diluted: $ 0.72 $ 0.77 $ 2.65 $ 2.70 Weighted average common
shares outstanding - diluted: 68,900,000 68,850,000 69,300,000
69,100,000 (3) Represents transaction costs and other
purchase accounting adjustments incurred directly in connection
with any investment, as defined in our credit agreement, equity
issuance or debt issuance or refinancing.
Anticipated unlevered free cash flow reconciliation
Year Ended December 31,
2012 2011 (unaudited) Net cash provided by
operating activities $ 185,000 $ 169,712 Expenditures for property
and equipment (19,000 ) (12,060 ) Free cash
flow $ 166,000 $ 157,652 Cash interest 34,000
24,262 Unlevered free cash flow $ 200,000
$ 181,914
SOURCE: Generac Holdings Inc.
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