WAUKESHA, Wis., Aug 05, 2011 (BUSINESS WIRE) --

Generac Holdings Inc. (NYSE: GNRC), a leading designer and manufacturer of backup power generation products, today reported financial results for its second quarter ended June 30, 2011.

Highlights -

• Total net sales increased year-over-year by 14.9% to $161.4 million as compared to $140.5 million in the second quarter of 2010.
  • Year-over-year growth of 4.9% across Residential product sales.
  • Continued strength in Commercial & Industrial (C&I) product sales with 32.4% year-over-year growth.
• Net income increased year-over-year to $15.3 million as compared to $12.8 million for the second quarter of 2010; Adjusted net income increased 5.8% to $27.7 million from $26.1 million in the second quarter of 2010.
• Diluted net income per common share was $0.23 per share as compared to $0.19 per share in the second quarter of 2010; Adjusted diluted net income per common share was $0.41 per share as compared to $0.39 per share in the second quarter of 2010.

"We are pleased with our strong second quarter results which were driven by year-over-year growth in our home standby products and ongoing momentum in our Commercial & Industrial product sales," said Aaron Jagdfeld, President and Chief Executive Officer of Generac. "For our Residential product sales, we have seen improved sales trends across our distribution channels relative to the first quarter 2011. Second quarter residential results were up approximately 5% year-over-year due to increased awareness of our home standby products and the continued expansion of our distribution network. Shipments of our C&I products remained robust as we experienced over 30% year-over-year growth as a result of strengthening demand from our national account customers. We are also experiencing improved quote-to-order conversion rates for our large industrial systems as we continue to bring value and innovation to the market place."

Residential product sales for the second quarter of 2011 increased 4.9% to $92.2 million from $87.9 million for the comparable period in 2010. New distribution points, new product offerings and increased awareness helped to generate this year-over-year increase, partially offset by a slight year-over-year decrease in sales for our lower kilowatt portable generators due to elevated channel inventory levels.

Commercial & Industrial product sales for the second quarter of 2011 increased 32.4% to $57.3 million from $43.3 million for the comparable period in 2010. The increase was driven predominantly by continued strength in sales to both industrial national account customers and independent industrial dealers, particularly in telecom, healthcare and data center applications.

Gross profit margin for the second quarter 2011 decreased to 37.4% from 39.0% in the same period last year, which was primarily attributable to increased commodity and material costs and a sales mix shift towards more industrial product sales. The impact of increasing commodity levels was partially offset by selective price increases that were implemented during the first quarter of 2011.

Operating expenses for the second quarter of 2011 increased to $38.6 million from $35.9 million in the second quarter of 2010. The year-over-year increase in operating expenses was primarily driven by increased sales, marketing and engineering costs to support the Company's long term strategic growth initiatives coupled with increases in variable operating expenses on higher sales volumes versus prior year. Operating expense increases were partially offset by a $1.1 million reduction in amortization of intangibles that became fully amortized in 2010.

Adjusted EBITDA of $37.6 million in the second quarter 2011 increased from $36.0 million in the same period last year, as increased sales volumes were partially offset by reduced gross margins and higher operating expenses.

Interest expense increased in the second quarter of 2011 to $5.9 million, compared to $5.7 million in the same period last year. The increase in interest expense was attributable to the impact of interest rate swaps effective the third and fourth quarters of 2010, partially offset by interest expense reductions driven by nearly $100 million of debt pre-payments over the last 12 months.

Net cash provided by operating activities was $15.3 million in the second quarter of 2011, which was down from $28.2 million in the same period last year. This decrease in cash flows was driven by elevated net working capital levels, primarily related to a temporary increase in inventory levels.

In April 2011, the Company used $24.7 million of its cash flow to make a voluntary debt pre-payment on its first lien credit facility. As of June 30, 2011, the Company currently has $633 million of debt outstanding.

OUTLOOK

Mr. Jagdfeld continued, "Given the strength of our C&I products and the dedicated focus we have on our "Powering Ahead" strategic plan, we remain confident that we can achieve moderate sales growth overall in 2011. Although the second half of the year should present more difficult prior year comparisons for our C&I products, we still expect to generate solid double-digit year-over-year growth throughout 2011 given the strong backlog that exists for these products. Assuming no major outage events for the balance of the year, we re-affirm our expectation that Residential product sales will be roughly flat for the second half of 2011 compared to last year. Lastly, in spite of the headwind presented by ongoing commodity volatility, we expect our margins to be up sequentially in the second half of the year, driven by continued realization of price increases, realized cost reductions during the third quarter and improved overhead absorption."

Conference Call and Webcast

Generac management will hold a conference call at 9:00 a.m. EDT on Friday, August 5, 2011 to discuss highlights of this earnings release. The conference call can be accessed by dialing (866) 730-5765 (domestic) or +1 (857) 350-1589 (international) and entering passcode 84945309.

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 any supporting materials will be made available on the Company's website prior to the start of the call.

The webcast is also being distributed through the Thomson Reuters StreetEvents Network. Individual investors can listen to the call at http://www.earnings.com, Thomson Reuters' individual investor portal, powered by StreetEvents. Institutional investors can access the call via StreetEvents (http://www.streetevents.com), a password-protected event management site.

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 65205593. The telephonic replay will be available for 30 days.

Generac company news is available

24 hours a day, on-line at: http://www.generac.com.

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.

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;
• 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.

Reconciliations to GAAP Financial Metrics

Adjusted EBITDA

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. The computation of Adjusted EBITDA is based on the definition of EBITDA contained in Generac's credit agreement, dated as of November 10, 2006.

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 loan costs related to the Company's debt, intangible impairment charges, and certain non-cash gains.

Free Cash Flow

In addition, we reference free cash flow to further supplement Generac's condensed consolidated financial statements presented in accordance with US GAAP. Free cash flow is defined as Net cash provided by operating activities less Expenditures for property and equipment and is intended to be a measure of operational cash flow 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.

SOURCE: Generac Holdings Inc.

For Investor Inquiries:
Generac Holdings Inc.
York Ragen
Chief Financial Officer
262-506-6064