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Generac Reports Record Fourth Quarter and Full-Year 2012 Results
Fourth quarter results significantly exceed expectations - Strong broad based organic revenue growth and operational execution lead to record levels of revenue, adjusted EBITDA and cash flow in the quarter
-
Net sales increased year-over-year by 28.0% to
$342.0 million as compared to$267.3 million in the fourth quarter of 2011.- Residential product sales increased 28.9% compared to the fourth quarter of 2011.
- Commercial & Industrial (C&I) product sales increased 29.4% compared to the prior year fourth quarter.
-
The Ottomotores acquisition closed on
December 8, 2012 , building a more balanced, globally focused business. The entire$44.8 million net purchase price was funded using cash on hand. -
Net income during the fourth quarter of 2012 was
$28.3 million , or$0.41 per diluted share. -
Adjusted net income, as defined in the accompanying reconciliation
schedules, increased 17.1% over the prior year quarter to
$60.7 million . Adjusted diluted net income per common share increased 15.3% to$0.87 per share. -
Adjusted EBITDA increased 34.5% over the prior year fourth quarter to
$83.1 million . -
Cash flow from operations in the fourth quarter of 2012 was
$106.4 million as compared to$80.7 million in the prior year quarter. Free cash flow was$97.4 million as compared to$73.1 million in the fourth quarter of 2011. -
As a result of this strong free cash flow conversion, on
February 11, 2013 , the Company prepaid$80.0 million of principal on its existing term loan, contributing to significantly improved leverage ratios since refinancing the Company’s credit facilities in the second quarter of 2012.
Full-Year 2012 Highlights
-
Net sales increased year-over-year by 48.5% to
$1.176 billion as compared to$792.0 million in 2011.- Residential product sales during 2012 increased 43.7% as compared to a strong 2011, which grew at a 31.7% rate over 2010.
- C&I product sales increased 64.0% as compared to 2011. Excluding the impact of Magnum Products and the modest impact from the recent Ottomotores acquisition, C&I product sales increased 14.0% versus 2011 on an organic basis.
-
Net income during 2012 was
$93.2 million , or$1.35 per diluted share. -
Adjusted net income increased 50.0% over the prior year to
$220.8 million . Adjusted diluted net income per common share increased 47.0% to$3.19 . -
Adjusted EBITDA increased 53.8% over the prior year to
$289.8 million . -
Cash flow from operations during 2012 was
$235.6 million as compared to$169.7 million in the prior year. Free cash flow was$213.2 million as compared to$157.7 million in 2011, which represents 97% and 107% of the adjusted net income reported during the respective years.
“2012 was a tremendous year for
“In addition to investments in our core markets in the U.S., our efforts
to become a more global player took a major step forward with the
acquisition of the Ottomotores businesses late in the fourth quarter of
2012,” continued Mr. Jagdfeld. “With over 500 employees and locations in
Residential product sales for the fourth quarter of 2012 increased 28.9%
to
Commercial & Industrial product sales for the fourth quarter of 2012
increased 29.4% to
Gross profit margin for the fourth quarter of 2012 was 36.9% compared to 36.8% in the fourth quarter of 2011. The positive impact from improved pricing and a moderation in commodity costs was largely offset by changes in product mix during the current year quarter.
Operating expenses for the fourth quarter of 2012 declined by
Interest expense in the fourth quarter of 2012 increased to
Net income in the current year quarter includes an income tax provision
of
2013 Outlook
The Company is initiating guidance for 2013 with solid revenue growth expected off a very strong 2012. For the full-year 2013, the Company currently expects net sales to increase approximately 10% as compared to the prior year. This top-line guidance assumes no material changes in the current macroeconomic environment and no major power outage events for the remainder of 2013.
Gross margins are expected to decline by approximately 80 to 100 basis points during 2013 as compared to the prior year primarily as a result of the addition of Ottomotores partially offset by the expected favorable impact from cost reduction initiatives.
Operating expenses as a percentage of net sales, excluding amortization of intangibles, are expected to be slightly up compared to 2012, as the Company continues to invest in its infrastructure to support strategic growth initiatives and an overall higher level of baseline sales.
As a result, Adjusted EBITDA for the full-year 2013 is expected to increase in the mid single-digit percentage range as compared to 2012.
Cash flow conversion is expected to remain strong during 2013 and be consistent with the cumulative average during the past four years of free cash flow representing between 90-95% of adjusted net income.
Mr. Jagdfeld concluded, “Over the course of the past two years, we have
significantly increased our product development efforts by doubling the
size of the Company’s engineering functions and investing heavily in our
capabilities. We expect to bring more new products to market in 2013
than at any other time in the history of
Conference Call and Webcast
The conference call will also be webcast simultaneously on
Following the live webcast, a replay will be available on the Company's web site. A telephonic replay will also be available approximately one hour after the call and can be accessed by dialing (888) 286-8010 (domestic) or +1 (617) 801-6888 (international) and entering passcode 20752381. The telephonic replay will be available for 30 days.
24 hours a day,
on-line at: http://www.generac.com.
About
Since 1959,
Forward-looking Information
Certain statements contained in this news release, as well as other
information provided from time to time by
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
-
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 Ottomotores businesses or other acquisitions will not be realized, or will not be realized within the expected time period;
- the risk that the Ottomotores businesses or other acquisitions that we make 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,
Any forward-looking statement made by
Reconciliations to GAAP Financial Metrics
Adjusted EBITDA
The computation of adjusted EBITDA is based on the definition of EBITDA
contained in
Adjusted Net Income
To further supplement
Free Cash Flow
In addition, we reference free cash flow to further supplement
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
SOURCE:
| Generac Holdings Inc. | ||||||||||||||||
| Condensed Consolidated Statements of Comprehensive Income | ||||||||||||||||
| (Dollars in Thousands, Except Share and Per Share Data) | ||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Audited) | |||||||||||||
| Net sales | $ | 342,022 | $ | 267,308 | $ | 1,176,306 | $ | 791,976 | ||||||||
| Costs of goods sold | 215,869 | 168,843 | 735,906 | 497,322 | ||||||||||||
| Gross profit | 126,153 | 98,465 | 440,400 | 294,654 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and service | 27,791 | 25,126 | 101,448 | 77,776 | ||||||||||||
| Research and development | 6,285 | 4,807 | 23,499 | 16,476 | ||||||||||||
| General and administrative | 15,332 | 10,833 | 46,031 | 30,012 | ||||||||||||
| Amortization of intangibles | 8,965 | 12,450 | 45,867 | 48,020 | ||||||||||||
| Trade name write-down | – | 9,389 | – | 9,389 | ||||||||||||
| Total operating expenses | 58,373 | 62,605 | 216,845 | 181,673 | ||||||||||||
| Income from operations | 67,780 | 35,860 | 223,555 | 112,981 | ||||||||||||
| Other (expense) income: | ||||||||||||||||
| Interest expense | (16,613 | ) | (5,888 | ) | (49,114 | ) | (23,718 | ) | ||||||||
| Loss on extinguishment of debt | – | (191 | ) | (14,308 | ) | (377 | ) | |||||||||
| Investment income | 25 | 26 | 79 | 110 | ||||||||||||
| Costs related to acquisition | (1,062 | ) | (274 | ) | (1,062 | ) | (875 | ) | ||||||||
| Other, net | (448 | ) | (385 | ) | (2,798 | ) | (1,155 | ) | ||||||||
| Total other expense, net | (18,098 | ) | (6,712 | ) | (67,203 | ) | (26,015 | ) | ||||||||
| Income before provision for income taxes | 49,682 | 29,148 | 156,352 | 86,966 | ||||||||||||
| Provision (benefit) for income taxes | 21,395 | (237,983 | ) | 63,129 | (237,677 | ) | ||||||||||
| Net income | $ | 28,287 | $ | 267,131 | $ | 93,223 | $ | 324,643 | ||||||||
| Net income per common share - basic: | $ | 0.42 | $ | 3.98 | $ | 1.38 | $ | 4.84 | ||||||||
| Weighted average common shares outstanding - basic: | 67,515,127 | 67,143,422 | 67,360,632 | 67,130,356 | ||||||||||||
| Net income per common share - diluted: | $ | 0.41 | $ | 3.91 | $ | 1.35 | $ | 4.79 | ||||||||
| Weighted average common shares outstanding - diluted: | 69,477,244 | 68,369,773 | 69,193,138 | 67,797,371 | ||||||||||||
| Dividends declared per share | $ | - | $ | - | $ | 6.00 | $ | - | ||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Amortization of unrealized loss on interest rate swaps | $ | 1,003 | $ | – | $ | 2,082 | $ | – | ||||||||
| Foreign currency translation adjustment | (34 | ) | – | (34 | ) | – | ||||||||||
| Net unrealized gain (loss) on derivatives | – | 1,807 | 365 | (683 | ) | |||||||||||
| Pension liability adjustment | (1,552 | ) | (4,922 | ) | (1,552 | ) | (4,922 | ) | ||||||||
| Other comprehensive income (loss) | (583 | ) | (3,115 | ) | 861 | (5,605 | ) | |||||||||
| Comprehensive income | $ | 27,704 | $ | 264,016 | $ | 94,084 | $ | 319,038 | ||||||||
| Generac Holdings Inc. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (Dollars in Thousands, Except Share and Per Share Data) | ||||||||
| December 31, | ||||||||
| 2012 | 2011 | |||||||
| (Unaudited) | (Audited) | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 108,023 | $ | 93,126 | ||||
|
Accounts receivable, less allowance for doubtful accounts of $1,166 in 2012 and $789 in 2011 |
134,978 | 109,705 | ||||||
| Inventories | 225,817 | 162,124 | ||||||
| Deferred income taxes | 48,687 | 14,395 | ||||||
| Prepaid expenses and other assets | 5,048 | 3,915 | ||||||
| Total current assets | 522,553 | 383,265 | ||||||
| Property and equipment, net | 104,718 | 84,384 | ||||||
| Customer lists, net | 37,823 | 72,897 | ||||||
| Patents, net | 70,302 | 78,167 | ||||||
| Other intangible assets, net | 5,783 | 7,306 | ||||||
| Deferred financing costs, net | 13,987 | 3,459 | ||||||
| Trade names, net | 158,831 | 148,401 | ||||||
| Goodwill | 552,943 | 547,473 | ||||||
| Deferred income taxes | 136,754 | 227,363 | ||||||
| Other assets | 153 | 78 | ||||||
| Total assets | $ | 1,603,847 | $ | 1,552,793 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Short-term borrowings | $ | 12,550 | $ | – | ||||
| Accounts payable | 94,543 | 81,053 | ||||||
| Accrued wages and employee benefits | 19,435 | 14,439 | ||||||
| Other accrued liabilities | 86,081 | 47,024 | ||||||
| Current portion of long-term borrowings | 82,250 | 22,874 | ||||||
| Total current liabilities | 294,859 | 165,390 | ||||||
| Long-term borrowings | 799,018 | 575,000 | ||||||
| Other long-term liabilities | 46,342 | 43,514 | ||||||
| Total liabilities | 1,140,219 | 783,904 | ||||||
| Stockholders’ equity: | ||||||||
|
Common stock (formerly Class A non-voting common stock), par value $0.01, 500,000,000 shares authorized, 68,295,960 and 67,652,812 shares issued and outstanding at December 31, 2012 and 2011, respectively |
683 | 676 | ||||||
| Additional paid-in capital | 743,349 | 1,142,701 | ||||||
| Excess purchase price over predecessor basis | (202,116 | ) | (202,116 | ) | ||||
| Accumulated deficit | (63,792 | ) | (157,015 | ) | ||||
| Accumulated other comprehensive loss | (14,496 | ) | (15,357 | ) | ||||
| Total stockholders’ equity | 463,628 | 768,889 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,603,847 | $ | 1,552,793 | ||||
| Generac Holdings Inc. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (Dollars in Thousands) | ||||||||
| Year Ended December 31, | ||||||||
| 2012 | 2011 | |||||||
| (Unaudited) | (Audited) | |||||||
| Operating activities | ||||||||
| Net income | $ | 93,223 | $ | 324,643 | ||||
| Adjustment to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 8,293 | 8,103 | ||||||
| Amortization of intangible assets | 45,867 | 48,020 | ||||||
| Trade name write-down | – | 9,389 | ||||||
| Amortization of original issue discount | 1,598 | – | ||||||
| Amortization of deferred finance costs | 2,161 | 1,986 | ||||||
| Amortization of unrealized loss on interest rate swaps | 2,082 | – | ||||||
| Loss on extinguishment of debt | 14,308 | 377 | ||||||
| Provision for losses on accounts receivable | 204 | (7 | ) | |||||
| Deferred income taxes | 62,429 | (238,170 | ) | |||||
| Loss on disposal of property and equipment | 261 | 10 | ||||||
| Share-based compensation expense | 10,780 | 8,646 | ||||||
| Net changes in operating assets and liabilities, net of effects from acquisitions: | ||||||||
| Accounts receivable | (137 | ) | (22,235 | ) | ||||
| Inventories | (31,656 | ) | (11,224 | ) | ||||
| Other assets | (8,416 | ) | (6,834 | ) | ||||
| Accounts payable | (3,898 | ) | 18,517 | |||||
| Accrued wages and employee benefits | 3,168 | 6,516 | ||||||
| Other accrued liabilities | 35,327 | 21,975 | ||||||
| Net cash provided by operating activities | 235,594 | 169,712 | ||||||
| Investing activities | ||||||||
| Proceeds from sale of property and equipment | 91 | 14 | ||||||
| Expenditures for property and equipment | (22,392 | ) | (12,060 | ) | ||||
| Acquisition of business, net of cash acquired | (47,044 | ) | (83,907 | ) | ||||
| Net cash used in investing activities | (69,345 | ) | (95,953 | ) | ||||
| Financing activities | ||||||||
| Proceeds from short-term borrowings | 23,018 | – | ||||||
| Proceeds from long-term borrowings | 1,455,614 | – | ||||||
| Repayments of short-term borrowings | (23,000 | ) | – | |||||
| Repayments of long-term borrowings | (1,175,124 | ) | (59,355 | ) | ||||
| Payment of debt issuance costs | (25,691 | ) | – | |||||
| Cash dividends paid | (404,332 | ) | – | |||||
| Taxes paid related to the net share settlement of equity awards | (6,425 | ) | (371 | ) | ||||
| Excess tax benefits from equity awards | 4,588 | 200 | ||||||
| Proceeds from exercise of stock options | – | 310 | ||||||
| Net cash used in financing activities | (151,352 | ) | (59,216 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 14,897 | 14,543 | ||||||
| Cash and cash equivalents at beginning of period | 93,126 | 78,583 | ||||||
| Cash and cash equivalents at end of period | $ | 108,023 | $ | 93,126 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid during the period | ||||||||
| Interest | $ | 33,076 | $ | 24,264 | ||||
| Income taxes | 2,811 | 437 | ||||||
| Generac Holdings Inc. | ||||||||||||||||||
|
Reconciliation Schedules |
||||||||||||||||||
| (Dollars in Thousands, Except Share and Per Share Data) | ||||||||||||||||||
|
Net income to Adjusted EBITDA reconciliation |
||||||||||||||||||
| Three months ended December 31, | Year Ended December 31, | |||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||
| Net income | $ | 28,287 | $ | 267,131 | $ | 93,223 | $ | 324,643 | ||||||||||
| Interest expense | 16,613 | 5,888 | 49,114 | 23,718 | ||||||||||||||
| Depreciation and amortization | 11,142 | 14,489 | 54,160 | 56,123 | ||||||||||||||
| Income taxes provision | 21,395 | (237,983 | ) | 63,129 | (237,677 | ) | ||||||||||||
| Non-cash write-down and other charges (1) | 388 | 8,394 | 247 | 10,400 | ||||||||||||||
| Non-cash share-based compensation expense (2) | 2,759 | 3,184 | 10,780 | 8,646 | ||||||||||||||
| Loss on extinguishment of debt | - | 191 | 14,308 | 377 | ||||||||||||||
| Transaction costs and credit facility fees (3) | 2,307 | 453 | 4,117 | 1,719 | ||||||||||||||
| Other | 237 | 62 | 731 | 527 | ||||||||||||||
| Adjusted EBITDA | $ | 83,128 | $ | 61,809 | $ | 289,809 | $ | 188,476 | ||||||||||
| (1) Includes losses on disposals of assets, unrealized mark-to-market adjustments on commodity contracts and a 2011 non-cash trade name write-down. A full description of these and the other reconciliation adjustments contained in these schedules is included in Generac's SEC filings. | ||||||||||||||||||
| (2) Includes share-based compensation expense to account for stock options, restricted stock and other stock awards over their respective vesting periods. | ||||||||||||||||||
| (3) 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. | ||||||||||||||||||
|
Net income to Adjusted net income reconciliation |
||||||||||||||||||
| Three months ended December 31, | Year Ended December 31, | |||||||||||||||||
|
2012 |
2011 | 2012 | 2011 | |||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||
| Net income | $ | 28,287 | $ | 267,131 | $ | 93,223 | $ | 324,643 | ||||||||||
| Provision for income taxes | 21,395 | (237,983 | ) | 63,129 | (237,677 | ) | ||||||||||||
| Income before provision for income taxes | 49,682 | 29,148 | 156,352 | 86,966 | ||||||||||||||
| Amortization of intangible assets | 8,965 | 12,450 | 45,867 | 48,020 | ||||||||||||||
| Amortization of deferred finance costs and original issue discount | 1,244 | 495 | 3,759 | 1,986 | ||||||||||||||
| Loss on extinguishment of debt | - | 191 | 14,308 | 377 | ||||||||||||||
| Trade name write-down | - | 9,389 | - | 9,389 | ||||||||||||||
| Transaction costs and other purchase accounting adjustments (4) | 2,136 | 274 | 3,317 | 875 | ||||||||||||||
| Adjusted net income before provision for income taxes | 62,027 | 51,947 | 223,603 | 147,613 | ||||||||||||||
| Cash income tax expense | (1,328 | ) | (122 | ) | (2,811 | ) | (437 | ) | ||||||||||
| Adjusted net income | $ | 60,699 | $ | 51,825 | $ | 220,792 | $ | 147,176 | ||||||||||
| Adjusted net income per common share - diluted: | $ | 0.87 | $ | 0.76 | $ | 3.19 | $ | 2.17 | ||||||||||
| Weighted average common shares outstanding - diluted: | 69,477,244 | 68,369,773 | 69,193,138 | 67,797,371 | ||||||||||||||
| (4) Represents transaction costs incurred directly in connection with any investment, as defined in our credit agreement, equity issuance or debt issuance or refinancing. Also includes certain purchase accounting adjustments. | ||||||||||||||||||
| Free Cash Flow Reconciliation | ||||||||||||||||||
| Three months ended December 31, | Year Ended December 31, | |||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||
| Net cash provided by operating activities | $ | 106,370 | $ | 80,697 | $ | 235,594 | $ | 169,712 | ||||||||||
| Expenditures for property and equipment | (8,967 | ) | (7,599 | ) | (22,392 | ) | (12,060 | ) | ||||||||||
| Free Cash Flow | $ | 97,403 | $ | 73,098 | $ | 213,202 | $ | 157,652 | ||||||||||
Source:
Generac Holdings Inc.
York A. Ragen
Chief Financial Officer
(262)
506-6064
InvestorRelations@generac.com
or
Michael
W. Harris
Director – Finance and Investor Relations
(262)
544-4811 x2675
Michael.Harris@generac.com
