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Generac Reports Record First Quarter 2013 Results
Strong organic revenue growth from residential products and operational execution lead to record levels of revenue and adjusted earnings - Outlook raised for full-year 2013
Company announces proposed special cash dividend of up to
-
Net sales increased year-over-year by 35.7% to
$399.6 million as compared to$294.6 million in the first quarter of 2012.- Residential product sales increased 45.8% compared to the strong first quarter of 2012, in which year-over-year sales growth was 153.1%.
- Commercial & Industrial (C&I) product sales increased 21.0% compared to the prior year first quarter.
- Gross profit margin during the first quarter improved 70 basis points over the prior year, contributing to an overall improved outlook for gross margins for full-year 2013.
-
Net income during the first quarter of 2013 was
$50.7 million or$0.73 per share as compared to$30.1 million or$0.44 per share for the same period of 2012. -
Adjusted net income, as defined in the accompanying reconciliation
schedules, increased to
$83.9 million from$66.1 million in the first quarter of 2012. Adjusted diluted net income per common share was$1.21 as compared to$0.96 per share in the first quarter of 2012. -
Adjusted EBITDA increased 43.5% to
$108.8 million as compared to$75.8 million in the first quarter last year. -
Cash flow from operations in the first quarter of 2013 was
$38.3 million as compared to$38.6 million in the prior year quarter. Free cash flow was$33.9 million as compared to$36.4 million in the first quarter of 2012. -
For the trailing four quarters, including the first quarter of 2013,
net sales were
$1.281 billion ; net income was$113.8 million ; adjusted EBITDA was$322.8 million ; cash flow from operations was$235.3 million ; and free cash flow was$210.7 million .
“We have started 2013 with yet another record quarter in revenues and
earnings,” said
Residential product sales for the first quarter of 2013 increased 45.8%
to
Commercial & Industrial product sales for the first quarter of 2013
increased 21.0% to
Gross profit margin for the first quarter of 2013 was 38.4% compared to 37.7% in the first quarter of 2012. Gross margin improved over the prior year due to the combination of cost-reduction initiatives, improved pricing and a moderation in commodity costs. These margin improvements were partially offset by the mix impact from the addition of Ottomotores sales.
Operating expenses for the first quarter of 2013 increased
Interest expense in the first quarter of 2013 increased to
Outlook
The Company is revising upward its sales guidance for full-year 2013 primarily due to continued strong demand for home standby and portable generators. Full-year 2013 net sales are now expected to increase at a low-to-mid teens rate over the prior year, which is an increase from the approximately 10% rate previously expected. Specifically for the second quarter of 2013, net sales are forecasted to increase between 30-35% in comparison to the second quarter of 2012. This top-line guidance continues to assume no material changes in the current macroeconomic environment and no major power outage events for the remainder of 2013.
Gross margins for 2013 are now expected to be approximately flat as compared to the prior year, which is an improvement from a decline of approximately 80 to 100 basis points previously expected. The improved outlook for gross margins is primarily due to the benefit from additional cost-reductions and a moderation in commodity costs, along with a slight improvement in product mix.
Operating expenses as a percentage of net sales, excluding amortization of intangibles, are still expected to be slightly up compared to 2012, as the Company continues to invest in its infrastructure to support its various strategic growth initiatives and an overall higher level of baseline sales.
As a result of the higher sales outlook and the improved margin guidance, adjusted EBITDA for the full-year 2013 is now expected to increase in the low-teens percentage range over the prior year, which is an increase from the mid single-digit percentage range previously expected.
Cash flow conversion is still 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.
Proposed Special Cash Dividend to Shareholders
In addition to the upwardly revised outlook for full-year 2013, the
Company is announcing its plan to execute a recapitalization in which it
intends to incur, subject to market and other conditions, approximately
Mr. Jagdfeld continued, “For a second consecutive year we are pleased to announce that we plan to return significant capital to shareholders through a special cash dividend, which is directly attributable to our strong free cash flow and demonstrated track record of paying down debt. We are confident this capital structure will allow us to further invest in organic growth initiatives and provide the flexibility to pursue additional acquisitions in the future as we execute our Powering Ahead strategy. Given the new credit facility is expected to provide a meaningfully lower interest rate than our current facility, we believe this is another attractive use of capital as we continue to drive shareholder value higher through strong execution.”
“We believe that continued underinvestment in the electrical grid, an
aging and more electrically dependent population and more severe and
unpredictable weather will continue to drive additional awareness of the
need for backup power,” concluded Mr. Jagdfeld. “We are also working on
a number of strategic initiatives that we believe will further grow our
baseline business over the long term. When considering all the
compelling macro growth drivers to our business, our internal
initiatives, and the potential for a more meaningful recovery in
residential investment and non-residential construction, we believe
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 96396239. 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 transaction completed in
May 2012 and our proposed dividend recapitalization transaction that is discussed above under “Proposed Special Cash Dividend to Shareholders”; - 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
| Generac Holdings Inc. | ||||||||
| Condensed Consolidated Statements of Comprehensive Income | ||||||||
| (Dollars in Thousands, Except Share and Per Share Data) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2013 | 2012 | |||||||
| Net sales | $ | 399,572 | $ | 294,561 | ||||
| Costs of goods sold | 246,110 | 183,556 | ||||||
| Gross profit | 153,462 | 111,005 | ||||||
| Operating expenses: | ||||||||
| Selling and service | 31,681 | 25,126 | ||||||
| Research and development | 6,645 | 5,055 | ||||||
| General and administrative | 12,426 | 9,106 | ||||||
| Amortization of intangibles | 6,185 | 12,225 | ||||||
| Total operating expenses | 56,937 | 51,512 | ||||||
| Income from operations | 96,525 | 59,493 | ||||||
| Other (expense) income: | ||||||||
| Interest expense | (15,675 | ) | (5,674 | ) | ||||
| Investment income | 17 | 19 | ||||||
| Loss on extinguishment of debt | (1,839 | ) | (4,309 | ) | ||||
| Other, net | 396 | (425 | ) | |||||
| Total other expense, net | (17,101 | ) | (10,389 | ) | ||||
| Income before provision for income taxes | 79,424 | 49,104 | ||||||
| Provision for income taxes | 28,750 | 19,044 | ||||||
| Net income | $ | 50,674 | $ | 30,060 | ||||
| Net income per common share - basic: | $ | 0.75 | $ | 0.45 | ||||
| Weighted average common shares outstanding - basic: | 67,864,475 | 67,200,480 | ||||||
| Net income per common share - diluted: | $ | 0.73 | $ | 0.44 | ||||
| Weighted average common shares outstanding - diluted: | 69,554,941 | 68,637,927 | ||||||
| Comprehensive income | $ | 51,676 | $ | 29,991 | ||||
| Generac Holdings Inc. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (Dollars in Thousands, Except Share and Per Share Data) | ||||||||
| March 31, | December 31, | |||||||
| 2013 | 2012 | |||||||
| (Unaudited) | (Audited) | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 54,337 | $ | 108,023 | ||||
| Accounts receivable, less allowance for doubtful accounts | 169,388 | 134,978 | ||||||
| Inventories | 258,821 | 225,817 | ||||||
| Deferred income taxes | 37,538 | 48,687 | ||||||
| Prepaid expenses and other assets | 5,111 | 5,048 | ||||||
| Total current assets | 525,195 | 522,553 | ||||||
| Property and equipment, net | 106,474 | 104,718 | ||||||
| Customer lists, net | 33,956 | 37,823 | ||||||
| Patents, net | 68,358 | 70,302 | ||||||
| Other intangible assets, net | 5,409 | 5,783 | ||||||
| Deferred financing costs, net | 12,655 | 13,987 | ||||||
| Trade names, net | 158,831 | 158,831 | ||||||
| Goodwill | 552,943 | 552,943 | ||||||
| Deferred income taxes | 127,883 | 136,754 | ||||||
| Other assets | 22 | 153 | ||||||
| Total assets | $ | 1,591,726 | $ | 1,603,847 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Short-term borrowings | $ | 12,532 | $ | 12,550 | ||||
| Accounts payable | 117,134 | 94,543 | ||||||
| Accrued wages and employee benefits | 16,077 | 19,435 | ||||||
| Other accrued liabilities | 82,388 | 86,081 | ||||||
| Current portion of long-term borrowings | 30,000 | 82,250 | ||||||
| Total current liabilities | 258,131 | 294,859 | ||||||
| Long-term borrowings | 770,702 | 799,018 | ||||||
| Other long-term liabilities | 47,299 | 46,342 | ||||||
| Total liabilities | 1,076,132 | 1,140,219 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock, par value $0.01, 500,000,000 shares authorized, 68,546,806 and 68,295,960 shares issued at March 31, 2013 and December 31, 2012, respectively | 686 | 683 | ||||||
| Additional paid-in capital | 750,179 | 743,349 | ||||||
| Treasury stock, at cost | (6,543 | ) | – | |||||
| Excess purchase price over predecessor basis | (202,116 | ) | (202,116 | ) | ||||
| Accumulated deficit | (13,118 | ) | (63,792 | ) | ||||
| Accumulated other comprehensive loss | (13,494 | ) | (14,496 | ) | ||||
| Total stockholders’ equity | 515,594 | 463,628 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,591,726 | $ | 1,603,847 | ||||
| Generac Holdings Inc. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (Dollars in Thousands) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2013 | 2012 | |||||||
| Operating activities | ||||||||
| Net income | $ | 50,674 | $ | 30,060 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 2,565 | 1,993 | ||||||
| Amortization of intangible assets | 6,185 | 12,225 | ||||||
| Amortization of original issue discount | 616 | 37 | ||||||
| Amortization of deferred finance costs | 561 | 469 | ||||||
| Amortization of unrealized loss on interest rate swaps | 1,002 | – | ||||||
| Loss on extinguishment of debt | 1,839 | 4,309 | ||||||
| Provision for losses on accounts receivable | 225 | 79 | ||||||
| Deferred income taxes | 20,075 | 18,239 | ||||||
| Loss on disposal of property and equipment | 2 | 107 | ||||||
| Share-based compensation expense | 2,931 | 2,439 | ||||||
| Net changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (34,648 | ) | (3,255 | ) | ||||
| Inventories | (33,007 | ) | (37,700 | ) | ||||
| Other assets | 13 | (530 | ) | |||||
| Accounts payable | 22,601 | 9,663 | ||||||
| Accrued wages and employee benefits | (3,358 | ) | (2,739 | ) | ||||
| Other accrued liabilities | 7,684 | 3,919 | ||||||
| Excess tax benefits from equity awards | (7,694 | ) | (731 | ) | ||||
| Net cash provided by operating activities | 38,266 | 38,584 | ||||||
| Investing activities | ||||||||
| Expenditures for property and equipment | (4,322 | ) | (2,138 | ) | ||||
| Acquisition of business, net of cash acquired | – | (2,279 | ) | |||||
| Net cash used in investing activities | (4,322 | ) | (4,417 | ) | ||||
| Financing activities | ||||||||
| Proceeds from long-term borrowings | – | 573,614 | ||||||
| Repayments of short-term borrowings | (18 | ) | – | |||||
| Repayments of long-term borrowings | (82,250 | ) | (597,874 | ) | ||||
| Payment of debt issuance costs | – | (10,756 | ) | |||||
| Cash dividends paid for restricted stock upon vesting | (2,649 | ) | – | |||||
| Taxes paid related to the net share settlement of equity awards | (10,417 | ) | (1,278 | ) | ||||
| Excess tax benefits from equity awards | 7,694 | 731 | ||||||
| Net cash used in financing activities | (87,640 | ) | (35,563 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 10 | – | ||||||
| Net decrease in cash and cash equivalents | (53,686 | ) | (1,396 | ) | ||||
| Cash and cash equivalents at beginning of period | 108,023 | 93,126 | ||||||
| Cash and cash equivalents at end of period | $ | 54,337 | $ | 91,730 | ||||
| Generac Holdings Inc. | |||||||||||
| Reconciliation Schedules | |||||||||||
| (Dollars in Thousands, Except Share and Per Share Data) | |||||||||||
| Net income to Adjusted EBITDA reconciliation | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2013 | 2012 | ||||||||||
| (unaudited) | (unaudited) | ||||||||||
| Net income | $ | 50,674 | $ | 30,060 | |||||||
| Interest expense | 15,675 | 5,674 | |||||||||
| Depreciation and amortization | 8,750 | 14,218 | |||||||||
| Income taxes provision | 28,750 | 19,044 | |||||||||
| Non-cash write-down and other charges (1) | (423 | ) | (204 | ) | |||||||
| Non-cash share-based compensation expense (2) | 2,931 | 2,439 | |||||||||
| Loss on extinguishment of debt | 1,839 | 4,309 | |||||||||
| Transaction costs and credit facility fees (3) | 314 | 135 | |||||||||
| Other | 291 | 127 | |||||||||
| Adjusted EBITDA | $ | 108,801 | $ | 75,802 | |||||||
| (1) Includes losses on disposals of assets, inventory write-off and unrealized mark-to-market adjustments on commodity contracts. 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 March 31, | |||||||||||
| 2013 | 2012 | ||||||||||
| (unaudited) | (unaudited) | ||||||||||
| Net income | $ | 50,674 | $ | 30,060 | |||||||
| Provision for income taxes | 28,750 | 19,044 | |||||||||
| Income before provision for income taxes | 79,424 | 49,104 | |||||||||
| Amortization of intangible assets | 6,185 | 12,225 | |||||||||
| Amortization of deferred finance costs and original issue discount | 1,177 | 506 | |||||||||
| Loss on extinguishment of debt | 1,839 | 4,309 | |||||||||
| Transaction costs and other purchase accounting adjustments (4) | (253 | ) | - | ||||||||
| Adjusted net income before provision for income taxes | 88,372 | 66,144 | |||||||||
| Cash income tax expense (5) | (4,520 | ) | (55 | ) | |||||||
| Adjusted net income | $ | 83,852 | $ | 66,089 | |||||||
| Adjusted net income per common share - diluted: | $ | 1.21 | 0.96 | ||||||||
| Weighted average common shares outstanding - diluted: | 69,554,941 | 68,637,927 | |||||||||
| (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. | |||||||||||
| (5) Amount for the three months ended March 31, 2013 is based on an anticipated cash income tax rate of approximately 6%. | |||||||||||
| Free cash flow reconciliation | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2013 | 2012 | ||||||||||
| (unaudited) | (unaudited) | ||||||||||
| Net cash provided by operating activities | $ | 38,266 | $ | 38,584 | |||||||
| Expenditures for property and equipment | (4,322 | ) | (2,138 | ) | |||||||
| Free cash flow | $ | 33,944 | $ | 36,446 | |||||||
| LTM free cash flow reconciliation | |||||||||||
| LTM March 31, | |||||||||||
| 2013 | |||||||||||
| (unaudited) | |||||||||||
| 2012 net cash provided by operating activities, as reported | $ | 235,594 | |||||||||
| Add: March 2013 net cash provided by operating activities, as reported | 38,266 | ||||||||||
| Less: March 2012 net cash provided by operating activities, as reported | (38,584 | ) | |||||||||
| LTM net cash provided by operating activities | 235,276 | ||||||||||
| 2012 expenditures for property and equipment, as reported | (22,392 | ) | |||||||||
| Add: March 2013 expenditures for property and equipment, as reported | (4,322 | ) | |||||||||
| Less: March 2012 expenditures for property and equipment, as reported | 2,138 | ||||||||||
| LTM expenditures for property and equipment | (24,576 | ) | |||||||||
| Free cash flow | $ | 210,700 | |||||||||
| LTM Adjusted EBITDA reconciliation | |||||||||||
| LTM March 31, | |||||||||||
| 2013 | |||||||||||
| (unaudited) | |||||||||||
| 2012 Adjusted EBITDA, as reported | $ | 289,809 | |||||||||
| Add: March 2013 Adjusted EBITDA, as reported | 108,801 | ||||||||||
| Less: March 2012 Adjusted EBITDA, as reported | (75,802 | ) | |||||||||
| Adjusted EBITDA | $ | 322,808 | |||||||||
SOURCE:
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
