Generac chief executive officer Aaron Jagdfeld is now also the company’s executive chairman of the board after Timothy Walsh stepped down as chair and informed the company he would not stand for reelection in 2016.
The Waukesha-based maker of power generation products announced the move along with its fourth quarter and full year earnings report. The company said Walsh’s decision was not the result of any disagreement. The managing director and chief operating officer at New York-based CCMP Capital, Walsh has served on the board since 2006.
The company reported its net income for 2015 was down 38.8 percent driven by lower commercial and residential sales and non-cash charges related to consolidating various brands to the Generac trade name.
Generac’s profit for the year was $77.7 million or $1.12 per share, compared to $174.6 million of $2.46 per share in 2014. The profit was decreased by a $40.7 million non-cash charge for a new brand strategy. The company reported an adjusted net income of $198.4 million, compared to $234.2
Generac’s revenue for fiscal 2015 was down 9.9 percent to $1.317 billion. The company’s residential product segment was down 6.7 percent to $673.8 million, driven by lower demand for home standby generators because of significant declines in the severity of power outages in 2015.
Jagdfeld said the company feels demand for residential products is up compared to recent similar outage environments. He said he is impressed with the level of sales considering there hasn’t been a major outage in three years.
“We feel really good about it,” he said. “We’re selling against a market that’s not necessarily buying.”
Many of the initiatives the company has undertaken in recent years haven’t had a chance to prove their worth during a major outage event, Jagdfeld said.
“We haven’t really pressure tested all these new initiatives,” he said.
The commercial and industrial segment saw revenue down 15.9 percent to $548.4 million, driven by significant reductions in shipments to oil and gas and general retail markets. Jagdfeld said the impact of falling energy prices on the commercial market was “worse than expected.”
The company forecasted that total organic sales would be down between 5 and 7 percent in 2016, with nearly the entire decline coming from weakness in mobile product shipments to the oil and gas and general rental markets.
The company did say that the acquisition of Pramac, announced Monday, would lead to net sales increasing between 10 and 12 percent compared to 2015.
The deal is expected to close by the end of the first quarter of 2016. Jagdfeld declined to give an exact number for the potential cost savings created by the deal as there are a number of decisions to still be made about combining the two companies. He anticipated the integration would be completed in the second half of 2017 and into 2018.
“This elevates our game to a whole new level globally,” Jagdfeld said.
He said Italian-based Pramac’s products are particularly well suited for emerging markets and it would have been difficult for Generac to build that global business organically.
The acquisition calls for Generac to have 65 percent ownership of Pramac and Jagdfeld said there is an agreement in place to allow Generac to take 100 percent ownership over time.
“It does allow for that and that is the anticipated end-game,” he said.
