Alliance Laundry Holdings LLC Reports Record Third Quarter Revenues

Diversified growth results in record third quarter revenues, Europe up 120 percent

RIPON, Wis.--()--Alliance Laundry Holdings LLC announced today results for the three and nine months ended September 30, 2014.

Net revenues for the quarter ended September 30, 2014 increased $47.5 million, or 33.3%, to $190.2 million from $142.7 million for the quarter ended September 30, 2013. Excluding the impact of the Primus Laundry Equipment Group acquisition, net revenues increased 12.8% for the third quarter 2014. Our net income for the quarter ended September 30, 2014 decreased $1.5 million to $7.3 million from $8.8 million for the quarter ended September 30, 2013. Adjusted EBITDA (see “About Non-GAAP Financial Measures” below) for the quarter ended September 30, 2014 increased $13.3 million to $39.7 million from $26.4 million for the quarter ended September 30, 2013. Excluding the impact of the Primus Laundry Equipment Group acquisition, Adjusted EBITDA for the third quarter 2014 increased $5.5 million, or 20.9%, to $32.0 million.

The net revenues increase of $47.5 million was attributable to increases in United States & Canada revenues of $17.1 million, Europe revenues of $17.0 million, Latin America revenues of $1.9 million, Asia revenues of $8.5 million and Middle East & Africa revenues of $3.0 million. These increases represent percentage growth by segment for United States & Canada revenues of 15.8%, Europe revenues of 119.7%, Latin America revenues of 39.5%, Asia revenues of 83.8% and Middle East & Africa revenues of 55.3%.

The net income decrease of $1.5 million was attributable to higher selling, general and administrative expenses of $11.0 million, higher restructuring and other costs of $4.4 million, higher interest expense of $2.4 million, higher other expenses of $0.4 million and higher provision for income tax of $0.4 million, partially offset by higher gross profit of $17.0 million.

Net revenues for the nine months ended September 30, 2014 increased $114.0 million, or 28.0%, to $521.7 million from $407.7 million for the nine months ended September 30, 2013. Excluding the impact of the Primus Laundry Equipment Group acquisition, net revenues increased 10.5% for the nine months ended September 30, 2014. Our net income for the nine months ended September 30, 2014 decreased $4.2 million to $19.3 million from $23.5 million for the nine months ended September 30, 2013. Adjusted EBITDA for the nine months ended September 30, 2014 increased $34.9 million to $112.7 million from $77.8 million for the nine months ended September 30, 2013. Excluding the impact of the Primus Laundry Equipment Group acquisition, Adjusted EBITDA for the nine months ended September 30, 2014 increased $11.2 million, or 14.4%, to $89.0 million.

The net revenues increase of $114.0 million was attributable to increases in United States & Canada revenues of $39.1 million, Europe revenues of $47.2 million, Latin America revenues of $4.3 million, Asia revenues of $13.9 million and Middle East & Africa revenues of $9.5 million. These increases represent percentage growth by segment for United States & Canada revenues of 13.1%, Europe revenues of 109.8%, Latin America revenues of 30.6%, Asia revenues of 39.6% and Middle East & Africa revenues of 54.3%.

Michael D. Schoeb, President & CEO, commented, “Our revitalized product portfolio and improved branding drove significant growth in our core commercial product revenues in U.S. & Canada. The addition of the Primus Group in March aided our growth in all geographic regions, led by Europe at 120%. Excluding the impact of the Primus acquisition, organic growth was 12.8% for the third quarter.”

Schoeb concluded, “Our Alliance team continues to execute at a high level, and our investments in product development and sales and marketing can be seen in our strong financial performance to date. During the third quarter we made significant progress related to the integration of the Primus Group. As a result, we have increased confidence in our ability to achieve our 2014 and 2015 goals.”

About Non-GAAP Financial Measures

In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles (GAAP), we also disclose EBITDA and Adjusted EBITDA, which are non-GAAP measures. We have presented EBITDA and Adjusted EBITDA because certain covenants in our Amended December 2012 Credit Facilities are tied to a ratio based on these measures. EBITDA represents net income before interest expense (including non-cash interest income), income tax provision, depreciation and amortization. Adjusted EBITDA, as defined in our Amended December 2012 Credit Facilities, is EBITDA as further adjusted to exclude, among other things, certain non-recurring expenses or income and other non-recurring non-cash charges which are further defined therein. EBITDA and Adjusted EBITDA do not represent, and should not be considered, an alternative to net income or cash flow from operations, as determined by GAAP, and our calculations thereof may not be comparable to similarly entitled measures reported by other companies.

Under the Amended First Lien Credit Agreement, if the aggregate outstanding amount of all revolving credit loans and letters of credit obligations are in excess of 20% of the lenders’ current revolving credit commitments, we are required to perform a Total Leverage Ratio test, as defined therein. To the extent that we fail to maintain this ratio within the limits set forth in the Amended First Lien Credit Agreement, our ability to access amounts available under the Amended December 2012 Revolving Credit Facility would be limited, our liquidity would be adversely affected and our obligations under the Amended December 2012 Credit Facilities could be accelerated. A reconciliation of EBITDA and Adjusted EBITDA with the most directly comparable GAAP measure is included below for the three and nine months ended September 30, 2014 along with the components of EBITDA and Adjusted EBITDA.

About Alliance Laundry Holdings LLC

Alliance Laundry Holdings LLC is the parent company of Alliance Laundry Systems, a leading designer, manufacturer and marketer of commercial laundry equipment used in laundromats, multi-housing laundries and on-premise laundries. Under the well-known brand names of Speed Queen®, UniMac®, Huebsch®, IPSO®, Primus®, Lavamac® and Deli®, Alliance produces a full line of commercial washing machines and dryers with load capacities from 12 to 275 pounds. Certain of our commercial quality washers and dryers are also sold in the consumer laundry marketplace. Alliance Laundry’s worldwide employment combined with Primus Laundry Equipment Group was 2,528 at the end of December 2013. With combined 2013 net revenues of $670.0 million, Alliance Laundry is the world’s leading manufacturer of commercial laundry equipment. For more information, visit www.alliancelaundry.com.

Safe Harbor for Forward-Looking Statements

With the exception of the reported actual results, this press release contains predictions, estimates and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Act of 1934 as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of our business to differ materially from those expressed or implied by such forward-looking statements. Although we believe that our plans, intentions and expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that such plans, intentions, expectations, objectives or goals will be achieved. Important factors that could cause actual results to differ materially from those included in forward-looking statements include: the ability to borrow funds under the Amended December 2012 Revolving Credit Facility; the ability to successfully implement operating strategies and trends affecting the business, liquidity, financial condition and results of operations of the Company; unfavorable economic conditions in other markets in which we operate; the impact of competition; the ability to successfully integrate and realize anticipated benefits of the Primus Acquisition; continued sales to key customers; possible fluctuations in the cost of raw materials and components; possible fluctuations in currency exchange rates, which affect the competitiveness of our products abroad; possible fluctuations in interest rates, which affects our earnings and cash flows; the impact of substantial leverage and debt service on us; possible loss of suppliers; risks related to our asset backed securitization facility; dependence on key personnel; labor relations; potential liability for environmental, health and safety matters; potential future legal proceedings and litigation and other risks listed from time to time in the Company’s reports, including, but not limited to our Annual Report for the Year Ended December 31, 2013.

Financial information for Alliance Laundry Holdings LLC appears on the next six pages for the three and nine months ended September 30, 2014 and 2013.

ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
 
  September 30,   December 31,
Assets 2014 2013
Current assets:
Cash and cash equivalents $ 51,388 $ 60,849
Restricted cash 414 89
Restricted cash - for securitization investors 21,563 17,087
Accounts receivable, net 46,172 18,166
Inventories, net 64,428 41,644
Accounts receivable - restricted for securitization investors 93,844 86,674
Loans receivable, net - restricted for securitization investors 48,083 45,910
Deferred income tax asset, net 11,080 11,306
Prepaid expenses and other current assets   4,452   3,269
Total current assets 341,424 284,994
 
Loans receivable, net 10,308 11,151
Property, plant and equipment, net 115,976 81,235
Goodwill 284,007 182,174
Loans receivable, net - restricted for securitization investors 212,500 206,849
Deferred income tax asset, net 840 704
Debt issuance costs, net 17,486 17,450
Intangible assets, net 245,306 125,596
Other long-term assets   840   311
Total assets $ 1,228,687 $ 910,464
 
Liabilities and Member(s)' Equity
Current liabilities:
Current portion of long-term debt $ 35 $ -
Revolving credit facility - -
Accounts payable 82,762 59,005
Asset backed borrowings - owed to securitization investors 106,290 100,023
Other current liabilities   62,289   40,069
Total current liabilities 251,376 199,097
 
Long-term debt, net 667,213 442,746
Asset backed borrowings - owed to securitization investors 202,563 196,694
Deferred income tax liability, net 75,033 40,092
Other long-term liabilities   28,432   20,128
Total liabilities 1,224,617 898,757
 
Commitments and contingencies
Member(s)' equity   4,070   11,707
Total liabilities and member(s)' equity $ 1,228,687 $ 910,464
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(unaudited)
(in thousands)
 
  Three Months Ended   Nine Months Ended
September 30,   September 30, September 30,   September 30,
2014 2013 2014 2013
Net revenues:
Equipment and service parts $ 187,405 $ 140,700 $ 514,592 $ 401,256
Equipment financing, net   2,829     1,996   7,100     6,433
Net revenues 190,234 142,696 521,692 407,689
Cost of sales   130,962     100,423   356,165     285,697
Gross profit   59,272     42,273   165,527     121,992
 
Selling, general and administrative expenses 31,308 20,327 83,575 57,122
Restructuring and other costs   4,937     537   19,760     1,393
Total operating expenses   36,245     20,864   103,335     58,515
Operating income 23,027 21,409 62,192 63,477
 
Interest expense 10,822 8,446 31,823 26,287
Other (income)/expenses, net   406     -   579     1,871
Income before taxes 11,799 12,963 29,790 35,319
Provision for income taxes   4,479     4,117   10,457     11,812
Net income $ 7,320   $ 8,846 $ 19,333   $ 23,507
 
 
Comprehensive income/(loss):
Net income $ 7,320 $ 8,846 $ 19,333 $ 23,507
Foreign currency translation adjustment, net (24,583 ) 2,419 (24,801 ) 1,732
Change in pension liability and other benefits, net   (1,053 )   585   (3,159 )   1,755
Comprehensive income/(loss) $ (18,316 ) $ 11,850 $ (8,627 ) $ 26,994
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 
  Nine Months Ended
September 30,   September 30,
2014 2013
Cash flows from operating activities:
Net income $ 19,333 $ 23,507
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 17,038 10,186
Amortization of debt issuance costs 4,897 4,240
Amortization of original issue discount 404 387
Non-cash interest expense/(income) 337 (361 )
Non-cash (gain)/loss on commodity & foreign exchange contracts, net (141 ) 355
Non-cash foreign exchange loss/(gain), net 579 -
Non-cash executive unit compensation 5,704 1,851
Non-cash trademark impairment 340 -
Non-cash charge for pension and post-retirement benefit plans 84 832
Non-cash charge for write-off of debt issue costs - 577
Non-cash charge for write-off of original issue discount on long-term borrowings - 178
Non-cash acquisition related inventory expense 3,249 -
(Gain)/loss on sale of property, plant and equipment (679 ) -
Deferred income taxes 736 7,277
Other, net (150 ) (36 )
Changes in assets and liabilities, net of the effects of the acquisition:
Accounts and loans receivable, net (6,747 ) (13,294 )
Accounts receivable - restricted for securitization investors (7,170 ) (944 )
Inventories, net (7,465 ) (3,035 )
Loans receivable, net - restricted for securitization investors (7,824 ) (278 )
Other assets (1,383 ) 1,830
Accounts payable 14,412 5,993
Other liabilities   12,950     7,439  
Net cash provided by operating activities   48,504     46,704  
 
Cash flows from investing activities:
Capital expenditures (29,615 ) (19,578 )
Restricted cash 11 11
Restricted cash - for securitization investors (4,476 ) 2,434
Acquisition of business, net of cash acquired (254,737 ) -
Proceeds on disposition of assets   729     -  
Net cash used by investing activities   (288,088 )   (17,133 )
 
Cash flows from financing activities:
Proceeds from revolving line of credit borrowings 14,000 -
Payments on revolving line of credit borrowings (14,000 ) -
Proceeds from long-term borrowings 236,000 20,000
Payments on long-term borrowings (12,000 ) (45,000 )
Proceeds from forgivable loan - 2,000
Cash paid for debt establishment and amendment fees (4,933 ) (9,974 )
Net increase in asset backed borrowings owed to securitization investors 12,136 27,171
Member contributions 1,509 1,086
Member distributions   (521 )   (31 )
Net cash provided/(used) by financing activities   232,191     (4,748 )
 
Effect of exchange rate changes on cash and cash equivalents   (2,068 )   239  
 
(Decrease)/increase in cash and cash equivalents (9,461 ) 25,062
Cash and cash equivalents at beginning of period   60,849     33,237  
Cash and cash equivalents at end of period $ 51,388   $ 58,299  
 
Supplemental disclosure of cash flow information:
Cash paid for interest on long-term debt $ 22,364 $ 17,066
Cash paid for interest - for securitized investors $ 5,007 $ 4,630
Cash paid for income taxes $ 7,833 $ 4,060
 
Supplemental disclosure of investing and financing non-cash activities:
Capital expenditures included in accounts payable $ 6,827 $ 2,761
Assumption of acquisition related debt $ 68,253 $ -

Reconciliation of Net income to EBITDA and Adjusted EBITDA, and reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities for the Three Months Ended September 30, 2014 and 2013 (Dollars in Thousands):

  Three Months Ended
September 30,   September 30,
2014 2013
 
Net income $ 7,320 $ 8,846
Provision for income taxes 4,479 4,117
Interest expense 10,822 8,446
Depreciation and amortization   6,482     3,505  
EBITDA 29,103 24,914
Securitization interest - permitted receivables financing (a) (241 ) (229 )
Other non-recurring charges (b) 5,781 1,709
Other non-cash charges (c)   5,020     53  
Adjusted EBITDA 39,663 26,447
 
Interest expense (10,822 ) (8,446 )
Amortization of debt issuance costs 1,761 1,438
Amortization of original issue discount 169 133
Other non-cash interest 466 (108 )
Securitization interest - permitted receivables financing (a) 241 229
Other non-recurring charges (b) (5,781 ) (1,709 )
Cash taxes paid and payable (4,318 ) (2,935 )
Other expense/(income) (25 ) 252
Changes in assets and liabilities   824     5,156  
Net cash provided by operating activities $ 22,178   $ 20,457  

(a) Securitization interest - permitted receivables financing represents interest expense on trade receivables sold to ALERT 2013A. This expense, which is charged to the Interest expense line of our Condensed Consolidated Statements of Comprehensive Income/(Loss), is deducted in calculating Adjusted EBITDA as defined in the Amended December 2012 Credit Facilities.

(b) Other non-recurring charges are described as follows:

  • Other non-recurring charges of $5.8 million for the quarter ended September 30, 2014 consist of $2.7 million of European restructuring costs, $1.1 million of post-acquisition Primus-related integration costs and $0.8 million for other new entity organization costs, which are included in the Restructuring and other costs line of the Condensed Consolidated Statements of Comprehensive Income/(Loss), as well as $1.2 million of charges for expected excess and obsolete inventory related to the European restructuring, which are included within the Cost of sales line of the Condensed Consolidated Statements of Comprehensive Income/(Loss).
  • Other non-recurring charges of $1.7 million for the quarter ended September 30, 2013 consist of $1.2 million for a one-time bonus related to a union contract extension, which is included in the Cost of sales line of the Condensed Consolidated Statements of Comprehensive Income/(Loss) and $0.5 million of professional fees and expenses related to a potential acquisition and entity organization costs, which are included in the Restructuring and other costs line of the Condensed Consolidated Statements of Comprehensive Income/(Loss).

(c) Other non-cash charges are described as follows:

  • Other non-cash charges of $5.0 million for the quarter ended September 30, 2014 relate to $2.6 million of non-cash management incentive compensation, which is included in the Selling, general and administrative expenses line of the Condensed Consolidated Statements of Comprehensive Income/(Loss), $1.6 million of net non-cash mark-to-market losses relating to commodity and foreign exchange hedge agreements, which are included in the Cost of sales line of the Condensed Consolidated Statements of Comprehensive Income/(Loss) and $0.3 million of non-cash impairment charges related to the write off of a U.S. trademark which is included in Restructuring and other costs line of the Condensed Consolidated Statements of Comprehensive Income/(Loss) and $0.4 million of non-cash foreign exchange losses related to intercompany loans which are included in the Other (income)/expenses, net line of the Condensed Consolidated Statements of Comprehensive Income/(Loss).
  • Other non-cash charges for the quarter ended September 30, 2013 relate to $0.8 million of non-cash expense for management incentive stock options, which is included in the Selling, general and administrative expenses line of the Condensed Consolidated Statements of Comprehensive Income/(Loss) partially offset by $0.7 million of net non-cash mark-to-market gains relating to commodity and foreign exchange hedge agreements, which are included in the Cost of sales line of the Condensed Consolidated Statements of Comprehensive Income/(Loss).

Reconciliation of Net income to EBITDA and Adjusted EBITDA, and reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities for the Nine Months Ended September 30, 2014 and 2013 (Dollars in Thousands):

  Nine Months Ended
September 30,   September 30,
2014 2013
 
Net income $ 19,333 $ 23,507
Provision for income taxes 10,457 11,812
Interest expense 31,823 26,287
Depreciation and amortization   17,038     10,186  
EBITDA (a) 78,651 71,792
EBITDA - Primus pre-acquisition (a) 4,255 -
Securitization interest - permitted receivables financing (b) (691 ) (613 )
Other non-recurring charges (c) 20,777 4,436
Other non-cash charges (d)   9,731     2,206  
Adjusted EBITDA 112,723 77,821
 
Interest expense (31,823 ) (26,287 )
Amortization of debt issuance costs 4,897 4,240
Amortization of original issue discount 404 387
Other non-cash interest 337 (361 )
EBITDA - Primus pre-acquisition (a) (4,255 ) -
Securitization interest - permitted receivables financing (b) 691 613
Other non-recurring charges (c) (20,777 ) (4,436 )
Non-cash loss on early extinguishment of debt - 755
Cash taxes paid and payable (9,721 ) (4,535 )
Other expense/(income) (745 ) 796
Changes in assets and liabilities   (3,227 )   (2,289 )
Net cash provided by operating activities $ 48,504   $ 46,704  

(a) EBITDA includes the consolidated results including the operations of Primus from the acquisition date through September 30, 2014. EBITDA - Primus pre-acquisition represents the historical pre-acquisition results of Primus, which are added in calculating Adjusted EBITDA as defined in the Amended December 2012 Credit Facilities.

(b) Securitization interest - permitted receivables financing represents interest expense on trade receivables sold to ALERT 2009A and ALERT 2013A. This expense, which is charged to the Interest expense line of our Condensed Consolidated Statements of Comprehensive Income/(Loss), is deducted in calculating Adjusted EBITDA as defined in the Amended December 2012 Credit Facilities.

(c) Other non-recurring charges are described as follows:

  • Other non-recurring charges of $20.8 million for the nine months ended September 30, 2014 consist of $9.4 million of European restructuring costs, $4.5 million of post-acquisition Primus-related integration costs, $2.2 million of professional fees and expenses related to the Primus Acquisition and $3.3 million of other new entity organization costs, which are included in the Restructuring and other costs line of the Condensed Consolidated Statements of Comprehensive Income/(Loss), as well as $2.0 million of charges for expected excess and obsolete inventory related to the European restructuring, which are included within the Cost of sales line of the Condensed Consolidated Statements of Comprehensive Income/(Loss). These amounts are partially offset by an unusual and non-recurring asset disposal gain of $0.6 million which is included in the Selling, general and administrative expenses line of our Condensed Consolidated Statements of Comprehensive Income/(Loss).
  • Other non-recurring charges of $4.4 million for the nine months ended September 30, 2013 consist primarily of $1.9 million related to early extinguishment of debt expense, which is included in the Restructuring and other costs line of the Condensed Consolidated Statements of Comprehensive Income/(Loss), $1.2 million for a one-time bonus related to a union contract extension, which is included in the Cost of sales line of the Condensed Consolidated Statements of Comprehensive Income/(Loss) and $1.3 million of professional fees and expenses related to a potential acquisition and entity organization costs, which are included in the Restructuring and other costs line of the Condensed Consolidated Statements of Comprehensive Income/(Loss).

(d) Other non-cash charges are described as follows:

  • Other non-cash charges of $9.7 million for the nine months ended September 30, 2014 relate to $5.7 million of non-cash management incentive compensation, which is included in the Selling, general and administrative expenses line of the Condensed Consolidated Statements of Comprehensive Income/(Loss), $3.2 million of expense related to the inventory step-up to fair market value recorded at the Primus Acquisition date, $0.3 million of non-cash impairment charges related to the write off of a U.S. trademark which is included in Restructuring and other costs line of the Condensed Consolidated Statements of Comprehensive Income/(Loss) and $0.6 million of non-cash foreign exchange losses related to intercompany loans which are included in the Other (income)/expenses, net line of the Condensed Consolidated Statements of Comprehensive Income/(Loss), partially offset by $0.1 million of net non-cash mark-to-market gains relating to commodity and foreign exchange hedge agreements, which are included in the Cost of sales line of the Condensed Consolidated Statements of Comprehensive Income/(Loss).
  • Other non-cash charges of $2.2 million for the nine months ended September 30, 2013 relate to $1.9 million of non-cash expense for management incentive stock options, which is included in the Selling, general and administrative expenses line of the Condensed Consolidated Statements of Comprehensive Income/(Loss) and $0.4 million of non-cash mark-to-market losses relating to commodity and foreign exchange hedge agreements, which are included in the Cost of sales line of the Condensed Consolidated Statements of Comprehensive Income/(Loss).

Contacts

Alliance Laundry Holdings LLC
Bruce P. Rounds, Vice President CFO
920-748-1634

Contacts

Alliance Laundry Holdings LLC
Bruce P. Rounds, Vice President CFO
920-748-1634