Alliance Laundry Holdings LLC Reports 2015 First Quarter Results

Company posts record first quarter revenues and earnings

RIPON, Wis.--()--Alliance Laundry Holdings LLC announced today results for the three months ended March 31, 2015.

Net revenues for the quarter ended March 31, 2015 increased $32.3 million, or 22.3%, to $176.9 million from $144.6 million for the quarter ended March 31, 2014. Our net income for the quarter ended March 31, 2015 increased $6.5 million to $12.1 million from $5.6 million for the quarter ended March 31, 2014. Adjusted EBITDA (see “About Non-GAAP Financial Measures” below) for the quarter ended March 31, 2015 increased $5.7 million, or 17.9%, to $37.5 million from $31.8 million for the quarter ended March 31, 2014.

The total net revenues growth of 22.3% was driven by organic growth of 16.1%, net acquisition growth of 9.9% and a decline due to foreign currency translation of 3.7%. The net revenues increase of $32.3 million was attributable to increases in United States & Canada revenues of $25.9 million, Asia revenues of $5.5 million and Europe revenues of $4.3 million. These increases represent percentage growth by segment for United States & Canada revenues of 27.2%, Asia revenues of 40.8% and Europe revenues of 19.3%. These increases were partially offset by decreases in Middle East & Africa revenues of $2.1 million, and Latin America revenues of $1.3 million.

The net income increase of $6.5 million was mostly attributable to higher gross profit of $13.3 million and lower restructuring and other costs of $3.2 million offset by higher selling, general and administrative expenses of $6.5 million, higher interest expense of $0.7 million and higher provision for income tax of $2.8 million.

“We had a very strong start to 2015, with record revenue and earnings growth in the first quarter. This is despite a tough operating environment in many of our major markets and is a testament to the strength of our people and their ability to execute on our strategic priorities.” said President & CEO Michael D. Schoeb.

Schoeb concluded, “In addition to robust organic growth, our top and bottom line performance was enhanced by the acquisition of the Primus Laundry Equipment Group which continues to deliver well ahead of planned synergies. In summary, Alliance remains well positioned for another year of strong performance in 2015 and is focused on initiatives that will deliver continued growth over the coming years.”

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, income tax provision, depreciation and amortization (including non-cash interest income). 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 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 twelve months ended December 31, 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® and Deli®, Alliance produces a full line of commercial washing machines and dryers with load capacities from 12 to 400 pounds. Certain of our commercial products are also sold in the consumer laundry marketplace. Alliance Laundry’s worldwide employment was 2,730 at the end of 2014. With 2014 net revenues of $726.3 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: unfavorable economic conditions in markets in which we operate; the ability to successfully implement operating strategies and manage trends affecting the business, liquidity, financial condition and results of operations of the Company; continued sales to key customers; risks related to our asset backed securitization facility; possible fluctuations in the cost of raw materials and components; possible loss of suppliers; the impact of competition; potential adverse effects of energy efficiency or water usage standards; risks related to our international operations; possible fluctuations in currency exchange rates; costs and other difficulties related to acquisitions; dependence on key personnel; labor relations; obligations under our pension plan; potential liability for environmental, health and safety matters; potential future legal proceedings and litigation; product liability expenses; product warranty claims; our ability to protect our intellectual property rights; risks related to cybersecurity attacks; the impact of substantial leverage and debt service on us; the ability to borrow funds under the Amended December 2012 Credit Facilities; possible fluctuations in interest rates 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, 2014.

Financial information for Alliance Laundry Holdings LLC appears on the next five pages for the three months ended March 31, 2015 and 2014.

ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
       
March 31, December 31,
Assets 2015 2014
Current assets:
Cash and cash equivalents $ 44,939 $ 48,115
Restricted cash 354 394
Restricted cash - for securitization investors 20,132 22,531
Accounts receivable, net 38,504 41,563
Inventories, net 69,683 65,821
Accounts receivable - restricted for securitization investors 100,927 100,818
Loans receivable, net - restricted for securitization investors 50,688 49,010
Deferred income tax asset, net 16,727 16,097
Prepaid expenses and other current assets   3,596     3,520
Total current assets 345,550 347,869
 
Loans receivable, net 11,864 13,153
Property, plant and equipment, net 127,368 123,591
Goodwill 264,434 278,434
Loans receivable, net - restricted for securitization investors 225,618 220,007
Deferred income tax asset, net 1,478 50
Debt issuance costs, net 14,180 15,814
Intangible assets, net 222,225 237,283
Other long-term assets   1,524     1,667
Total assets $ 1,214,241   $ 1,237,868
 
Liabilities and Member(s)' Equity/(Deficit)
Current liabilities:
Current portion of long-term debt $ 1,478 $ 34
Revolving credit facility - -
Accounts payable 77,747 82,962
Asset backed borrowings - owed to securitization investors 109,548 107,548
Other current liabilities   59,089     62,648
Total current liabilities 247,862 253,192
 
Long-term debt, net 655,058 656,419
Asset backed borrowings - owed to securitization investors 214,217 209,435
Deferred income tax liability, net 78,520 80,713
Other long-term liabilities   35,803     35,234
Total liabilities 1,231,460 1,234,993
 
Commitments and contingencies
Member(s)' equity/(deficit)   (17,219 )   2,875
Total liabilities and member(s)' equity/(deficit) $ 1,214,241   $ 1,237,868
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(unaudited)
(in thousands)
     
Three Months Ended
March 31, March 31,
2015 2014
Net revenues:
Equipment and service parts $ 175,035 $ 142,459
Equipment financing, net   1,834     2,162
Net revenues 176,869 144,621
Cost of sales   118,364     99,447
Gross profit 58,505 45,174
 
Selling, general and administrative expenses 28,941 22,403
Restructuring and other costs   1,395     4,569
Total operating expenses   30,336     26,972
Operating income 28,169 18,202
 
Interest expense 10,309 9,570
Other (income)/expenses, net   77     206
Income before taxes 17,783 8,426
Provision for income taxes   5,689     2,855
Net income $ 12,094   $ 5,571
 
 
Comprehensive income/(loss):
Net income $ 12,094 $ 5,571
Foreign currency translation adjustment, net (32,263 ) 1,891
Change in pension liability and other benefits, net   277     106
Comprehensive income/(loss) $ (19,892 ) $ 7,568
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
     
Three Months Ended
March 31, March 31,
2015 2014
Cash flows from operating activities:
Net income $ 12,094 $ 5,571
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,693 4,410
Amortization of debt issuance costs 1,635 1,463
Amortization of original issue discount 101 110
Non-cash interest expense/(income) 120 175
Non-cash loss/(gain) on commodity & foreign exchange contracts, net 987 (426 )
Non-cash foreign exchange loss, net 77 206
Non-cash executive unit compensation 1,517 616
Non-cash charge for pension and post-retirement benefit plans 307 206
Non-cash acquisition related inventory expense - 1,059
Loss/(gain) on sale of property, plant and equipment 37 (629 )
Deferred income taxes (232 ) 210
Other, net (74 ) (50 )
Changes in assets and liabilities, net of the effects of the acquisition:
Accounts and loans receivable, net 456 (3,592 )
Accounts receivable - restricted for securitization investors (109 ) 2,720
Inventories, net (8,213 ) (6,056 )
Loans receivable, net - restricted for securitization investors (7,289 ) (2,833 )
Other assets (523 ) 52
Accounts payable (960 ) 5,004
Other liabilities   (3,033 )   (842 )
Net cash provided by operating activities   2,591     7,374  
 
Cash flows from investing activities:
Capital expenditures (12,418 ) (9,084 )
Restricted cash 5 (3 )
Restricted cash - for securitization investors 2,399 376
Acquisition of businesses, net of cash acquired - (254,737 )
Proceeds on disposition of assets   89     666  

Net cash used by investing activities

  (9,925 )   (262,782 )
 
Cash flows from financing activities:
Proceeds from revolving line of credit borrowings 13,000 -
Payments on revolving line of credit borrowings (13,000 ) -
Proceeds from long-term borrowings - 236,000
Payments on long-term borrowings (8 ) (415 )
Cash paid for debt establishment and amendment fees - (4,933 )
Cash paid for deferred costs (180 ) -
Net increase/(decrease) in asset backed borrowings owed to securitization investors 6,782 (270 )
Member contributions - 50
Member distributions   (202 )   -  
Net cash provided by financing activities   6,392     230,432  
 
Effect of exchange rate changes on cash and cash equivalents   (2,234 )   (677 )
 
Decrease in cash and cash equivalents (3,176 ) (25,653 )
Cash and cash equivalents at beginning of period   48,115     60,849  
Cash and cash equivalents at end of period $ 44,939   $ 35,196  
 
Supplemental disclosure of cash flow information:
Cash paid for interest on long-term debt $ 8,272 $ 6,354
Cash paid for interest - for securitized investors $ 1,732 $ 1,639
Cash paid for income taxes $ 1,269 $ 1,811
 
Supplemental disclosure of investing and financing non-cash activities:
Capital expenditures included in accounts payable $ 3,480 $ 2,407
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 March 31, 2015 and 2014 (Dollars in Thousands):

    Three Months Ended
March 31,   March 31,
2015 2014
 
Net income $ 12,094 $ 5,571
Provision for income taxes 5,689 2,855
Interest expense 10,309 9,570
Depreciation and amortization   5,693     4,410  
EBITDA (a) 33,785 22,406
EBITDA - Primus pre-acquisition (a) - 4,255
Securitization interest - permitted receivables financing (b) (244 ) (219 )
Other non-recurring charges (c) 1,409 3,940
Other non-cash charges (d)   2,581     1,455  
Adjusted EBITDA 37,531 31,837
 
Interest expense (10,309 ) (9,570 )
Amortization of debt issuance costs 1,635 1,463
Amortization of original issue discount 101 110
Other non-cash interest 120 175
EBITDA - Primus pre-acquisition (a) - (4,255 )
Securitization interest - permitted receivables financing (b) 244 219
Other non-recurring charges (c) (1,409 ) (3,940 )
Cash taxes paid and payable (5,921 ) (2,645 )
Other expense/(income) 270 (473 )
Changes in assets and liabilities   (19,671 )   (5,547 )
Net cash provided by operating activities $ 2,591   $ 7,374  
(a)   EBITDA for the quarter ended March 31, 2014 includes the operations of Primus from the acquisition date thru March 31, 2014. EBITDA - Primus pre-acquisition for the quarter ended March 31, 2014 represents the historical pre-acquisition results of Primus, which are added in calculating Adjusted EBITDA and in calculating Total Leverage Ratio as defined in the Amended December 2012 Credit Facilities.
 
(b) 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.
 
(c) Other non-recurring charges are described as follows:
  • Other non-recurring charges of $1.4 million for the quarter ended March 31, 2015 consist of $0.8 million of costs associated with the closure of the Wevelgem, Belgium production facility, $0.5 million of professional fees and expenses related to entity organization and other costs and $0.1 million of Primus integration-related costs, all of which are included in the Restructuring and other costs line of our Condensed Consolidated Statements of Comprehensive Income/(Loss).
  • Other non-recurring charges of $3.9 million for the quarter ended March 31, 2014 are comprised of $3.5 million of professional fees and expenses related to potential acquisitions and entity organization costs and $1.1 million of Primus integration related costs, which are included in the Restructuring and other costs line of our Condensed Consolidated Statements of Comprehensive Income/(Loss). These charges were 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).
(d)   Other non-cash charges are described as follows:
  • Other non-cash charges of $2.6 million for the quarter ended March 31, 2015 are comprised of $1.0 million of non-cash mark-to-market losses relating to commodity and foreign exchange hedge agreements and $0.2 million of non-cash management incentive compensation expense which are included in the Cost of sales line of the Condensed Consolidated Statements of Comprehensive Income/(Loss). Other non-cash charges also include $1.3 million of non-cash management incentive compensation expense which is included in the Selling, general and administrative expenses line of our Condensed Consolidated Statements of Comprehensive Income/(Loss) and $0.1 million of foreign exchange losses related to intercompany loans which are included in the Other (income)/expenses, net line of our Condensed Consolidated Statements of Comprehensive Income/(Loss).
  • Other non-cash charges of $1.5 million for the quarter ended March 31, 2014 are comprised of $1.1 million of expense related to the inventory step-up to fair market value recorded at the Primus Acquisition date and $0.1 million of non-cash management incentive compensation expense, which were partially offset by $0.4 million of non-cash mark-to-market income relating to commodity and foreign exchange hedge agreements, all of which are included in the Cost of sales line of the Condensed Consolidated Statements of Comprehensive Income/(Loss). Other non-cash charges also include $0.5 million of non-cash management incentive compensation expense which is included in the Selling, general and administrative expenses line of our Condensed Consolidated Statements of Comprehensive Income/(Loss) and $0.2 million of foreign exchange losses related to intercompany loans which are included in the Other (income)/expenses, net line of our Condensed Consolidated Statements of Comprehensive Income/(Loss).

Contacts

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

Contacts

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