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Alliance Laundry Holdings LLC Reports 2013 Second Quarter Earnings

Record revenues and operational execution lead to increased earnings in the second quarter

RIPON, Wis.--(BUSINESS WIRE)--Alliance Laundry Holdings LLC announced today results for the three and six months ended June 30, 2013.

“While a level of caution remains around the broader economic environment, we continue to be confident in the opportunities that lie ahead. Our continued investments in new products, value-added services and international will enhance our market position across the globe.”

Net revenues for the quarter ended June 30, 2013 increased $13.5 million, or 10.4%, to $142.4 million from $128.9 million for the quarter ended June 30, 2012. Our net income for the quarter ended June 30, 2013 increased $4.0 million to $10.0 million from $6.0 million for the quarter ended June 30, 2012. Adjusted EBITDA (see “About Non-GAAP Financial Measures” below) for the quarter ended June 30, 2013 increased $4.6 million to $29.0 million from $24.4 million for the quarter ended June 30, 2012.

The net revenues increase of $13.5 million was attributable to increases in United States & Canada revenues of $11.2 million, Europe revenues of $1.5 million, Latin America revenues of $1.1 million and Middle East & Africa revenues of $0.5 million. These increases were partially offset by lower Asia revenues of $0.8 million.

The net income increase of $4.0 million for the quarter ended June 30, 2013 was attributable to improved gross profit of $6.9 million and lower loss from early extinguishment of debt of $6.2 million offset by higher interest expense of $4.8 million, higher selling, general and administrative expenses of $2.5 million, higher other costs of $0.3 million and a higher provision for income taxes of $1.6 million.

Net revenues for the six months ended June 30, 2013 increased $18.9 million, or 7.7%, to $265.0 million from $246.1 million for the six months ended June 30, 2012. Our net income for the six months ended June 30, 2013 increased $3.2 million to $14.7 million from $11.5 million for the six months ended June 30, 2012. Adjusted EBITDA for the six months ended June 30, 2013 increased $8.6 million to $51.4 million from $42.8 million for the six months ended June 30, 2012.

The net revenues increase of $18.9 million was attributable to increases in United States & Canada revenues of $14.9 million, Europe revenues of $1.5 million, Latin America revenues of $1.0 million, Asia revenues of $0.9 million and Middle East & Africa revenues of $0.6 million.

In announcing the Company’s results, CEO Michael D. Schoeb said, “We are pleased to report record revenues for the 2013 second quarter and significantly increased earnings versus the prior year. Strong demand in the U.S. from new products, improved economic conditions and continuing momentum in international markets contributed to higher sales. We were encouraged to see double digit growth in three of our five geographic segments.”

Schoeb concluded, “While a level of caution remains around the broader economic environment, we continue to be confident in the opportunities that lie ahead. Our continued investments in new products, value-added services and international will enhance our market position across the globe.”

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 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 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 First Lien Credit Agreement, if the aggregate outstanding amount of the revolving credit loans and letter of credit obligations is in excess of 20% of the lenders’ current revolving credit commitments, we are required to satisfy a maximum Total Leverage Ratio, as defined therein. To the extent that we fail to maintain this ratio within the limits set forth in the First Lien Credit Agreement, our ability to access amounts available under the December 2012 Revolving Credit Facility would be limited, our liquidity would be adversely affected and our obligations under the 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 six months ended June 30, 2013 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® and Cissell®, Alliance produces a full line of commercial washing machines and dryers with load capacities from 12 to 200 pounds. Certain of our commercial products are also sold in the consumer laundry marketplace. Alliance Laundry’s worldwide employment was 1,613 at the end of 2012. With 2012 net revenues of $505.5 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 December 2012 Credit Facilities; 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 certain markets in which we operate; the impact of competition; 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, 2012.

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

 
 
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
       
June 30, December 31,
2013 2012
Assets
Current assets:
Cash and cash equivalents $ 65,003 $ 33,341
Restricted cash - for securitization investors 19,655 22,112
Accounts receivable, net 26,947 14,595
Inventories, net 40,735 38,378
Accounts receivable - restricted for securitization investors 77,568 79,315
Loans receivable, net - restricted for securitization investors 45,652 44,048
Deferred income tax asset, net 11,266 10,035
Prepaid expenses and other assets   5,510     4,519  
Total current assets 292,336 246,343
 
Loans receivable, net 9,824 10,555
Property, plant and equipment, net 70,855 63,978
Goodwill 180,594 180,954
Loans receivable, net - restricted for securitization investors 210,035 206,219
Deferred income tax asset, net 566 566
Debt issuance costs, net 18,794 12,200
Intangible assets, net   127,401     129,282  
Total assets $ 910,405   $ 850,097  
 
Liabilities and Member(s)' Equity/(Deficit)
Current liabilities:
Current portion of long-term debt $ 982 $ 3,750
Revolving credit facility - -
Accounts payable 53,738 48,433
Asset backed borrowings - owed to securitization investors 97,284 81,626
Other current liabilities   41,999     34,382  
Total current liabilities 194,003 168,191
 
Long-term debt, net 474,500 478,300
Asset backed borrowings - owed to securitization investors 200,905 184,970
Deferred income tax liability, net 35,348 27,413
Other long-term liabilities   21,121     22,927  
Total liabilities 925,877 881,801
 
Commitments and contingencies
Member(s)' equity/(deficit)   (15,472 )   (31,704 )
Total liabilities and member(s)' equity/(deficit) $ 910,405   $ 850,097  
 
 
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(in thousands)
           
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2013 2012 2013 2012
 
Net revenues:
Equipment and service parts $ 140,351 $ 126,749 $ 260,556 $ 241,376
Equipment financing, net   2,040   2,192     4,437     4,718  
Net revenues 142,391 128,941 264,993 246,094
Cost of sales   98,817   92,218     185,274     177,879  
Gross profit   43,574   36,723     79,719     68,215  
 
Selling, general and administrative expenses 19,389 16,936 36,795 32,710
Other costs   392   94     856     1,014  
Total operating expenses   19,781   17,030     37,651     33,724  
Operating income 23,793 19,693 42,068 34,491
 
Interest expense 8,795 4,024 17,841 9,992
Loss from early extinguishment of debt   -   6,239     1,871     6,239  
Income before taxes 14,998 9,430 22,356 18,260
Provision for income taxes   5,009   3,401     7,695     6,727  
Net income $ 9,989 $ 6,029   $ 14,661   $ 11,533  
 
 
Comprehensive income:
Net income $ 9,989 $ 6,029 $ 14,661 $ 11,533
Foreign currency translation adjustment, net 744 (3,032 ) (687 ) (1,575 )
Change in pension liability and other benefits, net   850   393     1,170     620  
Comprehensive income $ 11,583 $ 3,390   $ 15,144   $ 10,578  
 
 
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
       
Six Months Ended
June 30, June 30,
2013 2012
 
Cash flows from operating activities:
Net income $ 14,661 $ 11,533
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 6,681 6,507
Amortization of debt issuance costs 2,802 1,688
Amortization of original issue discount 254 113
Non-cash interest (income)/expense (253 ) 335
Non-cash loss/(gain) on commodity & foreign exchange contracts, net 1,058 (171 )
Non-cash executive unit compensation 1,095 1,389
Non-cash charge for pension and post-retirement benefit plans 555 703
Non-cash charge for write-off of debt issuance costs 577 4,026
Non-cash charge for write-off of original issue discount on long-term borrowings 178 2,213
Deferred income taxes 6,095 5,026
Other, net (11 ) (61 )
Changes in assets and liabilities:
Accounts and loans receivable, net (11,834 ) (7,176 )
Accounts receivable - restricted for securitization investors 1,747 (4,545 )
Inventories, net (2,491 ) 433
Loans receivable, net - restricted for securitization investors (5,420 ) (455 )
Other assets (1,021 ) (65 )
Accounts payable 5,434 598
Other liabilities   4,868     (2,474 )
Net cash provided by operating activities   24,975     19,617  
 
Cash flows from investing activities:
Capital expenditures (11,904 ) (4,271 )
Restricted cash - for securitization investors   2,457     3,705  
Net cash used by investing activities   (9,447 )   (566 )
 
Cash flows from financing activities:
Proceeds from long-term borrowings 20,000 275,000
Payments on long-term borrowings (27,000 ) (246,437 )
Proceeds from forgivable loan 500 -
Deferred debt issuance costs (9,974 ) (4,649 )
Net increase in asset backed borrowings owed to securitization investors 31,593 5,576
Member contributions 1,086 2,414
Member distributions   -     (47,343 )
Net cash provided/(used) by financing activities   16,205     (15,439 )
 
Effect of exchange rate changes on cash and cash equivalents   (71 )   (291 )
 
Increase in cash and cash equivalents 31,662 3,321
Cash and cash equivalents at beginning of period   33,341     37,618  
Cash and cash equivalents at end of period $ 65,003   $ 40,939  
 
Supplemental disclosure of cash flow information:
Cash paid for interest on long-term debt $ 10,165 $ 9,139
Cash paid for interest - for securitized investors $ 3,038 $ 3,065
Cash paid for income taxes $ 550 $ 1,286
 
 

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 June 30, 2013 and June 30, 2012. (Dollars in Thousands):

         
Three Months Ended
June 30, June 30,
2013 2012
 
Net income $ 9,989 $ 6,029
Provision for income taxes 5,009 3,401
Interest expense 8,795 4,024
Depreciation and amortization   3,383     3,105  
EBITDA 27,176 16,559
Securitization interest - permitted receivables financing (a) (198 ) (207 )
Other non-recurring charges (b) 392 6,333
Other non-cash charges (c)   1,646     1,687  
Adjusted EBITDA 29,016 24,372
 
Interest expense (8,795 ) (4,024 )
Amortization of debt issuance costs 1,642 858
Amortization of original issue discount 156 6
Other non-cash interest (100 ) 18
Securitization interest - permitted receivables financing (a) 198 207
Other non-recurring charges (b) (392 ) (6,333 )
Non-cash loss on early extinguishment of debt - 6,239
Cash taxes paid and payable (1,093 ) (1,184 )
Other expense/(income) 241 305
Changes in assets and liabilities   35     (14,192 )
Net cash provided by operating activities $ 20,908   $ 6,272  
 

(a) 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 the Condensed Consolidated Statements of Comprehensive Income, is deducted in calculating Adjusted EBITDA.

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

  • Other non-recurring charges of $0.4 million for the quarter ended June 30, 2013 consist of entity organization costs and professional fees and expenses related to a potential acquisition, which are included in the Other costs line of the Condensed Consolidated Statements of Comprehensive Income.
  • Other non-recurring charges of $6.3 million for the quarter ended June 30, 2012 consisted of $6.2 million related to early extinguishment of debt expense, which is included in the Loss from early extinguishment of debt line of the Condensed Consolidated Statements of Comprehensive Income and $0.1 million of legal and other professional fees and expenses related to a potential acquisition, which is included in the Other costs line of the Condensed Consolidated Statements of Comprehensive Income.

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

  • Other non-cash charges for the quarter ended June 30, 2013 relate to $0.9 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 and $0.7 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.
  • Other non-cash charges for the quarter ended June 30, 2012 relate to $1.1 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 and $0.6 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.

Reconciliation of Net income to EBITDA and Adjusted EBITDA, and reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities for the Six Months Ended June 30, 2013 and June 30, 2012. (Dollars in Thousands):

         
Six Months Ended
June 30, June 30,
2013 2012
 
Net income $ 14,661 $ 11,533
Provision for income taxes 7,695 6,727
Interest expense 17,841 9,992
Depreciation and amortization   6,681     6,507  
EBITDA 46,878 34,759
Securitization interest - permitted receivables financing (a) (384 ) (403 )
Other non-recurring charges (b) 2,727 7,253
Other non-cash charges (c)   2,153     1,218  
Adjusted EBITDA 51,374 42,827
 
Interest expense (17,841 ) (9,992 )
Amortization of debt issuance costs 2,802 1,688
Amortization of original issue discount 254 113
Other non-cash interest (253 ) 335
Securitization interest - permitted receivables financing (a) 384 403
Other non-recurring charges (b) (2,727 ) (7,253 )
Non-cash loss on early extinguishment of debt 755 6,239
Cash taxes paid and payable (1,600 ) (1,701 )
Other expense/(income) 544 642
Changes in assets and liabilities   (8,717 )   (13,684 )
Net cash provided by operating activities $ 24,975   $ 19,617  
 

(a) 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 the Condensed Consolidated Statements of Comprehensive Income, is deducted in calculating Adjusted EBITDA.

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

  • Other non-recurring charges of $2.7 million for the six months ended June 30, 2013 consist of $1.9 million related to early extinguishment of debt expense, which is included in the Loss from early extinguishment of debt line of the Condensed Consolidated Statements of Comprehensive Income and $0.8 million of entity organization costs and professional fees and expenses related to a potential acquisition, which are included in the Other costs line of the Condensed Consolidated Statements of Comprehensive Income.
  • Other non-recurring charges of $7.3 million for the six months ended June 30, 2012 consisted of $6.2 million related to early extinguishment of debt expense, which is included in the Loss from early extinguishment of debt line of the Condensed Consolidated Statements of Comprehensive Income and $1.0 million of legal and other professional fees and expenses related to a potential acquisition, which is included in the Other costs line of the Condensed Consolidated Statements of Comprehensive Income.

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

  • Other non-cash charges for the six months ended June 30, 2013 relate to $1.1 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 and $1.1 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.
  • Other non-cash charges for the six months ended June 30, 2012 relate to $1.4 million of non-cash expense for management incentive stock options, which is included in the Selling, general and administrative expenses line of our Condensed Consolidated Statements of Comprehensive Income, offset by $0.2 million of non-cash mark to market gains relating to commodity and foreign exchange hedge agreements, which are included in the Cost of sales line of our Condensed Consolidated Statements of Comprehensive Income.

Contacts

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