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Alliance Laundry Holdings LLC Reports 2013 Third Quarter Earnings

Alliance Laundry reports record revenues on 12.7% increase in revenues; raises 2013 outlook

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

“Based on our year-to-date 2013 results and expectations for the remainder of the year, we expect Adjusted EBITDA for 2013 to be approximately $106.0 million. We believe our continued investments in new products, value-added services and an expanded international footprint will continue to enhance our market position across the globe.”

Net revenues for the quarter ended September 30, 2013 increased $16.1 million, or 12.7%, to $142.7 million from $126.6 million for the quarter ended September 30, 2012. Our net income for the quarter ended September 30, 2013 decreased $2.6 million to $8.8 million from $11.4 million for the quarter ended September 30, 2012. Adjusted EBITDA (see “About Non-GAAP Financial Measures” below) for the quarter ended September 30, 2013 increased $0.3 million to $26.4 million from $26.1 million for the quarter ended September 30, 2012.

The net revenues increase of $16.1 million was attributable to increases in United States & Canada revenues of $17.1 million and Europe revenues of $3.2 million offset by lower Asia revenues of $1.6 million, lower Latin America revenues of $1.4 million and lower Middle East & Africa revenues of $1.2 million.

The net income decrease of $2.6 million for the quarter ended September 30, 2013 was attributable to higher interest expense of $4.5 million, higher selling, general and administrative expenses of $2.4 million and higher other costs of $0.3 million offset by improved gross profit of $2.5 million and a lower provision for income taxes of $2.1 million.

Net revenues for the nine months ended September 30, 2013 increased $35.0 million, or 9.4%, to $407.7 million from $372.7 million for the nine months ended September 30, 2012. Our net income for the nine months ended September 30, 2013 increased $0.6 million to $23.5 million from $22.9 million for the nine months ended September 30, 2012. Adjusted EBITDA for the nine months ended September 30, 2013 increased $8.9 million to $77.8 million from $68.9 million for the nine months ended September 30, 2012.

The net revenues increase of $35.0 million was attributable to increases in United States & Canada revenues of $31.9 million and Europe revenues of $4.7 million offset by lower Asia revenues of $0.6 million, lower Middle East & Africa revenues of $0.6 million and lower Latin America revenues of $0.4 million.

In announcing the Company’s results, CEO Michael D. Schoeb said, “We are pleased to report record revenues for the third quarter, led by our largest geographic region, United States & Canada. Revenue rose in almost every product category but was principally due to continued high demand for our small chassis products in the United States & Canada as well as continued international growth in vended laundry. Notably, our organic sales growth of 12.7 percent marked the highest level achieved in the last five years.”

Schoeb concluded, “Based on our year-to-date 2013 results and expectations for the remainder of the year, we expect Adjusted EBITDA for 2013 to be approximately $106.0 million. We believe our continued investments in new products, value-added services and an expanded international footprint will continue to 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 nine months ended September 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 1,838 at the end of September 2013. 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 nine months ended September 30, 2013.

     
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
 
September 30, December 31,
2013 2012
Assets
Current assets:
Cash and cash equivalents $ 58,392 $ 33,341
Restricted cash - for securitization investors 19,678 22,112
Accounts receivable, net 24,651 14,595
Inventories, net 41,697 38,378
Accounts receivable - restricted for securitization investors 80,259 79,315
Loans receivable, net - restricted for securitization investors 45,560 44,048
Deferred income tax asset, net 11,278 10,035
Prepaid expenses and other assets   2,668     4,519  
Total current assets 284,183 246,343
 
Loans receivable, net 14,057 10,555
Property, plant and equipment, net 73,464 63,978
Goodwill 181,670 180,954
Loans receivable, net - restricted for securitization investors 204,985 206,219
Deferred income tax asset, net 566 566
Debt issuance costs, net 17,356 12,200
Intangible assets, net   126,727     129,282  
Total assets $ 903,008   $ 850,097  
 
Liabilities and Member(s)' Equity/(Deficit)
Current liabilities:
Current portion of long-term debt $ 939 $ 3,750
Revolving credit facility - -
Accounts payable 51,788 48,433
Asset backed borrowings - owed to securitization investors 97,545 81,626
Other current liabilities   46,006     34,382  
Total current liabilities 196,278 168,191
 
Long-term debt, net 456,676 478,300
Asset backed borrowings - owed to securitization investors 196,222 184,970
Deferred income tax liability, net 36,880 27,413
Other long-term liabilities   20,604     22,927  
Total liabilities 906,660 881,801
 
Commitments and contingencies
Member(s)' equity/(deficit)   (3,652 )   (31,704 )
Total liabilities and member(s)' equity/(deficit) $ 903,008   $ 850,097  
       
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(in thousands)
 
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2013 2012 2013 2012
 
Net revenues:
Equipment and service parts $ 140,700 $ 124,570 $ 401,256 $ 365,946
Equipment financing, net   1,996   1,991   6,433   6,709  
Net revenues 142,696 126,561 407,689 372,655
Cost of sales   100,423   86,730   285,697   264,609  
Gross profit   42,273   39,831   121,992   108,046  
 
Selling, general and administrative expenses 20,327 17,961 57,122 50,671
Other costs   537   262   1,393   1,276  
Total operating expenses   20,864   18,223   58,515   51,947  
Operating income 21,409 21,608 63,477 56,099
 
Interest expense 8,446 3,949 26,287 13,941
Loss from early extinguishment of debt   -   -   1,871   6,239  
Income before taxes 12,963 17,659 35,319 35,919
Provision for income taxes   4,117   6,247   11,812   12,974  
Net income $ 8,846 $ 11,412 $ 23,507 $ 22,945  
 
 
Comprehensive income:
Net income $ 8,846 $ 11,412 $ 23,507 $ 22,945
Foreign currency translation adjustment, net 2,419 1,133 1,732 (442 )
Change in pension liability and other benefits, net   585   310   1,755   930  
Comprehensive income $ 11,850 $ 12,855 $ 26,994 $ 23,433  
     
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 
Nine Months Ended
September 30, September 30,
2013 2012
 
Cash flows from operating activities:
Net income $ 23,507 $ 22,945
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 10,186 9,638
Amortization of debt issuance costs 4,240 2,550
Amortization of original issue discount 387 113
Non-cash interest (income)/expense (361 ) 477
Non-cash loss/(gain) on commodity & foreign exchange contracts, net 355 (1,658 )
Non-cash executive unit compensation 1,851 4,191
Non-cash charge for pension and post-retirement benefit plans 832 1,054
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 7,277 9,156
Other, net (36 ) (123 )
 
Changes in assets and liabilities:
Accounts and loans receivable, net (13,294 ) (3,434 )
Accounts receivable - restricted for securitization investors (944 ) (3,853 )
Inventories, net (3,035 ) (251 )
Loans receivable, net - restricted for securitization investors (278 ) (4,657 )
Other assets 1,830 (24 )
Accounts payable 5,824 (66 )
Other liabilities   7,439     (776 )
Net cash provided by operating activities   46,535     41,521  
 
Cash flows from investing activities:
Capital expenditures (19,409 ) (7,915 )
Restricted cash - for securitization investors   2,434     1,911  
Net cash used by investing activities   (16,975 )   (6,004 )
 
Cash flows from financing activities:
Proceeds from long-term borrowings 20,000 275,000
Payments on long-term borrowings (45,000 ) (256,750 )
Proceeds from forgivable loan 2,000 -
Deferred debt issuance costs (9,974 ) (4,649 )
Net increase in asset backed borrowings owed to securitization investors 27,171 6,503
Member contributions 1,086 2,414
Member distributions   (31 )   (52,343 )
Net cash provided/(used) by financing activities   (4,748 )   (29,825 )
 
Effect of exchange rate changes on cash and cash equivalents   239     (110 )
 
Increase in cash and cash equivalents 25,051 5,582
Cash and cash equivalents at beginning of period   33,341     37,618  
Cash and cash equivalents at end of period $ 58,392   $ 43,200  
 
Supplemental disclosure of cash flow information:
Cash paid for interest on long-term debt $ 17,063 $ 12,586
Cash paid for interest - for securitized investors $ 4,630 $ 4,651
Cash paid for income taxes $ 4,060 $ 2,327
 
Supplemental disclosure of investing and financing non-cash activities:
Capital expenditures included in accounts payable $ 2,701 $ 1,461
 

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

       
Three Months Ended
September 30,   September 30,
2013 2012
 
Net income $ 8,846 $ 11,412
Provision for income taxes 4,117 6,247
Interest expense 8,446 3,949
Depreciation and amortization   3,505     3,131  
EBITDA 24,914 24,739
Securitization interest - permitted receivables financing (a) (229 ) (212 )
Other non-recurring charges (b) 1,709 262
Other non-cash charges (c)   53     1,315  
Adjusted EBITDA 26,447 26,104
 
Interest expense (8,446 ) (3,949 )
Amortization of debt issuance costs 1,438 862
Amortization of original issue discount 133 -
Other non-cash interest (108 ) 142
Securitization interest - permitted receivables financing (a) 229 212
Other non-recurring charges (b) (1,709 ) (262 )
Non-cash loss on early extinguishment of debt - -
Cash taxes paid and payable (2,935 ) (2,117 )
Other expense/(income) 252 289
Changes in assets and liabilities   5,160     (311 )
Net cash provided by operating activities $ 20,461   $ 20,970  
 

(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 $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 and $0.5 million of professional fees and expenses related to a potential acquisition and entity organization costs, which are included in the Other costs line of the Condensed Consolidated Statements of Comprehensive Income.
  • Other non-recurring charges of $0.3 million for the quarter ended September 30, 2012 consist of legal and other professional expenses related to a potential acquisition, which are 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 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 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.
  • Other non-cash charges for the quarter ended September 30, 2012 relate to $2.8 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 partially offset by $1.5 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 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 Nine Months Ended September 30, 2013 and September 30, 2012. (Dollars in Thousands):

         
Nine Months Ended
September 30, September 30,
2013 2012
 
Net income $ 23,507 $ 22,945
Provision for income taxes 11,812 12,974
Interest expense 26,287 13,941
Depreciation and amortization   10,186     9,638  
EBITDA 71,792 59,498
Securitization interest - permitted receivables financing (a) (613 ) (615 )
Other non-recurring charges (b) 4,436 7,515
Other non-cash charges (c)   2,206     2,533  
Adjusted EBITDA 77,821 68,931
 
Interest expense (26,287 ) (13,941 )
Amortization of debt issuance costs 4,240 2,550
Amortization of original issue discount 387 113
Other non-cash interest (361 ) 477
Securitization interest - permitted receivables financing (a) 613 615
Other non-recurring charges (b) (4,436 ) (7,515 )
Non-cash loss on early extinguishment of debt 755 6,239
Cash taxes paid and payable (4,535 ) (3,818 )
Other expense/(income) 796 931
Changes in assets and liabilities   (2,458 )   (13,061 )
Net cash provided by operating activities $ 46,535   $ 41,521  
 

(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 $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 Loss from early extinguishment of debt line of the Condensed Consolidated Statements of Comprehensive Income, $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 and $1.3 million of professional fees and expenses related to a potential acquisition and entity organization costs, which are included in the Other costs line of the Condensed Consolidated Statements of Comprehensive Income.
  • Other non-recurring charges of $7.5 million for the nine months ended September 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 $1.3 million of legal and other 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.

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

  • Other non-cash charges 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 and $0.3 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 nine months ended September 30, 2012 relate to $4.2 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, partially offset by $1.7 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