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Alliance Laundry Holdings LLC Reports Financial Results for 2013

Diversified growth in North America and Europe drives record revenue and earnings

RIPON, Wis.--(BUSINESS WIRE)--Alliance Laundry Holdings LLC announced today results for the year ended December 31, 2013.

“We experienced strong growth across all end customer groups in the United States & Canada as well as mid-teen growth in Europe. We also intentionally ramped up key strategic investments that on a go forward basis, will produce clear benefits in 2014 and beyond.”

Net revenues for the full year 2013 increased $51.1 million, or 10.1%, to $556.6 million from $505.5 million for the full year 2012. Our net income for 2013 increased $16.8 million to $33.2 million from $16.4 million for 2012. Adjusted EBITDA (see “About Non-GAAP Financial Measures” below) for 2013 increased $11.9 million to $106.3 million from $94.4 million for 2012.

The 2013 increase in net revenues of $51.1 million was attributable to increases in United States & Canada revenues of $44.4 million, Europe revenues of $8.1 million and Asia revenues of $0.9 million. These increases represent percentage growth by segment for United States & Canada revenues of 12.4%, Europe revenues of 15.4% and Asia revenues of 1.8%. These increases were offset by decreases in Middle East & Africa revenues of $2.1 million, an 8.3% decrease, and Latin America revenues of $0.2 million, a 0.9% decrease.

The overall net income increase of $16.8 million was primarily attributable to higher gross profit of $21.8 million, lower selling, general and administrative expenses of $3.2 million, lower other costs of $0.5 million and a lower loss from early extinguishment of debt of $8.5 million. The higher gross profit and decreased expenses were partially offset by higher interest expense of $15.6 million and a higher provision for income taxes of $1.6 million.

“2013 was another solid year for Alliance. It is our fourth consecutive year of record revenues with a compound annual growth rate of 9.1% since 2009,” said President & CEO Michael D. Schoeb. “We experienced strong growth across all end customer groups in the United States & Canada as well as mid-teen growth in Europe. We also intentionally ramped up key strategic investments that on a go forward basis, will produce clear benefits in 2014 and beyond.”

Schoeb concluded, “On February 11th, we announced the signing of an agreement to acquire Primus Laundry Equipment Group. We expect this transaction to close in early March. We are very pleased to have the Primus organization join our Company. We view their management team, customers and focus on durability and reliability as complementary. In addition to our organic growth, this important acquisition provides additional product breadth, significantly expands our international footprint and provides unrivaled scale in the commercial laundry industry.”

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, 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 1,887 at the end of 2013. With 2013 net revenues of $556.6 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; 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 five pages for the years ended December 31, 2013 and 2012.

 
ALLIANCE LAUNDRY HOLDINGS LLC
CONSOLIDATED BALANCE SHEETS
(in thousands)
     
December 31, December 31,
Assets 2013 2012
Current assets:
Cash and cash equivalents $ 60,938 $ 33,341
Restricted cash - for securitization investors 17,087 22,112
Accounts receivable (net of allowance for doubtful accounts of
$2,247 and $1,659 at December 31, 2013 and 2012, respectively) 18,688 14,595
Inventories, net 41,644 38,378
Accounts receivable - restricted for securitization investors 86,674 79,315
Loans receivable, net - restricted for securitization investors 45,910 44,048
Deferred income tax asset, net 11,306 10,035
Prepaid expenses and other current assets   2,747   4,519  
Total current assets 284,994 246,343
 
Loans receivable, net 11,151 10,555
Property, plant and equipment, net 81,235 63,978
Goodwill 182,174 180,954
Loans receivable, net - restricted for securitization investors 206,849 206,219
Deferred income tax asset, net 704 566
Debt issuance costs, net 17,450 12,200
Intangible assets, net   125,907   129,282  
Total assets $ 910,464 $ 850,097  
 
Liabilities and Member(s)' Equity/(Deficit)
Current liabilities:
Current portion of long-term debt $ - $ 3,750
Revolving credit facility - -
Accounts payable 59,005 48,433
Asset backed borrowings - owed to securitization investors 100,023 81,626
Other current liabilities   43,721   34,382  
Total current liabilities 202,749 168,191
 
Long-term debt, net 442,746 478,300
Asset backed borrowings - owed to securitization investors 196,694 184,970
Deferred income tax liability, net 40,092 27,413
Other long-term liabilities   16,476   22,927  
Total liabilities 898,757 881,801
 
Commitments and contingencies
Member(s)' equity/(deficit)   11,707   (31,704 )
Total liabilities and member(s)' equity/(deficit) $ 910,464 $ 850,097  
 
ALLIANCE LAUNDRY HOLDINGS LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
       
Year Ended December 31,
2013 2012 2011
Net revenues:
Equipment and service parts $ 548,565 $ 496,987 $ 450,724
Equipment financing, net   8,042   8,529     7,271  
Net revenues 556,607 505,516 457,995
Cost of sales   387,434   358,118     330,887  
Gross profit 169,173 147,398 127,108
 
Selling, general and administrative expenses 81,172 84,398 63,295
Other costs   2,568   3,099     1,644  
Total operating expenses   83,740   87,497     64,939  

Operating income

85,433 59,901 62,169
 
Interest expense 34,662 19,057 26,262
Loss from early extinguishment of debt   1,871   10,399     -  
Income before taxes 48,900 30,445 35,907
Provision for income taxes   15,653   14,016     12,552  
Net income $ 33,247 $ 16,429   $ 23,355  
 
Comprehensive income:
Net income $ 33,247 $ 16,429 $ 23,355
Foreign currency translation adjustment, net 2,453 786 (1,813 )
Change in pension liability and other benefits, net   5,749   (1,808 )   (5,668 )
Comprehensive income $ 41,449 $ 15,407   $ 15,874  
 
ALLIANCE LAUNDRY HOLDINGS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
         
Year Ended December 31,
2013 2012 2011
Cash flows from operating activities:
Net income $ 33,247 $ 16,429 $ 23,355
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 13,889 12,940 15,441
Amortization of debt issuance costs 5,705 3,534 3,198
Amortization of original issue discount 517 138 421
Non-cash interest (income)/expense (496 ) 366 1,816
Non-cash loss/(gain) on commodity & foreign exchange contracts, net 29 (1,699 ) 3,072
Non-cash executive unit compensation 4,024 20,537 2,526
Non-cash charge for pension and post-retirement benefit plans 1,109 1,406 896
Non-cash charge for write-off of debt issue costs 577 8,186 -
Non-cash charge for write-off of original issue discount on long-term borrowings 178 2,213 -
Deferred income taxes 8,068 11,195 10,072
Other, net 54 (108 ) 183
Changes in assets and liabilities:
Accounts and loans receivable, net (4,224 ) (306 ) 2,124
Accounts receivable - restricted for securitization investors (7,359 ) (2,463 ) (15,739 )
Inventories, net (2,937 ) 3,404 (1,412 )
Loans receivable, net - restricted for securitization investors (2,492 ) (2,085 ) 13,097
Other assets 1,279 (93 ) (400 )
Accounts payable 7,861 (1,359 ) 8,099
Other liabilities   5,920     (3,276 )   (4,585 )
Net cash provided by operating activities   64,949     68,959     62,164  
 
Cash flows from investing activities:
Capital expenditures (24,903 ) (14,872 ) (10,552 )
Restricted cash - for securitization investors   5,025     (4,519 )   (65 )
Net cash used by investing activities   (19,878 )   (19,391 )   (10,617 )
 
Cash flows from financing activities:
Proceeds from long-term borrowings 20,000 757,025 -
Payments on long-term borrowings (60,000 ) (518,000 ) (36,000 )
Proceeds from forgivable loans 2,000 - -
Change in other long-term debt, net - - (4 )
Cash paid for debt establishment and amendment fees (11,532 ) (14,757 ) (4,556 )
Net increase/(decrease) in asset backed borrowings owed to securitization investors 30,121 4,424 (2,015 )
Member contributions 1,657 24,036 -
Member distributions   (31 )   (306,546 )   (9,000 )
Net cash used by financing activities   (17,785 )   (53,818 )   (51,575 )
 
Effect of exchange rate changes on cash and cash equivalents   311     (27 )   (97 )
 
Increase/(Decrease) in cash and cash equivalents 27,597 (4,277 ) (125 )
Cash and cash equivalents at beginning of period   33,341     37,618     37,743  
Cash and cash equivalents at end of period $ 60,938   $ 33,341   $ 37,618  
 
Supplemental disclosure of cash flow information:
Cash paid for interest on long-term debt and capital lease obligations $ 23,924 $ 16,574 $ 20,921
Cash paid for interest - for securitized investors $ 6,218 $ 6,101 $ 7,588
Cash paid for income taxes $ 5,244 $ 3,848 $ 2,335
 
Supplemental disclosure of investing and financing non-cash activities:
Capital expenditures included in accounts payable $ 7,890 $ 5,620 $ 2,253
 

Reconciliation of Net income to EBITDA and Adjusted EBITDA, and reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities for the Twelve Months Ended December 31, 2013 and 2012 (Dollars in Thousands):

 
Year Ended December 31,
2013   2012
 
Net income $ 33,247 $ 16,429
Provision for income taxes 15,653 14,016
Interest expense 34,662 19,057
Depreciation and amortization   13,889     12,940  
EBITDA 97,451 62,442
Securitization interest - permitted receivables financing (a) (846 ) (817 )
Other non-recurring charges (b) 5,579 13,498
Other non-cash charges (c)   4,086     19,248  
Adjusted EBITDA 106,270 94,371
 
Interest expense (34,662 ) (19,057 )
Amortization of debt issuance costs 5,705 3,534
Amortization of original issue discount 517 138
Other non-cash interest (496 ) 366
Securitization interest - permitted receivables financing (a) 846 817
Other non-recurring charges (b) (5,579 ) (13,498 )
Non-cash loss on early extinguishment of debt 755 10,399
Cash taxes paid and payable (7,585 ) (2,821 )
Other expense/(income) 1,130 888
Changes in assets and liabilities   (1,952 )   (6,178 )
Net cash provided by operating activities $ 64,949   $ 68,959  
 

(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 our 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 $5.6 million in 2013 are comprised of $2.4 million of professional fees and expenses related to potential acquisitions and entity organization costs, which are included in the Other costs line of the Consolidated Statements of Comprehensive Income, $1.9 million of early extinguishment of debt expense, which is included in the Loss from early extinguishment of debt line of our Consolidated Statements of Comprehensive Income and $1.2 million related to a one-time bonus related to a union contract extension, which is included in the Cost of sales line of the Consolidated Statements of Comprehensive Income.
  • Other non-recurring charges of $13.5 million in 2012 are comprised of $10.4 million of expense resulting from the early extinguishment of prior credit facilities, which are included in the Loss from early extinguishment of debt line of our Consolidated Statements of Comprehensive Income. Also included are $2.7 million of legal and other professional fees and expenses related to a potential acquisition and $0.4 million of dividend related costs, which are included in the Other costs line of our Consolidated Statements of Comprehensive Income.

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

  • Other non-cash charges of $4.1 million in 2013 are comprised of $4.0 million of non-cash management incentive compensation expense, which is included in the Selling, general and administrative expenses line of our Consolidated Statements of Comprehensive Income and less than $0.1 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 our Consolidated Statements of Comprehensive Income.
  • Other non-cash charges of $19.2 million in 2012 are comprised of $20.5 million of non-cash management incentive compensation expense and $0.4 million of related employer paid payroll taxes, which are included in the Selling, general and administrative expenses line of our Consolidated Statements of Comprehensive Income. These expenses were 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 Consolidated Statements of Comprehensive Income.

Contacts

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