MRO Magazine

Alliance Laundry Holdings LLC Reports Financial Results for 2014


March 3, 2015
By Business Wire News

RIPON, Wis.

Alliance Laundry Holdings LLC announced today results for the year ended December 31, 2014.

Net revenues for the full year 2014 increased $169.7 million, or 30.5%, to $726.3 million from $556.6 million for the full year 2013. Excluding the impact of the Primus Laundry Equipment Group acquisition, net revenues increased 12.1% for 2014. Our net income for 2014 decreased $3.6 million to $29.6 million from $33.2 million for 2013. Adjusted EBITDA (see “About Non-GAAP Financial Measures” below) for 2014 increased $58.0 million to $164.3 million from $106.3 million for 2013. Excluding the impact of the Primus Laundry Equipment Group acquisition, Adjusted EBITDA for 2014 increased $18.1 million, or 17.1% to $124.4 million.

The 2014 increase in net revenues of $169.7 million was attributable to increases in United States & Canada revenues of $65.9 million, Europe revenues of $65.0 million, Asia revenues of $19.2 million, Middle East & Africa revenues of $12.0 million and Latin America revenues of $7.6 million. These increases represent percentage growth by segment for United States & Canada revenues of 16.4%, Europe revenues of 107.9%, Asia revenues of 37.3%, Middle East & Africa revenues of 51.6% and Latin America revenues of 37.3%.

The net income decrease of $3.6 million was mostly attributable to higher selling, general and administrative expenses of $35.5 million, higher restructuring and other costs of $21.0 million, higher interest expense of $7.5 million and higher provision for income tax of $1.9 million, partially offset by higher gross profit of $61.9 million.

“2014 was an extraordinary year for Alliance. It is our fifth consecutive year of record revenues with a compound annual growth rate of 13.1% since 2009,” said President & CEO Michael D. Schoeb. “In early 2014 we announced a transformational event with the acquisition of the Primus Laundry Equipment Group which contributed significantly to 2014 revenues and Adjusted EBITDA. This acquisition provided our distribution partners with added product breadth and significantly expanded our international footprint giving Alliance unrivaled scale in the commercial laundry industry.”

Schoeb concluded, “We look forward to another year of solid growth and expanded profitability in 2015, tempered somewhat by currency and select international market headwinds. Over the last twelve months we have made significant progress with the integration of the Primus Group and are delighted to have their distribution and employees be a part of our growing company. As a result of the speed and execution of the integration and other operational initiatives, we have increased confidence that we will exceed our 2015 profitability goals that were communicated with the acquisition in early 2014.

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 years ended December 31, 2014 and 2013.

   
ALLIANCE LAUNDRY HOLDINGS LLC
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
December 31,December 31,
Assets20142013
Current assets:
Cash and cash equivalents $ 48,115 $ 60,849
Restricted cash 394 89
Restricted cash – for securitization investors 22,531 17,087

Accounts receivable (net of allowance for doubtful accounts of $3,807 and $2,247 at December 31, 2014 and 2013, respectively)

41,563 18,166
Inventories, net 65,821 41,644
Accounts receivable – restricted for securitization investors 100,818 86,674
Loans receivable, net – restricted for securitization investors 49,010 45,910
Deferred income tax asset, net 16,097 11,306
Prepaid expenses and other current assets   3,520   3,269
Total current assets 347,869 284,994
 
Loans receivable, net 13,153 11,151
Property, plant and equipment, net 123,591 81,235
Goodwill 278,434 182,174
Loans receivable, net – restricted for securitization investors 220,007 206,849
Deferred income tax asset, net 50 704
Debt issuance costs, net 15,814 17,450
Intangible assets, net 237,283 125,596
Other long-term assets   1,667   311
Total assets $ 1,237,868 $ 910,464
 
Liabilities and Member(s)’ Equity
Current liabilities:
Current portion of long-term debt $ 34 $
Revolving credit facility
Accounts payable 82,962 59,005
Asset backed borrowings – owed to securitization investors 107,548 100,023
Other current liabilities   62,648   40,069
Total current liabilities 253,192 199,097
 
Long-term debt, net 656,419 442,746
Asset backed borrowings – owed to securitization investors 209,435 196,694
Deferred income tax liability, net 80,713 40,092
Other long-term liabilities   35,234   20,128
Total liabilities 1,234,993 898,757
 
Commitments and contingencies
Member(s)’ equity   2,875   11,707
Total liabilities and member(s)’ equity $ 1,237,868 $ 910,464
     
ALLIANCE LAUNDRY HOLDINGS LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(in thousands)
 
Year Ended December 31,
201420132012
Net revenues:
Equipment and service parts $ 717,391 $ 548,565 $ 496,987
Equipment financing, net   8,877     8,042   8,529  
Net revenues 726,268 556,607 505,516
Cost of sales   496,028     388,294   358,772  
Gross profit 230,240 168,313 146,744
 
Selling, general and administrative expenses 115,776 80,312 83,744
Restructuring and other costs   23,582     2,568   3,099  
Total operating expenses   139,358     82,880   86,843  
Operating income 90,882 85,433 59,901
 
Interest expense 42,177 34,662 19,057
Other (income)/expenses, net   1,489     1,871   10,399  
Income before taxes 47,216 48,900 30,445
Provision for income taxes   17,576     15,653   14,016  
Net income $ 29,640   $ 33,247 $ 16,429  
 
 
Comprehensive income/(loss):
Net income $ 29,640 $ 33,247 $ 16,429
Foreign currency translation adjustment, net (37,265 ) 2,453 786
Change in pension liability and other benefits, net   (6,033 )   5,749   (1,808 )
Comprehensive income/(loss) $ (13,658 ) $ 41,449 $ 15,407  
     
ALLIANCE LAUNDRY HOLDINGS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Year Ended December 31,
201420132012
Cash flows from operating activities:
Net income $ 29,640 $ 33,247 $ 16,429
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 23,520 13,889 12,940
Amortization of debt issuance costs 6,568 5,705 3,534
Amortization of original issue discount 508 517 138
Non-cash interest (income)/expense 564 (496 ) 366
Non-cash loss/(gain) on commodity & foreign exchange contracts, net 938 29 (1,699 )
Non-cash foreign exchange loss/(gain), net 1,416
Non-cash executive unit compensation 9,249 4,024 20,537
Non-cash trademark impairment 340
Non-cash charge for pension and post-retirement benefit plans 115 1,109 1,406
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
Non-cash acquisition related inventory expense 3,249
(Gain)/loss on sale of property, plant and equipment (706 ) 108 (66 )
Deferred income taxes 5,746 8,068 11,195
Other, net (287 ) (64 ) (174 )
Changes in assets and liabilities, net of the effects of the acquisition:
Accounts and loans receivable, net (7,262 ) (3,957 ) (331 )
Accounts receivable – restricted for securitization investors (14,144 ) (7,359 ) (2,463 )
Inventories, net (10,684 ) (2,937 ) 3,404
Loans receivable, net – restricted for securitization investors (16,258 ) (2,492 ) (2,085 )
Other assets (257 ) 1,012 (68 )
Accounts payable 17,759 7,861 (1,359 )
Other liabilities   13,499     5,920     (3,276 )
Net cash provided by operating activities   63,513     64,939     68,827  
 
Cash flows from investing activities:
Capital expenditures (44,678 ) (24,903 ) (14,872 )
Restricted cash 17 15 (104 )
Restricted cash – for securitization investors (5,444 ) 5,025 (4,519 )
Acquisition of businesses, net of cash acquired (254,737 )
Proceeds on disposition of assets   810     10     132  
Net cash used by investing activities   (304,032 )   (19,853 )   (19,363 )
 
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 234,723 20,000 757,025
Payments on long-term borrowings (22,000 ) (60,000 ) (518,000 )
Proceeds from forgivable loans 900 2,000
Cash paid for debt establishment and amendment fees (4,933 ) (11,532 ) (14,757 )
Net increase/(decrease) in asset backed borrowings owed to securitization investors 20,266 30,121 4,424
Member contributions 2,824 1,657 24,036
Member distributions   (521 )   (31 )   (306,546 )
Net cash provided/(used) by financing activities   231,259     (17,785 )   (53,818 )
 
Effect of exchange rate changes on cash and cash equivalents   (3,474 )   311     (27 )
 
(Decrease)/Increase in cash and cash equivalents (12,734 ) 27,612 (4,381 )
Cash and cash equivalents at beginning of period   60,849     33,237     37,618  
Cash and cash equivalents at end of period $ 48,115   $ 60,849   $ 33,237  
 
Supplemental disclosure of cash flow information:
Cash paid for interest on long-term debt and capital lease obligations $ 31,181 $ 23,924 $ 16,574
Cash paid for interest – for securitized investors $ 6,637 $ 6,218 $ 6,101
Cash paid for income taxes $ 11,927 $ 5,244 $ 3,848
 
Supplemental disclosure of investing and financing non-cash activities:
Capital expenditures included in accounts payable $ 4,885 $ 7,890 $ 5,620
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 Twelve Months Ended December 31, 2014 and 2013 (Dollars in Thousands):

         Year Ended December 31,
2014  2013
 

Net income

$ 29,640 $ 33,247
Provision for income taxes 17,576 15,653
Interest expense 42,177 34,662
Depreciation and amortization   23,520     13,889  
EBITDA (a) 112,913 97,451
EBITDA – Primus pre-acquisition (a) 4,255
Securitization interest – permitted receivables financing (b) (935 ) (846 )
Other non-recurring charges (c) 24,384 5,579
Other non-cash charges (d) 15,192 4,086
Acquisition driven synergies (e)   8,498      
Adjusted EBITDA 164,307 106,270
 
Interest expense (42,177 ) (34,662 )
Amortization of debt issuance costs 6,568 5,705
Amortization of original issue discount 508 517
Other non-cash interest 564 (496 )
EBITDA – Primus pre-acquisition (a) (4,255 )
Securitization interest – permitted receivables financing (b) 935 846
Other non-recurring charges (c) (24,384 ) (5,579 )
Acquisition driven synergies (e) (8,498 )
Non-cash loss on early extinguishment of debt 755
Cash taxes paid and payable (11,830 ) (7,585 )
Other (income)/expense (878 ) 1,120
Changes in assets and liabilities   (17,347 )   (1,952 )
Net cash provided by operating activities $ 63,513   $ 64,939  
 
(a)   EBITDA includes the consolidated results including the operations of Primus from the acquisition date thru December 31, 2014. EBITDA – Primus pre-acquisition 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 2009A and ALERT 2013A. This expense, which is charged to the Interest expense line of our 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 $24.4 million in 2014 consist of $12.1 million of costs associated with the closure of the Wevelgem, Belgium production facility, $4.9 million of Primus integration-related costs, and $6.3 million of professional fees and expenses related to acquisition and entity organization costs, which are included in the Restructuring and other costs line of the Consolidated Statements of Comprehensive Income/(Loss), as well as $1.8 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 Consolidated Statements of Comprehensive Income/(Loss). These amounts are partially offset by a non-recurring asset disposal gain of $0.6 million which is included in the Selling, general and administrative expenses line of our Consolidated Statements of Comprehensive Income/(Loss).
  • Other non-recurring charges of $5.6 million in 2013 consist of $2.4 million of professional fees and expenses related to potential acquisitions and entity organization costs, which are included in the Restructuring and other costs line of the Consolidated Statements of Comprehensive Income/(Loss), $1.9 million of early extinguishment of debt expense, which is included in the Other (income)/expenses, net line of our Consolidated Statements of Comprehensive Income/(Loss) 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/(Loss).
(d)   Other non-cash charges are described as follows:
 
  • Other non-cash charges of $15.2 million in 2014 consist of $8.2 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/(Loss); $3.2 million of expense related to the inventory step-up to fair market value recorded at the Primus Acquisition closing date, $1.0 million of non-cash management incentive compensation expense and $0.9 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/(Loss); $1.4 million of non-cash foreign exchange losses related to intercompany loans which are included in the Other (income)/expenses, net line of the Consolidated Statements of Comprehensive Income/(Loss); and $0.3 million of non-cash trademark impairment costs which are included in the Restructuring and other costs line of the Consolidated Statements of Comprehensive Income/(Loss).
  • Other non-cash charges of $4.1 million in 2013 consist of $3.6 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/(Loss); $0.4 million of non-cash management incentive compensation expense, 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/(Loss).
(e)   Acquisition driven synergies represent the net cost savings projected by the Company to be realized as the result of actions taken or to be taken prior to twelve months after the consummation of the Primus Acquisition, which are added in calculating Adjusted EBITDA and Total Leverage Ratio under the Amended December 2012 Credit Facilities. Such cost savings are allowable provided that the aggregate amount added back may not exceed 10% of adjusted EBITDA in any four-fiscal quarter period (calculated before giving effect to any such add-back).

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