Alliance Laundry Holdings LLC Reports 2005 Sales and Earnings.RIPON Ripon, town (1991 pop. 11,952), North Yorkshire, N England, on the Ure River. It is a market town with foundries, varnish and paint factories, tanneries, and breweries. Ripon is famous as an old cathedral city where monasteries have stood since the 7th cent. , Wis adv. 1. Certainly; really; indeed. v. t. 1. To think; to suppose; to imagine; - used chiefly in the first person sing. present tense, I wis. See the Note under Ywis. . -- Alliance Laundry Laundry can be:
Before industrialization Holdings LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control announced today results for the year ended December December: see month. 31, 2005. Net revenues for the full year 2005 increased $36.3 million, or 12.9%, to $317.3 million from $281.0 million for the full year 2004. Net loss for 2005 was $29.1 million as compared to income of $11.8 million for 2004. Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (see "About Non-GAAP Financial Measures" below) for 2005 was $60.4 million compared with Adjusted EBITDA of $59.5 million for 2004. The overall net revenue increase of $36.3 million was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to higher commercial laundry revenue of $29.1 million, higher U.S. and Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. consumer laundry revenue of $4.9 million and higher service parts revenue of $2.3 million. Net loss for the full year 2005 included $18.8 million of transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). associated with the sale of the business on January January: see month. 27, 2005, $9.9 million for loss on early extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt and $8.1 million of transaction costs to establish our new asset backed facility. In announcing the Company's results today, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. and President Thomas (language) Thomas - A language compatible with the language Dylan(TM). Thomas is NOT Dylan(TM). The first public release of a translator to Scheme by Matt Birkholz, Jim Miller, and Ron Weiss, written at Digital Equipment Corporation's Cambridge Research Laboratory runs F. L'Esperance said, "We are extremely pleased with our top line performance for 2005. Throughout the year, we continued to successfully execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution our operational strategies while navigating (networking, hypertext) navigating - Finding your way around. Often used of the Internet, particularly the World-Wide Web. A browser is a tool for navigating hypertext documents. a challenging cost environment. Our financial performance reflects our success in offsetting cost increases with required price increases." "On October October: see month. 14, 2005, we announced that we would be moving our Marianna Marianna may refer to:
Founding . This strategic project remains on schedule and should be completed by the end of the third quarter of 2006. We expect to begin seeing efficiencies from the consolidation during the fourth quarter of 2006," said L'Esperance. About Non-GAAP Financial Measures In addition to disclosing financial results that are determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See 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 the indenture An agreement declaring the benefits and obligations of two or more parties, often applicable in the context of Bankruptcy and bond trading. The term indenture primarily describes secured contracts and has several applications in U.S. law. governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. our 2005 Senior Subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. Notes are tied to ratios based on these measures. "EBITDA" represents net income before interest expense, income tax (provision) benefit and depreciation and amortization, and "Adjusted EBITDA" is EBITDA as further adjusted to exclude, among other things, certain non-recurring expenses and other non-recurring non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. . EBITDA and Adjusted EBITDA do not represent, and should not be considered, an alternative to net income or cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses , as determined by GAAP, and our calculations thereof may not be comparable to similarly entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: measures reported by other companies. Based on our industry and debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay experience, we believe that EBITDA and Adjusted EBITDA are customarily cus·tom·ar·y adj. 1. Commonly practiced, used, or encountered; usual. See Synonyms at usual. 2. Based on custom or tradition rather than written law or contract. used to provide useful information regarding a company's ability to service and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. . In addition, EBITDA and Adjusted EBITDA are defined in the indenture governing our 2005 Senior Subordinated Notes in a manner which is identical to the definition of EBITDA and Adjusted EBITDA in our New Senior Credit Facility under which we are required to satisfy specified spec·i·fy tr.v. spec·i·fied, spec·i·fy·ing, spec·i·fies 1. To state explicitly or in detail: specified the amount needed. 2. To include in a specification. 3. financial ratios and tests, including a maximum of total debt to Adjusted EBITDA and a minimum interest coverage ratio. A reconciliation from Net (Loss) Income to EBITDA and from EBITDA to Adjusted EBITDA is provided under the heading Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations for the Quarter and Nine Months Ended September September: see month. 30, 2005 of this press release. About Alliance Laundry Holdings LLC Alliance Laundry Holdings LLC is the parent company of Alliance Laundry Systems LLC (www.comlaundry.com), a leading North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. manufacturer of commercial laundry products and provider of services for laundromats, multi-housing laundries, on-premise laundries and drycleaners. Alliance offers a full line of washers and dryers for light commercial use as well as large frontloading washers, heavy duty tumbler dryers, and presses and finishing equipment for heavy commercial use. The Company's products are sold under the well known brand names Speed Queen(R), UniMac(R), Huebsch(R) and Ajax(R). Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. for Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. 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: 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 fluctuation Fluctuation A price or interest rate change. 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 facilities; dependence on key personnel; labor relations; potential liability for environmental, health and safety matters; potential future legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. and litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. ; and other risks listed from time to time in the Company's reports, including, but not limited to the Company's most recent Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2005. Financial information for Alliance Laundry Holdings LLC appears on the next three pages, followed by management's discussion and analysis of financial condition and results of operations for the years ended December 31, 2005 and 2004.
ALLIANCE LAUNDRY HOLDINGS LLC
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, December 31,
2005 2004
------------ ------------
Successor Predecessor
Assets
Current assets:
Cash $5,075 $11,471
Accounts receivable (net of allowance
for doubtful accounts of $104 and
$123 at December 31, 2005 and 2004,
respectively) 9,056 5,611
Inventories, net 29,050 26,761
Beneficial interests in securitized
accounts receivable 22,577 19,479
Deferred income taxes 433 -
Prepaid expenses and other 2,139 1,088
------------ ------------
Total current assets 68,330 64,410
Notes receivable, net 6,131 6,742
Property, plant and equipment, net 66,869 30,481
Goodwill 139,903 55,414
Beneficial interests in securitized
financial assets 16,939 19,379
Deferred income taxes 8,932 -
Debt issuance costs, net 11,172 5,751
Intangible assets, net 145,183 172
Other assets - 1,667
------------ ------------
Total assets $463,459 $184,016
============ ============
Liabilities and Member(s) Equity (Deficit)
Current liabilities:
Current portion of long-term debt $- $12,036
Revolving credit facility - -
Accounts payable 7,866 11,618
Other current liabilities 26,500 24,718
------------ ------------
Total current liabilities 34,366 48,372
Long-term debt:
Senior credit facility 177,000 118,218
Senior subordinated notes 149,336 110,000
Junior subordinated note - 28,776
Other long-term debt - 529
Other long-term liabilities 8,924 7,218
Mandatorily redeemable preferred units - 6,000
------------ ------------
Total liabilities 369,626 319,113
Commitments and contingencies
Member(s) equity (deficit) 93,833 (135,097)
------------ ------------
Total liabilities and member(s) equity
(deficit) $463,459 $184,016
============ ============
ALLIANCE LAUNDRY HOLDINGS LLC
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
January 28, January 1,
2005 through 2005 through Years Ended December 31,
December 31, January 27, -------------------------
2005 2005 2004 2003
------------ ------------ ------------ ------------
Successor Predecessor Predecessor Predecessor
Net revenues $296,645 $20,683 $280,987 $267,607
Cost of sales 225,706 15,585 199,010 188,979
------------ ------------ ------------ ------------
Gross profit 70,939 5,098 81,977 78,628
------------ ------------ ------------ ------------
Selling, general
and administrative
expense 38,632 3,829 39,879 33,599
Securitization and
other costs 10,009 - - -
Transaction costs
associated with
sale of business - 18,790 - -
------------ ------------ ------------ ------------
Total operating
expenses 48,641 22,619 39,879 33,599
------------ ------------ ------------ ------------
Operating
income (loss) 22,298 (17,521) 42,098 45,029
Interest expense 24,117 995 25,439 28,258
Loss from early
extinguishment of
debt - 9,867 - -
Costs related to
abandoned public
offerings - - 4,823 -
Other income
(expense), net - - - (797)
------------ ------------ ------------ ------------
(Loss) income
before taxes (1,819) (28,383) 11,836 15,974
Provision (benefit)
for income taxes (1,158) 9 71 55
------------ ------------ ------------ ------------
Net (loss)
income $(661) $(28,392) $11,765 $15,919
============ ============ ============ ============
ALLIANCE LAUNDRY HOLDINGS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
January 28, January 1,
2005 through 2005 through Year Ended Year Ended
December 31, January 27, December 31, December 31,
2005 2005 2004 2003
------------ ------------ ------------ ------------
Successor Predecessor Predecessor Predecessor
Cash flows from
operating
activities:
Net (loss) income $(661) $(28,392) $11,765 $15,919
Adjustments to
reconcile net
(loss) income to
cash provided by
operating
activities:
Depreciation
and
amortization 20,187 526 9,695 10,886
Non-cash
interest (933) 351 4,415 5,290
Non-cash
executive unit
compensation 1,120 1,089 5,579 -
Non-cash
trademark
impairment 1,767 - - -
Non-cash debt
financing
write-off - 5,751 - -
Non-cash
inventory
expense 6,246 - - -
Deferred income
taxes (1,158) - - -
Loss on sale of
property,
plant and
equipment 48 - 42 33
Changes in
assets and
liabilities:
Accounts
receivable (2,889) (556) 3,546 (3,323)
Inventories (456) (1,833) (546) (518)
Other assets 246 101 344 4,346
Accounts
payable (22,828) 19,076 339 (2,518)
Other
liabilities 5,939 (2,732) (299) 278
------------ ------------ ------------ ------------
Net cash
provided by
(used in)
operating
activities 6,628 (6,619) 34,880 30,393
------------ ------------ ------------ ------------
Cash flows from
investing
activities:
Additions to
property, plant
and equipment (4,229) (188) (4,166) (3,600)
Proceeds on
disposal of
property, plant
and equipment 4 - 65 10
------------ ------------ ------------ ------------
Net cash used
in investing
activities (4,225) (188) (4,101) (3,590)
------------ ------------ ------------ ------------
Cash flows from
financing
activities:
Principal
payments on
long-term debt (23,000) 1 (27,245) (26,237)
Proceeds from
senior term loan 200,000 - - -
Proceeds from
senior
subordinate
notes 149,250 - - -
Repayment of
long-term debt (275,920) - - -
Contribution from
member 117,000 - - -
Distribution to
prior
unitholders (154,658) - - -
Debt financing
costs (13,230) - - -
Cash paid for
capitalized
offering related
costs (1,364) - - -
Net proceeds -
management note - (71) - -
Repayment of
management note - - - 32
------------ ------------ ------------ ------------
Net cash used
in financing
activities (1,922) (70) (27,245) (26,205)
------------ ------------ ------------ ------------
Increase (decrease)
in cash 481 (6,877) 3,534 598
Cash at beginning
of period 4,594 11,471 7,937 7,339
------------ ------------ ------------ ------------
Cash at end of
period $5,075 $4,594 $11,471 $7,937
============ ============ ============ ============
Supplemental
disclosure of cash
flow information:
Cash paid for
interest $19,699 $1,133 $21,876 $22,148
Cash paid for
taxes $55 $9 $71 $55
Management's Discussion and Analysis of Financial Condition and Results of Operations for the Years Ended December 31, 2005 and 2004 OVERVIEW We believe we are the leading designer, manufacturer and marketer of stand-alone (jargon) stand-alone - Capable of operating without other programs, libraries, computers, hardware, networks, etc. Exactly what is absent is presumed to be obvious from context. "We only run Windows on stand-alone PCs because it's too dangerous to run it on networked ones." commercial laundry equipment in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and that we are similarly a leader worldwide. Under the well-known well-known adj. 1. Widely known; familiar or famous: a well-known performer. 2. Fully known: well-known facts. brand names of Speed Queen, UniMac, Huebsch, and Ajax, we produce a full line of commercial washing machines (storage) washing machine - An old-style 14-inch hard disk in a floor-standing cabinet. So called because of the size of the cabinet and the "top-loading" access to the media packs - and, of course, they were always set on "spin cycle". and dryers with load capacities from 16 to 250 pounds as well as presses and finishing equipment. Our commercial products are sold to four distinct customer groups: (i) laundromats; (ii) multi-housing laundries, consisting primarily of common laundry facilities in apartment buildings, universities and military installations; (iii) on-premise laundries, consisting primarily of in-house In-house In the context of general equities, keeping an activity within the firm. For example, rather than go to the marketplace and sell a security for a client to anyone, an attempt is made to find a buyer to complete the transaction with the firm. laundry facilities of hotels, hospitals, nursing homes and prisons and (iv) drycleaners. The North American stand-alone commercial laundry equipment industry's revenues are primarily driven by population growth and the replacement cycle of laundry equipment. With economic conditions having limited effect on the frequency of use, and therefore the useful life of laundry equipment, industry revenues have been relatively stable over time. Similarly, with a majority of our revenues generated by recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. sales of replacement equipment and service parts, we have experienced stable revenues even during economic slowdowns. Sales of stand-alone commercial laundry equipment are the single most important driver of our revenues. In 2005, our net revenues from the sale of commercial laundry equipment were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $268.3 million, which comprised over 84% of our total net revenues. The other main component of our revenues is the sale of high margin service parts. We offer immediate response service whereby many of our parts are available on a 24-hour turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. for emergency repair parts orders. In 2005, our net revenues from the sale of service parts were approximately $40.5 million, almost 13% of our total net revenues. In addition to commercial laundry equipment and service parts, we re-entered the U.S. consumer laundry market in October 2004, after the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of a non-compete agreement. In 2005, our net revenues from the sale of consumer laundry equipment were approximately $8.5 million, which comprised approximately 2.7% of our total net revenues. We have achieved steady revenues by building an extensive and loyal distribution network for our products, establishing a significant installed base of units and developing and offering a full innovative product line. As a result of our large installed base, a significant majority of our revenue is attributable to replacement sales of equipment and service parts. We believe that continued population expansion in North America will continue to drive steady demand for garment and textile textile Any filament, fibre, or yarn that can be made into fabric or cloth, and the resulting material itself. The word originally referred only to woven fabrics but now includes knitted, bonded, felted, and tufted fabrics as well. laundering by all customer groups that purchase commercial laundry equipment. We anticipate growth in demand for commercial laundry equipment in international markets as well, especially in developing countries where laundry processing has historically been far less sophisticated than in North America. In addition, customers are increasingly trading up to equipment with enhanced functionality, thereby raising average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. . Customers are also moving towards equipment with increased water and energy efficiency as the result of government and consumer pressure and a focus on operating costs operating costs npl → gastos mpl operacionales . Recent Developments. On October 12, 2005, we announced our intention to close our Marianna, Florida Marianna is a city in Jackson County, Florida, United States. The population was 6,230 at the 2000 census. As of 2004, the population recorded by the U.S. Census Bureau is 6,200 [1]. facility (the "Facility") and consolidate Consolidate To combine the assets, liabilities, and other financial items of two or more entities into one. Notes: This term is generally used in the context of consolidated financial statements. the manufacture and design of the Facility's product lines into our existing Ripon, Wisconsin operations. We expect to complete the facility closure and consolidation by the end of the third quarter of 2006. The decision was based on an analysis of each facility's manufacturing capabilities as well as the continuing investment requirements for each of the locations. We believe that efficiencies will be gained with the consolidation of the design and manufacturing of all of our product lines within our Ripon, Wisconsin operations. For additional information about the Marianna, Florida facility closure, see the discussion under Note 4 to the Financial Statements - "Infrequently in·fre·quent adj. 1. Not occurring regularly; occasional or rare: an infrequent guest. 2. Occurring Items." The Acquisition. On January 27, 2005, ALH ALH Advanced Light Helicopter ALH Amplitude of Lateral Head (Displacement) ALH Alpha Hospitality Corporation (former stock symbol; now ALHY) ALH Advanced Liquid Hydrogen Holding Inc. ("ALH"), an entity formed by Teachers' Private Capital, the private equity arm of Ontario Teachers' Pension Plan The Ontario Teachers' Pension Plan (OTPP), commonly referred to as Teachers', is the organization responsible for administering pensions for public school teachers of Ontario. The OTPP also invests the plan's pension fund. Board, or OTPP OTPP Ontario Teachers' Pension Plan (Canada) OTPP Other Than Private Passenger (commercial insurance business) , acquired 100% of the outstanding equity interests in Alliance Holdings for aggregate consideration of approximately $466.3 million. In connection with such acquisition, the members of our senior management acquired approximately $7.6 million of newly issued shares of common stock of ALH, and our other management employees acquired approximately $2.0 million of newly issued shares of ALH common stock in exchange for equity interests in Alliance Holdings and cash pursuant to a management share offering. A portion of the aggregate acquisition consideration was used to repay our then existing indebtedness, redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. our then outstanding preferred equity interests and pay certain fees and expenses payable in connection with the consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like. 2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. of the acquisition and the financing transactions described below, and the balance was paid to Alliance Holdings' former equity holders. The Acquisition was financed with approximately $350.0 million of debt financing described below, the management equity, approximately $107.4 million of new equity capital from OTPP and available cash. As a result of the Acquisition, all of the outstanding equity interests of Alliance Laundry are owned by Alliance Holdings, all of the equity interests of Alliance Holdings are owned by ALH and approximately 91.8% of the capital stock of ALH is owned by OTPP. The remaining capital stock of ALH is held by management. In connection with the closing of the Acquisition, we consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. the following financing transactions: --the closing of the issuance of $150.0 million of 8 1/2% senior subordinated notes due January 15, 2013, which we refer to as the "2005 Senior Subordinated Notes." The proceeds from the 2005 Senior Subordinated Notes offering were $149.3 million; --the closing of Alliance Laundry's new $250.0 million senior secured credit facility, which we refer to as the "Senior Credit Facility," consisting of a six-year $50.0 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility and a seven-year $200.0 million term loan facility; and --the settlement of the tender offer and consent solicitation Consent Solicitation A solicitation by one party to the stakeholders of a particular security for the consent of a material change. Notes: Should the majority of stakeholders provide valid consent prior to the consent expiry date, the issuer may then follow through with , or the tender offer, initiated by us on January 4, 2005 for the $110.0 million aggregate principal amount of our then outstanding 1998 Senior Subordinated Notes. We redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. the approximately 5.10% of the total principal amount of the 1998 Senior Subordinated Notes that remained outstanding after the consummation of the tender offer in accordance with the indenture governing such notes. This news release should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the audited financial statements presented in our Annual Report on Form 10-K (file no. 333-56857-02) filed with the Securities and Exchange Commission, effective March 9, 2006. RESULTS OF OPERATIONS As a result of the Acquisition, the Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge present our results of operations, financial position and cash flows prior to the date of the Acquisition transaction under "Predecessor predecessor - parent ." The financial effects of the Acquisition transaction and our results of operations, financial position and cash flows following the closing of the Acquisition are presented under "Successor 1. SuccessoR - A language for distributed computing derived from SR. ["SuccessoR: Refinements to SR", R.A. Olsson et al, TR 84-3, U Arizona 1984]. 2. successor - daughter ." In accordance with generally accepted accounting principles in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , or GAAP, our Predecessor results have not been aggregated with our Successor results and, accordingly, our Consolidated Financial Statements do not show results of operations or cash flows for the twelve months ended December 31, 2005. However, in order to facilitate an understanding of our results of operations for the twelve months ended December 31, 2005 in comparison with the twelve months ended December 31, 2004, we have presented and discussed below our Predecessor results and our Successor results on an unaudited, combined basis under "Combined". The Combined results represent the January 1, 2005 through January 27, 2005 Predecessor period added to the January 28, 2005 through December 31, 2005 Successor period. The combined results of operations are non-GAAP financial measures and should not be considered in isolation or as a substitute for the Predecessor and Successor results.
January 28, January 1,
2005 through 2005 through
December 31, January 27,
2005 2005
------------- -------------
Successor Predecessor
Net revenues 296,645 20,683
Cost of sales 225,706 15,585
------------- -------------
Gross profit 70,939 5,098
Selling, general and administrative
expense 38,632 3,829
Securitization and other costs 10,009 -
Transaction costs associated with sale
of business - 18,790
------------- -------------
Total operating expense 48,641 22,619
------------- -------------
Operating income (loss) 22,298 (17,521)
Interest expense 24,117 995
Loss from early extinguishment of debt - 9,867
Costs related to abandoned public
offerings - -
Other income (expense), net - -
------------- -------------
(Loss) income before taxes (1,819) (28,383)
Provision (benefit) for income taxes (1,158) 9
------------- -------------
Net (loss) income $(661) $(28,392)
============= =============
Years Ended December 31,
--------------------------------------
2005 2004 2003
------------ ------------ ------------
Combined Predecessor Predecessor
(unaudited)
Net revenues 317,328 280,987 267,607
Cost of sales 241,291 199,010 188,979
------------ ------------ ------------
Gross profit 76,037 81,977 78,628
Selling, general and
administrative expense 42,461 39,879 33,599
Securitization and other costs 10,009 - -
Transaction costs associated
with sale of business 18,790 - -
------------ ------------ ------------
Total operating expense 71,260 39,879 33,599
------------ ------------ ------------
Operating income (loss) 4,777 42,098 45,029
Interest expense 25,112 25,439 28,258
Loss from early extinguishment
of debt 9,867 - -
Costs related to abandoned
public offerings - 4,823 -
Other income (expense), net - - (797)
------------ ------------ ------------
(Loss) income before taxes (30,202) 11,836 15,974
Provision (benefit) for income
taxes (1,149) 71 55
------------ ------------ ------------
Net (loss) income $(29,053) $11,765 $15,919
============ ============ ============
The following table provides our historical net revenues for the periods indicated:
January 28, January 1,
2005 through 2005 through Years Ended December 31,
December 31, January 27, -----------------------------------
2005 2005 2005 2004 2003
------------ ----------- ----------- ----------- -----------
Successor Predecessor Combined Predecessor Predecessor
(unaudited)
(dollars in millions)
Commercial
laundry $251.0 $17.3 $268.3 $239.2 $230.7
Consumer
laundry 8.3 0.2 8.5 3.6 -
Service
parts 37.3 3.2 40.5 38.2 36.9
------------ ----------- ----------- ----------- -----------
$296.6 $20.7 $317.3 $281.0 $267.6
============ =========== =========== =========== ===========
The following table provides certain condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. historical financial data expressed as a percentage of net revenues for each of the periods indicated:
January 28, January 1,
2005 through 2005 through
December 31, January 27,
2005 2005
------------- -------------
Successor Predecessor
Net revenues 100.0% 100.0%
Cost of sales 76.1% 75.4%
Gross profit 23.9% 24.6%
Selling, general and administrative
expense 13.0% 18.5%
Securitization and other costs 3.4% 0.0%
Transaction costs associated with sale
of business 0.0% 90.8%
Operating income (loss) 7.5% -84.7%
Net (loss) income -0.2% -137.3%
Years Ended December 31,
--------------------------------------
2005 2004 2003
------------ ------------ ------------
Combined Predecessor Predecessor
Net revenues 100.0% 100.0% 100.0%
Cost of sales 76.0% 70.8% 70.6%
Gross profit 24.0% 29.2% 29.4%
Selling, general and
administrative expense 13.4% 14.2% 12.6%
Securitization and other costs 3.2% 0.0% 0.0%
Transaction costs associated
with sale of business 5.9% 0.0% 0.0%
Operating income (loss) 1.5% 15.0% 16.8%
Net (loss) income -9.2% 4.2% 5.9%
Below is a reconciliation of certain items of the consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: statements of cash flows for the periods presented (in thousands):
January 28, January 1,
2005 through 2005 through
December 31, January 27,
2005 2005
------------- -------------
Successor Predecessor
Net cash (used in) provided by operations $26,616 $(20,675)
Net cash (used for) provided by working
capital (19,988) 14,056
------------- -------------
Net cash (used in) provided by operating
activities $6,628 $(6,619)
------------- -------------
Cash flows from investing activities:
Additions to property, plant and
equipment $(4,229) $(188)
Proceeds on disposal of property, plant
and equipment 4 -
------------- -------------
Net cash used in investing
activities $(4,225) $(188)
------------- -------------
Cash flows from financing activities:
Principal payments on long-term debt $(23,000) $1
Proceeds from senior term loan 200,000 -
Proceeds from senior subordinate notes 149,250 -
Repayment of long-term debt (275,920) -
Contribution from member 117,000 -
Distribution to old unitholders (154,658) -
Debt financing costs (13,230) -
Cash paid for capitalized offering
related costs (1,364) -
Net proceeds - management note - (71)
Repayment of management note - -
------------- -------------
Net cash used in financing
activities $(1,922) $(70)
============= =============
Years Ended December 31,
--------------------------------------
2005 2004 2003
------------ ------------ ------------
Combined Predecessor Predecessor
(unaudited)
(dollars in thousands)
Net cash (used in) provided by
operations $5,941 $31,496 $32,128
Net cash (used for) provided by
working capital (5,932) 3,384 (1,735)
------------ ------------ ------------
Net cash (used in) provided by
operating activities $9 $34,880 $30,393
------------ ------------ ------------
Cash flows from investing
activities:
Additions to property, plant
and equipment $(4,417) $(4,166) $(3,600)
Proceeds on disposal of
property, plant and
equipment 4 65 10
------------ ------------ ------------
Net cash used in investing
activities $(4,413) $(4,101) $(3,590)
------------ ------------ ------------
Cash flows from financing
activities:
Principal payments on long-
term debt $(22,999) $(27,245) $(26,237)
Proceeds from senior term
loan 200,000 - -
Proceeds from senior
subordinate notes 149,250 - -
Repayment of long-term debt (275,920) - -
Contribution from member 117,000 - -
Distribution to old
unitholders (154,658) - -
Debt financing costs (13,230) - -
Cash paid for capitalized
offering related costs (1,364) - -
Net proceeds - management
note (71) - -
Repayment of management note - - 32
------------ ------------ ------------
Net cash used in financing
activities $(1,992) $(27,245) $(26,205)
============ ============ ============
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004 Net Revenues. Net revenues for the year ended December 31, 2005 increased $36.3 million, or 12.9%, to $317.3 million from $281.0 million for the year ended December 31, 2004. This increase was primarily attributable to higher commercial laundry revenue of $29.1 million, higher service parts revenue of $2.3 million and higher consumer laundry revenue of $4.9 million. The increase in commercial laundry revenue was due primarily to higher North American equipment revenue of $15.1 million, higher international revenue of $10.7 million and higher earnings from our off-balance sheet equipment financing program of $3.2 million. The increase in North American equipment revenue was primarily due to higher revenue from coin operated laundry customers and on-premise laundries, partially offset by lower revenue from drycleaners. Revenue from international customers was higher in Asia, Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , Middle Eastern countries, Africa and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . Our
off-balance sheet equipment financing program earnings were higher due
to an increase in notes sold and due to adjustments of beneficial
interests to their respective fair market values. The increase in
consumer laundry revenue resulted from our re-entry RE-ENTRY, estates. The resuming or retaking possession of land which the party lately had.2. Ground rent deeds and leases frequently contain a clause authorizing the landlord to reenter on the non-payment of rent, or the breach of some covenant, when the into this marketplace, following the expiration of a non-compete agreement in late 2004. Gross Profit. Gross profit for the year ended December 31, 2005 decreased $6.0 million, or 7.2%, to $76.0 million from $82.0 million for the year ended December 31, 2004. This decrease was primarily attributable to the amortization of $6.2 million related to an inventory step-up step-up A scheduled increase in the exercise or conversion price at which a warrant, an option, or a convertible security may be used to acquire shares of common stock. to fair market value recorded on the Acquisition date, higher depreciation expense of $6.0 million driven by the Acquisition asset write-up Write-Up An increase made to the book value of an asset because it is undervalued compared to market values. Notes: A write-up will increase a company's accounting book value without any expenditures. to fair market value which totaled $5.0 million and accelerated depreciation Accelerated Depreciation Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset. Notes: The straight-line depreciation method spreads the cost evenly over the life of an asset. related to the planned closure of the Marianna, Florida manufacturing facility of $1.0 million, and material cost increases of approximately $13.0 million, mostly related to steel cost increases. These cost increases as compared to the prior year were mostly offset by price increases, margins associated with higher sales volumes and the higher earnings from our off-balance sheet equipment financing program. The inventory step-up to fair market value is fully amortized at December 31, 2005. Gross profit as a percentage of net revenues decreased to 24.0% for the year ended December 31, 2005 from 29.2% for the year ended December 31, 2004, primarily as a result of the amortization associated with the inventory, the higher depreciation expense and lower contribution margins associated with consumer laundry products. Selling, General and Administrative Expense. Selling, general and administrative expenses for the year ended December 31, 2005 increased $2.6 million, or 6.5%, to $42.5 million from $39.9 million for the year ended December 31, 2004. The increase in selling, general and administrative expense was primarily due to $3.8 million of increased amortization expenses driven primarily by Acquisition date write-ups to fair market value for customer agreements, engineering drawings, and our distribution network, $1.1 million of costs related to a retention program for key executives, $0.6 million of legal costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc business development initiatives and $0.4 million of costs associated with the transition of Marianna, Florida products to Ripon, Wisconsin. Additionally, sales expenses increased $0.9 million as a result of bonuses related to the higher sales volumes and higher trade show costs. These increases were partially offset by $3.4 million of lower non-cash incentive compensation relating to incentive units and stock option programs and lower pension expense of $0.6 million. Selling, general and administrative expenses as a percentage of net revenues decreased to 13.4% for the year ended December 31, 2005 from 14.2% for the year ended December 31, 2004. Securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. and Other Costs. Securitization and other costs for the year ended December 31, 2005 were $10.0 million, with no similar costs in 2004. These costs are comprised of $8.1 million of transaction costs incurred in establishing a new asset backed facility for the sale of equipment notes and trade receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed , a $1.7 million impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge related to the Ajax trademark and $0.2 million related to Marianna plant closure costs. Securitization and other costs as a percentage of net revenues was 3.2% for the year ended December 31, 2005. Transaction Costs Associated With Sale of Business. Transaction costs associated with the sale of the business for the year ended December 31, 2005 were $18.8 million, with no similar costs in 2004. These costs are comprised of seller transaction fees including transaction underwriting fees Underwriting fee The portion of the gross underwriting spread that compensates the securities firms that underwrite a public offering for their services. of $4.5 million, legal and professional fees of $1.3 million, a management sale bonus of $6.2 million and advisory fees to Bain Capital Bain Capital LLC is a Boston, Massachusetts-based private equity firm founded in 1984 by Mitt Romney, the former Governor of Massachusetts, and two other partners from the consulting firm Bain & Company: T. Coleman Andrews III and Eric Kriss. Partners LLC and Bruckman, Rosser Rosser is a surname, and may refer to:
Operating Income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. . As a result of the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. , operating income for the year ended December 31, 2005 decreased $37.3 million to $4.8 million from $42.1 million for the year ended December 31, 2004. Operating income as a percentage of net revenues decreased to 1.5% for the year ended December 31, 2005 from 15.0% for the year ended December 31, 2004. Interest Expense. Interest expense for the year ended December 31, 2005 decreased $0.3 million, or 1.2%, to $25.1 million from $25.4 million for the year ended December 31, 2004. Interest expense in 2005 includes a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. non-cash adjustment of $1.1 million to reflect adjustments in the fair values of an interest rate swap Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. agreement. Interest expense in 2004 included a favorable non-cash adjustment of $0.2 million to reflect adjustments in the fair values of an interest rate swap agreement. Loss on Early Extinguishment of Debt. Loss on early extinguishment of debt for the year ended December 31, 2005 was $9.9 million, with no similar costs in 2004. These costs include the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of $5.8 million of unamortized deferred financing costs associated with pre-Acquisition debt, which was paid off as of the Acquisition date and $4.1 million of tender and call premium costs associated with redeeming re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. the 1998 Senior Subordinated Notes. Loss on early extinguishment of debt expense as a percentage of net revenues was 3.1% for the year ended December 31, 2005. Costs Related to Abandoned Public Offerings. Costs related to abandoned public offerings for the year ended December 31, 2004 were $4.8 million with no similar costs in 2005. During 2004, we pursued an initial public offering of Income Deposit Securities for which we incurred offering related expenses and for which we capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. debt and offering related costs totaling $4.8 million. In the fourth quarter of 2004, this public offering was abandoned and all related capitalized costs were expensed at that time. Income Tax Benefit. The income tax benefit for the year ended December 31, 2005 was $1.1 million, with no similar benefit for the year ended December 31, 2004. Prior to January 28, 2005, we did not provide for U.S. federal income taxes or tax benefits as the Predecessor Company was a partnership for tax reporting purposes and the payment of federal and most state taxes were the responsibility of the partners. Net Income. As a result of the aforementioned, net income for the year ended December 31, 2005 decreased $40.9 million to a loss of $29.1 million as compared to income of $11.8 million for the year ended December 31, 2004. Net income as a percentage of net revenues decreased to negative 9.2% for the year ended December 31, 2005 from 4.2% for the year ended December 31, 2004. Year Ended December 31, 2004 Compared to Year Ended December 31, 2003 Net Revenues. Net revenues for the year ended December 31, 2004 increased $13.4 million, or 5.1%, to $281.0 million from $267.6 million for the year ended December 31, 2003. This increase was primarily attributable to higher commercial laundry revenue of $8.6 million, higher service parts revenue of $1.3 million and higher consumer laundry revenue of $3.6 million. The increase in commercial laundry revenue was due primarily to higher international revenue of $7.3 million and higher North American equipment revenue of $1.5 million, which were partly offset by lower earnings from our off-balance sheet equipment financing program of $0.2 million. Revenue from international customers was higher in the Middle East, Africa, Asia and Europe and was driven by favorable selling prices resulting from the weaker United States dollar. The increase in consumer laundry resulted from our re-entry into this marketplace, following the expiration of a non-compete agreement in late 2004. The increase in North American equipment revenue was primarily due to higher revenue from on-premise laundries and drycleaners, partially offset by lower revenue from multi-housing laundries and laundromats. Gross Profit. Gross profit for the year ended December 31, 2004 increased $3.4 million, or 4.3%, to $82.0 million from $78.6 million for the year ended December 31, 2003. This increase was primarily attributable to margins associated with higher product sales volume, a price increase and lower depreciation expense of $1.1 million, which were partially offset by steel cost increases, higher nickel nickel, metallic chemical element; symbol Ni; at. no. 28; at. wt. 58.69; m.p. about 1,453°C;; b.p. about 2,732°C;; sp. gr. 8.902 at 25°C;; valence 0, +1, +2, +3, or +4. and chrome (jargon) chrome - (From automotive slang via wargaming) Showy features added to attract users but contributing little or nothing to the power of a system. "The 3D icons in Motif are just chrome, but they certainly are *pretty* chrome!" surcharges of $4.8 million related to stainless steel stainless steel: see steel. stainless steel Any of a family of alloy steels usually containing 10–30% chromium. The presence of chromium, together with low carbon content, gives remarkable resistance to corrosion and heat. purchases and higher employee medical expenses of $1.1 million. Gross profit was not affected to the full extent of recent steel market conditions as we have steel purchase agreements in place. When these agreements expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. in early 2005, we will be subject to prevailing steel prices at that time. As a result of the recent escalation es·ca·late v. es·ca·lat·ed, es·ca·lat·ing, es·ca·lates v.tr. To increase, enlarge, or intensify: escalated the hostilities in the Persian Gulf. v.intr. in the cost of steel and the negative impact from nickel and chrome surcharges related to stainless steel purchases, we published a price increase, effective on December 1, 2004, which is expected to offset anticipated steel cost increases. Gross profit as a percentage of net revenues decreased to 29.2% for the year ended December 31, 2004 from 29.4% for the year ended December 31, 2003, primarily as a result of the increases in steel related components and medical expense increases. Selling, General and Administrative Expense. Selling, general and administrative expenses for the year ended December 31, 2004 increased $6.2 million, or 18.7%, to $39.8 million from $33.6 million for the year ended December 31, 2003. The increase in selling, general and administrative expenses was primarily due to recognition of $5.6 million of non-cash compensation expense related to incentive units issued to our executives in 1998 and 2003, higher sales and marketing expenses of $1.2 million and higher independent development costs of $0.4 million, which were partially offset by lower pension expense of $1.0 million. Selling, general and administrative expenses as a percentage of net revenues increased to 14.2% for the year ended December 31, 2004 from 12.6% for the year ended December 31, 2003. Operating Income. As a result of the aforementioned, operating income for the year ended December 31, 2004 decreased $3.0 million, or 6.5%, to $42.1 million from $45.1 million for the year ended December 31, 2003. Operating income as a percentage of net revenues decreased to 15.0% for the year ended December 31, 2004 from 16.8% for the year ended December 31, 2003. Interest Expense. Interest expense for the year ended December 31, 2004 decreased $2.9 million, or 10.0%, to $25.4 million from $28.3 million for the year ended December 31, 2003. Interest expense in 2004 includes a favorable non-cash adjustment of $0.2 million to reflect changes in the fair values of an interest rate swap agreement. Interest expense in 2003 included an unfavorable non-cash adjustment of $1.4 million to reflect changes in the fair values of an interest rate swap agreement. Interest expense was also lower in 2004 as a result of lower interest rates and a reduction in total debt outstanding of $45.0 million, or 14.3% since December of 2002. Costs Related to Abandoned Public Offerings. Costs related to abandoned public offerings for the year ended December 31, 2004 were $4.8 million with no similar costs in the prior year. During 2004, we pursued an initial public offering of Income Deposit Securities for which we incurred offering related expenses and for which we capitalized debt and offering related costs totaling $4.8 million. As a result of abandoning the Income Deposit Securities offering, we have written off all related capitalized costs in 2004. Other Income (Expense), Net. Other expense for the year ended December 31, 2003 was $0.8 million with no similar expense in 2004. The 2003 other expense is comprised of costs associated with the settlement of a lawsuit lawsuit: see procedure; tort. against a former subsidiary in Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. . Net Income. As a result of the aforementioned, net income for the year ended December 31, 2004 decreased $4.1 million to $11.8 million as compared to $15.9 million for the year ended December 31, 2003. Net income as a percentage of net revenues decreased to 4.2% for the year ended December 31, 2004 from 5.9% for the year ended December 31, 2003. Liquidity and Capital Resources In connection with the consummation of the January 27, 2005 Transactions, we refinanced substantially all of our indebtedness, which included the refinancing Refinancing An extension and/or increase in amount of existing debt. of our amended and restated credit agreement dated as of August 2, 2002 (the "2002 Senior Credit Facility") and the 1998 Senior Subordinated Notes, with borrowings under our Senior Credit Facility and the proceeds of the offering of the 2005 Senior Subordinated Notes. Senior Credit Facility. The Senior Credit Facility is comprised of a senior secured revolving credit facility in a total principal amount of up to $50.0 million (less the then outstanding letters of credit), which we refer to as the "Revolving Credit Facility," and a senior secured term loan facility in an aggregate principal amount of $200.0 million, which we refer to as the "Term Loan Facility." The Revolving Credit Facility has a six-year maturity and the Term Loan Facility has a seven-year maturity. We expect to use borrowings under the Revolving Credit Facility for general corporate purposes, including working capital, capital expenditures and letters of credit. We used borrowings under the Term Loan Facility together with proceeds from the offering of the 2005 Senior Subordinated Notes to pay the adjusted equity purchase price under the Acquisition, to repay outstanding debt, including the 2002 Senior Credit Facility, 1998 Senior Subordinated Notes, junior subordinated promissory notes promissory note, unconditional written promise to pay a certain sum of money at a definite time to bearer or to a specified person on his order. Promissory notes are generally used as evidence of debt. , unreturned capital on certain preferred units, and to pay fees and expenses related to the Financing Transactions. The Senior Credit Facility requires that we meet certain financial tests including, without limitation, a maximum total leverage ratio and a minimum interest coverage ratio. For the year ended December 31, 2005, the Senior Credit Facility allowed us to incur a maximum ratio of consolidated debt to Adjusted EBITDA (the "Consolidated Leverage Ratio" as defined by the Senior Credit Facility) of 6.50. For the year ended December 31, 2005, the Senior Credit Facility requires us to have a minimum ratio of Adjusted EBITDA to consolidated interest (the "Consolidated Interest Coverage Ratio" as defined by the Senior Credit Facility) of 1.75. We were in compliance with these and all other debt related covenants set forth in the Senior Credit Facility as of December 31, 2005, the latest measurement date. The maximum Consolidated Leverage Ratio and the minimum Consolidated Interest Coverage Ratio as set forth in the Senior Credit Facility for the period ending December 31, 2006 are 5.75 and 2.00, respectively. The Senior Credit Facility contains covenants and restrictions including, among others, limitations or prohibitions on capital expenditures and acquisitions, declaring and paying dividends and other distributions, redeeming and repurchasing our other indebtedness, loans and investments, additional indebtedness, liens, guarantees, recapitalizations, mergers, asset sales and transactions with affiliates. The occurrence of any default of these covenants could result in acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. of any outstanding principal balances under the Senior Credit Facility (approximately $177.0 million as of December 31, 2005) and foreclosure foreclosure Legal proceeding by which a borrower's rights to a mortgaged property may be extinguished if the borrower fails to live up to the obligations agreed to in the loan contract. on the collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although securing such obligations. Further, such acceleration would constitute an event of default under the indenture governing the 2005 Senior Subordinated Notes. Additional borrowings and the issuance of additional letters of credit under the Senior Credit Facility are subject to certain continuing representations and warranties warranties, n.pl the details of a contract; considered less important than the conditions. Whereas the penalty for breach of conditions is the termination of the contract, the penalty for breach of warranties is payment of damages to the innocent party. , including the absence of any development or event which has had or could reasonably be expected to have a material adverse effect on our business or financial condition. The Senior Credit Facility requires mandatory Peremptory; obligatory; required; that which must be subscribed to or obeyed. Mandatory statutes are those that require, as opposed to permit, a particular course of action. prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. for certain debt incurrences, asset sales and a portion of Excess Cash Flow (as defined in the Senior Credit Facility). The Revolving Credit Facility will terminate Terminate (terminat.exe) was a shareware modem terminal and host program for MS-DOS and compatible operating systems developed from the early to the late 1990s by the Dane Bo Bendtsen. The last release (5. on January 27, 2011. 2005 Senior Subordinated Notes. As part of the Financing Transactions, we offered and sold $150.0 million of 2005 Senior Subordinated Notes and received proceeds of approximately $149.3 million. The indenture governing the 2005 Senior Subordinated Notes (the "Notes Indenture"), among other things, restricts our ability and the ability of our restricted subsidiaries to make investments, incur or guarantee additional indebtedness, pay dividends, create liens, sell assets, merge See mail merge and concatenate. or consolidate with other entities, enter into transactions with affiliates and engage in certain business activities. The occurrence of an event of default under the Notes Indenture covenants could result in an acceleration of the principal amount of the 2005 Senior Subordinated Notes of approximately $150.0 million, plus any other amounts due under the Notes Indenture. EBITDA and Adjusted EBITDA. We have presented EBITDA below and Adjusted EBITDA below because certain covenants in the Notes Indenture governing our 2005 Senior Subordinated Notes are tied to ratios based on these measures. "EBITDA" represents net income (loss) before interest expense, income tax (provision) benefit and depreciation and amortization, and "Adjusted EBITDA" 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 in the Notes Indenture. 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. Based on our industry and debt financing experience, we believe that EBITDA and Adjusted EBITDA are customarily used to provide useful information regarding a company's ability to service and/or incur indebtedness. In addition, EBITDA and Adjusted EBITDA are defined in the Notes Indenture in a manner which is identical to the definition of EBITDA and Adjusted EBITDA in our Senior Credit Facility under which we are required to satisfy specified financial ratios and tests, including a maximum of total debt to Adjusted EBITDA and a minimum interest coverage ratio. The Notes Indenture governing our 2005 Senior Subordinated Notes also requires us to meet a fixed charge coverage ratio in order to incur additional indebtedness, subject to certain exceptions. The following is a reconciliation from Net Income to EBITDA and EBITDA to Adjusted EBITDA for the periods presented:
January 28, January 1,
2005 through 2005 through
December 31, January 27,
2005 2005
------------- -------------
Successor Predecessor
Net (loss) income $(661) $(28,392)
Cumulative effect of change in accounting
principle - -
Provision (benefit) for income taxes (1,158) 9
------------- -------------
Net (loss) income before income taxes (1,819) (28,383)
Adjustments:
Interest expense $24,117 $995
Depreciation and amortization (a) 20,187 526
Non-cash interest expense included
in amortization above (2,058) -
------------- -------------
EBITDA $40,427 $(26,862)
============= =============
Adjustments:
Finance program adjustments (b) $(1,879) $31
Other non-recurring charges (c) 9,734 28,657
Other non-cash charges (d) 9,133 1,089
Management fees paid to affiliates
of Bain - 83
------------- -------------
Adjusted EBITDA $57,415 $2,998
============= =============
Years Ended December 31,
2005 2004 2003
------------ ------------ ------------
Combined Predecessor Predecessor
(unaudited)
(dollars in thousands)
Net (loss) income $(29,053) $11,765 $15,919
Cumulative effect of change in
accounting principle - - -
Provision (benefit) for income
taxes (1,149) 71 55
------------ ------------ ------------
Net (loss) income before income
taxes (30,202) 11,836 15,974
Adjustments:
Interest expense $25,112 $25,439 $28,258
Depreciation and amortization
(a) 20,713 9,695 10,886
Non-cash interest expense
included in amortization
above (2,058) (1,885) (2,017)
------------ ------------ ------------
EBITDA $13,565 $45,085 $53,101
============ ============ ============
Adjustments:
Finance program adjustments
(b) $(1,848) $2,980 $3,396
Other non-recurring charges
(c) 38,391 4,823 797
Other non-cash charges (d) 10,222 5,579 -
Management fees paid to
affiliates of Bain 83 1,033 1,020
------------ ------------ ------------
Adjusted EBITDA $60,413 $59,500 $58,314
============ ============ ============
(a) Depreciation and amortization amounts include amortization of
deferred financing costs included in interest expense.
(b) We currently operate an off-balance sheet commercial equipment
finance program in which newly originated equipment loans are sold
to a qualified special-purpose bankruptcy remote entity. In
accordance with GAAP, we are required to record gains/losses on
the sale of these equipment based promissory notes. In
calculating Adjusted EBITDA, management determines the cash impact
of net interest income on these notes. The finance program
adjustments are the difference between GAAP basis revenues (as
prescribed by SFAS No. 125/140) and cash basis revenues.
(c) Other non-recurring charges include executive retention costs
included in administrative expenses and infrequently occurring
items, as are allowed based on the Notes Indenture, as follows:
-- Other non-recurring charges in 2003 relate to $0.8 million of
costs associated with the settlement of a lawsuit against a
former subsidiary in Argentina.
-- Other non-recurring charges in 2004 relate to expenses
associated with a proposed initial public offering of Income
Deposit Securities ("IDS"). In connection with the proposed
IDS offering, as of December 31, 2004 we had incurred and
recorded $1.3 million of offering related expenses in the
consolidated statement of income. In addition we had
capitalized $3.5 million of debt and offering related costs in
other assets within the consolidated balance sheet. On
December 7, 2004, we chose to abandon the proposed IDS
offering, and consequently wrote off the $3.5 million of
capitalized costs in 2004.
-- Other non-recurring charges for the period from January 1,
2005 through January 27, 2005 relate to seller transaction
costs of $18.8 million incurred as part of the business sale
and a loss on the early extinguishment of debt of $9.9
million. The seller transaction costs are primarily comprised
of transaction underwriting fees of $4.5 million, legal and
professional fees of $1.3 million, Bain and BRS advisory fees
of $6.8 million and a management sale bonus of $6.2 million.
The loss on early extinguishment of debt includes the
write-off of $5.8 million of unamortized deferred financing
costs associated with pre- Acquisition debt, which was paid
off as of the Acquisition date and $4.1 million of tender and
call premium costs associated with redeeming the 1998 Senior
Subordinated Notes.
-- Other non-recurring charges for the period from January 28,
2005 through December 31, 2005 relate to $8.1 million of costs
associated with establishing a new asset backed facility for
the sale of equipment notes and trade receivables, a periodic
accrual of $1.1 million under a one time retention bonus
agreement and $0.5 million of expenses relate to the closure
and transition of the Marianna, Florida facility. The
retention bonus agreements were entered into with certain
Company executives concurrent with the Acquisition and entitle
the executive to receive special retention bonus awards upon
the second anniversary of the closing date of the Acquisition,
subject generally to their continued employment with Alliance
Laundry through such date. The aggregate amount of retention
bonuses payable upon the two year anniversary of the sale date
under these agreements is approximately $2.3 million.
(d) Other non-cash charges are described as follows:
-- Other non-cash charges in 2004 relate to $5.6 million of
non-cash executive unit compensation associated with incentive
units issued to our executives in 1998 and 2003.
-- Non-cash charges for the period from January 1, 2005 through
January 27, 2005 relate to non- cash incentive compensation
expense resulting from the acceleration of vesting for
incentive units at the date of the Acquisition. These
incentive units were issued to our executives in 1998 and
2003.
-- Non-cash charges for the period from January 28, 2005 through
December 31, 2005 relate to $6.2 million associated with the
inventory step-up to fair market value recorded at the
Acquisition date, $1.7 million for an impairment charge
related to the Ajax trademark and $1.1 million of non-cash
incentive compensation expense resulting from an increase in
value and additional vesting of stock options granted to
certain of the Company's executive officers in 2005.
|
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion