Alliance Laundry Holdings LLC Reports 3rd Qtr 2005 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 quarter and nine months ended September September: see month. 30, 2005. Net revenues for the quarter ended September 30, 2005 increased $13.2 million, or 20.3%, to $78.4 million from $65.1 million for the quarter ended September 30, 2004. Net income for the quarter ended September 30, 2005 increased $0.4 million to $3.4 million from $3.0 million for the quarter ended September 30, 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 (a) for the quarter ended September 30, 2005 was $14.1 million compared with Adjusted EBITDA of $13.2 million for the quarter ended September 30, 2004. The overall net revenue increase of $13.2 million was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to higher product revenues of $12.6 million and service parts revenue of $0.6 million. The increase in product revenue was due to higher North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. commercial equipment revenue of $7.6 million, higher international revenue of $2.8 million and higher earnings from our off-balance sheet equipment financing program of $2.6 million, with lower U.S. consumer laundry revenue of $0.4 million. Net revenues for the nine months ended September 30, 2005 increased $29.1 million, or 14.2%, to $233.9 million from $204.8 million for the nine months ended September 30, 2004. Our net loss for the nine months ended September 30, 2005 was $30.7 million as compared to net income of $13.5 million for the nine months ended September 30, 2004. Adjusted EBITDA(a) for the nine months ended September 30, 2005 was $43.3 million as compared with Adjusted EBITDA of $44.3 million for the nine months ended September 30, 2004. 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 year over year net revenue growth of 20.3% for the third quarter of 2005. North American commercial equipment led the way for us. Additionally, we had a very strong international performance for the third quarter." "On October October: see month. 14, 2005, we announced that we would be moving our Marianna Marianna may refer to:
Founding . We expect the consolidation to be completed by the end of the third quarter of 2006. We expect there will be efficiencies as a result of the consolidation of the design and manufacturing of all of our product lines within one operation," said L'Esperance. Alliance Laundry Holdings LLC is the parent company of Alliance Laundry Systems LLC (www.comlaundry.com), a leading North American 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). (a) 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 30, 2005 of this press release. 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 December: see month. 31, 2004. Financial information for Alliance Laundry Holdings LLC appears on the next two pages, followed by management's discussion and analysis of financial condition and results of operations for the quarter and nine months ended September 30, 2005.
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
September 30, December 31,
2005 2004
------------- -------------
Successor Predecessor
Assets
Current assets:
Cash $3,579 $11,471
Accounts receivable, net 8,546 5,611
Inventories, net 28,614 26,761
Beneficial interests in securitized
accounts receivable 21,107 19,479
Deferred income tax assets 2,730 -
Prepaid expenses and other 3,433 1,088
------------- -------------
Total current assets 68,009 64,410
Notes receivable, net 4,867 6,742
Property, plant and equipment, net 69,552 30,481
Goodwill 139,903 55,414
Beneficial interests in securitized
financial assets 16,717 19,379
Deferred income tax assets 5,964 -
Debt issuance costs, net 11,740 5,751
Other intangibles, net 148,087 1,839
------------- -------------
Total assets $464,839 $184,016
============= =============
Liabilities and Member's Equity (Deficit)
Current liabilities:
Current portion of long-term debt $- $12,036
Revolving credit facility - -
Accounts payable 7,575 11,618
Other current liabilities 21,667 24,718
------------- -------------
Total current liabilities 29,242 48,372
Long-term debt:
Senior credit facility 187,000 118,218
Senior subordinated notes 149,313 110,000
Junior subordinated note - 28,776
Other long-term debt - 529
Deferred income tax liability - -
Other long-term liabilities 6,310 7,218
Mandatorily redeemable preferred
interests - 6,000
------------- -------------
Total liabilities 371,865 319,113
Commitments and contingencies (see Note)
Member's equity (deficit) 92,974 (135,097)
------------- -------------
Total liabilities and member's equity
(deficit) $464,839 $184,016
============= =============
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
(in thousands)
Three Months Three Months
Ended Ended
September 30, September 30,
2005 2004
------------- -------------
Successor Predecessor
Net revenues:
Commercial and consumer laundry $68,438 $55,805
Service parts 9,914 9,341
------------- -------------
78,352 65,146
Cost of sales 55,956 47,001
------------- -------------
Gross profit 22,396 18,145
------------- -------------
Selling, general and administrative expense 9,815 8,217
Securitization and other costs 40 -
Transaction costs associated with sale of
business - -
------------- -------------
Total operating expenses 9,855 8,217
------------- -------------
Operating income (loss) 12,541 9,928
Interest expense 6,138 6,849
Loss from early extinguishment of debt - -
Costs related to abandoned public offerings - 30
------------- -------------
Other income (expense), net - -
------------- -------------
Income (loss) before taxes 6,403 3,049
Income tax (benefit) provision 3,026 10
------------- -------------
Net income (loss) $3,377 $3,039
============= =============
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
(in thousands)
January 28, January 1, Nine Months
2005 through 2005 through Ended
September 30, January 27, September 30,
2005 2005 2004
------------- ------------- -------------
Successor Predecessor Predecessor
Net revenues:
Commercial and consumer
laundry $185,767 $17,470 $176,023
Service parts 27,493 3,213 28,773
------------- ------------- -------------
213,260 20,683 204,796
Cost of sales 164,374 15,585 144,761
------------- ------------- -------------
Gross profit 48,886 5,098 60,035
------------- ------------- -------------
Selling, general and
administrative expense 26,673 3,829 25,995
Securitization and other
costs 8,055 - -
Transaction costs associated
with sale of business - 18,790 -
------------- ------------- -------------
Total operating expenses 34,728 22,619 25,995
------------- ------------- -------------
Operating income (loss) 14,158 (17,521) 34,040
Interest expense 17,439 995 19,219
Loss from early
extinguishment of debt - 9,867 -
Costs related to abandoned
public offerings - - 1,298
------------- ------------- -------------
Other income (expense), net - - -
------------- ------------- -------------
Income (loss) before taxes (3,281) (28,383) 13,523
Income tax (benefit)
provision (995) 9 64
------------- ------------- -------------
Net income (loss) $(2,286) $(28,392) $13,459
============= ============= =============
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
January 28, January 1, Nine Months
2005 through 2005 through Ended
September 30, January 27, September 30,
2005 2005 2004
------------- ------------- -------------
Successor Predecessor Predecessor
Cash flows from operating
activities:
Net income (loss) $(2,286) $(28,392) $13,459
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Depreciation and
amortization 14,743 526 7,585
Non-cash interest (680) 351 3,456
Non-cash incentive unit
compensation - 1,089 540
Non-cash debt financing
write-off - 5,751 -
Non-cash loss from
early extinguishment
of debt - - -
Non-cash inventory
expense 6,246 - -
Deferred income tax
assets (1,042) - -
Loss on sale of
property, plant and
equipment 48 - -
Changes in assets and
liabilities:
Accounts receivable (2,379) (556) 203
Inventories (20) (1,833) (2,748)
Other assets 1,918 101 1,722
Accounts payable (23,119) 19,076 541
Other liabilities 644 (2,732) 1,308
------------- ------------- -------------
Net cash (used in)
provided by operating
activities (5,927) (6,619) 26,066
------------- ------------- -------------
Cash flows from investing
activities:
Additions to property,
plant and equipment (3,168) (188) (2,982)
Proceeds on disposal of
property, plant and
equipment 2 - 67
------------- ------------- -------------
Net cash used in
investing activities (3,166) (188) (2,915)
------------- ------------- -------------
Cash flows from financing
activities:
Principal payments on long-
term debt (13,000) 1 (21,183)
Net increase in revolving
line of credit borrowings - - -
Proceeds from senior term
loan 200,000 - -
Proceeds from senior
subordinated 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) - (1,071)
Net proceeds - management
note - (71) -
Repayment of management
note - - -
Proceeds from long-term
debt - - -
------------- ------------- -------------
Net cash provided by
(used in) financing
activities 8,078 (70) (22,254)
------------- ------------- -------------
(Decrease) increase in cash (1,015) (6,877) 897
Cash at beginning of period 4,594 11,471 7,937
------------- ------------- -------------
Cash at end of period $3,579 $4,594 $8,834
============= ============= =============
Management's Discussion and Analysis of Financial Condition and Results of Operations for the Quarter and Nine Months Ended September 30, 2005 OVERVIEW As a result of the January January: see month. 27, 2005 transactions described further below, activity that occurred prior to January 27, 2005 has been reflected as the Predecessor predecessor - parent and activity that occurred after January 27, 2005 has been reflected as the 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 . We have inserted in·sert tr.v. in·sert·ed, in·sert·ing, in·serts 1. To put or set into, between, or among: inserted the key in the lock. See Synonyms at introduce. 2. a dark vertical line to segregate seg·re·gate v. seg·re·gat·ed, seg·re·gat·ing, seg·re·gates v.tr. 1. To separate or isolate from others or from a main body or group. See Synonyms at isolate. 2. the activities of the Predecessor and Successor. The distinction between Predecessor and Successor relates to the application of purchase accounting in accordance with Statement of Financial Standard (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) No. 141, "Business Combinations." The basis of the assets and liabilities has been reflected at fair market values in the Successor financial statements. Throughout this news release, we refer to Alliance Laundry Holdings LLC, a Delaware Delaware, state, United States Delaware (dĕl`əwâr, –wər), one of the Middle Atlantic states of the United States, the country's second smallest state (after Rhode Island). limited liability company, as "Alliance Holdings," and, together with its 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: operations, as "Alliance," "we," "our," "Predecessor," "Successor," and "us," unless otherwise indicated. Any reference to "Alliance Laundry" refers to our wholly-owned subsidiary, Alliance Laundry Systems LLC, a Delaware limited liability company, and its consolidated operations, unless otherwise indicated. The unaudited financial statements as of and for the quarter ended September 30, 2005 present the consolidated financial position and results of operations of Alliance Laundry Holdings LLC, including our wholly-owned direct and indirect subsidiaries, Alliance Laundry Systems LLC and Alliance Laundry Corporation. This news release for the period ended September 30, 2005 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) filed with the Securities and Exchange Commission, which includes our audited financial statements as of and for the year ended December 31, 2004. SALE OF ALLIANCE LAUNDRY HOLDINGS LLC 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 ("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 pursuant to a unit purchase agreement for aggregate consideration of $466.3 million. In connection with such acquisition, the executive officers of Alliance Laundry acquired $7.4 million of newly issued shares of common stock of ALH, and our other management employees acquired $2.2 million of newly issued shares of ALH common stock in exchange for equity interests in Alliance Holdings and cash pursuant to ALH's stock purchase and rollover A graphic element in an application or on a Web page that changes its color or shape when the pointer is moved (rolled) over it. See JavaScript rollover. See also n-key rollover. investment plan. A portion of the aggregate acquisition consideration was used to repay our 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 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 the then current equity holders of Alliance Holdings. We refer to the acquisition of Alliance Holdings and the related management investments in ALH as the "Acquisition." The Acquisition was financed with $350.0 million of debt financing described below, the management equity, approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $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 owned by our 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 "Financing Transactions," which we refer to, together with the Acquisition, as the "Transactions"): --the closing of the issuance of $150.0 million 8 1/2% senior subordinated notes due January 15, 2013, 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 "New 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. On the closing date (January 27, 2005), the term loan facility was drawn in full, but the revolving credit facility remained undrawn un·draw tr.v. un·drew , un·drawn , un·draw·ing, un·draws To draw to one side, as a curtain. Adj. 1. undrawn - not represented in a drawing undelineated - not represented accurately or precisely ; 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 9 5/8% Senior Subordinated Notes due 2008 (the "1998 Senior Subordinated Notes"). The tender offer expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. at 5:00 PM New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. time on February February: see month. 2, 2005, and approximately 5.10% of the total principal amount of the 1998 Senior Subordinated Notes remained outstanding after the consummation of the tender offer. 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 remaining 1998 Senior Subordinated Notes in accordance with the indenture governing such notes on March 7, 2005. In connection with the consummation of the Transactions, Alliance Laundry and Alliance Laundry Corporation became the obligors under the 2005 Senior Subordinated Notes. Alliance Laundry is the borrower BORROWER, contracts. He to whom a thing is lent at his request. 2. The contract of loan confers rights, and imposes duties on the borrower' 1. In general, he has the right to use the thing borrowed, during the time and for the purpose intended between the and obligor The individual who owes another person a certain debt or duty. The term obligor is often used interchangeably with debtor. obligor (ah-bluh-gore) n. under the New Senior Credit Facility and Alliance Laundry Corporation became a guarantor guarantor n. a person or entity that agrees to be responsible for another's debt or performance under a contract, if the other fails to pay or perform. (See: guarantee) GUARANTOR, contracts. He who makes a guaranty. 2. under the New Senior Credit Facility, and Alliance Holdings became a guarantor of the New Senior Credit Facility and the 2005 Senior Subordinated Notes. Alliance Laundry Corporation is a wholly-owned subsidiary of Alliance Laundry and was originally incorporated for the sole purpose of serving as a co-issuer of the 1998 Senior Subordinated Notes. Alliance Holdings is the parent of Alliance Laundry and has provided a full and unconditional HEIR, UNCONDITIONAL. A term used in the civil law, adopted by the Civil Code of Louisiana. Unconditional heirs are those who inherit without any reservation, or without making an inventory, whether their acceptance be express or tacit. Civ. Code of Lo. art. 878. UNCONDITIONAL. guarantee of the 2005 Senior Subordinated Notes. Alliance Holdings and Alliance Laundry Corporation do not have any operations or assets independent of Alliance Laundry. 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." 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." 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 nine months ended September 30, 2005. However, in order to facilitate an understanding of our results of operations for the nine months ended September 30, 2005 in comparison with the nine months ended September 30, 2004, we have presented and discussed below our Predecessor results and our Successor results on a combined basis. 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.
The following table sets forth our historical net revenues for the
periods indicated:
Quarter Ended
---------------------------
September 30, September 30,
2005 2004
---------------------------
(Dollars in millions)
Net revenues:
Commercial laundry $68.5 $55.8
Service parts 9.9 9.3
------------- -------------
$78.4 $65.1
============= =============
The following table sets forth certain condensed historical financial
data for us expressed as a percentage of net revenues for each of the
periods indicated:
Quarter Ended
---------------------------
September 30, September 30,
2005 2004
------------- -------------
Net revenues 100.0% 100.0%
Cost of sales 71.4% 72.1%
Gross profit 28.6% 27.9%
Selling, general and administrative
expense 12.5% 12.7%
Securitization and other costs 0.1% -
Operating income 16.0% 15.2%
Net income 4.3% 4.7%
Net revenues. Net revenues for the quarter ended September 30, 2005 increased $13.2 million, or 20.3%, to $78.4 million from $65.1 million for the quarter ended September 30, 2004. This increase was attributable to higher product revenues of $12.6 million, and service parts revenue increases of $0.6 million. The increase in product revenue was due to higher North American commercial equipment revenue of $7.6 million, higher international revenue of $2.8 million and higher earnings from our off-balance sheet equipment financing program of $2.6 million, with lower U.S. consumer laundry revenue of $0.4 million. Revenue for 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. was higher for coin-operated Adj. 1. coin-operated - of devices that do not operate without the prior insertion of one or more coins; "a coin-operated telephone" coin-operated adj [machine] → que funciona con monedas laundry customers and on-premise laundries. Revenue for international customers was higher primarily in Asia, 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. and 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). . Our off-balance sheet equipment
financing program earnings were higher due to an increase in notes sold
and due to adjusting beneficial interests to their respective fair
market values. The revenue increases stated above include net price
increases of approximately $4.0 million.Gross profit. Gross profit for the quarter ended September 30, 2005 increased $4.3 million, or 23.4%, to $22.4 million from $18.1 million for the quarter ended September 30, 2004. This increase was primarily attributable to price increases, profit margins related to increased sales and the higher earnings from our off-balance sheet equipment financing program. These gross profit increases were partially offset by material cost increases of approximately $3.2 million, mostly related to steel cost increases, and higher depreciation expense of $0.5 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 values. As a result of these factors, gross profit as a percentage of net revenues increased to 28.6% for the quarter ended September 30, 2005 from 27.9% for the quarter ended September 30, 2004. Selling, general and administrative expense. Selling, general and administrative expense for the quarter ended September 30, 2005 increased $1.6 million, or 19.4%, to $9.8 million from $8.2 million for the quarter ended September 30, 2004. The increase in selling, general and administrative expense was primarily due to increased amortization expenses of $1.0 million driven by Acquisition date write-ups to fair market value for customer agreements, engineering drawings, and our distribution network. Expenses also increased by $0.3 million as a result of a retention program for key executives and increased by $0.3 million for management bonuses. Selling, general and administrative expense as a percentage of net revenues decreased to 12.5% for the quarter ended September 30, 2005 as compared to 12.7% for the quarter ended September 30, 2004 as these costs did not increase as significantly as net revenues. 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. (loss). As a result of the foregoing, operating income (loss) as a percentage of net revenues increased to 16.0% for the quarter ended September 30, 2005 as compared to 15.2% for the quarter ended September 30, 2004. Interest expense. Interest expense for the quarter ended September 30, 2005 decreased $0.7 million, or 10.4%, to $6.1 million from $6.8 million for the quarter ended September 30, 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 $0.8 million to reflect changes in the fair value 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 entered into after the Acquisition. There was essentially no change in the fair value of a previous interest rate swap agreement for the quarter ended September 30, 2004. Income tax provision. The provision for income taxes for the quarter ended September 30, 2005 was $3.0 million, with no similar provision for the quarter ended September 30, 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 (loss). As a result of the foregoing, our net income for the quarter ended September 30, 2005 increased $0.4 million, or 11.1%, to $3.4 million from $3.0 million for the quarter ended September 30, 2004. Net income (loss) as a percentage of net revenues for the quarter ended September 30, 2005 decreased to 4.3% for the quarter ended September 30, 2005 as compared to 4.7% for the quarter ended September 30, 2004. Below is a reconciliation of the combined results of operations for the periods presented (in thousands):
January 28, January 1, Nine Months Nine Months
2005 through 2005 through Ended Ended
September 30, January 27, September 30, September 30,
2005 2005 2005 2004
------------- ------------- ------------- -------------
Successor Predecessor Combined Predecessor
Net revenues:
Commercial
and consumer
laundry $185,767 $17,470 $203,237 $176,023
Service parts 27,493 3,213 30,706 28,773
------------- ------------- ------------- -------------
213,260 20,683 233,943 204,796
Cost of sales 164,374 15,585 179,959 144,761
------------- ------------- ------------- -------------
Gross profit 48,886 5,098 53,984 60,035
Selling,
general and
administrative
expense 26,673 3,829 30,502 25,995
Securitization
and other
costs 8,055 - 8,055 -
Transaction
costs
associated
with sale of
business - 18,790 18,790 -
------------- ------------- ------------- -------------
Total operating
expense 34,728 22,619 57,347 25,995
------------- ------------- ------------- -------------
Operating
income
(loss) 14,158 (17,521) (3,363) 34,040
Interest
expense 17,439 995 18,434 19,219
Loss from early
extinguishment
of debt - 9,867 9,867 -
Costs related
to abandoned
public
offerings - - - 1,298
------------- ------------- ------------- -------------
(Loss)
income
before
taxes (3,281) (28,383) (31,664) 13,523
Provision for
income taxes (995) 9 (986) 64
------------- ------------- ------------- -------------
Net (loss)
income $(2,286) $(28,392) $(30,678) $13,459
============= ============= ============= =============
Below is a reconciliation of certain items of the combined statements
of cash flows for the periods presented (in thousands):
January 28, January 1, Nine Months Nine Months
2005 through 2005 through Ended Ended
September 30, January 27, September 30, September 30,
2005 2005 2005 2004
------------- ------------- ------------- -------------
Successor Predecessor Combined Predecessor
Net cash (used
in) provided
by operations $17,029 $(20,675) $(3,646) $25,040
Net cash (used
for) provided
by working
capital (22,956) 14,056 (8,900) 1,026
------------- ------------- ------------- -------------
Net cash (used
in) provided
by operating
activities $(5,927) $(6,619) $(12,546) $26,066
------------- ------------- ------------- -------------
Cash flows from
investing
activities:
Additions to
property,
plant and
equipment $(3,168) $(188) $(3,356) $(2,982)
Proceeds on
disposal of
property,
plant and
equipment 2 - 2 67
------------- ------------- ------------- -------------
Net cash
used in
investing
activities $(3,166) $(188) $(3,354) $(2,915)
------------- ------------- ------------- -------------
Cash flows from
financing
activities:
Principal
payments on
long-term
debt $(13,000) $1 $(12,999) $(21,183)
Proceeds from
senior term
loan 200,000 - 200,000 -
Proceeds from
senior
subordinated
notes 149,250 - 149,250 -
Repayment of
long-term
debt (275,920) - (275,920) -
Contribution
from member 117,000 - 117,000 -
Distribution
to old
unitholders (154,658) - (154,658) -
Debt
financing
costs (13,230) - (13,230) -
Cash paid for
capitalized
offering
related
costs (1,364) - (1,364) (1,071)
Net proceeds
- management
note - (71) (71) -
------------- ------------- ------------- -------------
Net cash
provided
by (used
in)
financing
activities $8,078 $(70) $8,008 $(22,254)
============= ============= ============= =============
Net revenues. Net revenues for the nine months ended September 30, 2005 increased $29.1 million, or 14.2%, to $233.9 million from $204.8 million for the nine months ended September 30, 2004. This increase was attributable to higher product revenue of $27.2 million and higher service parts revenue of $1.9 million. The increase in product revenue was due to higher international revenue of $8.4 million, higher North American commercial equipment revenue of $12.8 million, higher U.S. consumer laundry revenue of $3.1 million and higher earnings from our off-balance sheet equipment financing program of $2.9 million. Revenue for North America was higher for coin-operated laundry customers and on-premise laundries. Revenue for international customers was higher in Asia, Europe, Latin America and middle eastern countries. Alliance re-entered the U.S. consumer laundry marketplace in the third quarter of 2004, and as such, there was no comparable revenue recognized in the first six months of 2004. The revenue increases stated above include net price increases of approximately $11.8 million, which were effective during the quarter ended March 31, 2005. Gross profit. Gross profit for the nine months ended September 30, 2005 decreased $6.0 million, or 10.1%, to $54.0 million from $60.0 million for the nine months ended September 30, 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 $4.2 million driven by the Acquisition asset write-up to fair market values and material cost increases of approximately $11.7 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. As a result of these factors, gross profit as a percentage of net revenues decreased to 23.1% for the nine months ended September 30, 2005 from 29.3% for the nine months ended September 30, 2004. Selling, general and administrative expense. Selling, general and administrative expense for the nine months ended September 30, 2005 increased $4.5 million, or 17.3%, to $30.5 million from $26.0 million for the nine months ended September 30, 2004. The increase in selling, general and administrative expense was primarily due to $2.8 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 and charges related to $0.5 million of non-cash incentive compensation resulting from the 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 vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: for incentive units on the date of the Acquisition. Sales expenses also increased by $0.8 million as compared to the prior period due to incremental costs Costs which are additional costs to the Service appropriations that would not have been incurred absent support of the contingency operation. See also financial management. associated with consumer laundry and higher trade show and advertising costs. As a result of these factors, selling, general and administrative expense as a percentage of net revenues increased to 13.0% for the nine months ended September 30, 2005 as compared to 12.7% for the nine months ended September 30, 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 nine months ended September 30, 2005 were $8.1 million, with no similar costs in 2004. These costs are comprised of $8.1 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). 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 . Securitization and other costs as a percentage of net revenues was 3.5% for the nine months ended September 30, 2005. Substantially all of these costs were incurred during the quarter ended June June: see month. 30, 2005. Transaction costs associated with sale of business. Transaction costs associated with sale of business for the nine months ended September 30, 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 (loss). As a result of the foregoing, operating income (loss) for the nine months ended September 30, 2005 decreased $37.4 million, to a loss of $3.4 million as compared to operating income of $34.0 million for the nine months ended September 30, 2004. Operating income as a percentage of net revenues decreased to negative 1.4% for the nine months ended September 30, 2005 as compared to a positive 16.6% for the nine months ended September 30, 2004. Interest expense. Interest expense for the nine months ended September 30, 2005 decreased $0.8 million, or 4.1%, to $18.4 million from $19.2 million for the nine months ended September 30, 2004. This decrease was primarily attributable to the recognition of $0.7 million of interest income in 2005 related to investor 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. for the period from May 5, 1998 through January 27, 2005 in accordance with applicable accounting requirements and lower average interest rates associated with the current capital structure as compared to the average interest rates for the Predecessor Company. 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. Loss on early extinguishment of debt for the nine months ended September 30, 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 call 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. Offering related expense as a percentage of net revenues was 4.2% for the nine months ended September 30, 2005. Costs Related to Abandoned Public Offerings. Costs related to abandoned public offerings for the nine months ended September 30, 2004 were $1.3 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 $3.1 million as of September 30, 2004. In the fourth quarter of 2004, this public offering was abandoned and all related capitalized costs were expensed at that time. Income tax provision. The provision for income taxes for the nine months ended September 30, 2005 was a benefit of $1.0 million, with no similar provision for the quarter ended September 30, 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 (loss). As a result of the foregoing, our net loss for the nine months ended September 30, 2005 was $30.7 million as compared to net income of $13.5 million for the nine months ended September 30, 2004. Net (loss) income as a percentage of net revenues for the nine months ended September 30, 2005 was a negative 13.1% as compared to a positive 6.6% for the nine months ended September 30, 2004. LIQUIDITY AND CAPITAL RESOURCES In connection with the consummation of the January 27, 2005 Transactions, we refinanced substantially all of our indebtedness with the proceeds of the offering of the 2005 Senior Subordinated Notes and borrowings under the New Senior Credit Facility. 2002 Senior Credit Facility. All borrowings under our amended and restated credit agreement dated as of August 2, 2002 ("2002 Senior Credit Facility"), which was comprised of a $193.0 million term loan facility and a $45.0 million revolving credit facility were repaid in connection with the consummation of the Transactions and all outstanding letters of credit under our amended and restated August 2002 credit agreement were refinanced. New Senior Credit Facility. The New Senior Credit Facility is comprised of a senior secured revolving credit facility in a total principal amount of up to $50.0 million (less amounts received for letters of credit), which we refer to as the "New 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 "New Term Loan Facility." The New Revolving Credit Facility has a six-year maturity and the New Term Loan Facility has a seven-year maturity. We expect to use borrowings under the New Revolving Credit Facility for general corporate purposes, including working capital, capital expenditures and letters of credit. We used borrowings under the New 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, unreturned capital on certain preferred units, and to pay fees and expenses related to the Financing Transactions. The New 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 quarter ended September 30, 2005, the New Senior Credit Facility allows a maximum ratio of consolidated debt to Adjusted EBITDA (as defined by the New Senior Credit Facility) of 6.50. We are in compliance with this and all other debt related covenants as of September 30, 2005. The New Senior Credit Facility contains customary 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. Additional borrowings and the issuance of additional letters of credit under the New 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. Securitization Programs. On June 28, 2005, Alliance Laundry, through a special-purpose bankruptcy remote A company within a corporate group is said to be bankruptcy remote when the solvency of that company does not affect any other company in the group, particularly any holding company or subsidiary company of the bankruptcy remote vehicle. subsidiary, Alliance Laundry Equipment Receivables 2005 LLC ("ALER ALER AquaLogic Enterprise Repository (BEA) ALER American Law and Economics Review ALER Azienda Lombarda Edilizia Residenziale di Cremona (Italy) ALER Antitrust Law and Economics Review 2005"), and a trust, Alliance Laundry Equipment Receivables Trust 2005-A ("ALERT 2005A"), entered into a four year $330.0 million revolving credit facility (the "Asset Backed Facility"), backed by equipment loans and trade receivables originated by us. During the first four years of the new Asset Backed Facility, Alliance Laundry is permitted, from time to time, to sell its trade receivables and certain equipment loans to the special-purpose subsidiary, which in turn will sell them to the trust. The trust finances the acquisition of the trade receivables and equipment loans through borrowings under the Asset Backed Facility in the form of funding notes, which are limited to an advance rate of approximately 95% for equipment loans and 60-70% for trade receivables. Funding availability for trade receivables is limited to a maximum of $60.0 million, while funding for equipment loans is limited at $330.0 million less the amount of funding outstanding for trade receivables. Funding for the trade receivables and equipment loans is subject to certain eligibility criteria criteria (krītēr´ē  ),n. , including concentration and other limits, standard for transactions of this type. After four years from the closing date, which is June 27, 2009, (or earlier in the event of a rapid amortization event or an event of default), the trust will not be permitted to request new borrowings under the facility and the outstanding borrowings will amortize amortize To write off gradually and systematically a given amount of money within a specific number of time periods. For example, an accountant amortizes the cost of a long-term asset by deducting a portion of that cost against income in each period. over a period of up to nine years. As of September 30, 2005, the balance of variable funding notes due to lenders under the Asset Backed Facility for equipment loans was $219.1 million. Additional advances under the Asset Backed Facility are subject to certain continuing conditions, including but not limited to (i) covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the restrictions relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the weighted average life, weighted average interest rate, and the amount of fixed rate equipment loans held by the trust, (ii) the absence of a rapid amortization event or event of default, as defined, (iii) our compliance, as servicer, with certain financial covenants, and (iv) no event having occurred which materially and adversely affects our operations. The variable funding notes under the Asset Backed Facility will commence amortization and borrowings thereunder will cease prior to four years after the closing date upon the occurrence of certain "rapid amortization events" which include: (i) a borrowing base shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. exists and remains uncured, (ii) delinquency delinquency Criminal behaviour carried out by a juvenile. Young males make up the bulk of the delinquent population (about 80% in the U.S.) in all countries in which the behaviour is reported. , dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. or default ratios on pledged pledge n. 1. A solemn binding promise to do, give, or refrain from doing something: signed a pledge never to reveal the secret; a pledge of money to a charity. 2. a. receivables and equipment loans exceeding certain specified ratios in any given month, (iii) the days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). on receivables exceed a specified number of days, (iv) the occurrence and continuance The adjournment or postponement of an action pending in a court to a later date of the same or another session of the court, granted by a court in response to a motion made by a party to a lawsuit. of an event of default or servicer default under the Asset Backed Facility, including but not limited to, as servicer, a material adverse change in our business or financial condition and our compliance with certain required financial covenants, and (v) a number of other specified events. The risk of loss to the note purchasers under the new Asset Backed Facility resulting from default or dilution on the trade receivables and equipment loans is protected by credit enhancement Credit Enhancement A method whereby a company attempts to improve its debt or credit worthiness. Notes: Credit enhancements take many different forms. An example of a credit enhancement would be conversion rights added on to a debt instrument in order to lower the issuing , provided by us in the form of cash reserves Cash reserves See: Cash investments cash reserves Investment funds that are held in short-term assets such as Treasury bills and certificates of deposit until more permanent investment opportunities are available. , letters of credit and overcollateralization Overcollateralization The posting of more collateral than is needed to obtain financing. Notes: This is often done in order to get a better debt rating from a credit rating agency. See also: Collateral, Overcapitalization . Further, the timely payment of interest and the ultimate payment of principal on the facility are guaranteed by Ambac Assurance Corporation Ambac Assurance Corporation A subsidiary of publicly traded Ambac Financial Group that provides financial guarantees for municipal borrowers and for asset-backed and structured issues. . All of the residual Residual See:Residual value beneficial interests in the trust and cash flows remaining from the pool of receivables and loans after payment of all obligations under the Asset Backed Facility would accrue To increase; to augment; to come to by way of increase; to be added as an increase, profit, or damage. Acquired; falling due; made or executed; matured; occurred; received; vested; was created; was incurred. to the benefit of Alliance Laundry. Except for the retained interests Retained interest (also colloquially known as a payout penalty) is future, currently unpaid, interest that some lenders add to the remaining principal of a loan to determine a payout figure in the event that the loan is terminated before the completion of the original term. and amounts of the letters of credit outstanding from time to time as credit enhancement, we provide no support or recourse The right of an individual who is holding a Commercial Paper, such as a check or promissory note, to receive payment on it from anyone who has signed it if the individual who originally made it is unable, or refuses, to tender payment. for the risk of loss relating to default on the assets transferred to the trust. In addition, we are paid a monthly servicing fee equal to one-twelfth Noun 1. one-twelfth - one part in twelve equal parts duodecimal, twelfth part, twelfth common fraction, simple fraction - the quotient of two integers of 1.0% of the aggregate balance of such trade receivables and equipment loans. The estimated fair value of Alliance Laundry's beneficial interests in the accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and notes sold to ALERT 2005A are based on the amount and timing of expected distributions to Alliance Laundry as the holder of the trust's residual equity interests. Such distributions may be substantially deferred or eliminated, and result in an 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. of our residual interests Residual Interest A type of interest payment received by investors in a real estate mortgage investment conduit (REMIC). Notes: Investors receive interest payments after all required regular interest has been paid to investors within higher priority tranches. , if repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of the variable funding notes issued by ALERT 2005A is accelerated upon an event of default or rapid amortization event described above. The Asset Backed Facility replaces a similar facility previously maintained with CDC See Control Data, century date change and Back Orifice. CDC - Control Data Corporation Financial Products, Inc., Bear, Stearns & Co., Inc. and Altamira Altamira: see Paleolithic art. Altamira Cave near Santander, northern Spain, famous for its magnificent prehistoric paintings and engravings. The paintings, dating to 14,000–12,000 BC, were first described in 1880. Funding, LLC (the "ALERT 2002A Facility"). In connection with the establishment of the new facility, Alliance Laundry, through its special-purpose subsidiaries, repurchased and simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics resold the assets held by the ALERT 2002A Facility to the new Asset Backed Facility. 1998 Senior Subordinated Notes. On January 4, 2005, we commenced a cash tender offer and consent solicitation with respect to all $110.0 million of our outstanding 1998 Senior Subordinated Notes. The tender offer for the 1998 Senior Subordinated Notes expired at 5:00 p.m. New York City time on February 2, 2005, and approximately 5.10% of the principal amount of the 1998 Senior Subordinated Notes remained outstanding after the consummation of the tender offer. We redeemed the remaining 1998 Senior Subordinated Notes in accordance with the indenture governing such notes on March 7, 2005. 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 2005 Notes Indenture governing the 2005 Senior Subordinated Notes, 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 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. with other entities, enter into transactions with affiliates and engage in certain business activities. EBITDA and Adjusted EBITDA We have presented EBITDA below and Adjusted EBITDA below because certain covenants in the 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. 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 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 financial ratios and tests, including a maximum of total debt to Adjusted EBITDA and a minimum interest coverage ratio. The 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 (loss) to EBITDA and from EBITDA to Adjusted EBITDA for the combined periods presented (in thousands):
Three Months Ended
---------------------------
September 30, September 30,
2005 2004
------------- -------------
Successor Predecessor
Net income (loss) $3,377 $3,039
Provision for income taxes 3,026 10
------------- -------------
Net income (loss) before income taxes 6,403 3,049
Adjustments:
Interest expense $6,138 $6,849
Depreciation and amortization (a) 4,401 2,467
Non-cash interest (income) included
in amortization above (602) (468)
------------- -------------
EBITDA $16,340 $11,897
============= =============
Adjustments:
Finance program adjustments (b) $(2,615) $1,091
Other non-recurring charges (c) 330 30
Other non-cash charges (d) - (130)
Management fees paid to affiliates of
Bain - 262
------------- -------------
Adjusted EBITDA $14,055 $13,150
============= =============
January 28, January 1, Nine Months Nine Months
2005 through 2005 through Ended Ended
September 30, January 27, September 30, September 30,
2005 2005 2005 2004
------------- ------------- ------------- -------------
Successor Predecessor Combined Predecessor
Net income
(loss) $(2,286) $(28,392) $(30,678) $13,459
Provision for
income taxes (995) 9 (986) 64
------------- ------------- ------------- -------------
Net income
(loss) before
income taxes (3,281) (28,383) (31,664) 13,523
Adjustments:
Interest
expense $17,439 $995 $18,434 $19,219
Depreciation
and
amortization (a) 14,805 526 15,331 7,585
Non-cash
interest
(income)
included in
amortization
above (1,552) - (1,552) (1,428)
------------- ------------- ------------- -------------
EBITDA $27,411 $(26,862) $549 $38,899
============= ============= ============= =============
Adjustments:
Finance
program
adjustments (b) $(2,195) $31 $(2,164) $2,832
Other non-
recurring
charges (c) 8,828 28,657 37,485 1,298
Other non-
cash charges (d) 6,246 1,089 7,335 540
Management
fees paid to
affiliates
of Bain - 83 83 773
------------- ------------- ------------- -------------
Adjusted EBITDA $40,290 $2,998 $43,288 $44,342
============= ============= ============= =============
(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 qualified special-purpose bankruptcy remote entities. 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 follows:
-- 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. As of September 30, 2004 we had
incurred $1.3 million of expenses associated with this
proposed transaction.
-- 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 call and call
premium costs associated with redeeming the 1998 Senior
Subordinated Notes.
-- Other non-recurring charges for the period from January 28,
2005 through September 30, 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 and a
periodic accrual of $0.8 million under a one time retention
bonus agreement, entered into with certain management
employees concurrent with the Acquisition. Under the retention
bonus agreements, the executives are entitled 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 under
these agreements is approximately $2.3 million.
(d) Other non-cash charges are described as follows:
-- 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 the
incentive units at the date of the Acquisition.
-- Non-cash charges for the period from July 1, 2004 through
September 30, 2004 relate to non- cash incentive compensation
expense adjustments related to management incentive units.
-- Non-cash charges for the period from January 28, 2005 through
September 30, 2005 relate to $6.2 million associated with the
inventory step-up to fair market value recorded at the
Acquisition date.
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