-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TeB+phW6P3ILoCX8dsVRC01bPEI/fHvL5Qwqnu8LYduPWNb2nwoELgLeETJTFdaB oCeSWeHZ/0w0680RLZ8u3g== /in/edgar/work/20000803/0000950130-00-004183/0000950130-00-004183.txt : 20000921 0000950130-00-004183.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950130-00-004183 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000730 FILED AS OF DATE: 20000803 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCE LAUNDRY SYSTEMS LLC CENTRAL INDEX KEY: 0001063699 STANDARD INDUSTRIAL CLASSIFICATION: [5080 ] IRS NUMBER: 391927923 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-56857 FILM NUMBER: 684874 BUSINESS ADDRESS: STREET 1: ALLIANCE LAUNDRY SYSTEMS STREET 2: P.O. BOX 990 CITY: RIPON STATE: WI ZIP: 54971-0990 BUSINESS PHONE: 9207481634 MAIL ADDRESS: STREET 1: ALLIANCE LAUNDRY SYSTEMS STREET 2: P.O. BOX 990 CITY: RIPON STATE: WI ZIP: 54971-0990 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCE LAUNDRY CORP CENTRAL INDEX KEY: 0001063697 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 391928505 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-56857-01 FILM NUMBER: 684875 BUSINESS ADDRESS: STREET 1: RAYTHEON COMMERCIAL LAUNDRY STREET 2: P.O. BOX 990 CITY: RIPON STATE: WI ZIP: 54971-0990 BUSINESS PHONE: 9207481634 MAIL ADDRESS: STREET 1: RAYTHEON COMMERCIAL LAUNDRY STREET 2: P.O. BOX 990 CITY: RIPON STATE: WI ZIP: 54971-0990 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCE LAUNDRY HOLDINGS LLC CENTRAL INDEX KEY: 0001063698 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 522055893 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-56857-02 FILM NUMBER: 684876 BUSINESS ADDRESS: STREET 1: RAYTHEON COMMERCIAL LAUNDRY STREET 2: P.O. BOX 990 CITY: RIPON STATE: WI ZIP: 54971-0990 BUSINESS PHONE: 9207481634 MAIL ADDRESS: STREET 1: RAYTHEON COMMERCIAL LAUNDRY STREET 2: P.O. BOX 990 CITY: RIPON STATE: WI ZIP: 54971-0990 10-Q 1 0001.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________ to_________ Commission file number 333-56857 333-56857-01 333-56857-02 ALLIANCE LAUNDRY SYSTEMS LLC ALLIANCE LAUNDRY CORPORATION ALLIANCE LAUNDRY HOLDINGS LLC (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 39-1927923 DELAWARE 39-1928505 DELAWARE 52-2055893 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) P.O. BOX 990 RIPON, WISCONSIN 54971-0990 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (920) 748-3121 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes [ X ] No [ ] Alliance Laundry Systems LLC Form 10-Q For The Periods Ended June 30, 2000 Table of Contents
Page No. -------- PART I Financial Information Item 1. Financial Statements Condensed Balance Sheets as of June 30, 2000 and December 31, 1999 3 Condensed Statements of Income for the periods ended June 30, 2000 and June 30, 1999 4 Condensed Statements of Cash Flows for the periods ended June 30, 2000 and June 30, 1999 5 Notes to Unaudited Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II Other Information Item 1. Legal Proceedings 20 Item 2. Changes in Securities 20 Item 3. Defaults upon Senior Securities 20 Item 4. Submission of Matters to a Vote of Security Holders 20 Item 5. Other Information 20 Item 6. Exhibits and Reports on Form 8-K 20 Signatures 21
2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ALLIANCE LAUNDRY HOLDINGS LLC CONDENSED BALANCE SHEETS (in thousands)
June 30, December 31, 2000 1999 ------------ ------------ Assets (Unaudited) Current assets: Cash.......................................................... $ 831 $ 3,028 Cash-restricted............................................... 425 956 Accounts receivable, net...................................... 22,213 33,578 Inventories, net.............................................. 41,312 31,282 Prepaid expenses and other.................................... 9,235 6,160 ------------ ------------ Total current assets...................................... 74,016 75,004 Notes receivable................................................. 20,986 18,314 Property, plant and equipment, net............................... 56,223 57,615 Goodwill, net.................................................... 56,622 48,319 Debt issuance costs, net......................................... 11,813 13,064 Other assets..................................................... 7,394 7,550 ------------ ------------ Total assets.............................................. $ 227,054 $ 219,866 ============ ============= Liabilities and Members' Deficit Current liabilities: Current portion of long-term debt............................. $ 1,000 $ 500 Accounts payable.............................................. 13,965 12,362 Finance program obligation.................................... 2,886 3,551 Revolving credit facility..................................... 15,000 - Other current liabilities..................................... 22,309 21,805 ------------ ------------ Total current liabilities................................. 55,160 38,218 Long-term debt: Senior credit facility........................................ 199,000 199,500 Senior subordinated notes..................................... 110,000 110,000 Junior subordinated note...................................... 13,122 12,048 Other long-term liabilities...................................... 1,921 1,866 ------------ ------------ Total liabilities......................................... 379,203 361,632 Commitments and contingencies (See Note 6)....................... Mandatorily redeemable preferred equity.......................... 6,000 6,000 Members' deficit................................................. (158,149) (147,766) ----------- ------------- Total liabilities and members' deficit.................... $ 227,054 $ 219,866 =========== =============
3 ALLIANCE LAUNDRY HOLDINGS LLC STATEMENTS OF INCOME (in thousands)
Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- (Unaudited) (Unaudited) Net sales: Commercial laundry............................. $ 66,489 $ 58,756 $ 123,134 $ 110,543 Appliance Co. consumer laundry................. - 21,145 - 40,100 Service parts.................................. 8,766 8,244 17,760 16,790 ---------- --------- ---------- ---------- 75,255 88,145 140,894 167,433 Cost of sales....................................... 52,015 65,314 98,566 124,104 ---------- --------- ---------- ---------- Gross profit........................................ 23,240 22,831 42,328 43,329 ---------- --------- ---------- ---------- Selling, general and administrative expense......... 12,778 10,630 23,831 21,125 Nonrecurring costs.................................. - 448 - 894 ---------- --------- ---------- ---------- Total operating expenses............................ 12,778 11,078 23,831 22,019 ---------- --------- ---------- ---------- Operating income............................... 10,462 11,753 18,497 21,310 Interest expense.................................... 8,605 8,007 18,245 16,047 Other income (expense), net......................... (111) (117) (108) (144) ---------- --------- ---------- ---------- Income before taxes............................ 1,746 3,629 144 5,119 Provision for income taxes.......................... 20 29 20 29 ---------- --------- ---------- ---------- Net income..................................... $ 1,726 $ 3,600 $ 124 $ 5,090 ========== ========= ========== ==========
4 ALLIANCE LAUNDRY HOLDINGS LLC STATEMENTS OF CASH FLOWS (in thousands)
Six Months Ended ---------------------------- June 30, June 30, 2000 1999 ----------- ----------- (Unaudited) Cash flows from operating activities: Net income (loss)......................................................... $ 124 $ 5,090 Adjustments to reconcile net income to net cash provided by operating activities; excluding the effects of the acquisition opening balance sheet: Depreciation and amortization........................................ 8,681 8,552 Non-cash junior subordinated note interest........................... 1,074 898 (Gain) loss on sale of property, plant and equipment................. 108 144 Changes in assets and liabilities: Accounts and notes receivable..................................... 4,373 (23,456) Inventories....................................................... (6,047) 2,071 Other assets...................................................... (3,467) 720 Accounts payable.................................................. 821 11,147 Finance program obligation........................................ (357) (275) Other liabilities................................................. (637) (366) ----------- ----------- Net cash provided by operating activities............................ 4,673 4,525 ----------- ----------- Cash flows from investing activities: Additions to property, plant and equipment................................ (2,508) (5,989) Acquisition of business................................................... (13,399) - Proceeds on disposal of property, plant and equipment..................... (43) 596 ----------- ----------- Net cash (used in) investing activities.............................. (15,950) (5,393) ----------- ----------- Cash flows from financing activities: Debt financing costs...................................................... - (686) Proceeds from revolving line of credit.................................... 15,000 - Distribution to Raytheon and related transaction costs.................... (5,920) - ----------- ----------- Net cash provided by financing activities............................ 9,080 (686) ----------- ----------- Increase (decrease) in cash.................................................... (2,197) (1,554) Cash at beginning of quarter................................................... 3,028 4,839 ----------- ----------- Cash at end of quarter......................................................... $ 831 $ 3,285 =========== =========== Supplemental disclosure of cash flow information: Cash paid for interest.................................................... $ 16,001 $ 14,129
5 Notes to Unaudited Condensed Financial Statements NOTE 1. BASIS OF PRESENTATION The unaudited financial statements as of June 30, 2000 and June 30, 1999 and for the periods ended June 30, 2000 present the consolidated financial position and results of operations of Alliance Laundry Holdings LLC (the "Company"), including its wholly-owned direct and indirect subsidiaries, Alliance Laundry Systems LLC and Alliance Laundry Corporation. In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments necessary (consisting only of normal recurring adjustments) to present fairly the financial position and operating results of the Company for the periods presented. The results of operations for such interim periods are not necessarily indicative of results of operations to be expected for the full year. These financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such regulations, although the Company believes the disclosures provided are adequate to prevent the information presented from being misleading. This report on Form 10-Q for the periods ended June 30, 2000 should be read in conjunction with the audited financial statements presented in the Company's Annual Report on Form 10-K (file no. 333-56857) filed with the Securities and Exchange Commission, which includes the audited financial statements of the Company as of and for the year ended December 31, 1999. NOTE 2. MERGER OF BUSINESS On May 5, 1998, pursuant to an Agreement and Plan of Merger (the "Merger Agreement") among Bain/RCL, L.L.C., a Delaware limited liability company ("Bain LLC"), RCL Acquisitions LLC ("MergeCo"), Raytheon Commercial Laundry LLC and Raytheon Company ("Raytheon"), MergeCo was merged with and into Raytheon Commercial Laundry LLC (the "Merger") with Raytheon Commercial Laundry LLC being the surviving entity. Immediately following the merger Raytheon Commercial Laundry LLC was renamed to "Alliance Laundry Holdings LLC". Prior to the Merger, Raytheon owned 100% of the equity securities of Raytheon Commercial Laundry LLC, and Bain LLC, the BRS Investors (as defined), and certain members of management owned 100% of the equity securities of MergeCo. As a result of the Merger (i) Raytheon's limited liability company interest in Raytheon Commercial Laundry LLC was converted into the right to receive (a) an aggregate amount of cash equal to $320.6 million, which includes pre-closing and post-closing adjustments (including final settlements - see Note 6), (b) a junior subordinated promissory note from the Company in the original principal amount of $9.0 million which matures in 2009, (c) preferred membership interests of the Company with a liquidation value of approximately $6.0 million which are mandatorily redeemable in 2009, and (d) common membership units of the Company representing 7% of the total common membership interests of the Company and (ii) Bain LLC's, the BRS Investors' and certain management members' limited liability company interests in MergeCo were converted into the right to receive up to 93% of the total common membership interests of the Company. 6 Simultaneous with the consummation of the Merger and each of the other related transactions (the "Closing"), the Company contributed substantially all of its assets and liabilities to Alliance Laundry Systems LLC, a newly formed limited liability company ("Alliance Laundry"). Immediately after the consummation of the transactions, Alliance Laundry became the only direct subsidiary of the Company and succeeded to substantially all of the assets and liabilities of the Company. Subsequent to May 4, 1998, Alliance Laundry comprises all of the operating activities of the Company. The transactions contemplated by the Merger Agreement (the "Transactions") were funded by: (i) $200.0 million of term loan borrowings by Alliance Laundry; (ii) $110.0 million of senior subordinated notes of Alliance Laundry and Alliance Laundry Corporation due in 2008 (substantially all of the amounts in clauses (i) and (ii) were distributed by Alliance Laundry to the Company to fund the Merger and to fund related fees and expenses); (iii) the issuance by the Company of a junior subordinated promissory note in the original principal amount of $9.0 million; (iv) the issuance by the Company of the mandatorily redeemable preferred membership interests with a liquidation value of $6.0 million; (v) the investors' equity contributions by Bain LLC, the BRS Investors and certain members of management of $47.1 million and (vi) retained equity of Raytheon of $3.5 million. Each of the transactions was conditioned upon consummation of each of the others, and consummation of each of the transactions occurred simultaneously. In connection with the Merger, the Company entered into a five year $250.0 million revolving loan agreement, which provides off-balance sheet financing through Alliance Laundry Receivables Warehouse LLC ("ALRW"), its special purpose single member limited liability company, to finance trade receivables and notes receivable related to equipment loans with Lehman Commercial Paper, Inc. (the "Facility Lender"), an affiliate of Lehman Brothers, Inc. (the "Asset Backed Facility"). These financing programs have been and will continue to be structured in a manner that qualifies for off-balance sheet treatment in accordance with generally accepted accounting principles. Alliance Laundry, as servicing agent, retains collection and administrative responsibilities for the accounts and notes sold through the Asset Backed Facility. NOTE 3. NONRECURRING ITEMS The Company entered into retention agreements with certain key executives, managers and commissioned sales people prior to the Merger. For the period ended June 30, 1999, the Company incurred approximately $0.9 million in expense associated with payments under these agreements. Payments under this program were completed in November of 1999. During the fourth quarter of 1999, the Company recorded a $2.3 million restructuring charge, of which $2.1 million was non-cash, associated with the closing of the Company's Madisonville, Kentucky manufacturing facility. A decision was made to close the Madisonville facility and transfer production to the Ripon, Wisconsin manufacturing facility because of the available capacity at the Ripon facility and the operating synergies that will be recognized. The charge includes $1.7 million in employee termination and severance benefit charges, $0.5 million for the estimated loss on fixed assets which were held for disposal, and $0.1 million in miscellaneous costs. The carrying value of assets held for disposal at June 30, 2000 is $1.0 million. 7
Balance at 1999 Utilized December 31, Charge Cash Non-cash 1999 ------------ ------------ ------------ ------------ Write-down of fixed assets.................... $ 485 $ - $ (485) $ - Employee termination and severance benefits... 1,739 (20) (1,640) 79 Other......................................... 31 - - 31 ------------ ------------ ------------ ------------ Total................................... $ 2,255 $ (20) $ (2,125) $ 110 ============ ============ ============ ============ Balance at Balance at December 31, Utilized June 30, 1999 Cash Non-cash Reallocation 2000 ------------ ------------ ------------ ------------ ------------ Write-down of fixed assets.................... $ - $ - $ 50 $ (48) $ 2 Employee termination and severance benefits... 79 (58) (69) 48 - Other......................................... 31 (5) (8) - 18 ------------ ------------ ------------ ------------ ------------ Total................................... $ 110 $ (63) $ (27) $ - $ 20 ============ ============ ============ ============ ============
NOTE 4. INVENTORIES Inventories are stated at cost using the first-in, first-out method but not in excess of net realizable value, and consist of the following (in thousands):
June 30, December 31, 2000 1999 ------------ ------------ (Unaudited) Materials and purchased parts.............................. $ 20,291 $ 14,506 Work in process............................................ 3,382 3,688 Finished goods............................................. 21,515 16,736 Less: inventory reserves................................... (3,876) (3,648) ------------ ------------ $ 41,312 $ 31,282 ============ ============
NOTE 5. CONDENSED FINANCIAL INFORMATION OF ALLIANCE LAUNDRY SYSTEMS LLC As discussed more fully in Note 2, substantially all of the assets and liabilities of the Company were transferred to Alliance Laundry, a wholly-owned subsidiary of the Company, in connection with the Merger. Alliance Laundry is the only direct subsidiary of the Company and comprises all of the Company's operating activities. In connection with the Merger, Alliance Laundry and its wholly-owned subsidiary, Alliance Laundry Corporation, issued the $110 million of senior subordinated notes. Alliance Laundry Corporation was incorporated for the sole purpose of serving as a co-issuer of the senior subordinated notes in order to facilitate their issuance. Alliance Laundry Corporation does not have any substantial operations or assets of any kind. Alliance Laundry Holdings LLC has provided a full and unconditional guarantee of the senior subordinated notes and has no operating activities independent of Alliance 8 Laundry. Separate financial statements of Alliance Laundry are not presented because Company management has determined that they would not be material to investors. Summarized unaudited financial information of Alliance Laundry as of June 30, 2000 and December 31, 2000 and for the three months and six months ended June 30, 2000 and June 30, 1999 is presented below.
June 30, December 31, 2000 1999 ----------- ------------ (Unaudited) Current assets....................................... $ 74.0 $ 75.0 Noncurrent assets.................................... 153.1 144.9 ----------- ------------ $ 227.1 $ 219.9 =========== ============ Current liabilities.................................. $ 55.2 $ 38.2 Long-term debt....................................... 309.0 309.5 Other long-term liabilities.......................... 1.9 1.9 Members' deficit..................................... (139.0) (129.7) ----------- ------------ $ 227.1 $ 219.9 =========== ============ Three Months Ended ------------------------------ June 30, June 30, 2000 1999 ----------- ------------ (Unaudited) (Unaudited) Net sales............................................ $ 75.3 $ 88.1 Gross profit......................................... 23.2 22.8 Selling, general and administrative expense.......... 12.8 10.6 Nonrecurring costs................................... - 0.5 ----------- ------------ Operating income..................................... 10.4 11.7 Interest expense..................................... 8.0 7.5 Other income (expense), net.......................... (0.1) (0.1) ----------- ------------ Income before taxes.................................. $ 2.3 $ 4.1 =========== ============ Six Months Ended ------------------------------ June 30, June 30, 2000 1999 ----------- ------------ (Unaudited) (Unaudited) Net sales............................................ $ 140.9 $ 167.4 Gross profit......................................... 42.3 43.3 Selling, general and administrative expense.......... 23.8 21.1 Nonrecurring costs................................... - 0.9 ----------- ------------ Operating income..................................... 18.5 21.3 Interest expense..................................... 17.2 15.2 Other income (expense), net.......................... (0.1) (0.1) ----------- ------------ Income before taxes.................................. $ 1.2 $ 6.0 =========== ============
9 NOTE 6. COMMITMENTS AND CONTINGENCIES On February 8, 1999, Raytheon commenced an arbitration under the Commercial Arbitration Rules of the American Arbitration Association in Boston, Massachusetts against the Company, seeking damages of $12.2 million plus interest thereon and attorney's fees for breach of the Merger Agreement based on Raytheon's claim for indemnification for a payment made to a third party allegedly on behalf of the Company and Alliance Laundry following the Closing. An arbitration was conducted pursuant to the terms of the Merger Agreement ("Arbitration"). The Company asserted in the Arbitration that Raytheon owed the $12.2 million to the third party and that neither the Company nor Alliance Laundry is liable for such amount. In addition, the Company and Bain LLC filed counterclaims and claims seeking damages in excess of $30 million from Raytheon. On March 31, 2000, the Arbitrators issued their decision. Pursuant to that decision Raytheon prevailed on its claim and the Company and Bain LLC prevailed on its counterclaims. Ultimately, the Company was required to pay Raytheon $6.8 million, including $1.5 million in interest, in full satisfaction of the arbitration award and after offsetting the amount for price adjustments in favor of the Company which had been agreed to during 1999. The award payment was made on April 13, 2000. Of this amount, $9.9 million plus related costs of $0.6 million (of which $0.5 million had been expended as of March 31, 2000) was recorded in the first quarter financial statements as an adjustment of members' deficit, consistent with the original recording of the Merger, which was accounted for as a recapitalization. The price adjustments concluded during 1999 had been previously recorded in the financial statements as of and for the period ended December 31, 1999. The related net interest, including amounts related to prior years, has been included in current year interest expense. Various claims and legal proceedings generally incidental to the normal course of business are pending or threatened against the Company. While the ultimate liability from these proceedings is difficult to determine, in the opinion of management, any additional liability will not have a material effect on the Company's financial position, liquidity or results of operations. NOTE 7. COMPREHENSIVE INCOME Comprehensive income totaled $124,000 and $4,897,000 for the six months ended June 30, 2000 and June 30, 1999, respectively. Total Comprehensive Income for the six months ended June 30, 2000 is comprised entirely of net income. Total Comprehensive Income for the six months ended June 30, 1999 is comprised of net income of $5,090,000 and Other Comprehensive Income (Loss) of ($193,000). Other Comprehensive Income (Loss) in 1999 is comprised entirely of unrealized holding gains and losses on available-for-sale securities. NOTE 8. SEGMENT INFORMATION Based upon the information used by management for making operating decisions and assessing performance, the Company has organized its business into categories based upon products and services broken down primarily by markets. Commercial laundry equipment and service parts, including sales to international markets, are combined to form the commercial laundry segment. Commercial laundry net sales include amounts related to the Company's finance program which supports its commercial laundry operations. The Company's primary measure of operating performance is gross profit which does not include an allocation of any selling or product distribution expenses. Such amounts are reviewed on a consolidated basis by management. In determining gross profit for its operating units, the Company also does not allocate certain manufacturing costs, including manufacturing variances and warranty and service support costs. Gross profit is determined by subtracting cost of sales from net sales. Cost of sales is comprised of the costs of raw materials and component parts, plus costs incurred at the 10 manufacturing plant level, including, but not limited to, labor and related fringe benefits, depreciation, tools, supplies, utilities, property taxes and insurance. The Company does not allocate assets internally in assessing operating performance. Net sales and gross profit as determined by the Company for its operating segments are as follows:
Three Months Ended --------------------------------------------------------------------------- June 30, 2000 June 30, 1999 --------------------------------------- ------------------------------- Net Gross Net Gross Sales Profit Sales Profit ------------------- ---------------- ------------- ------------- Commercial laundry............................. $75,255 $28,695 $67,000 $24,732 Appliance Co. consumer laundry................ - - 21,145 623 ------------------- ---------------- ------------- ------------- $75,255 28,695 $88,145 25,355 =================== ============= Other manufacturing costs...................... (5,455) (2,524) ---------------- ------------- Gross profit as reported.................. $23,240 $22,831 ================ =============
Six Months Ended --------------------------------------------------------------------------- June 30, 2000 June 30, 1999 --------------------------------------- ------------------------------- Net Gross Net Gross Sales Profit Sales Profit ------------------- ---------------- ------------- ------------- Commercial laundry............................. $140,894 $54,096 $127,333 $46,699 Appliance Co. consumer laundry................ - - 40,100 1,112 ------------------- ---------------- ------------- ------------- $140,894 54,096 $167,433 47,811 =================== ============= Other manufacturing costs...................... (11,768) (4,482) ---------------- ------------- Gross profit as reported.................. $42,328 $43,329 ================ =============
NOTE 9. ACQUISITION OF AJAX PRODUCT LINE On March 6, 2000, the Company completed the acquisition of selected assets of American Laundry Machinery Inc.'s pressing and finishing equipment division (d/b/a "Ajax"). Ajax, located in Cincinnati, Ohio, manufactures, designs and markets a line of presses and finishers serving the dry cleaning and industrial laundry markets. The cash consideration was approximately $13.1 million. The Company also assumed selective liabilities of approximately $1.2 million related to the product line and recorded estimated acquisition costs of $0.3 million (of which $0.2 million was expended as of June 30, 2000). Assets acquired and liabilities assumed have been recorded at their estimated fair value, and are subject to adjustment when additional information concerning asset and liability valuations is finalized. The excess of the purchase price over the fair value of the net assets acquired (goodwill) was approximately $9.2 million and is being amortized on a straight-line basis over 20 years. The purchase was financed through the proceeds of trade receivable sales and use of the Revolving Credit Facility. As part of the Ajax acquisition, the Cincinnati facility will be closed, and production will be transferred to the Company's Marianna, Florida manufacturing facility. As such, a $1.0 million reserve was established primarily for employee termination and severance benefit charges. 11 The Ajax acquisition has been accounted for by the purchase method of accounting for business combinations. Accordingly, the accompanying consolidated statements of income include only revenues and expenses of Ajax for the period from March 6, 2000. On a pro-forma basis, this acquisition was not material to the results of operations for the periods presented and, accordingly, such information is not presented. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW The Company believes it is the leading designer, manufacturer and marketer of stand-alone commercial laundry equipment in North America and a leader worldwide. Under the well-known brand names of Speed Queen, UniMac, Huebsch and Ajax, the Company produces a full line of commercial washing machines and dryers with load capacities from 16 to 250 pounds, and presses and finishers used in the dry cleaning market. The Company's 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 laundry facilities of hotels, hospitals, nursing homes and prisons; and (iv) dry cleaners. In addition, during 1999, pursuant to a supply agreement with Appliance Co., the Company supplied consumer washing machines to the consumer appliance business of Appliance Co. for sale at retail. This supply agreement was completed and concluded on September 17, 1999. This discussion and analysis should be read in conjunction with the Financial Statements and Notes thereto included in this report and in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in the Company's Annual Report on Form 10-K (file no. 333-56857) filed with the Securities and Exchange Commission, which includes the audited financial position and operating results of the Company as of and for the year ended December 31, 1999. RESULTS OF OPERATIONS Quarter Ended June 30, 2000 Compared to the Quarter Ended June 30, 1999 The following table sets forth the Company's historical net sales for the periods indicated:
Quarter Ended ------------------------------------ June 30, 2000 June 30, 1999 ---------------- -------------- (Dollars in millions) Net sales Commercial laundry $ 66.5 $ 58.8 Appliance Co. consumer laundry - 21.1 Service parts 8.8 8.2 ---------------- -------------- $ 75.3 $ 88.1 ================ ==============
The following table sets forth certain condensed historical financial data for the Company expressed as a percentage of net sales for each of the periods indicated: 12
Quarter Ended ----------------------------------- June 30, 2000 June 30, 1999 --------------- --------------- Net sales 100.0% 100.0% Cost of sales 69.1% 74.1% Gross profit 30.9% 25.9% Selling, general and administrative expense 17.0% 12.1% Nonrecurring costs - 0.5% Operating income 13.9% 13.3% Net income 2.3% 4.1%
Net sales. Net sales for the quarter ended June 30, 2000 decreased $12.8 million, or 14.6%, to $75.3 million from $88.1 million for the quarter ended June 30, 1999. This decrease, attributable to consumer laundry equipment sales of $21.1 million, was partly offset by increases in commercial laundry sales, $7.7 million, and service part sales, $0.6 million. The decrease in consumer laundry sales was due to the completion and conclusion of the Appliance Co. supply agreement as of September 17, 1999. The increase in commercial laundry sales was due primarily to higher North American equipment sales of $6.4 million, higher international sales of $1.1 million and higher earnings from the Company's off-balance sheet equipment financing program of $0.2 million. The increase in North American equipment sales was primarily due to higher sales for laundromats and multi-housing laundries, and due to the additional sales resulting from the March 6, 2000 acquisition of the Ajax pressing and finishing equipment division. The equipment financing program earnings were higher due to an increase in the amount of loan originations. Gross profit. Gross profit for the quarter ended June 30, 2000 increased $0.4 million, or 1.8%, to $23.2 million from $22.8 million for the quarter ended June 30, 1999. This increase was primarily attributable to manufacturing efficiencies implemented during 1999 and 2000 which were partially offset by under-absorption of overhead previously applied against consumer laundry sales. Gross profit as a percentage of net sales increased to 30.9% for the quarter ended June 30, 2000 from 25.9% for the quarter ended June 30, 1999. The increase in gross profit as a percentage of net sales is attributable to the termination of sales to Appliance Co. which were at margins substantially below that of the continuing business as well as from the manufacturing efficiencies noted above. Selling, general and administrative expense. Selling, general and administrative expenses for the quarter ended June 30, 2000 increased $2.1 million, or 20.2%, to $12.7 million from $10.6 million for the quarter ended June 30, 1999. The increase in selling, general and administrative expenses was primarily due to $0.9 million of expenses related to the relocation of Madisonville, Kentucky production lines to Ripon, Wisconsin and due to incremental selling, general and administrative expenses associated with the Ajax product line. Selling, general and administrative expenses as a percentage of net sales increased to 17.0% for the quarter ended June 30, 2000 from 12.1% for the quarter ended June 30, 1999 as a result of the production line move noted above. 13 Nonrecurring costs. There were no nonrecurring costs for the quarter ended June 30, 2000 as compared to $0.4 million in nonrecurring costs recorded for the quarter ended June 30, 1999. Nonrecurring costs in 1999 were comprised entirely of employee retention costs. Operating income. As a result of the foregoing, operating income for the quarter ended June 30, 2000 decreased $1.3 million, or 11.0%, to $10.5 million from $11.8 million for the quarter ended June 30, 1999. Operating income as a percentage of net sales increased to 13.9% for the quarter ended June 30, 2000 from 13.3% for the quarter ended June 30, 1999. Interest expense. Interest expense for the quarter ended June 30, 2000 increased $0.6 million, or 7.5%, to $8.6 million from $8.0 million for the quarter ended June 30, 1999. The increase is primarily attributable to interest expense on borrowings from the revolving line of credit resulting from the acquisition of the Ajax product line (see note 9 of the financial statements) and from payment of the Raytheon arbitration award (see note 6 of the financial statements). Net income. As a result of the foregoing, net income for the quarter ended June 30, 2000 decreased $1.9 million, or 52.1%, to $1.7 million from $3.6 million for the quarter ended June 30, 1999. Net income as a percentage of net sales decreased to 2.3% for the quarter ended June 30, 2000 from 4.1% for the quarter ended June 30, 1999. Six Months Ended June 30, 2000 Compared to the Six Months Ended June 30, 1999 The following table sets forth the Company's historical net sales for the periods indicated: Six Months Ended ------------------------------------ June 30, 2000 June 30, 1999 --------------- -------------- (Dollars in millions) Net sales Commercial laundry................ $ 123.1 $ 110.5 Appliance Co. consumer laundry.... - 40.1 Service parts..................... 17.8 16.8 ---------------- -------------- $ 140.9 $ 167.4 ================ ============== 14 The following table sets forth certain condensed historical financial data for the Company expressed as a percentage of net sales for each of the periods indicated:
Six Months Ended ----------------------------------- June 30, 2000 June 30, 1999 --------------- --------------- Net sales...................................... 100.0% 100.0% Cost of sales.................................. 70.0% 74.1% Gross profit................................... 30.0% 25.9% Selling, general and administrative expense.... 16.9% 12.7% Nonrecurring costs............................. - 0.5% Operating income............................... 13.1% 12.7% Net income................................. 0.1% 3.0%
Net sales. Net sales for the six months ended June 30, 2000 decreased $26.5 million, or 15.9%, to $140.9 million from $167.4 million for the six months ended June 30, 1999. This decrease, attributable to consumer laundry equipment sales of $40.1 million, was partly offset by increases in commercial laundry sales, $12.6 million, and service part sales, $1.0 million. The decrease in consumer laundry sales was due to the completion and conclusion of the Appliance Co. supply agreement as of September 17, 1999. The increase in commercial laundry sales was due primarily to higher North American equipment sales of $9.7 million, higher international sales of $2.1 million and higher earnings from the Company's off-balance sheet equipment financing program of $0.8 million. The increase in North American equipment sales was primarily due to higher sales for laundromats and multi-housing laundries, and due to the additional sales resulting from the March 6, 2000 acquisition of the Ajax pressing and finishing equipment division. The equipment financing program earnings were higher due to an increase in the amount of loan originations. Gross profit. Gross profit for the six months ended June 30, 2000 decreased $1.0 million, or 2.3%, to $42.3 million from $43.3 million for the six months ended June 30, 1999. This decrease was attributable to the completion of the supply agreement with Appliance Co. on September 17, 1999, which resulted in under-absorption of overhead previously applied against consumer laundry sales. This under-absorption was partially offset by manufacturing efficiencies implemented during 1999 and 2000. Gross profit as a percentage of net sales increased to 30.0% for the six months ended June 30, 2000 from 25.9% for the six months ended June 30, 1999. The increase in gross profit as a percentage of net sales is primarily attributable to the manufacturing efficiencies noted above and higher margins attributable to the increased North American equipment sales as compared to consumer laundry sales. Selling, general and administrative expense. Selling, general and administrative expenses for the six months ended June 30, 2000 increased $2.7 million, or 12.8%, to $23.8 million from $21.1 million for the six months ended June 30, 1999. The increase in selling, general and administrative expenses was primarily due to $2.0 million of expenses related to the relocation of Madisonville, Kentucky production lines to Ripon, Wisconsin and due to incremental selling, general and administrative expenses associated with the Ajax product line. Selling, general and administrative expenses as a percentage of net sales increased to 13.1% for the six months ended June 30, 2000 from 12.7% for the six months ended June 30, 1999 as a result of the production line move noted above. 15 Nonrecurring costs. There were no nonrecurring costs for the six months ended June 30, 2000 as compared to $0.9 million in nonrecurring costs recorded for the six months ended June 30, 1999. Nonrecurring costs in 1999 were comprised entirely of employee retention costs. Operating income. As a result of the foregoing, operating income for the six months ended June 30, 2000 decreased $2.8 million, or 13.2%, to $18.5 million from $21.3 million for the six months ended June 30, 1999. Operating income as a percentage of net sales increased to 13.1% for the six months ended June 30, 2000 from 12.7% for the six months ended June 30, 1999. Interest expense. Interest expense for the six months ended June 30, 2000 increased $2.2 million, or 13.7%, to $18.2 million from $16.0 million for the six months ended June 30, 1999. The increase is attributable to $1.5 million of net interest expense associated with the Raytheon arbitration award, as well as borrowings from the revolving line of credit used in connection with the Raytheon arbitration award (see note 6 of the financial statements) and the acquisition of the Ajax product line (see note 9 of the financial statements). Net income. As a result of the foregoing, net income for the six months ended June 30, 2000 decreased $5.0 million, or 97.6%, to $0.1 million from $5.1 million for the six months ended June 30, 1999. Net income as a percentage of net sales decreased to 0.1% for the six months ended June 30, 2000 from 3.0% for the six months ended June 30, 1999. LIQUIDITY AND CAPITAL RESOURCES In May 1998, Alliance Laundry entered into a credit agreement (the "Senior Credit Facility") with a syndicate of financial institutions (the "Lenders") for which Lehman Brothers, Inc. acted as arranger and Lehman Commercial Paper, Inc. acted as syndication agent. The Senior Credit Facility is comprised of a term loan facility aggregating $200.0 million (the "Term Loan Facility") and a $75.0 million revolving credit facility (the "Revolving Credit Facility"), which was made available in conjunction with the issuance of Alliance Laundry's senior subordinated notes. The Company's principal sources of liquidity are cash flows generated from operations and borrowings under its $75.0 million Revolving Credit Facility. The Company's principal uses of liquidity are to meet debt service requirements, finance the Company's capital expenditures and provide working capital. The Company expects that capital expenditures in 2000 will not exceed $12.0 million. The Company expects the ongoing requirements for debt service, capital expenditures and working capital will be funded by internally generated cash flow and borrowings under the Revolving Credit Facility. As of June 30, 2000, the Company has $338.1 million of combined indebtedness outstanding, consisting of outstanding debt of $200.0 million under the Term Loan Facility and $15.0 million under the Revolving Credit Facility, $110.0 million of senior subordinated notes and $13.1 million of junior subordinated notes, and had $44.5 million of its $75.0 million Revolving Credit Facility available subject to certain limitations under the Senior Credit Facility. After considering such limitations, the Company could have borrowed up to $44.5 million at June 30, 2000 in additional indebtedness under the Revolving Credit Facility. 16 The $200.0 million Term Loan Facility amortizes quarterly and is repayable in the following aggregate annual amounts: Year Amount Due ---- ----------- (Dollars in millions) 2000.............................. $ 0.5 2001.............................. $ 1.0 2002.............................. $ 1.0 2003.............................. $ 20.5 2004.............................. $ 98.5 2005.............................. $ 78.5 The Term Loan Facility is also subject to mandatory prepayment with the proceeds of 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 in 2003. The Company's Asset Backed Facility provides $250.0 million of off-balance sheet financing for trade receivables and equipment loans. The finance programs have been and will continue to be structured in a manner that qualifies for off-balance sheet treatment in accordance with generally accepted accounting principles. It is expected that under the Asset Backed Facility, the Company will continue to act as originator and servicer of the equipment financing promissory notes and the trade receivables. As required by the terms of the Asset Backed Facility, the Company is in the process of completing a securitization transaction for the sale of loans currently held by Alliance Laundry Receivable Warehouse ("ALRW"), a special-purpose single member limited liability company. The Company expects this transaction to be completed during the third quarter and expects to finance its net increase in related residual interests with borrowings under the Revolving Credit Facility. The net effects resulting from the Company's interests in this new securitization transaction will be reflected in financial statements for the period in which the securitization transaction is completed. The Company's ability to make scheduled payments of principal of, or to pay the interest or liquidated damages, if any, on, or to refinance, its indebtedness, or to fund planned capital expenditures, will depend upon its future performance, which, in turn, is subject to general economic, financial, competitive and other factors that are beyond its control. Based upon the current level of operations and anticipated growth, management believes that future cash flow from operations, together with available borrowings under the Revolving Credit Facility, will be adequate to meet the Company's anticipated requirements for capital expenditures, working capital, interest payments and scheduled principal payments. There can be no assurance, however, that the Company's business will continue to generate sufficient cash flow from operations in the future to service its debt and make necessary capital expenditures after satisfying certain liabilities arising in the ordinary course of business. If unable to do so, the Company may be required to refinance all or a portion of its existing debt, to sell assets or to obtain additional financing. There can be no assurance that any such refinancing would be available or that any such sales of assets or additional financing could be obtained. 17 Historical Cash generated from operations for the six months ended June 30, 2000 of $4.7 million was principally derived from the Company's earnings before depreciation and amortization, and increased sales of accounts receivable under the Asset Backed Facility which were partially offset by changes in working capital. The working capital investment in accounts receivable at June 30, 2000 of $22.2 million decreased $11.4 million as compared to the balance of $33.6 million at December 31, 1999, which was primarily attributable to selling more accounts receivable through ALRW. The working capital investment in inventories at June 30, 2000 of $41.3 million increased $10.0 million as compared to the balance of $31.3 million at December 31, 1999. Inventory balances have increased as a result of a $4.0 million increase attributable to inventories acquired through the Ajax acquisition, and temporary increases in raw materials and finished goods during the relocation of the Madisonville, Kentucky production lines to Ripon, Wisconsin. Net cash provided by operating activities for the six months ended June 30, 2000 of $4.7 million increased by $0.1 million as compared to the six months ended June 30, 1999. This increase was primarily due to higher net cash provided by changes in assets and liabilities of $4.8 million, offset by a reduction in net income of $5.0 million for the six months ended June 30, 2000 as compared to the six months ended June 30, 1999. The net cash impact from changes in assets and liabilities for six months ended June 30, 2000 of $4.8 million was largely due to an increase in accounts receivable sold under the Asset Backed Facility. The proceeds of the sale of receivables was utilized largely to finance the March 6, 2000 acquisition of the Ajax pressing and finishing equipment division and to pay the Raytheon award. Capital Expenditures The Company's capital expenditures for the six months ended June 30, 2000 and June 30, 1999 were $2.5 million and $6.0 million, respectively. Capital spending in 2000 was principally oriented toward reducing manufacturing costs and transitioning tumbler production from the Company's Madisonville, Kentucky manufacturing facility to Ripon, Wisconsin (see Note 3), while spending in 1999 was principally oriented toward reducing manufacturing costs and transitioning dryer production from Appliance Co. to the Company's Ripon manufacturing facility. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued and was effective for all fiscal years beginning after June 15, 1999. SFAS No. 133 was subsequently amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of SFAS No. 133," and will now be effective for fiscal years beginning after June 15, 2000, with early adoption permitted. SFAS No. 133, as amended, requires the Company to recognize all derivatives as either assets or liabilities and measure those instruments at fair value. Upon adoption, the Company will be required to report derivative and hedging instruments at fair value in the balance sheet and recognize changes in the fair value of derivatives in net income or other comprehensive income, as appropriate. This statement will be effective for the Company's first quarter of 2001. Given the Company's current derivative and hedging activities, the statement is not expected to have a material effect on the Company's results of operations or financial position. 18 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is potentially exposed to market risk associated with changes in interest and foreign exchange rates. From time to time the Company may enter into derivative financial instruments to hedge its interest rate exposures and to hedge exchange rate fluctuations between United States dollars and foreign currencies. An instrument will be treated as a hedge if it is effective in offsetting the impact of volatility in the Company's underlying exposures. The Company does not enter into derivatives for speculative purposes. There have been no material changes in the Company's market risk exposures as compared to those discussed in the Company's Annual Report on Form 10-K (file no. 333-56857). FORWARD-LOOKING STATEMENTS With the exception of the reported actual results, the information presented herein contains predictions, estimates or other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended, including items specifically discussed in the "Note 6 - Commitments and Contingencies" section of this document. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to differ materially from those expressed or implied by such forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in such forward-looking statements are based on reasonable assumptions, it 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 the Company's products abroad; market acceptance of new and enhanced versions of the Company's products; the impact of substantial leverage and debt service on the Company and other risks listed from time to time in the Company's reports, including but not limited to the Company's Annual Report on Form 10-K (file no. 333-56857). 19 PART II OTHER INFORMATION Item 1. Legal Proceedings. Legal actions relating to Appliance Co. are described in Footnote 6 to the Financial Statements in Part I hereto and are incorporated by reference into Part II. Item 2. Changes in Securities. None. Item 3. Defaults upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K (a) List of Exhibits. 27.1 Financial Data Schedule (b) Reports on Form 8-K. None. 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Alliance Laundry Systems LLC has duly caused this quarterly report to be signed on its behalf by the undersigned, thereto duly authorized, in the city of Ripon, state of Wisconsin, on the 2nd day of August 2000. Signature Title Date --------- ----- ---- /s/ Thomas L'Esperance Chairman and CEO 8/2/2000 - --------------------- ------------ Thomas L'Esperance /s/ Bruce P. Rounds Vice President and Chief Financial Officer 8/2/2000 - --------------------- ------------ Bruce P. Rounds Pursuant to the requirements of the Securities Exchange Act of 1934, Alliance Laundry Corp. has duly caused this quarterly report to be signed on its behalf by the undersigned, thereto duly authorized, in the city of Ripon, state of Wisconsin, on the 2nd day of August 2000. Signature Title Date --------- ----- ---- /s/ Thomas L'Esperance Chairman and CEO 8/2/2000 - --------------------- ------------ Thomas L'Esperance /s/ Bruce P. Rounds Vice President and Chief Financial Officer 8/2/2000 - --------------------- ------------ Bruce P. Rounds Pursuant to the requirements of the Securities Exchange Act of 1934, Alliance Laundry Holdings LLC has duly caused this quarterly report to be signed on its behalf by the undersigned, thereto duly authorized, in the city of Ripon, state of Wisconsin, on the 2nd day of August 2000. Signature Title Date --------- ----- ---- /s/ Thomas L'Esperance Chairman and CEO 8/2/2000 - --------------------- ------------ Thomas L'Esperance /s/ Bruce P. Rounds Vice President and Chief Financial Officer 8/2/2000 - --------------------- ------------ Bruce P. Rounds 21 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001063698 ALLIANCE LAUNDRY HOLDINGS LLC 1,000 6-MOS DEC-31-2000 JUN-30-2000 1,256 0 22,790 (577) 41,312 74,016 178,720 (122,497) 227,054 55,160 323,122 6,000 0 63,886 (222,035) 227,054 140,894 140,894 98,566 98,566 0 205 18,245 144 20 124 0 0 0 124 0 0
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