UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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 Holdings LLC
Form 10-Q
For The Quarter Ended March 31, 2001
Table of Contents
Page No.
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PART I Financial Information
Item 1. Financial Statements
Condensed Balance Sheets as of March 31, 2001 and
December 31, 2000.............................................................. 3
Condensed Statements of Operations for the periods ended March
31, 2001 and March 31, 2000.................................................... 4
Condensed Statements of Cash Flows for the periods ended March
31, 2001 and March 31, 2000.................................................... 5
Notes to Unaudited Condensed Financial Statements............................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................................... 9
PART II Other Information
Item 1. Legal Proceedings.............................................................. 14
Item 2. Changes in Securities.......................................................... 14
Item 3. Defaults upon Senior Securities................................................ 14
Item 4. Submission of Matters to a Vote of Security Holders............................ 14
Item 5. Other Information.............................................................. 14
Item 6. Exhibits and Reports on Form 8-K............................................... 14
Signatures.................................................................................... 15
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED BALANCE SHEETS
(in thousands)
March 31, December 31,
2001 2000
--------- ---------
Assets (Unaudited)
Current assets:
Cash .................................. $ 1,278 $ 5,091
Cash-restricted ....................... 854 494
Accounts receivable, net .............. 14,379 10,575
Inventories, net ...................... 37,121 37,462
Prepaid expenses and other ............ 8,866 8,825
--------- ---------
Total current assets ............. 62,498 62,447
Notes receivable ......................... 20,297 10,208
Property, plant and equipment, net ....... 52,311 53,857
Goodwill, net ............................ 56,956 57,327
Debt issuance costs, net ................. 9,956 10,583
Other assets ............................. 15,455 18,335
--------- ---------
Total assets ..................... $ 217,473 $ 212,757
========= =========
Liabilities and Members' Deficit
Current liabilities:
Current portion of long-term debt ..... $ 1,055 $ 1,036
Accounts payable ...................... 12,229 8,755
Finance program obligation ............ 3,294 3,121
Revolving credit facility ............. 14,000 12,000
Other current liabilities ............. 20,280 18,466
--------- ---------
Total current liabilities ........ 50,858 43,378
Long-term debt:
Senior credit facility ................ 198,250 198,500
Senior subordinated notes ............. 110,000 110,000
Junior subordinated note .............. 14,941 14,343
Other long-term debt .................. 715 726
Other long-term liabilities .............. 1,695 1,671
--------- ---------
Total liabilities ................ 376,459 368,618
Mandatorily redeemable preferred equity... 6,000 6,000
Members' deficit ......................... (164,986) (161,861)
--------- ---------
Total liabilities and
members' deficit ................ $ 217,473 $ 212,757
========= =========
3
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED STATEMENTS OF OPERATIONS
(in thousands)
Three Months Ended
--------------------
March 31, March 31,
2001 2000
-------- --------
(Unaudited)
Net revenues:
Commercial laundry ....................... $ 53,175 $ 57,138
Service parts ............................ 9,491 9,176
-------- --------
62,666 66,314
Cost of sales ............................. 46,642 49,147
-------- --------
Gross profit .............................. 16,024 17,167
Selling, general and administrative expense 7,471 9,132
-------- --------
Operating income ........................ 8,553 8,035
Interest expense .......................... 9,673 9,640
Other income, net ......................... 46 3
-------- --------
Net loss ................................ $ (1,074) $ (1,602)
======== ========
4
ALLIANCE LAUNDRY HOLDINGS LLC
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
-----------------------
March 31, March 31,
2001 2000
--------- ----------
(Unaudited)
Cash flows from operating activities:
Net loss ................................................................... $ (1,074) $ (1,602)
Adjustments to reconcile net loss to net cash
provided by operating activities; excluding the effects of the
acquisition opening balance sheet:
Depreciation and amortization ....................................... 4,182 4,303
Non-cash interest ................................................... 1,739 507
Gain on sale of property, plant and equipment ....................... (46) (3)
Changes in assets and liabilities:
Accounts and notes receivable .................................... (13,893) 11,954
Inventories ...................................................... 341 (6,888)
Other assets ..................................................... (87) (2,289)
Accounts payable ................................................. 3,474 2,094
Finance program obligation ....................................... (187) 152
Other liabilities ................................................ 1,270 (1,884)
------- ---------
Net cash provided by (used in) operating activities ................. (4,281) 6,344
------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment .............................. (1,342) (1,226)
Acquisition of business ................................................. -- (13,356)
Proceeds on disposal of property, plant and equipment ................... 60 5
------- ---------
Net cash used in investing activities ................................. (1,282) (14,577)
------- ---------
Cash flows from financing activities:
Net principal payments on long-term debt ................................ (250) --
Net borrowings on revolving line of credit .............................. 2,000 8,000
Distribution to Raytheon and related transaction costs .................. -- (465)
------- ---------
Net cash provided by financing activities ............................. 1,750 7,535
------- ---------
Decrease in cash .............................................................. (3,813) (698)
Cash at beginning of quarter .................................................. 5,091 3,028
------- ---------
Cash at end of quarter ........................................................ $ 1,278 $ 2,330
======= =========
Supplemental disclosure of cash flow information:
Cash paid for interest .................................................. $ 4,774 $ 4,387
Non-cash transactions:
Recapitalization price adjustment payable ............................. -- (10,042)
5
Notes to Unaudited Condensed Financial Statements
NOTE 1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The unaudited financial statements as of and for the quarter ended March
31, 2001 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.
The Company adopted Statement of Financial Accounting Standards No. 133
("FAS 133"), "Accounting for Derivative Instruments and Hedging Activities" on
January 1, 2001. In accordance with the transition provisions of FAS 133, the
Company recorded a cumulative-effect-type gain adjustment of $0.7 million in
other comprehensive income (loss) in members' deficit to recognize at fair value
its interest rate swap arrangements at January 1, 2001. The Company expects to
reclassify in earnings during 2001 approximately $0.6 million of the transition
adjustment that was recorded in other comprehensive income (loss). For the
three months ended March 31, 2001, the Company recognized a loss of $1.3 million
reflecting the changes in the fair values of its interest rate swaps and a gain
of $0.2 million for the reclassification of the transition adjustment as
discussed above. The resulting loss and gain were recorded in interest expense
in the statements of operations.
During the fourth quarter of 2000, the Company adopted the provisions of
the Emerging Issues Task Force ("EITF") Issue No. 00-10 "Accounting for Shipping
and Handling Fees and Costs." In accordance with the provisions of EITF 00-10,
certain shipping and handling fees and costs which the Company had previously
recorded on a net basis as a component of selling, general and administrative
expenses are reflected in net revenues and cost of goods sold as appropriate.
Prior year amounts have been reclassified in the accompanying statements of
operations to conform with the requirements of EITF 00-10.
During the fourth quarter of 2000, the Company adopted the provisions of
the Emerging Issues Task Force ("EITF") Issue No. 00-14 "Accounting for Certain
Sales Incentives." In accordance with the provisions of EITF 00-14, certain
sales incentive costs which the Company had previously recorded as a component
of selling, general and administrative expenses are reflected in net revenues.
Prior year amounts have been reclassified in the accompanying statements of
operations to conform with the requirements of EITF 00-14.
Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
6
This report on Form 10-Q for the quarter ended March 31, 2001 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, 2000.
NOTE 2. 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):
March 31, December 31,
2001 2000
---------- ------------
(Unaudited)
Materials and purchased parts $ 12,835 $ 13,250
Work in process ............. 4,533 4,907
Finished goods .............. 22,149 21,895
Less: inventory reserves .... (2,396) (2,590)
-------- --------
$ 37,121 $ 37,462
======== ========
NOTE 3. COMMITMENTS AND CONTINGENCIES
On February 8, 1999, the Company's prior owner, Raytheon Company
("Raytheon") commenced an arbitration under the Commercial Arbitration Rules of
the American Arbitration Association in Boston, Massachusetts against the
Company (the "Raytheon Arbitration"), seeking damages of $12.2 million plus
interest thereon and attorney's fees based on Raytheon's claim for
indemnification for a payment made to a third party allegedly on behalf of the
Company and Alliance Laundry Systems LLC ("Alliance Laundry"). The Company
asserted in the Raytheon 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 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 prevailed on its counterclaims. Ultimately the Company was required
to pay Raytheon $6.8 million, including 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. After considering certain price adjustments previously
recorded in the financial statements as of and for the period ended December 31,
1999, the Company recorded $9.9 million plus related costs of $0.6 million in
the first quarter 2000 financial statements as an adjustment of members'
deficit. This treatment is consistent with the original recording of the May 5,
1998 Agreement and Plan of Merger which was accounted for as a recapitalization.
The related net interest, including amounts related to prior years, was included
in interest expense in the first quarter 2000 financial statements.
In September 1999, Juan Carlos Lopez pursued an arbitration against
Alliance Laundry Sociedad Anonima, ("ALSA") a foreign subsidiary of Alliance
Laundry Systems LLC, under UNCITRAL rules in Buenos Aires, Argentina, seeking
in pertinent part, to be paid fees arising from a Consulting Agreement,
7
and indemnification for loss of profits in Argentina and Brazil, plus damages
for pain and suffering. An arbitration was conducted by an "ad-hoc" panel (the
"Lopez Arbitration"), during which ALSA contended that Juan Carlos Lopez failed
to fulfill responsibilities under the Consulting Agreement and was therefore not
entitled to the fees, and that ALSA was not liable for loss of profits either in
Argentina or Brazil, nor for an indemnification for pain and suffering. On April
3, 2001, the Lopez Arbitration was concluded. The arbitration panel awarded
Argentine Pesos $1,408,900 ($1.4 million U.S. dollars), plus nine percent
interest from September 6, 1999, plus ten percent over this principal and
interest amount as moral damages, plus certain fees and costs, while rejecting
other claims of plaintiff. The Company does not believe this arbitration award
will have a material affect on the Company's operations, in as much as ALSA is a
foreign subsidiary and is responsible for its own debts and obligations. The
remaining investment on the Company's financial statements is not material as
this operation was discontinued in the fourth quarter of 1998, at which time the
Company's investment in ALSA was written down to the value of certain remaining
assets. Under the terms of the award, any such payments would have to be
forthcoming from the assets of ALSA.
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 affect
on the Company's financial position, liquidity or results of operations.
NOTE 4. COMPREHENSIVE LOSS
Comprehensive loss for the three months ended March 31, 2001 and 2000
consist of the following (in thousands):
Three Months Ended
-----------------------
March 31, March 31,
2001 2000
-------- -----------
Comprehensive loss:
Net loss $(1,074) $(1,062)
Other comprehensive income (loss)
Net unrealized holding loss on residual interests (2,616) --
Unrealized gain on interest rate swap 564 --
-------- ---------
Comprehensive loss $(3,126) $(1,062)
======== =========
NOTE 5. ACQUISITION OF AJAX PRODUCT LINE
On March 6, 2000, the Company completed the acquisition of selected
assets of American Laundry Machinery Inc.'s press 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 drycleaning 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 acquisition costs of $0.3
million. Assets acquired and liabilities assumed have been recorded at their
estimated fair value. The excess of the purchase price over the fair value of
the net assets acquired (goodwill) was approximately $11.1 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
8
of the Revolving Credit Facility. As part of the Ajax acquisition, the
Cincinnati facility was closed, and production was transferred to the Company's
Marianna, Florida manufacturing facility. As such, a $1.4 million reserve was
established in the acquisition opening balance sheet primarily for employee
termination and severance benefit charges.
The Ajax acquisition has been accounted for by the purchase method of
accounting for business combinations. Accordingly, the accompanying statements
of operations include only revenue 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 as well as presses and finishing
equipment. 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.
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, 2000.
RESULTS OF OPERATIONS
The following table sets forth the Company's historical net revenues for the
periods indicated:
Quarter Ended
--------------------
March 31, March 31,
2001 2000
-------- -------
(Dollars in millions)
Net revenues:
Commercial laundry..... $ 53.2 $ 57.1
Service parts.......... 9.5 9.2
-------- -------
$ 62.7 $ 66.3
======== =======
9
The following table sets forth certain condensed historical financial data for
the Company expressed as a percentage of net revenues for each of the periods
indicated:
Quarter Ended
-------------------
March 31, March 31,
2001 2000
--------- ---------
Net revenues .............................. 100.0% 100.0%
Cost of sales ............................. 74.4% 74.1%
Gross profit .............................. 25.6% 25.9%
Selling, general and administrative expense 11.9% 13.8%
Operating income .......................... 13.6% 12.1%
Net loss ............................. (1.7%) (2.4%)
Net revenues. Net revenues for the quarter ended March 31, 2001 decreased
$3.6 million, or 5.5%, to $62.7 million from $66.3 million for the quarter ended
March 31, 2000. This decrease, attributable to lower commercial laundry revenue
of $3.9 million, was partly offset by increases in service parts revenue of $0.3
million. The decrease in commercial laundry revenue was due primarily to lower
North American equipment revenue of $2.3 million, and lower international
revenue of $1.6 million. The decrease in North American equipment revenue was
primarily due to lower revenue from laundromats and on-premise laundries, partly
offset by additional revenue resulting from the acquisition of the Ajax pressing
and finishing equipment product line on March 6, 2000.
Gross profit. Gross profit for the quarter ended March 31, 2001 decreased
$1.2 million, or 6.7%, to $16.0 million from $17.2 million for the quarter ended
March 31, 2000. This decrease was attributable to the lower sales volume as
discussed above. Gross profit as a percentage of net revenues decreased to 25.6%
for the quarter ended March 31, 2001 from 25.9% for the quarter ended March 31,
2000.
Selling, general and administrative expense. Selling, general and
administrative expenses for the quarter ended March 31, 2001 decreased $1.6
million, or 18.2%, to $7.5 million from $9.1 million for the quarter ended March
31, 2000. The decrease in selling, general and administrative expenses was
primarily attributable to one-time expenses in 2000 of $1.4 million relating to
the relocation of tumbler manufacturing to Ripon, Wisconsin from Madisonville,
Kentucky. Selling, general and administrative expenses as a percentage of net
revenues decreased to 11.9% for the quarter ended March 31, 2001 from 13.8% for
the quarter ended March 31, 2000.
Operating income. As a result of the foregoing, operating income for the
quarter ended March 31, 2001 increased $0.6 million, or 6.4%, to $8.6 million
from $8.0 for the quarter ended March 31, 2001. Operating income as a percentage
of net revenues increased to 13.6% for the quarter ended March 31, 2001 from
12.1% for the quarter ended March 31, 2000.
Interest expense. Interest expense for the quarter ended March 31, 2001
increased $0.1 million, or 0.3%, to $9.7 million from $9.6 million for the
quarter ended March 31, 2000. The increase is attributable to the non-cash mark-
to-market adjustment of the Company's interest rate swap agreements,
10
$1.1 million, and higher borrowings under the Company's Revolving Credit
Facility, which were partially offset by a one-time net interest expense in 2000
of $1.5 million associated with the Raytheon Arbitration award.
Net loss. As a result of the foregoing, net loss for the quarter ended
March 31, 2001 decreased $0.5 million, or 33.0%, to $1.1 million as compared to
$1.6 million for the quarter ended March 31, 2000. Net loss as a percentage of
net revenues decreased to (1.7%) for the quarter ended March 31, 2001 from
(2.4%) for the quarter ended March 31, 2000.
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 2001 will not exceed $10.0 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 March 31, 2001, the Company has $339.0 million of combined
indebtedness outstanding, consisting of outstanding debt of $199.3 million under
the Term Loan Facility and $14.0 million under the Revolving Credit Facility,
$110.0 million of senior subordinated notes and $14.9 million of junior
subordinated notes, and $0.8 million of borrowings pursuant to a Wisconsin
Community Development Block Grant Agreement. The Company had $50.2 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 $12.9 million at March 31,
2001 in additional indebtedness under the Revolving Credit Facility.
The $199.3 million Term Loan Facility amortizes quarterly and is repayable
in the following aggregate annual amounts:
Year Amount Due
---- (Dollars in
millions)
2001............... $ 0.8
2002............... $ 1.0
2003............... $20.5
2004............... $98.5
2005............... $78.5
11
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.
The Company's ability to make scheduled payments of principal, 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.
Historical
Cash used in operations for the three months ended March 31, 2001 of $4.3
million was principally derived from changes in working capital, lower sales of
accounts receivable under the Asset Backed Facility, and an increase in
ineligible loans under the Asset Backed Facility, partially offset by an
increase in accounts payable and cash generated from operations. The working
capital investment in accounts receivable at March 31, 2001 of $14.4 million
increased $3.8 million as compared to the balance of $10.6 million at December
31, 2000, which was primarily attributable to selling less accounts receivable
through Alliance Laundry Receivable Warehouse ("ALRW"), a special-purpose single
member limited liability company. The working capital investment in notes
receivable at March 31, 2001 of $20.3 million increased $10.1 million as
compared to the balance of $10.2 million at December 31, 2000, which was
primarily attributable to the retained interest on loans sold through ALRW, and
the increase in ineligible loans under the Asset Backed Facility. The investment
in accounts payable at March 31, 2001 of $12.2 million increased $3.4 million as
compared to the balance of $8.8 million at December 31, 2000. The accounts
payable balance at March 31, 2001 reflected a higher level of raw material
purchases in March as compared to December. Cash generated by operations of $4.8
million is attributed to the net loss of ($1.1) million, offset by non-cash
expenses from depreciation, amortization and interest of $5.9 million.
Net cash used in operating activities for the quarter ended March 31, 2001
of $4.3 million increased by $10.6 million as compared to the quarter ended
March 31, 2000. This increase was primarily due to higher net cash used in
changes in assets and liabilities of $12.2 million, offset by an increase in net
cash provided by operations (net loss adjusted for depreciation, amortization,
non-cash interest and gains on sale of property, plant and equiptment) of $1.6
million for the quarter ended March 31, 2001 as compared to the quarter ended
March 31, 2000. The net cash impact from changes in assets and
12
liabilities for the quarter ended March 31, 2001 of $12.2 million was largely
due to lower sales of accounts receivable under the Asset Backed Facility, and
the increase in ineligible loans under the Asset Backed Facility.
Capital Expenditures
The Company's capital expenditures for the three months ended March 31,
2001 and March 31, 2000 were $1.3 million and $1.2 million, respectively.
Capital spending in 2001 was principally oriented toward reducing manufacturing
costs and transitioning press and finishing equipment production to the
Company's Marianna, Florida manufacturing facility (see Note 6), while 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.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In October 2000, the Emerging Issues Task Force (EITF) reached a consensus
on Issue No. 99-20, "Recognition of Interest Income and Impairment on Purchased
and Retained Beneficial Interests in Securitized Financial Assets." The
consensus concludes on how a transferor that retains an interest in a
securitization transaction, or an enterprise that purchases a beneficial
interest in securitized financial assets, should account for interest income and
impairment. Issue No. 99-20 is required to be adopted by the Company in the
second quarter of 2001. The Company is currently evaluating the effects of Issue
No. 99-20 on its financial statements.
In October 2000, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, as replacement
of SFAS No. 125." The Statement revises certain aspects of the current standards
for accounting for securitizations and other transfers of financial assets and
collateral, and requires certain new and expanded disclosures. The Statement is
effective for transfers and servicing of financial assets occurring after March
31, 2001. The Company is in the process of assessing the effects of SFAS No. 140
on its financial statements.
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,
13
including items specifically discussed in the "Note 3 - 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).
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
Legal actions relating to the Lopez Arbitration are described in
Footnote 3 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. None.
(b) Reports on Form 8-K. None.
14
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 May 2001.
Signature Title Date
- --------- ----- ----
Chairman and CEO
- ---------------------- ----------------
Thomas L'Esperance
Vice President - Chief Financial Officer
- ----------------------
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 May 2001.
Signature Title Date
- --------- ----- ----
Chairman and CEO
- ----------------------- ----------------
Thomas L'Esperance
Vice President - Chief Financial Officer
- ----------------------- ----------------
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 May 2001.
Signature Title Date
- --------- ----- ----
Chairman and CEO ----------------
- --------------------
Thomas L'Esperance
Vice President - Chief Financial Officer
- -------------------- ----------------
Bruce P. Rounds
15