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8-K - 8-K - Armored AutoGroup Inc.a12-27443_28k.htm

Exhibit 99.1

 

GRAPHIC

 

For Immediate Release

 

ARMORED AUTOGROUP REPORTS RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 2012

 

DANBURY, CT, November 19, 2012 — Armored AutoGroup, Inc. (“Armored AutoGroup” or the “Company”) today announced third quarter financial results.  The Company’s net sales of $68.3 million and $237.4 million for the three and nine month periods ended September 30, 2012, respectively, increased as compared to net sales of $61.8 million and $221.8 million for the three and nine month periods ended September 30, 2011, respectively. Net sales in the Company’s North American market increased on a year-over-year basis by $5.1 million (11 percent) to $50.1 million for the three months ended September 30, 2012 and by $13.9 million (8 percent) to $183.3 million for the nine months ended September 30, 2012.   Net sales in the Company’s international markets increased 8%  to $18.3 million for the three months ended September 30, 2012 from $16.9 million for the comparable period in 2011, and were up 3 percent for the nine month period ended September 30, 2012 to $54.1 million from $52.4 million for the nine month period ended September 30, 2011.  The Company generated Adjusted EBITDA of $14.7 million and $67.4 million for the three and nine month periods ended September 30, 2012, respectively, compared to Adjusted EBITDA of $21.7 million and $75.5 million for the three and nine month periods ended September 30, 2011 respectively.

 

Armored AutoGroup has provided a reconciliation of net earnings (loss) to EBITDA and Adjusted EBITDA in the accompanying EBITDA and Adjusted EBITDA Reconciliation.

 

ABOUT ARMORED AUTOGROUP

 

Armored AutoGroup Inc., headquartered in Danbury, CT, is primarily comprised of the Armor All® and STP® brands. The current product line of Armor All protectants, wipes, tire and wheel care products, glass cleaners, leather care products and washes is designed to clean, shine and protect interior and exterior automobile surfaces. The offering of STP oil and fuel additives, functional fluids and automotive appearance products has a broad customer base ranging from professional racers to car enthusiasts and ‘‘Do-it-Yourselfers’’. The Company has a diversified geographic footprint with direct operations in the United States, Canada, Australia, Mexico and the U.K. and distributor relationships in approximately 50 countries.  For more information, please visit www.armorall.com and www.stp.com.

 

On November 5, 2010, affiliates of Avista Capital Holdings, L.P. (‘‘Avista’’) acquired certain equity interests, assets and liabilities of The Clorox Company’s (‘‘Clorox’’) Auto-Care Products Business, excluding the Prestone and YPF licensed brands, that operated through various Clorox wholly-owned or controlled legal entities throughout the world pursuant to the terms of a Purchase and Sale Agreement, dated September 21, 2010 (the ‘‘Acquisition’’). After completion of the Acquisition, the Company was renamed the’’Armored AutoGroup.” Armored AutoGroup Parent, Inc. (‘‘AAG Parent’’ or ‘‘Parent’’) indirectly owns all of our issued and outstanding capital stock through its direct subsidiary and our direct parent, Armored AutoGroup Intermediate Inc.

 

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

 

The information herein may contain forward-looking statements including, without limitation, statements concerning our operations, our economic performance and financial condition.  Forward-looking statements are not historical facts, but only predictions and generally can be identified by use of statements that include such words as “may”, “might”, “will”, “should”, “estimate”, “project”, “plan”, “anticipate”, “expect”, “intend”,

 



 

“outlook”, “believe” and other similar expressions that are intended to identify forward-looking statements and information.  These forward-looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. These risks and uncertainties include, without limitation, those identified under “Risk Factors” in our Form S-4 Registration Statement, Amendment No. 3 (the “2012 Prospectus”) dated July 10, 2012.

 

The following list represents some, but not necessarily all, of the factors that could cause actual results to differ from historical results or those anticipated or predicted by these forward-looking statements:  our substantial indebtedness and our ability to service our debt; our inability to implement our business strategy in a timely and effective manner; global market and economic conditions; levels of customers’ advertising and marketing spending, which may be impacted by economic factors and general market conditions; competition from other companies; fluctuations in raw material prices; unfavorable political conditions in international markets and risks relating to concentrations in international operations; fluctuations in currency exchange rates; our reliance on a limited number of suppliers; the seasonality of our business; the loss of significant customers or customer relations; our reliance on complex information systems; the cost of capital expenditures required for our businesses; developments in technology and related changes in consumer behavior; the reliance of our businesses on limited production facilities; labor disturbances; environmental obligations and liabilities; an adverse outcome of pending or threatened litigation; the enforcement of intellectual property rights; and the impact of changes in applicable law and regulations.

 

We caution you that the foregoing list of important factors is not exclusive.  In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements may not in fact occur.  Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly or revise any of them in light of new information, future events or otherwise, except as required by law.  Comparison of results for current and prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

 

The following information contains financial measures other than in accordance with generally accepted accounting principles and should not be considered in isolation from or as a substitute for the Company’s historical consolidated financial statements.  The Company presents this information because management uses it to monitor and evaluate the Company’s ongoing operating results and trends, and the covenants in its debt agreements are tied to these measures.  The Company believes this information provides investors with an understanding of the Company’s operating performance over comparative periods.

 



 

Armored AutoGroup Inc.

 

BALANCE SHEETS

 

(In thousands, except share and per share amounts)

 

 

 

September 30,
2012

 

December 31,
2011

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash

 

$

7,975

 

$

4,935

 

Accounts receivable

 

83,211

 

54,300

 

Inventories

 

52,396

 

37,250

 

Due from Clorox

 

 

11,727

 

Other current assets

 

13,844

 

9,937

 

Total current assets

 

157,426

 

118,149

 

 

 

 

 

 

 

Property, plant and equipment

 

31,932

 

29,905

 

Goodwill

 

386,943

 

384,793

 

Intangible assets

 

362,657

 

388,175

 

Deferred financing costs and other assets

 

5,473

 

6,454

 

Total assets

 

$

944,431

 

$

927,476

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDER’S EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Book overdraft

 

$

 

$

1,987

 

Accounts payable

 

13,820

 

8,606

 

Accrued expenses and other current liabilities

 

40,862

 

22,614

 

Income taxes payable

 

 

1,821

 

Due to Parent

 

795

 

795

 

Due to Clorox

 

186

 

 

Revolving credit loan

 

13,001

 

 

Current portion of long-term debt, less discount

 

329

 

470

 

Total current liabilities

 

68,993

 

36,293

 

 

 

 

 

 

 

Long-term debt, less discount and current portion

 

553,630

 

553,861

 

Other liability

 

2,500

 

2,500

 

Deferred income taxes

 

109,057

 

116,489

 

Total liabilities

 

734,180

 

709,143

 

Commitments and contingencies (Note 6)

 

 

 

 

 

Shareholder’s Equity:

 

 

 

 

 

Common stock ($0.01 par value, 1,000 shares authorized, issued and outstanding at September 30, 2012 and December 31, 2011

 

 

 

Additional paid-in capital

 

260,671

 

260,484

 

Accumulated deficit

 

(52,553

)

(39,784

)

Accumulated other comprehensive loss

 

2,133

 

(2,367

)

Total shareholder’s equity

 

210,251

 

218,333

 

Total liabilities and shareholder’s equity

 

$

944,431

 

$

927,476

 

 



 

Armored AutoGroup Inc.

 

STATEMENTS OF OPERATIONS

 

(In thousands)

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net sales

 

$

68,348

 

$

61,826

 

$

237,439

 

$

221,808

 

Cost of products sold

 

39,728

 

33,814

 

126,948

 

115,086

 

Cost of products sold - acquisition related

 

 

 

 

4,439

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

28,620

 

28,012

 

110,491

 

102,283

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

10,828

 

8,304

 

34,935

 

28,033

 

Advertising costs

 

7,929

 

4,149

 

27,414

 

22,823

 

Research and development costs

 

661

 

397

 

1,700

 

1,807

 

Amortization of acquired intangible assets

 

9,175

 

9,175

 

27,526

 

27,526

 

Acquisition-related charges

 

 

45

 

 

994

 

Total operating expenses

 

28,593

 

22,070

 

91,575

 

81,183

 

Operating profit

 

27

 

5,942

 

18,916

 

21,100

 

Non-operating expenses (income):

 

 

 

 

 

 

 

 

 

Interest expense

 

12,406

 

12,048

 

36,829

 

35,981

 

Other expense, net

 

123

 

550

 

166

 

280

 

 

 

 

 

 

 

 

 

 

 

Loss before benefit for income taxes

 

(12,502

)

(6,656

)

(18,079

)

(15,161

)

Benefit for income taxes

 

(2,729

)

(3,100

)

(5,309

)

(6,429

)

Net loss

 

$

(9,773

)

$

(3,556

)

$

(12,770

)

$

(8,732

)

 



 

Armored AutoGroup Inc.

 

STATEMENTS OF CASH FLOWS

 

(In thousands)

 

 

 

Nine months ended September 30,

 

 

 

2012

 

2011

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(12,770

)

$

(8,732

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

35,089

 

33,550

 

Share-based compensation

 

199

 

199

 

Deferred income taxes

 

(7,614

)

(11,129

)

Other

 

141

 

 

Cash effect of changes in:

 

 

 

 

 

Accounts receivable

 

(28,911

)

(18,872

)

Inventories

 

(15,146

)

(10,143

)

Due from Clorox

 

11,913

 

(8,007

)

Other current assets

 

(2,025

)

874

 

Book overdraft

 

(1,987

)

 

Accounts payable and accrued liabilities

 

23,462

 

13,383

 

Income taxes

 

(3,172

)

1,666

 

Other

 

97

 

233

 

Net cash used in operating activities

 

(724

)

(6,978

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

(6,718

)

(8,213

)

Net cash used in investing activities

 

(6,718

)

(8,213

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Borrowings under revolver

 

46,001

 

21,500

 

Payments on revolver

 

(33,000

)

(21,500

)

Principle payments on term loan

 

(2,250

)

(2,250

)

Advance from Parent

 

 

795

 

Deferred financing costs

 

(350

)

(670

)

Net cash provided by (used in) financing activities

 

10,401

 

(2,125

)

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

81

 

128

 

Net increase (decrease) in cash

 

3,040

 

(17,188

)

Cash at beginning of period

 

4,935

 

31,701

 

Cash at end of period

 

$

7,975

 

$

14,513

 

 

 

 

 

 

 

Supplemental cash flow disclosures:

 

 

 

 

 

Cash paid for interest

 

$

27,632

 

$

23,369

 

Cash paid for income taxes

 

$

7,791

 

$

1,681

 

 



 

ARMORED AUTOGROUP INC.

EBITDA AND ADJUSTED EBITDA RECONCILIATION

 

 

 

Nine Months Ended

 

 

 

Sept 30,

 

Sept 30,

 

($ in thousands)

 

2012

 

2011

 

 

 

 

 

 

 

Net earnings (loss)

 

$

(12,770

)

$

(8,732

)

Interest expense

 

36,996

 

35,769

 

Provision (benefit) for income taxes

 

(5,309

)

(6,429

)

Depreciation and amortization expense

 

32,156

 

30,695

 

EBITDA

 

51,073

 

51,303

 

 

 

 

 

 

 

Share based compensation (1)

 

195

 

199

 

Transition Services Agreement (2)

 

820

 

9,661

 

Total acquisition related charges (3)

 

10,467

 

11,247

 

Workforce retention and other transitional charges (4)

 

656

 

1,138

 

Avista monitoring fees (5)

 

851

 

827

 

Non-cash write-off of assets (6)

 

 

260

 

Enterprise Resource Planning implementation (7)

 

3,319

 

815

 

Adjusted EBITDA

 

$

67,381

 

$

75,450

 

 

EBITDA is defined as net earnings before interest expense (net), income taxes, depreciation and amortization, and is used by management to measure operating performance of the business. ‘‘Adjusted EBITDA’’ is calculated by adding to or subtracting from EBITDA items of expense and income as described below. We also use EBITDA and Adjusted EBITDA as a measure to calculate certain incentive-based compensation and certain financial covenants related to our Credit Facility and as a factor in our tangible and intangible asset impairment test. EBITDA and Adjusted EBITDA are supplemental measures of our performance and our ability to service indebtedness that are not required by, or presented in accordance with, GAAP. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered as alternatives to net earnings or other performance measures derived in accordance with GAAP, or as alternatives to cash flow from operating activities as measures of our liquidity. In addition, our measurements of EBITDA and Adjusted EBITDA may not be comparableto similarly titled measures of other companies.

 


(1)                                 Non-cash compensation expenses include share-based compensation expense related to options granted under the Company’s 2010 Stock Option Plan.

 

(2)                                 In conjunction with the Acquisition agreement, the Company entered into a shared services agreement (“Transition Services Agreement” or “TSA”) with Clorox whereby Clorox provides certain services, equipment and office space to the Company. Reflects costs incurred under the Transition Services Agreement with Clorox.

 

(3)                                 Reflects an adjustment for acquisition-related charges, the incremental cost of transitioning to a stand-alone basis and proforma cost savings.

 

(4)                                 Reflects one-time retention charges and other one-time compensation costs.

 

(5)                                 Amounts related to a monitoring agreement with Avista Capital Holdings, L.P..

 

(6)                                 Reflects amounts for non-cash write-off of certain machinery and equipment.

 

(7)                                 Reflects one-time non-capitalizable costs related to the implementation of our new Enterprise Resource Planning software.