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8-K - 8-K - Armored AutoGroup Inc.a13-9252_18k.htm

Exhibit 99.1

 

GRAPHIC

 

Armored AutoGroup Inc. (“Armored AutoGroup” or the “Company”) today announced 2012 fourth quarter and year end financial results.  The Company generated net sales of $306.5 million for the year ended December 31, 2012 compared to net sales of $281.3 million for the year ended December 31, 2011.  Net sales in the Company’s North American market increased on a year-over-year basis by $19.8 million (9 percent) to $231.9 million for the year ended December 31, 2012.  Net sales in the Company’s international markets increased 8%  to $74.5 million for the year ended December 31, 2012 .  The Company experienced a net loss of $45.8 million for the year ended December 31, 2012 principally due to non-cash charges of $36.7 million for amortization expense and $24.1 million for goodwill impairment.  For the year ended December 31, 2011, the Company’s net loss was $17.7 million, inclusive of non-cash amortization expense of $36.7 million and no goodwill impairment charge.   The Company generated Adjusted EBITDA of $83.6 million for the year ended December 31, 2012 compared to Adjusted EBITDA of $91.3 million for the comparable period in 2011.  The decrease in year-over-year Adjusted EBITDA is principally due to higher advertising and promotion expense incurred to support the Company’s Armor All and STP brands and higher selling and administration costs consistent with the Company’s standalone operating structure.

 

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

 

For the quarter ended December 31, 2012, the Company generated net sales of $69.0 compared to net sales of $59.5 for the comparable prior year period, an increase of 14%.  Adjusted EBITDA increased from $15,831 for the quarter ended December 31, 2011 to $16,600 in the quarter ended December 31, 2012 due to increased sales partially offset by higher adverstising and promotion costs for the comparable 2011 quarter.

 

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, air freshners, leather care products and washes is designed to clean, shine, refresh 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 China 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 10-K Annual Report dated April 1, 2013.

 

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 inability to implement our business strategy in a timely and effective manner; global market and economic conditions; competition from other companies; the loss of significant customers or customer relations; our reliance on complex information systems; the cost of capital expenditures required for our businesses; levels of customers’ advertising and marketing spending, which may be impacted by economic factors and general market conditions; developments in technology and related changes in consumer behavior;  fluctuations in raw material prices; our substantial indebtedness and our ability to service our debt;  fluctuations in currency exchange rates; unfavorable political conditions in international markets and risks relating to concentrations in international operations; our reliance on a limited number of suppliers; the seasonality of our business ; 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)

 

 

 

December 31,
2012

 

December 31,
2011

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash

 

$

4,206

 

$

4,935

 

Accounts receivable

 

69,602

 

54,300

 

Inventories

 

42,444

 

37,250

 

Due from Clorox

 

 

11,727

 

Other current assets

 

12,891

 

9,937

 

Total current assets

 

129,143

 

118,149

 

 

 

 

 

 

 

Property, plant and equipment

 

31,473

 

29,905

 

Goodwill

 

362,216

 

384,793

 

Intangible assets

 

352,905

 

388,175

 

Deferred financing costs and other assets

 

5,020

 

6,454

 

Total assets

 

$

880,757

 

$

927,476

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDER’S EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Book overdraft

 

$

 

$

1,987

 

Accounts payable

 

13,158

 

8,606

 

Accrued expenses and other current liabilities

 

28,571

 

22,614

 

Income taxes payable

 

 

1,821

 

Due to Parent

 

795

 

795

 

Due to Clorox

 

137

 

 

Current portion of long-term debt, less discount

 

279

 

470

 

Total current liabilities

 

42,940

 

36,293

 

 

 

 

 

 

 

Long-term debt, less discount and current portion

 

553,581

 

553,861

 

Other liability

 

2,500

 

2,500

 

Deferred income taxes

 

105,131

 

116,489

 

Total liabilities

 

704,152

 

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

 

260,750

 

260,484

 

Accumulated deficit

 

(85,585

)

(39,784

)

Accumulated other comprehensive loss

 

1,440

 

(2,367

)

Total shareholder’s equity

 

176,605

 

218,333

 

Total liabilities and shareholder’s equity

 

$

880,757

 

$

927,476

 

 



 

Armored AutoGroup Inc.

 

STATEMENTS OF RESULTS OF OPERATIONS

 

(In thousands)

 

 

 

Year ended December 31,

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Net sales

 

$

306,468

 

$

281,317

 

Cost of products sold

 

167,570

 

153,114

 

Cost of products sold - acquisition related

 

 

4,439

 

 

 

 

 

 

 

Gross profit

 

138,898

 

123,764

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Selling and administrative expenses

 

48,306

 

40,240

 

Advertising costs

 

31,072

 

24,699

 

Research and development costs

 

2,211

 

2,307

 

Amortization of acquired intangible assets

 

36,701

 

36,701

 

Goodwill impairment

 

24,117

 

 

Acquisition-related charges

 

 

1,020

 

Total operating expenses

 

142,407

 

104,967

 

Operating profit

 

(3,509

)

18,797

 

Non-operating expenses (income):

 

 

 

 

 

Interest expense

 

48,887

 

48,090

 

Other expense, net

 

445

 

80

 

 

 

 

 

 

 

Loss before benefit for income taxes

 

(52,841

)

(29,373

)

Benefit for income taxes

 

(7,040

)

(11,705

)

Net loss

 

$

(45,801

)

$

(17,668

)

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

Foreign currency translation gain (loss)

 

3,807

 

(2,007

)

Comprehensive loss

 

$

(41,994

)

$

(19,675

)

 



 

Armored AutoGroup Inc.

 

STATEMENTS OF CASH FLOWS

 

(In thousands)

 

 

 

Year ended December 31,

 

 

 

2012

 

2011

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(45,801

)

$

(17,668

)

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

 

 

 

 

 

Depreciation and amortization

 

46,813

 

45,262

 

Goodwill impairment

 

24,117

 

 

Share-based compensation

 

266

 

266

 

Deferred income taxes

 

(10,612

)

(14,126

)

Other

 

157

 

375

 

Cash effect of changes in:

 

 

 

 

 

Accounts receivable

 

(15,302

)

(18,934

)

Inventories

 

(5,194

)

972

 

Due from Clorox

 

11,864

 

(10,053

)

Other current assets

 

(753

)

(476

)

Book overdraft

 

(1,987

)

1,987

 

Accounts payable and accrued liabilities

 

10,509

 

2,299

 

Income taxes

 

(4,436

)

306

 

Other

 

603

 

 

Net cash provided by (used in) operating activities

 

10,244

 

(9,790

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

(7,698

)

(13,011

)

Net cash used in investing activities

 

(7,698

)

(13,011

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Borrowings under revolver

 

64,001

 

29,500

 

Payments on revolver

 

(64,001

)

(29,500

)

Principle payments on term loan

 

(3,000

)

(3,000

)

Advance from Parent

 

 

795

 

Deferred financing costs

 

(350

)

(670

)

Net cash used in financing activities

 

(3,350

)

(2,875

)

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

75

 

(1,090

)

Net increase (decrease) in cash

 

(729

)

(26,766

)

Cash at beginning of period

 

4,935

 

31,701

 

Cash at end of period

 

$

4,206

 

$

4,935

 

 

 

 

 

 

 

Supplemental cash flow disclosures:

 

 

 

 

 

Cash paid for interest

 

$

45,314

 

$

40,866

 

Cash paid for income taxes

 

$

8,207

 

$

2,116

 

 



 

ARMORED AUTOGROUP INC.

 

EBITDA AND ADJUSTED EBITDA RECONCILIATION

 

Armored AutoGroup

Adjusted EBITDA by quarter

($ in 000s)

 

($ in thousands)

 

2012

 

2011

 

Net earnings (loss)

 

$

(45,801

)

$

(17,668

)

Interest expense

 

48,887

 

47,746

 

Provision (benefit) for income taxes

 

(6,676

)

(11,705

)

Depreciation and amortization expense

 

43,055

 

41,426

 

Goodwill Impairment

 

24,117

 

 

 

EBITDA

 

63,582

 

59,799

 

Share based compensation (1)

 

261

 

265

 

Transition Services Agreement (2)

 

820

 

10,673

 

Total acquisition related charges (3)

 

13,527

 

16,455

 

Workforce retention and other transitional charges (4)

 

658

 

1,213

 

Sponsor monitoring fees (5)

 

1,101

 

1,114

 

Non-cash write-off of assets (6)

 

 

265

 

Enterprise Resource Planning implementation (7)

 

3,661

 

1,497

 

Aggregate Adjustments to EBITDA

 

20,028

 

31,482

 

Adjusted EBITDA

 

$

83,609

 

$

91,281

 

 

EBITDA is defined as net earnings before interest expense (net), income taxes, depreciation and amortization including goodwill impairment, 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. Of the aggregate adjustments to EBITDA of $20,028  in the year-ended December 31, 2012, $7,007 reduced the Company’s gross profit and $13,021 million were included in Selling and Administrative Expenses.  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 comparable to 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.