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8-K - 8-K - Armored AutoGroup Inc.a13-23626_28k.htm

Exhibit 99.1

 

GRAPHIC

 

Armored AutoGroup Inc. (“Armored AutoGroup” or the “Company”) today announced 2013 third quarter financial results.  The Company generated net sales of $71.0 million for the quarter ended September 30, 2013 compared to net sales of $68.3 million for the quarter ended September 30, 2012.  Net sales in the Company’s North American market increased year-over-year by $0.6 million (1 percent) to $50.9 million for the quarter ended September 30, 2013 primarily driven by the Armor All brand which experienced increases across most product lines, most notably in the wipes product line.  Net sales in the Company’s international markets increased 11%  to $20.1 million for the quarter ended September 30, 2013 primarily due to higher sales in Latin American, Asia and EMEA.  The Company reported a net loss of $2.3 million for the quarter ended September 30, 2013.  The Company generated Adjusted EBITDA of $19.1 million for the quarter ended September 30, 2013 compared to Adjusted EBITDA of $14.7 million for the comparable period in 2012.

 

Armored AutoGroup has provided a reconciliation of net earnings (loss) to EBITDA and Adjusted EBITDA in the accompanying EBITDA and Adjusted EBITDA Reconciliation. 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 one of  its debt agreements are tied to these measures.

 

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)

 

 

 

September 30,

 

December 31,

 

 

 

2013

 

2012

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash

 

$

23,732

 

$

4,206

 

Accounts receivable

 

71,816

 

69,602

 

Inventories

 

37,083

 

42,444

 

Other current assets

 

8,865

 

12,891

 

Total current assets

 

141,496

 

129,143

 

 

 

 

 

 

 

Property, plant and equipment

 

29,432

 

31,473

 

Goodwill

 

361,736

 

362,216

 

Intangible assets

 

322,458

 

352,905

 

Deferred financing costs and other assets

 

4,098

 

5,020

 

Total assets

 

$

859,220

 

$

880,757

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDER’S EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

15,720

 

13,158

 

Accrued expenses and other current liabilities

 

31,700

 

28,571

 

Due to Parent

 

745

 

795

 

Due to Clorox

 

3

 

137

 

Current portion of long-term debt

 

125

 

279

 

Total current liabilities

 

48,293

 

42,940

 

 

 

 

 

 

 

Long-term debt

 

553,504

 

553,581

 

Other liability

 

2,500

 

2,500

 

Deferred income taxes

 

92,162

 

105,131

 

Total liabilities

 

696,459

 

704,152

 

 

 

 

 

 

 

Shareholder’s Equity:

 

 

 

 

 

Common stock

 

 

 

Additional paid-in capital

 

260,966

 

260,750

 

Accumulated deficit

 

(93,651

)

(85,585

)

Accumulated other comprehensive loss

 

(4,554

)

1,440

 

Total shareholder’s equity

 

162,761

 

176,605

 

Total liabilities and shareholder’s equity

 

$

859,220

 

$

880,757

 

 



 

Armored AutoGroup Inc.

STATEMENTS OF RESULTS OF OPERATIONS

(In thousands)

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

71,007

 

$

68,348

 

$

225,495

 

$

237,439

 

Cost of products sold

 

38,483

 

39,728

 

121,307

 

126,948

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

32,524

 

28,620

 

104,188

 

110,491

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Selling and administrative expenses

 

9,854

 

10,828

 

29,202

 

34,935

 

Advertising costs

 

6,767

 

7,929

 

24,487

 

27,414

 

Research and development costs

 

626

 

661

 

1,839

 

1,700

 

Amortization of acquired intangible assets

 

9,175

 

9,175

 

27,526

 

27,526

 

Total operating expenses

 

26,422

 

28,593

 

83,054

 

91,575

 

Operating profit

 

6,102

 

27

 

21,134

 

18,916

 

Interest expense

 

12,049

 

12,406

 

35,976

 

36,829

 

Other expense (income), net

 

(68

)

123

 

447

 

166

 

 

 

 

 

 

 

 

 

 

 

Loss before benefit for income taxes

 

(5,879

)

(12,502

)

(15,289

)

(18,079

)

Benefit for income taxes

 

(3,604

)

(2,729

)

(7,222

)

(5,309

)

Net loss

 

$

(2,275

)

$

(9,773

)

$

(8,067

)

$

(12,770

)

 



 

Armored AutoGroup Inc.

STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

Nine months ended September 30,

 

 

 

2013

 

2012

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(8,067

)

$

(12,770

)

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

 

 

 

 

 

Depreciation and amortization

 

35,713

 

35,089

 

Share-based compensation

 

216

 

199

 

Deferred income taxes

 

(12,996

)

(7,614

)

Cash effect of changes in:

 

 

 

 

 

Accounts receivable

 

(623

)

(28,911

)

Inventories

 

6,287

 

(15,146

)

Income taxes

 

3,329

 

(3,172

)

Other current assets

 

499

 

(2,025

)

Book overdraft

 

 

(1,987

)

Accounts payable and accrued liabilities

 

5,079

 

23,462

 

Due Clorox

 

(134

)

11,913

 

Other

 

(771

)

238

 

Net cash provided by (used in) operating activities

 

28,532

 

(724

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

(2,894

)

(6,718

)

Acquistion,net

 

(3,755

)

 

Net cash used in investing activities

 

(6,649

)

(6,718

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Borrowings under revolver

 

23,000

 

46,001

 

Payments on revolver

 

(23,000

)

(33,000

)

Principle payments on term loan

 

(2,250

)

(2,250

)

Payment on advance from Parent

 

(50

)

 

Deferred financing costs

 

 

(350

)

Net cash used in financing activities

 

(2,300

)

10,401

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(57

)

81

 

Net increase (decrease) in cash

 

19,526

 

3,040

 

Cash at beginning of period

 

4,206

 

4,935

 

Cash at end of period

 

$

23,732

 

$

7,975

 

 

 

 

 

 

 

Supplemental cash flow disclosures:

 

 

 

 

 

Cash paid for interest

 

$

26,567

 

$

27,632

 

Cash paid for income taxes

 

$

3,226

 

$

7,791

 

 



 

ARMORED AUTOGROUP INC.

EBITDA AND ADJUSTED EBITDA RECONCILIATION

 

 

 

Nine Month Ended

 

 

 

Sept 30,

 

Sept 30,

 

 

 

2013

 

2012

 

Adjusted EBITDA Reconciliation:

 

 

 

 

 

Net earnings (loss)

 

$

(8,067

)

$

(12,770

)

Interest expense

 

 

35,976

 

 

36,625

 

Provision (benefit) for income taxes

 

 

(6,558

)

 

(5,309

)

Depreciation and amortization expense

 

 

32,751

 

 

32,156

 

EBITDA

 

 

54,102

 

 

50,702

 

Share based compensation (1)

 

 

216

 

 

195

 

Loss on Unrestricted Subsidary

 

 

501

 

 

 

Proforma cost M&A

 

 

 

 

 

Transition Services Agreement (2)

 

 

 

 

820

 

Total acquisition related charges (3)

 

 

1,197

 

 

10,467

 

Excess Warehouse

 

 

 

 

 

Excess Freight

 

 

 

 

 

Excess Supply Chain Startup

 

 

 

 

 

Workforce retention and other transitional charges (4)

 

 

299

 

 

656

 

Sponsor monitoring fees (5)

 

 

781

 

 

851

 

Non-cash write-off of assets (6)

 

 

348

 

 

 

Enterprise Resource Planning implementation (7)

 

 

 

 

3,319

 

Adjusted EBITDA

 

$

58,117

 

$

67,010

 

 

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.  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 the Company’s tax indemnity

 

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