# Ames True Temper announces 4th quarter results



## bontai Joe (Sep 16, 2003)

Press Release Source: Ames True Temper, Inc. 


Ames True Temper Reports Fourth Quarter Results
Wednesday December 1, 8:05 am ET 


CAMP HILL, Pa., Dec. 1 /PRNewswire/ -- ATT Holding Co., parent of Ames True Temper, Inc., reported today the results of the Company's fiscal fourth quarter ended September 25, 2004.
On June 28, 2004 an affiliate of Castle Harlan, Inc., a New York private- equity investment firm, completed the acquisition of ATT Holding Co., and its affiliates, in a transaction that was valued at approximately $380 million. This sale resulted in a $45 million increase in the carrying value of inventory and property, plant and equipment to the fair market value, as required by U.S. generally accepted accounting principles ("GAAP").

Fourth Quarter Results (13-week Period Ended September 25, 2004)

Net sales for the fiscal 2004 13-week fourth quarter were $83.0 million, versus $83.1 million for the comparable period in fiscal 2003. Adjusted net income (which excludes costs incurred as a result of the sale of the Company to Castle Harlan and is calculated on attached table) was $0.3 million for the fourth quarter of fiscal 2004, compared to $2.0 million in the fourth quarter of fiscal 2003. Net loss under GAAP for the fourth quarter of fiscal 2004 was $7.8 million, compared to GAAP net income of $2.8 million for the fourth quarter of fiscal 2003. Adjusted EBITDA (which is reconciled to net income on the attached table) for the fiscal 2004 fourth quarter was $6.7 million, compared to $9.2 million for fiscal 2003 fourth quarter.

"We have been challenged by the significant increases in commodity costs. We continue to explore opportunities to reduce costs and increase our selling prices to offset this commodity inflation. To date we have initiated two price increases, one effective August 1 and another effective October 1, 2004," said Rich Dell, President and CEO.

Judy Schuchart, VP of Finance and CFO, noted that during the fourth quarter, in connection with the sale of the Company, the Company was required, by GAAP, to increase the value of certain assets up to fair market value. The effect of these increases was a reduction in gross margin for the fourth quarter of $10.4 million for the inventory step-up and increased depreciation.

Full Year Results

Net sales for the combined fiscal year 2004 were $438.5 million, an 8 percent increase over $407.4 million for fiscal 2003. Adjusted net income on a comparative basis for fiscal year 2004 was $19.1 million, compared to GAAP net income of $16.6 million, or a 15 percent increase over fiscal year 2003. Net income under GAAP for the combined fiscal year 2004 was $11.6 million. Adjusted EBITDA for the combined fiscal year 2004 was $54.7 million, or a 9 percent increase over $50.2 million for fiscal year 2003. The combined fiscal year 2004 includes the 39-week period ended June 27, 2004 under the predecessor company and the 13 weeks ended September 25, 2004.

"We were pleased with our full year fiscal 2004 top line sales growth of 8% and adjusted EBITDA growth of 9%. We are excited about our new product opportunities for 2005 and continue to pursue our successful blended manufacturing strategy," Dell commented.

Ames True Temper, Inc. is a leading North American manufacturer and marketer of non-powered lawn and garden tools and accessories.

Forward-Looking Statements

This press release includes forward-looking statements. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements. Forward-looking statements involve risks and uncertainties faced by Ames including, but not limited to, economic, competitive, governmental and technological factors outside the control of Ames that may cause actual results to differ materially from the forward-looking statements. These factors, risks and uncertainties include, among others, the following: 

* Our liquidity and capital resources;
* Sales levels to existing and new customers;
* Increased concentration of our customers;
* Seasonality and adverse weather conditions;
* Competitive pressures and trends;
* Changing consumer preferences;
* New product and customer initiatives;
* Risks relating to foreign sourcing and foreign operations and
availability of raw materials;
* Our ability to successfully consummate and integrate acquisitions; and
* General economic conditions.


Our actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements. We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on our results of operations and financial condition. We do not intend, and we undertake no obligation, to update any forward-looking statement. 

ATT Holding Co.
Condensed Consolidated Balance Sheets
(In thousands)

September 25, September 27,
2004 2003

Assets
Current assets:
Cash and cash equivalents $1,250 $1,688
Trade receivables, net 57,904 51,023
Inventories 98,217 77,051
Deferred taxes 4,888 10,199
Other current assets 6,289 4,639
Total current assets 168,548 144,600

Property, plant and equipment, net 63,677 31,228
Pension asset 7,072 22,761
Intangibles, net 82,291 16,407
Goodwill 147,325 9,810
Other noncurrent assets 12,412 3,275
Total assets $481,325 $228,081

Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $28,926 $24,555
Accrued payroll and related taxes 3,593 3,425
Accrued interest payable 4,804 1,501
Accrued expenses and other current
liabilities 21,881 20,713
Revolving loan 6,300 1,941
Current portion of long-term debt 1,400 13,794
Total current liabilities 66,904 65,929

Deferred taxes 24,098 11,077
Long-term debt 288,600 62,753
Other liabilities 10,334 4,149
Total liabilities 389,936 143,908

Stockholders' equity:
Preferred stock - -
Common stock - -
Additional paid-in capital 110,500 63,543
Predecessor basis adjustment (13,539) -
Retained (deficit) earnings (7,820) 18,120
Accumulated other comprehensive
income 2,248 2,510
Total stockholders' equity 91,389 84,173
Total liabilities and stockholders'
equity $481,325 $228,081


ATT Holding Co.
Condensed Consolidated Statement of Income
(In thousands)

Adjusted
Thirteen weeks Thirteen weeks
ended ended
September 25, September 25,
2004 2004
(unaudited)

Net sales $83,044 100.0% $83,044 100.0%

Cost of goods sold 73,009 87.9% 73,009 87.9%
Less inventory write-up (a) - 0.0% (10,069) -12.1%
Change in depreciation (b) - 0.0% (315) -0.4%
Gross profit 10,035 12.1% 20,419 24.6%

Selling, general, and administrative
expense 16,572 20.0% 16,572 20.0%
Less increased management fee (c) - 0.0% (162) -0.2%
Gain on disposal of fixed assets (7) 0.0% (7) 0.0%
Amortization of intangible assets 477 0.6% 477 0.6%
Plus decreased amortization (b) - 0.0% 563 0.7%
Special Charges (12) 0.0% (12) 0.0%
Operating income (6,995) -8.4% 2,988 3.6%

Interest expense 5,899 7.1% 5,899 7.1%
Less increased interest (d) - 0.0% (3,398) -4.1%
Other income (36) 0.0% (36) 0.0%
Income before taxes (12,858) -15.5% 523 0.6%

Income tax (benefit) expense (5,038) -6.1% (5,038) -6.1%
Tax effect of adjustments (e) - 0.0% 5,243 6.3%
Net income $(7,820) -9.4% $318 0.4%


 Adjusted
Thirteen weeks Thirteen weeks
ended ended
September 27, September 27,
2003 2003
(unaudited) (unaudited)

Net sales $83,098 100.0% $83,098 100.0%

Cost of goods sold 59,817 72.0% 59,817 72.0%
Less inventory write-up (a) - 0.0% - 0.0%
Change in depreciation (b) - 0.0% 1,391 1.7%
Gross profit 23,281 28.0% 21,890 26.3%

Selling, general, and administrative
expense 15,953 19.2% 15,953 19.2%
Less increased management fee (c) - 0.0% - 0.0%
Gain on disposal of fixed assets (619) -0.7% (619) -0.7%
Amortization of intangible assets 1,063 1.3% 1,063 1.3%
Plus decreased amortization (b) - 0.0% - 0.0%
Special Charges - 0.0% - 0.0%
Operating income 6,884 8.3% 5,493 6.6%

Interest expense 2,499 3.0% 2,499 3.0%
Less increased interest (d) - 0.0% - 0.0%
Other income (300) -0.4% (300) -0.4%
Income before taxes 4,685 5.6% 3,294 4.0%

Income tax (benefit) expense 1,912 2.3% 1,912 2.3%
Tax effect of adjustments (e) - 0.0% (568) -0.7%
Net income $2,773 3.3% $1,950 2.3%

(a) We are required by GAAP to adjust inventory to fair market value for
each acquisition. These amounts represent additional costs of goods
sold as a result of these adjustments.

(b) In the thirteen weeks ended September 25, 2004, we incurred
additional depreciation as a result of the write-up of assets to fair
market value as required under GAAP, the amortization decreased as a
result of the valuation and the lives of the intangible assets. In
the thirteen weeks ended September 27, 2004, there was a reduction of
$1.4 million to depreciation expense as a result of a change in
estimate of capital spending.

(c) Consists of increased management fees to Castle Harlan compared to
management fees paid to Wind Point Partners.

(d) As a result of the sale of the Company, our capital structure changed
to include a significant amount of long-term debt. This resulted in
increased interest expense of $3.4 million.

(e) Represents the change in tax expense as a result of the adjustments.


ATT Holding Co.
Condensed Consolidated Statement of Income
(In thousands)

Combined Adjusted Combined
Fifty-two Fifty-two weeks Fiscal Year
weeks ended ended ended
September 25, September 25, September 27,
2004, 2004 2003
(unaudited) (unaudited)

Net sales $438,487  100.0% $438,487 100.0% $407,426 100.0%

Cost of goods sold 329,257 75.1% 329,257 75.1% 294,487 72.3%
Less inventory
write-up (a) - 0.0% (10,069) -2.3% - 0.0%
Change in
depreciation (b) - 0.0% (315) -0.1% - 0.0%
Gross profit 109,230 24.9% 119,614 27.3% 112,939 27.7%

Selling, general,
and administrative
expense 75,380 17.2% 75,380 17.2% 73,142 18.0%
Less increased
management fee (c) - 0.0% (162) 0.0% - 0.0%
Gain on disposal of
fixed assets (4,793) -1.1% (4,793) -1.1% (880) -0.2%
Amortization of
intangible assets 3,780 0.9% 3,780 0.9% 3,508 0.9%
Plus decreased
amortization (b) - 0.0% 563 0.1% - 0.0%
Special Charges 787 0.2% 787 0.2% 797 0.2%
Operating income 34,076 7.8% 44,059 10.0% 36,372 8.9%

Interest expense 13,462 3.1% 13,462 3.1% 10,377 2.5%
Less increased
interest (d) - 0.0% (3,398) -0.8% - 0.0%
Other expense
(income) 163 0.0% 163 0.0% (1,065) -0.3%
Income before taxes
(e) 20,451 4.7% 33,832 7.7% 27,060 6.6%

Income tax expense 8,890 2.0% 8,890 2.0% 10,495 2.6%
Tax effect of
adjustments - 0.0% 5,817 1.3% - 0.0%
Net income $11,561 2.6% $19,125 4.4% $16,565 4.1%

(a) We are required by GAAP to adjust inventory to fair market value for
each acquisition. These amounts represent additional costs of goods
sold as a result of these adjustments.

(b) We incurred additional depreciation as a result of the write-up of
assets to fair market value as required under GAAP, the amortization
decreased as a result of the valuation and the lives of the
intangible assets.

(c) Consists of increased management fees to Castle Harlan compared to
management fees paid to Wind Point Partners.

(d) As a result of the sale of the Company, our capital structure changed
to include a significant amount of long-term debt. This resulted in
increased interest expense of $3.4 million.

(e) Represents the change in tax expense as a result of the adjustments.


ATT Holding Co.
Reconciliation of Net Income to Adjusted EBITDA
(In thousands)
(Unaudited)

Thirteen weeks Thirteen weeks
ended ended
September 25, 2004 September 27, 2003

Net income $(7,820) $2,773

Depreciation of property, plant
and equipment 2,626 927
Amortization of intangible assets 477 1,063
Other expense (income) (36) (300)
Gain on disposal of fixed assets (7) (619)
Interest expense 5,899 2,499
Income tax (benefit) expense (5,038) 1,912
EBITDA (3,899) 8,255

Adjustments to EBITDA
Special charges (a) (12) -
Inventory write-up (b) 10,069 339
Equity sponsor fees and other
expenses (c) 557 615
Adjusted EBITDA (d) $6,715 $9,209

(a) In fiscal 2004, we incurred certain non-capitalizable transaction
costs.

(b) We are required by GAAP to adjust inventory to fair market value for
each acquisition. These amounts represent additional costs of goods
sold as a result of these adjustments.

(c) Consists of management fees paid to Wind Point Partners, fees paid to
lenders under our existing revolving loan facility primarily related
to the unused portion thereof, non-cash (income) expense related to
our pension plan and non-cash charges recorded in accordance with
SFAS 13 due to the expensing of escalating rent on a straight-line
basis. During the thirteen weeks ended September 25, 2004, we also
incurred management fees payable to Castle Harlan.

(d) "EBITDA" is calculated as net (loss) income before income tax
expense, interest expense, other expense (income) and gain on
disposal of fixed assets plus depreciation and amortization. Adjusted
EBITDA is EBITDA adjusted for management fees, and non-recurring
items. Adjusted EBITDA is not intended to represent cash flow from
operations as defined by GAAP and should not be used as an
alternative to net income as an indicator of operating performance or
to cash flow as a measure of liquidity. EBITDA and Adjusted EBITDA
is a basis upon which our management assesses financial performance
and covenants in our new senior credit facility are tied to ratios
based on this measure. While EBITDA and adjusted EBITDA are
frequently used as a measure of operations and the ability to meet
debt service requirements, they are not necessarily comparable to
other similarly titled captions of other companies due to potential
inconsistencies in the method of calculation.


ATT Holding Co.
Reconciliation of Net Income to Adjusted EBITDA
(In thousands)
(Unaudited)

Combined
Fifty-two weeks Fiscal year
ended ended
September 25, 2004 September 27, 2003

Net income $11,561 $16,565

Depreciation of property, plant and
equipment 8,579 7,485
Amortization of intangible assets 3,780 3,508
Other expense (income) 163 (1,065)
Gain on disposal of fixed assets (4,793) (880)
Interest expense 13,462 10,377
Income taxes 8,890 10,495
EBITDA 41,642 46,485

Adjustments to EBITDA
Special charges (a) 787 797
Inventory write-up (b) 10,159 892
Equity sponsor fees and other
expenses (c) 2,106 2,018
Adjusted EBITDA (d) $54,694 $50,192

(a) In fiscal 2004, we incurred certain non-capitalizable transaction
costs. In fiscal 2003, we incurred a $0.8 million special charge as
a result of medical expenses related to an employee.

(b) We are required by GAAP to adjust inventory to fair market value for
each acquisition. These amounts represent additional costs of goods
sold as a result of these adjustments.

(c) Consists of management fees paid to Wind Point Partners, fees paid to
lenders under our existing revolving loan facility primarily related
to the unused portion thereof, non-cash (income) expense related to
our pension plan and non-cash charges recorded in accordance with
SFAS 13 due to the expensing of escalating rent on a straight-line
basis. During the thirteen weeks ended September 25, 2004, we also
incurred management fees payable to Castle Harlan.

(d) "EBITDA" is calculated as net (loss) income before income tax
expense, interest expense, other expense (income) and gain on
disposal of fixed assets plus depreciation and amortization. Adjusted
EBITDA is EBITDA adjusted for management fees, and non-recurring
items. Adjusted EBITDA is not intended to represent cash flow from
operations as defined by GAAP and should not be used as an
alternative to net income as an indicator of operating performance or
to cash flow as a measure of liquidity. EBITDA and Adjusted EBITDA
is a basis upon which our management assesses financial performance
and covenants in our new senior credit facility are tied to ratios
based on this measure. While EBITDA and adjusted EBITDA are
frequently used as a measure of operations and the ability to meet
debt service requirements, they are not necessarily comparable to
other similarly titled captions of other companies due to potential
inconsistencies in the method of calculation.




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Source: Ames True Temper, Inc.


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