Ames True Temper Reports Third Quarter Fiscal 2010 Results

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Aug 05, 2010, 04:46 ET

CAMP HILL, Pa., Aug. 5 /PRNewswire/ -- ATT Holding Co., parent of Ames True Temper, Inc., reported today the results of Q3 2010 (thirteen week period ended July 3, 2010).

Third Quarter Fiscal 2010 Results

Net sales for Q3 2010 were $123.4 million, a 5.1% decrease over $130.0 million in Q3 2009 (thirteen week period ended June 27, 2009). Net income for Q3 2010 was $8.3 million, compared to net income of $9.2 million for Q3 2009. Adjusted EBITDA (which is reconciled to net income on the attached table) for Q3 2010 was $22.6 million compared to $16.5 million for Q3 2009.

"Adjusted EBITDA improved again in Q3 as we continue to focus on our initiatives to improve the bottom-line in an economic climate that is still challenging," stated President and CEO Duane Greenly.

Our revolving loan had a zero balance at July 3, 2010, compared to a balance of $32.0 million at June 27, 2009. Availability under our revolving loan was $87.0 million at July 3, 2010.

"We are proud of the team effort that resulted in achieving a zero balance for the first time on the revolving credit line," stated CFO Dave Nuti.

Year-to-Date Fiscal 2010 Results

Net sales for YTD 2010 (thirty-nine week period ended July 3, 2010) were $349.1 million, a 4.3% decrease compared to $364.7 million for YTD 2009 (thirty-nine week period ended June 27, 2009). Net income for YTD 2010 was $17.7 million, compared to net income of $1.2 million for YTD 2009. Adjusted EBITDA (which is reconciled to net income on the attached table) for YTD 2010 was $60.7 million compared to $48.8 million for YTD 2009.

Ames True Temper, Inc. is a global provider of non-powered landscaping products that make work easier for homeowners and professionals.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws. Forward-looking statements may include the words "may," "will," "plans," "estimates," "anticipates," "believes," "expects," "intends" and similar expressions. Although the Company believes that such statements are based on reasonable assumptions, these forward-looking statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected or assumed in its forward-looking statements. These factors, risks and uncertainties include, among others, the following:

We depend on a small number of customers for a significant portion of our business;

Our results of operations may be adversely impacted by macroeconomic events;

Reliance on third party suppliers and manufacturers may impair our ability to meet customer demands;

If we are unable to obtain raw materials for our products at favorable prices it could adversely impact our operating performance;

We are subject to risks associated with our foreign operations;

We are subject to risks associated with our operations in China;

Unseasonable weather could have a negative impact on our business and financial results;

Our lawn and garden sales are highly seasonal which could impact our cash flow and operating results;

We may not be able to acquire complementary lawn and garden product manufacturers or brands; in addition, our acquisition strategy may negatively impact our operating results, divert management's attention from operating our core business, and expose us to other risks;

Our industry is highly competitive and we may not be able to compete successfully;

Further consolidation in the retail industry may adversely affect our profitability;

A failure to successfully introduce new products could result in a reduction in sales and floor space at retailers that carry our products;

The products that we manufacture could expose us to product liability claims;

Our ability to pay our debt or seek alternative financing may be adversely impacted;

Environmental health and safety laws, ordinances, and regulations impose risks and costs on us;

We depend on the service of key individuals, the loss of any of which could materially harm our business;

Unionized employees could strike or participate in a work stoppage; and

We may be required to record impairment charges for goodwill, indefinite-lived intangible assets and other long-lived assets.

The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, the forward-looking statements. The Company can give no assurances that any of the events anticipated by or described in the forward-looking statements will occur or, if any of them do, what impact they will have on the business, results of operations and financial condition. The Company does not intend, and undertakes no obligation, to update any forward-looking statement.

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


		July 3,	October 3,
		2010	2009

	Assets
	Current assets:
	Cash and cash equivalents	$ 30,435	$ 33,609
	Trade receivables, net	58,544	42,449
	Inventories	103,085	90,305
	Prepaid expenses and other current assets	7,429	6,315
	Total current assets	199,493	172,678

	Property, plant and equipment, net	39,250	44,239
	Intangibles, net	52,620	53,681
	Goodwill	57,835	57,494
	Other noncurrent assets	5,731	6,531
	Total assets	$ 354,929	$ 334,623

	Liabilities and stockholder's deficit
	Current liabilities:
	Trade payables	$ 29,227	$ 18,214
	Accrued interest payable	8,864	5,392
	Accrued expenses and other current liabilities	28,960	26,642
	Revolving loan	-	17,500
	Current portion of long-term debt and capital lease obligations	103	489
	Total current liabilities	67,154	68,237

	Deferred income taxes	17,490	13,672
	Long-term debt	299,931	299,791
	Accrued retirement benefits	51,837	51,836
	Other liabilities	11,963	12,661
	Total liabilities	448,375	446,197
	Commitments and contingencies
	Stockholder's deficit:
	Preferred stock	-	-
	Common stock	-	-
	Additional paid-in capital	111,174	111,168
	Predecessor basis adjustment	(13,539)	(13,539)
	Accumulated deficit	(149,614)	(167,272)
	Accumulated other comprehensive loss	(41,467)	(41,931)
	Total stockholder's deficit	(93,446)	(111,574)
	Total liabilities and stockholder's deficit	$ 354,929	$ 334,623

ATT Holding Co.
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)


		Thirteen week		Thirteen week
		period ended		period ended
		July 3, 2010		June 27, 2009

	Net sales	$ 123,360	100.0%	$ 130,036	100.0%

	Cost of goods sold	80,813	65.5%	96,362	74.1%
	Gross profit	42,547	34.5%	33,674	25.9%

	Selling, general and administrative expenses	24,803	20.1%	21,843	16.8%
	Loss on disposal of fixed assets	128	0.1%	599	0.5%
	Amortization of intangible assets	300	0.2%	302	0.2%
	Impairment charges	300	0.2%	451	0.3%
	Operating income	17,016	13.8%	10,479	8.1%

	Interest expense	6,630	5.4%	7,085	5.4%
	Other income	(790)	-0.6%	(6,793)	-5.2%
	Income before income taxes	11,176	9.1%	10,187	7.8%

	Income tax expense	2,925	2.4%	941	0.7%
	Net income	$ 8,251	6.7%	$ 9,246	7.1%

ATT Holding Co.
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)


		Thirty-nine week		Thirty-nine week
		period ended		period ended
		July 3, 2010		June 27, 2009

	Net sales	$ 349,138	100.0%	$ 364,663	100.0%

	Cost of goods sold	237,619	68.1%	268,301	73.6%
	Gross profit	111,519	31.9%	96,362	26.4%

	Selling, general and administrative expenses	64,474	18.5%	62,143	17.0%
	(Gain) loss on disposal of fixed assets	(29)	0.0%	901	0.2%
	Amortization of intangible assets	909	0.3%	911	0.2%
	Impairment charges	300	0.1%	927	0.3%
	Operating income	45,865	13.1%	31,480	8.6%

	Interest expense	20,112	5.8%	22,420	6.1%
	Other expense	1,102	0.3%	5,643	1.5%
	Income before income taxes	24,651	7.1%	3,417	0.9%

	Income tax expense	6,993	2.0%	2,242	0.6%
	Net income	$ 17,658	5.1%	$ 1,175	0.3%

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


		Thirteen week	Thirteen week
		period ended	period ended
		July 3, 2010	June 27, 2009

	Net income	$ 8,251	$ 9,246

	Depreciation of property, plant and equipment	3,173	3,882
	Amortization of intangible assets	300	302
	Interest expense	6,630	7,085
	Income tax expense	2,925	941
	EBITDA (a)	21,279	21,456

	Adjustments to EBITDA:
	Equity sponsor fees and other expenses (b)	1,207	569
	Impairment charges (c)	300	451
	Loss on disposal of fixed assets (d)	128	599
	Net unrealized gains (e)	(320)	(6,533)
	Adjusted EBITDA (a)	22,594	16,542

	Adjustments to Adjusted EBITDA:
	Idle facility expenses (f)	1,194	742
	Merger and acquisition related expenses (g)	1,301	-
	Liability insurance for discontinued products (h)	159	159
	Net realized gains (i)	(470)	(263)
	Other	3	449
	Target EBITDA (a)	$ 24,781	$ 17,629


	(a) "EBITDA" is calculated as net income plus income tax expense, interest expense, depreciation and amortization. "Adjusted EBITDA" is EBITDA adjusted as indicated below. "Target EBITDA" is Adjusted EBITDA further adjusted as indicated below. EBITDA, Adjusted EBITDA and Target EBITDA are not intended to represent cash flow from operations as defined by U.S. 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 are a basis upon which our management assesses financial performance and covenants in our Revolving Loan are tied to ratios based on this measure. During Q3 2009, Adjusted EBITDA as defined by our Revolving Loan was amended to exclude non-recurring gains. Accordingly, non-recurring gains are presented as adjustments to EBITDA. 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. Target EBITDA reflects certain adjustments taken into account by Griffon Corporation ("Griffon") in connection with its acquisition of CHATT Holdings Inc. ("CHATT Inc.") that are not taken into account in calculating Adjusted EBITDA. On July 19, 2010, CHATT Inc., the direct parent of ATT Holding Co., entered into a stock purchase agreement with Griffon and certain other parties pursuant to which Griffon agreed to acquire 100% of the issued and outstanding shares of common stock of CHATT Inc.

	(b) Consists of management fees paid to our private equity sponsor (Castle Harlan), non-cash (income) expense related to our postretirement plans and non-cash charges recorded in accordance with lease accounting standards due to the expensing of escalating rent on a straight-line basis.

	(c) Q3 2010 consists of trade name impairment charges. Q3 2009 consists of impairment charges for property, plant and equipment.

	(d) Consists of losses on the disposition of property, plant and equipment.

	(e) Q3 2010 consists primarily of an unrealized gain on a U.S. dollar bank account held by a Canadian subsidiary. Q3 2009 consists primarily of an unrealized gain on a U.S. dollar denominated intercompany note issued by a Canadian subsidiary.

	(f) Consists of expenses related to idle facilities in Frankfort, NY & Louisville, KY.

	(g) Consists of non-recurring expenses related to the pending acquisition of certain assets of the Westmix business in Australia and non-recurring expenses related to the pending sale of 100% of the issued and outstanding common stock of CHATT Inc. to Griffon.

	(h) Consists of prepaid insurance expense for discontinued products.

	(i) Consists of realized gains on foreign currency.

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


		Thirty-nine week	Thirty-nine week
		period ended	period ended
		July 3, 2010	June 27, 2009

	Net income	$ 17,658	$ 1,175

	Depreciation of property, plant and equipment	9,788	11,825
	Amortization of intangible assets	909	911
	Interest expense	20,112	22,420
	Income tax expense	6,993	2,242
	EBITDA (a)	55,460	38,573

	Adjustments to EBITDA:
	Equity sponsor fees and other expenses (b)	3,655	1,276
	Impairment charges (c)	300	927
	(Gain) loss on disposal of fixed assets (d)	(29)	901
	Net unrealized losses (e)	1,282	7,151
	Adjusted EBITDA (a)	60,668	48,828

	Adjustments to Adjusted EBITDA:
	Idle facility expenses (f)	1,668	1,135
	Merger and acquisition related expenses (g)	1,301	-
	Liability insurance for discontinued products (h)	477	477
	Net realized gains (i)	(181)	(1,525)
	Other	2	922
	Target EBITDA (a)	$ 63,935	$ 49,837


	(a) "EBITDA" is calculated as net income plus income tax expense, interest expense, depreciation and amortization. "Adjusted EBITDA" is EBITDA adjusted as indicated below. "Target EBITDA" is Adjusted EBITDA further adjusted as indicated below. EBITDA, Adjusted EBITDA and Target EBITDA are not intended to represent cash flow from operations as defined by U.S. 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 are a basis upon which our management assesses financial performance and covenants in our Revolving Loan are tied to ratios based on this measure. During Q3 2009, Adjusted EBITDA as defined by our Revolving Loan was amended to exclude non-recurring gains. Accordingly, non-recurring gains are presented as adjustments to EBITDA. 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. Target EBITDA reflects certain adjustments taken into account by Griffon Corporation ("Griffon") in connection with its acquisition of CHATT Holdings Inc. ("CHATT Inc.") that are not taken into account in calculating Adjusted EBITDA. On July 19, 2010, CHATT Inc., the direct parent of ATT Holding Co., entered into a stock purchase agreement with Griffon and certain other parties pursuant to which Griffon agreed to acquire 100% of the issued and outstanding shares of common stock of CHATT Inc.

	(b) Consists of management fees paid to our private equity sponsor (Castle Harlan), non-cash (income) expense related to our postretirement plans and non-cash charges recorded in accordance with lease accounting standards due to the expensing of escalating rent on a straight-line basis.

	(c) YTD 2010 consists of trade name impairment charges. YTD 2009 consists of impairment charges for property, plant and equipment.

	(d) Consists of (gains) losses on the disposition of property, plant and equipment.

	(e) YTD 2010 consists primarily of an unrealized loss related to a U.S. dollar bank account held by a Canadian subsidiary. YTD 2009 consists primarily of an unrealized loss on a U.S. dollar denominated intercompany note issued by a Canadian subsidiary.

	(f) Consists of expenses related to idle facilities in Frankfort, NY & Louisville, KY.

	(g) Consists of non-recurring expenses related to the pending acquisition of certain assets of the Westmix business in Australia and non-recurring expenses related to the pending sale of 100% of the issued and outstanding common stock of CHATT Inc. to Griffon.

	(h) Consists of prepaid insurance expense for discontinued products.

	(i) Consists of realized gains on foreign currency.