WALTHAM, Mass., Oct. 31, 2013 /PRNewswire/ -- Mac-Gray
Corporation (NYSE: TUC), the nation's premier provider of laundry
facilities management services to multi-family housing, today
announced its financial results for the quarter ended September 30, 2013.
Mac-Gray reported that third quarter of 2013 revenue increased
to $79.5 million, compared with
$77.9 million in the third quarter of
2012. Net income for the third quarter of 2013 was
$1.5 million, or $0.09 per diluted share, compared with net income
of $1.5 million, or $0.10 per diluted share, for the same period in
2012. Third-quarter 2013 net income includes $420,000 of transaction costs related to the
previously announced proposed merger with CSC Fenway, Inc., a
wholly-owned subsidiary of Spin Holdco Inc., which is a
wholly-owned subsidiary of CSC ServiceWorks, Inc., and a pre-tax
unrealized gain of $29,000 related to
fuel commodity derivatives. Third-quarter of 2012 net income
included non-cash unrealized gains related to interest rate and
fuel commodity derivative instruments of $125,000, and $67,000, respectively. Excluding these items from
both periods, adjusted net income for the third quarter of 2013
increased to $1.7 million, or
$0.11 per diluted share, compared
with adjusted net income for the third quarter of 2012 of
$1.2 million, or $0.08 per diluted share.
Please refer to Table 1, included at the end of this news
release, for a reconciliation of net income, as reported, to net
income, as adjusted.
For the third quarter of 2013, Mac-Gray's earnings before
interest expense, income tax expense, depreciation and amortization
expense (EBITDA) was $14.6 million,
compared with $15.6 million in the
year-earlier quarter. Excluding from both periods, unrealized
gains/losses related to interest rate and fuel commodity derivative
instruments as well as transaction costs in the third quarter of
2013, EBITDA was $15.0 million for
the third quarter of 2013, compared with $15.4 million in the year-earlier quarter.
Please refer to Table 2, included at the end of this news
release, for a reconciliation of net income to EBITDA and EBITDA,
as adjusted.
"Results for the third-quarter improved over last year's same
period with revenue growth of two percent and our sixth consecutive
quarter of increased profitability," said Chief Executive Officer
Stewart G. MacDonald. "Same-location
multi-housing revenue grew 1% in the third quarter compared with
the third quarter of 2012, primarily reflecting the success of our
vend management capabilities. Commercial equipment sales grew
29 percent over last year's third quarter reflecting strength in
this sector, despite a reduced scope to only the New England
region."
"Our business through the first nine months of the year is
stable, with year-to-date revenue and gross margin on par with the
same period in 2012," MacDonald said. "During this year we have
completed and successfully integrated the tuck-in acquisitions of
three small laundry facilities management businesses that have
contributed to our performance."
Net income, as adjusted, and EBITDA, as adjusted, exclude
unrealized gains/losses related to interest rate derivative
instruments and fuel commodity derivatives, and any one-time
charges to income.
In light of the pending merger of Mac-Gray with CSC Fenway, the
Company will not be hosting a third-quarter financial results
conference call and has discontinued its financial guidance.
Further, Mac-Gray's previous guidance for 2013 is withdrawn and
should not be relied upon. Mac-Gray will publish further
details regarding its third-quarter results in the Management's
Discussion and Analysis and consolidated financial statements of
its Quarterly Report on Form 10-Q, which it plans to file next week
with the Securities and Exchange Commission.
About Mac-Gray Corporation
Founded in 1927, Mac-Gray
derives its revenue principally through the contracting of
debit-card- and coin-operated laundry facilities in multi-unit
housing facilities such as apartment buildings, college and
university residence halls, condominiums and public housing
complexes. Mac-Gray manages laundry rooms in 44 states and the
District of Columbia. Mac-Gray
also sells and services commercial laundry equipment to retail
laundromats and other customers through its product sales division.
To learn more about Mac-Gray, visit the Company's website at
www.macgray.com.
|
|
Contacts:
|
|
|
|
Michael J.
Shea
|
Scott Solomon
|
Chief Financial
Officer
|
Vice President
|
Mac-Gray Corporation
|
Sharon Merrill
|
781-487-7610
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617-542-5300
|
Email:
mshea@macgray.com
|
Email: tuc@investorrelations.com
|
|
|
Safe Harbor Statement
This news release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including statements regarding the proposed merger with
CSC Fenway, including the timing of the transaction. Mac-Gray
intends such forward-looking statements to be covered by the Safe
Harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995, and is including
this statement for purposes of complying with these Safe Harbor
provisions. Forward-looking statements, which are based on
certain assumptions and describe future plans, strategies and
expectations of Mac-Gray, may be identified by use of the words
"believe," "expect," "intend," "anticipate," "project," or similar
expressions. Investors should not rely on forward-looking
statements because they are subject to a variety of risks,
uncertainties and other factors that could cause actual results to
differ materially from such forward-looking statements.
Certain factors which could cause actual results to differ
materially from the forward-looking statements include, but are not
limited to, general economic conditions, changes in multi-housing
vacancy rates, Mac-Gray's ability to renew long-term customer
contracts, the proposed merger with CSC Fenway, the ability to
satisfy the closing conditions set forth in the merger agreement,
including obtaining stockholder approval and those conditions
related to antitrust clearance, the ability of the parties to
consummate the proposed transaction and those risks set forth in
Mac-Gray's Annual Report on Form 10-K for the year ended
December 31, 2012 under "Risk
Factors" and in other reports subsequently filed with the SEC.
Except as expressly required by law, Mac-Gray undertakes no
obligation to update any forward-looking statements, which speak
only as of the date of this news release. All forward-looking
statements in this document are qualified in their entirety by this
cautionary statement.
MAC-GRAY
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME
|
(In thousands,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
September
30,
|
|
September
30,
|
|
2012
|
|
2013
|
|
2012
|
|
2013
|
|
|
|
|
|
|
|
|
Revenue
|
$
77,873
|
|
$
79,511
|
|
$
239,936
|
|
$
240,325
|
Cost of
revenue:
|
|
|
|
|
|
|
|
Cost of facilities
management revenue
|
52,600
|
|
53,925
|
|
160,840
|
|
161,659
|
Depreciation and
amortization
|
10,706
|
|
10,878
|
|
31,536
|
|
32,230
|
Cost of products
sold
|
2,827
|
|
3,665
|
|
8,675
|
|
8,932
|
Total cost of revenue
|
66,133
|
|
68,468
|
|
201,051
|
|
202,821
|
|
|
|
|
|
|
|
|
Gross
margin
|
11,740
|
|
11,043
|
|
38,885
|
|
37,504
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general and
administration expenses
|
7,291
|
|
7,172
|
|
24,567
|
|
22,951
|
Loss (gain) on sale or
disposal of assets, net
|
(57)
|
|
(114)
|
|
(97)
|
|
(269)
|
Incremental costs of proxy
contests
|
-
|
|
-
|
|
377
|
|
770
|
Transaction costs
|
-
|
|
420
|
|
-
|
|
597
|
Total operating expenses
|
7,234
|
|
7,478
|
|
24,847
|
|
24,049
|
|
|
|
|
|
|
|
|
Income from
operations
|
4,506
|
|
3,565
|
|
14,038
|
|
13,455
|
|
|
|
|
|
|
|
|
Interest expense,
including change in fair value
|
|
|
|
|
|
|
|
of
non-hedged interest rate derivative instruments
and
|
|
|
|
|
|
|
|
amortization of deferred financing costs
|
1,931
|
|
1,147
|
|
7,235
|
|
4,100
|
Loss on early
extinguishment of debt
|
-
|
|
-
|
|
3,762
|
|
54
|
Income before income
tax expense
|
2,575
|
|
2,418
|
|
3,041
|
|
9,301
|
Income tax
expense
|
1,104
|
|
961
|
|
1,285
|
|
3,714
|
Net income
|
$
1,471
|
|
$
1,457
|
|
$
1,756
|
|
$
5,587
|
Other comprehensive
gain, net of tax:
|
|
|
|
|
|
|
|
Unrealized gain on derivative instruments
|
173
|
|
-
|
|
493
|
|
130
|
Comprehensive
income
|
$
1,644
|
|
$
1,457
|
|
$
2,249
|
|
$
5,717
|
Net income per share
– basic
|
$
0.10
|
|
$
0.10
|
|
$
0.12
|
|
$
0.38
|
Net income per
share – diluted
|
$
0.10
|
|
$
0.09
|
|
$
0.12
|
|
$
0.37
|
Weighted average
common shares outstanding - basic
|
14,447
|
|
14,715
|
|
14,396
|
|
14,634
|
Weighted average
common shares outstanding – diluted
|
15,134
|
|
15,405
|
|
15,078
|
|
15,206
|
MAC-GRAY
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Dollars in
thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
September
30,
|
|
|
|
2012
|
|
2013
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
14,328
|
|
$
13,537
|
|
Trade receivables,
net of allowance for doubtful accounts
|
5,835
|
|
6,704
|
|
Inventory of finished
goods, net
|
1,284
|
|
2,144
|
|
Prepaid expenses,
facilities management rent and
|
|
|
|
|
|
other current
assets
|
10,624
|
|
12,781
|
|
|
Total current
assets
|
32,071
|
|
35,166
|
Property, plant and
equipment, net
|
129,947
|
|
143,699
|
Goodwill
|
57,737
|
|
58,185
|
Intangible assets,
net
|
169,640
|
|
164,395
|
Prepaid expenses,
facilities management rent and other assets
|
12,014
|
|
14,307
|
|
|
Total
assets
|
$
401,409
|
|
$
415,752
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of
long-term debt and capital lease obligations
|
$
1,201
|
|
$
1,587
|
|
Trade accounts
payable and accrued expenses
|
22,866
|
|
29,032
|
|
Accrued facilities
management rent
|
20,930
|
|
20,390
|
|
|
Total current
liabilities
|
44,997
|
|
51,009
|
Long-term debt and
capital lease obligations
|
190,969
|
|
196,141
|
Deferred income
taxes
|
46,770
|
|
45,133
|
Other
liabilities
|
1,386
|
|
1,178
|
|
|
Total
liabilities
|
284,122
|
|
293,461
|
Commitments and
contingencies
|
-
|
|
-
|
Stockholders'
equity:
|
|
|
|
|
Preferred stock ($.01
par value, 5 million shares authorized
|
|
|
|
|
|
no shares issued or
outstanding)
|
-
|
|
-
|
|
Common stock ($.01
par value, 30 million shares authorized,
|
|
|
|
|
|
14,516,074 issued and
outstanding at December 31, 2012,
|
|
|
|
|
|
and 14,734,072 issued
and outstanding at September 30, 2013)
|
145
|
|
147
|
|
Additional paid in
capital
|
89,706
|
|
92,918
|
|
Accumulated other
comprehensive loss
|
(130)
|
|
-
|
|
Retained
earnings
|
27,566
|
|
29,226
|
|
|
Total stockholders'
equity
|
117,287
|
|
122,291
|
Total liabilities and
stockholders' equity
|
$
401,409
|
|
$
415,752
|
MAC-GRAY
CORPORATION
|
TABLE
1
|
Reconciliation of
Reported Net Income to Adjusted Net Income
|
(In thousands,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
September
30,
|
|
September
30,
|
|
2012
|
|
2013
|
|
2012
|
|
2013
|
|
|
|
|
|
|
|
|
Net income, as
reported
|
$
1,471
|
|
$
1,457
|
|
$
1,756
|
|
$
5,587
|
|
|
|
|
|
|
|
|
Income before income
tax expense, as reported
|
$
2,575
|
|
$
2,418
|
|
$
3,041
|
|
$
9,301
|
Unrealized gain
related to change in fair value of non-hedged
interest rate
derivative instruments (1)
|
(125)
|
|
-
|
|
(360)
|
|
(196)
|
Unrealized gain
related to change in fair value of fuel commodity
derivative
instruments (2)
|
(67)
|
|
(29)
|
|
(43)
|
|
(20)
|
Loss on early
extinguishment of debt (3)
|
-
|
|
-
|
|
3,762
|
|
54
|
Incremental costs of
proxy contests (4)
|
-
|
|
-
|
|
377
|
|
770
|
Transaction
costs(5)
|
-
|
|
420
|
|
-
|
|
597
|
Income before income
tax expense, as adjusted
|
2,383
|
|
2,809
|
|
6,777
|
|
10,506
|
Income tax expense,
as adjusted
|
1,159
|
|
1,122
|
|
2,864
|
|
4,128
|
|
|
|
|
|
|
|
|
Net income, as
adjusted
|
1,224
|
|
1,687
|
|
3,913
|
|
6,378
|
|
|
|
|
|
|
|
|
Diluted earnings per
share, as adjusted
|
$
0.08
|
|
$
0.11
|
|
$
0.26
|
|
$
0.42
|
|
|
|
|
(1)
|
Represents the
unrealized gain on change in fair value of interest rate protection
contracts, which do not qualify for hedge accounting
treatment.
|
(2)
|
Represents the
unrealized loss on change in fair value of fuel commodity
derivatives which do not qualify for hedge accounting
treatment
|
(3)
|
Represents the
premium paid to redeem $100,000 of senior notes as well as a
writeoff of deferred financing costs associated with our senior
notes and a partial writeoff of deferred financing costs associated
with our 2008 Credit Facility.
|
(4)
|
Represents additional
costs incurred for legal advice and proxy solicitation in response
to proxy contests relating to the Company's 2012 and 2013 annual
meetings.
|
(5)
|
Represents costs
associated with the Company's proposed combination with CSC
ServiceWorks, Inc. announced on October 15, 2013 ("the
Transaction").
|
|
|
To supplement the Company's unaudited condensed consolidated
financial statements presented on a generally accepted accounting
principles (GAAP) basis, management has used a non-GAAP measure of
net income. Management believes that the presentation of "Net
income as adjusted" is useful to investors to enhance an overall
understanding of our historical financial performance and future
prospects. Net income, as adjusted to exclude certain gains
and losses from the comparable GAAP net income, is an indication of
our baseline performance before gains, losses or other charges that
are considered by management to be outside of our core operating
results. These non-GAAP results are among the primary indicators
management uses as a basis for evaluating the Company's financial
performance as well as for forecasting future periods.
Management establishes performance targets, annual budgets and
makes critical operating decisions based upon these metrics.
Accordingly, disclosure of these non-GAAP measures provides
investors with the same information that management uses to
understand the Company's true economic performance year over
year. The presentation of this additional information is not
meant to be considered in isolation or as a substitute for net
income or other measures prepared in accordance with GAAP.
MAC-GRAY
CORPORATION
|
TABLE
2
|
Reconciliation of
Reported Net Income to Earnings Before Interest,
Taxes,
|
Depreciation and
Amortization ("EBITDA") and EBITDA, as adjusted
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
September
30,
|
|
September
30,
|
|
2012
|
|
2013
|
|
2012
|
|
2013
|
|
|
|
|
|
|
|
|
Net income
|
$
1,471
|
|
$
1,457
|
|
$
1,756
|
|
$
5,587
|
|
|
|
|
|
|
|
|
Interest
expense
|
1,966
|
|
1,063
|
|
7,239
|
|
4,034
|
Income tax
expense
|
1,104
|
|
961
|
|
1,285
|
|
3,714
|
Depreciation and
amortization
|
10,922
|
|
11,056
|
|
32,162
|
|
32,784
|
Amortization of
deferred financing costs
|
90
|
|
84
|
|
356
|
|
262
|
|
|
|
|
|
|
|
|
EBITDA
|
15,553
|
|
14,621
|
|
42,798
|
|
46,381
|
|
|
|
|
|
|
|
|
Unrealized gain
related to change in fair value of non-hedged interest
rate derivative
instruments (1)
|
(125)
|
|
-
|
|
(360)
|
|
(196)
|
Unrealized gain
related to change in fair value of fuel commodity
derivative
instruments (2)
|
(67)
|
|
(29)
|
|
(43)
|
|
(20)
|
Loss on early
extinguishment of debt (3)
|
-
|
|
-
|
|
3,762
|
|
54
|
Incremental costs of
proxy contests (4)
|
-
|
|
-
|
|
377
|
|
770
|
Transaction costs
(5)
|
-
|
|
420
|
|
-
|
|
597
|
|
|
|
|
|
|
|
|
EBITDA, as
adjusted
|
$
15,361
|
|
$
15,012
|
|
$
46,534
|
|
$
47,586
|
|
|
|
|
(1)
|
Represents the
unrealized gain on change in fair value of interest rate protection
contracts which do not qualify for hedge accounting
treatment.
|
(2)
|
Represents the
unrealized loss on change in fair value of fuel commodity
derivatives which do not qualify for hedge accounting
treatment.
|
(3)
|
Represents the
partial write off of deferred financing costs associated with our
2008 Credit Facility.
|
(4)
|
Represents additional
costs incurred for legal advice and proxy solicitation in response
to proxy contests relating to the Company's 2012 and 2013 annual
meetings.
|
(5)
|
Represents costs
associated with the Transaction.
|
|
|
EBITDA is defined as net income before interest expense,
provision for income taxes, and depreciation and amortization
expense. EBITDA, as adjusted, is EBITDA further adjusted to exclude
the items described in the table above. We have excluded these
items because we believe they are not reflective of our ongoing
operating performance. EBITDA and EBITDA, as adjusted, are not
measures of our liquidity or financial performance under GAAP and
should not be considered as alternatives to net income or any other
performance measure derived in accordance with GAAP, or as an
alternative to cash flows from operating activities as a measure of
our liquidity.
Our management believes EBITDA and EBITDA, as adjusted, are
useful to investors because they help enable investors to evaluate
our business in the same manner as our management. Management
uses EBITDA and EBITDA, as adjusted, as follows: (a) to evaluate
the Company's historical and prospective financial performance,
(b) to set internal revenue targets and spending budgets, (c)
to measure operational profitability and the accuracy of
forecasting, and (d) as an important factor in determining variable
compensation for management. In addition, these measures are
frequently used by securities analysts, investors and other
interested parties in the evaluation of companies with substantial
financial leverage. Moreover, investors have historically
requested and the Company has historically reported these non-GAAP
financial measures as a means of providing consistent and
comparable information with past reports of financial results.
While management believes that these non-GAAP financial measures
provide useful supplemental information to investors, there are
limitations associated with the use of these non-GAAP financial
measures. These measures are not prepared in accordance with
GAAP and may not be directly comparable to similarly titled
measures of other companies due to potential differences in the
exact method of calculation. Further, EBITDA and EBITDA, as
adjusted, exclude interest expense and depreciation and
amortization expense, which represent significant and unavoidable
operating costs given the level of indebtedness and the capital
expenditures needed to maintain our business. In addition,
our measures of EBITDA and EBITDA, as adjusted, are different from
those used in the covenants contained in our senior credit
facilities. Management compensates for these limitations by
relying primarily on our GAAP results and by using EBITDA and
EBITDA, as adjusted, only supplementally and by reviewing the
reconciliations of the non-GAAP financial measures to their most
comparable GAAP financial measures.
Non-GAAP financial measures are not in accordance with, or an
alternative for, generally accepted accounting principles in the
United States. The Company's non-GAAP financial measures are
not meant to be considered in isolation or as a substitute for
comparable GAAP financial measures, and should be read only in
conjunction with the Company's consolidated financial statements
prepared in accordance with GAAP.
SOURCE Mac-Gray Corporation