ALJ Regional Holdings, Inc. (NASDAQ:ALJJ) Q4 2019 Earnings Conference Call - Final Transcript

Jan 16, 2020 • 04:30 pm ET

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ALJ Regional Holdings, Inc. (NASDAQ:ALJJ) Q4 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Brian Hartman

customer contracts, compliance costs related to the implementation of new revenue recognition accounting standard and higher overall benefit costs at Faneuil. At Phoenix, profitability was impacted by lower overall volumes and unfavorable product mix.

For the year ended September 30, 2019, ALJ recognized consolidated revenue of $355 million, a decrease of $14.8 million or 4% compared to $369.8 million for the year ended September 30, 2018 due to lower planned volumes at Carpets, lower volume in components and packaging at Phoenix, offset somewhat by increases at Faneuil due to new customer contracts.

ALJ recognized a net loss of $16 million and loss per share of $0.41 for the year ended September 30, 2019, compared to a net loss of $7.3 million and loss per share of $0.19 for the year ended September 30, 2018. As mentioned earlier, a significant portion of the increased loss related to non-cash charge for deferred tax expense in the fiscal year ended September 30, 2019, as well as lower profitability at Faneuil for certain contracts that generated losses, lower volumes and unfavorable product mix at Phoenix offset somewhat by higher earnings at Carpets due to cost reduction initiatives and process improvement.

ALJ recognized adjusted EBITDA of $27.7 million for the year ended September 30, 2019, a decrease of $5.4 million or 16.3% compared to $33.1 million for the year ended September 30, 2018. Decreased adjusted EBITDA was driven by the same items mentioned a few moments ago.

With regard to debt and covenants, at September 30, 2019, total debt was $99.2 million and consisted of $81.1 million of term loans, $9.8 million outstanding on our line of credit, $5.2 million of capital leases and $3.1 million related to an equipment financing arrangement. All amounts are exclusive of any deferred financing cost. Cash on hand at September 30, 2019 was $4.5 million. At September 30, 2019, we had $12.1 million of borrowing capacity on our line of credit. At September 30, 2019, we were in compliance with all debt covenants.

On December 23, we filed an 8-K, which provided specific details related to Amendment Six to our term loan agreement. The provisions in Amendment Six were to adjust the leverage and fixed charge ratio over the next several quarters to provide additional cushion to allow for our turnaround to take hold. The amendment was also provided for the conversion of $4.1 million of the lender's existing term loan into a new term loan participation with our CEO. The total of term loans outstanding remained unchanged after this transaction.

Capital expenditures totaled $18.3 million for the fiscal year ended September 30, 2019. The majority was to support Faneuil's build out of three new call centers. Cash interest totaled $9.8 million for the fiscal year ended September 30, 2019, versus $9.3 million for fiscal 2018. The increase in cash paid for interest was due to higher weighted average outstanding borrowings on our revolver working capital facility during fiscal 2019 compared to fiscal 2018. Cash taxes paid totaled $0.9