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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549


FORM 10-Q








[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2002





OR





[  ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE ACT OF 1934





For the transition period
from    to





COMMISSION FILE NUMBER

333-56857333-56857-01333-56857-02





ALLIANCE LAUNDRY SYSTEMS LLC


ALLIANCE LAUNDRY CORPORATION


ALLIANCE LAUNDRY HOLDINGS LLC





(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)





DELAWARE DELAWARE DELAWARE (STATE OR OTHER
JURISDICTION OF INCORPORATION OR ORGANIZATION)

39-1927923 39-1928505 52-2055893 (I.R.S. EMPLOYER
IDENTIFICATION NO.)





P.O. BOX 990


RIPON, WISCONSIN 54971-0990


(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)





(920) 748-3121


(REGISTRANTS TELEPHONE
NUMBER, INCLUDING AREA CODE)





Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:





Yes [ X ]             No [    ]





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Alliance Laundry Systems LLC


Form 10-Q


For The Period Ended June 30, 2002





Table of Contents





Page No.PART I

Financial InformationItem 1.

Financial StatementsCondensed Balance Sheetsas of June 30, 2002 and December 31, 2001

3Condensed Statements of Operations for the periods ended June 30, 2002 and June 30, 2001

4Condensed Statements of Cash Flows for the periods ended June 30, 2002 and June 30, 2001

5Notes to Unaudited Condensed Financial Statements

6Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

9PART II

Other InformationItem 1.

Legal Proceedings

18Item 2.

Changes in Securities

18Item 3.

Defaults upon Senior Securities

18Item 4.

Submission of Matters to a Vote of Security Holders

18Item 5.

Other Information

18Item 6.

Exhibits and Reports on Form 8-K

18Signatures



19




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##### Table of Contents

PART I    FINANCIAL INFORMATION





ITEM 1.    FINANCIAL STATEMENTS.





ALLIANCE LAUNDRY HOLDINGS LLC


CONDENSED BALANCE SHEETS


(in thousands)





June 30, 2002


December 31, 2001(Unaudited)AssetsCurrent assets:Cash



$
7,678


$
5,659Cash-restricted




742



439Accounts receivable, net




15,923



10,440Inventories, net




26,279



29,862Prepaid expenses and other




10,224



10,093Total current assets






60,846



56,493Notes receivable, net


10,107



8,512Property, plant and equipment, net


42,379



46,909Goodwill, net


55,414



55,414Beneficial interests in securitized financial assets


29,434



28,227Debt issuance costs, net


6,551



7,863Other assets


334



353Total assets





$
205,065


$
203,771Liabilities and Members DeficitCurrent liabilities:Current portion of long-term debt



$
1,183


$
1,212Revolving credit facility








Accounts payable




11,092



12,194Other current liabilities




18,530



20,539Total current liabilities






30,805



33,945Long-term debt:Senior credit facility




187,051



194,018Senior subordinated notes




110,000



110,000Junior subordinated note




18,582



17,069Other long-term debt




1,147



1,265Other long-term liabilities


1,731



1,682Total liabilities






349,316



357,979Mandatorily redeemable preferred equity


6,000



6,000Members deficit


(150,251
)


(160,208
)Total liabilities and members deficit





$
205,065


$
203,771




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ALLIANCE LAUNDRY HOLDINGS LLC


CONDENSED STATEMENTS OF OPERATIONS


(in thousands)


Three Months Ended


Six Months EndedJune 30,

June 30,


June 30,

June 30,2002

2001


2002

2001(Unaudited)


(Unaudited)Net revenues:Commercial laundry

$
59,023

$
59,534


$
110,063

$
112,709Service parts


9,047


8,612



17,855


18,10368,070


68,146



127,918


130,812Cost of sales


48,028


51,184



90,821


97,826Gross profit


20,042


16,962



37,097


32,986Selling, general and administrative expense


7,763


7,619



14,749


15,090Nonrecurring costs


430






430


Total operating expense


8,193


7,619



15,179


15,090Operating income


11,849


9,343



21,918


17,896Interest expense


6,565


8,536



12,924


18,209Other income, net


8


34



33


80Income (loss) before taxes


5,292


841



9,027


(233
)Provision for income taxes


36


22



36


22Net income (loss) before cumulative effect of accounting change


5,256


819



8,991


(255
)Cumulative effect of change in accounting principle





2,043






2,043Net income (loss)

$
5,256

$
(1,224
)

$
8,991

$
(2,298
)




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ALLIANCE LAUNDRY HOLDINGS LLC


CONDENSED STATEMENTS OF CASH FLOWS


(in thousands)


Six Months EndedJune 30,


June 30,2002


2001(Unaudited)Cash flows from operating activities:Net income (loss) before cumulative effect of accounting change

$
8,991


$
(255
)Adjustments to reconcile net income (loss) before cumulative effect of accounting change to cash provided by operating
activities:Depreciation and amortization


7,156



8,390Non-cash interest


576



2,742Gain on sale of property, plant and equipment


(33
)


(80
)Changes in assets and liabilities:Accounts receivable


(5,483
)


(5,530
)Inventories


3,583



6,096Other assets


(2,291
)


(14,302
)Accounts payable


(1,102
)


5,505Other liabilities


(1,164
)


(1,872
)Net cash provided by operating activities


10,233



694Cash flows from investing activities:Additions to property, plant and equipment


(1,182
)


(3,141
)Proceeds on disposal of property, plant and equipment


82



171Net cash used in investing activities


(1,100
)


(2,970
)Cash flows from financing activities:Principal payments on long-term debt


(7,114
)


(508
)Net decrease in revolving line of credit borrowings






(2,000
)Net cash used in financing activities


(7,114
)


(2,508
)Increase (decrease) in cash


2,019



(4,784
)Cash at beginning of quarter


5,659



5,091Cash at end of quarter

$
7,678


$
307Supplemental disclosure of cash flow information:Cash paid for interest

$
11,635


$
14,528




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Notes to Unaudited Condensed Financial Statements





NOTE 1.    BASIS OF PRESENTATION





The unaudited financial statements as of June 30, 2002 and for the periods ended June 30, 2002 present the
consolidated financial position and results of operations of Alliance Laundry Holdings LLC (the Company), including its wholly-owned direct and indirect subsidiaries, Alliance Laundry Systems LLC and Alliance Laundry Corporation.





In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments
necessary (consisting only of normal recurring adjustments) to present fairly the financial position and operating results of the Company for the periods presented. The results of operations for such interim periods are not necessarily indicative of
results of operations to be expected for the full year.





These financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such regulations, although the Company believes the disclosures provided are adequate to prevent the information presented from being misleading.





In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. This statement modifies and expands the financial accounting and reporting for the impairment or disposal of long-lived assets other than goodwill, which is specifically addressed by SFAS No. 142. This
statement supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and reporting provisions for the disposal of a segment of a business of APB Opinion No.
30, Reporting the Results of Operations  Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS No. 144 had no effect on the Companys
financial condition or results of operations for the six months ended June 30, 2002.





Effective April 1, 2001, the
Company also adopted the provisions of EITF Issue No. 99-20 Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets. The Company recognized an approximate $2.0 million
charge upon adoption in 2001 and recognized approximately $1.1 million and $0.4 million of interest income related to its retained interests in its securitization transactions during the first six months of 2002 and 2001, respectively.





The Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and
Hedging Activities on January 1, 2001. SFAS No. 133 as amended, requires the Company to recognize all derivatives as either assets or liabilities and measure those instruments at fair value, and recognize changes in the fair value of
derivatives in net income or other comprehensive income, as appropriate. In accordance with the transition provisions of SFAS 133, the Company recorded a cumulative-effect-type gain adjustment of $0.7 million in other comprehensive income (loss)
within members deficit to recognize at fair value its interest rate swap arrangements at January 1, 2001. For the six months ended June 30, 2001, the Company recognized a non-cash loss of $1.9 million reflecting the changes in the fair values
of its interest rate swaps and a gain of $0.4 million




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for the reclassification of the transition adjustment as discussed above. For the six months ended June 30, 2002, the Company recognized a
non-cash gain of $0.9 million related to these interest rate swaps, which matured during the first quarter. These amounts were recorded in interest expense in the statement of operations.





Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.





This report on Form 10-Q for the periods ended June 30, 2002 should be read in conjunction with the audited financial statements presented
in the Companys Annual Report on Form 10-K (file no. 333-56857) filed with the Securities and Exchange Commission, which includes the audited financial statements of the Company as of and for the year ended December 31, 2001.





NOTE 2.    INVENTORIES





Inventories are stated at cost using the first-in, first-out method but not in excess of net realizable value, and consist of the following (in thousands):





June 30,


December 31,2002


2001(Unaudited)Materials and purchased parts

$
9,832


$
11,830Work in process


3,753



4,017Finished goods


14,776



16,822Less: inventory reserves


(2,082
)


(2,807
)$
26,279


$
29,862





NOTE 3.    GOODWILL AND OTHER INTANGIBLE ASSETS





The Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets, in the first quarter of fiscal 2002. Application of the non-amortization provisions of SFAS No. 142 is expected to result in an increase in net income (loss) of approximately $2.0 million in fiscal 2002. The
following sets forth a reconciliation of net income for the six months ended June 30, 2002 and 2001 adjusted for the non-amortization provisions of SFAS No. 142.





Six Months EndedJune 30,

June 30,2002

2001Reported net income (loss)

$
8,991

$
(2,298
)Add: Goodwill amortization





1,018Adjusted net income (loss)

$
8,991

$
(1,280
)




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NOTE 4.    COMMITMENTS AND CONTINGENCIES





In September 1999, Juan Carlos Lopez pursued an arbitration against Alliance Laundry Sociedad Anonima, (ALSA) a foreign subsidiary of Alliance Laundry Systems
LLC, under UNCITRAL rules in Buenos Aires, Argentina, seeking in pertinent part, to be paid fees arising from a Consulting Agreement, and indemnification for loss of profits in Argentina and Brazil, plus damages for pain and suffering. An
arbitration was conducted by an ad-hoc panel (the Lopez Arbitration), during which ALSA contended that Juan Carlos Lopez failed to fulfill responsibilities under the Consulting Agreement and was therefore not entitled to the
fees, and that ALSA was not liable for loss of profits either in Argentina or Brazil, nor for an indemnification for pain and suffering. On April 3, 2001, the Lopez Arbitration was concluded. The arbitration panel awarded Argentine Pesos $1,408,900
($1.4 million U.S. dollars at the time), plus nine percent interest from September 6, 1999, plus ten percent over this principal and interest amount as moral damages, plus certain fees and costs, while rejecting other claims of plaintiff. The
Company does not believe this arbitration award will have a material effect on the Companys operations, in as much as ALSA is a foreign subsidiary and is responsible for its own debts and obligations. The remaining investment on the
Companys financial statements is not material as this operation was discontinued in the fourth quarter of 1998, at which time the Companys investment in ALSA was written down to the value of certain remaining assets. In managements
opinion based on the advice of counsel, under the terms of the award, any such payments would have to be forthcoming from the assets of ALSA. On December 20, 2001, ALSAs bankruptcy was decreed, at the request of Mr. Lopez, on grounds of
non-payment of the arbitration award.





Since January 2002, there have been significant changes in Argentinas
monetary legislation, and the value of the Argentine Peso. The rate of exchange of one Argentine Peso per one United States Dollar is no longer in force, and as of July 30, 2002 the Argentine Peso was trading at .2743 per United States Dollar.
Accordingly, in the event that Mr. Lopez was ultimately successful in a U.S. court of securing payment of this award from the Company, the U.S. dollar value of the award (based upon the current rate of exchange) would be substantially reduced as
compared to the amount discussed above.





Various claims and legal proceedings generally incidental to the normal
course of business are pending or threatened against the Company. While the ultimate liability from these proceedings is difficult to determine, in the opinion of management, any additional liability will not have a material effect on the
Companys financial position, liquidity or results of operations.





NOTE 5.    COMPREHENSIVE INCOME / (LOSS)





Comprehensive income/(loss) for the six months ended June 30, 2002 and 2001 consist of the following (in
thousands):





Six Months EndedJune 30,


June 30,2002


2001Comprehensive income (loss):Net income (loss)

$
8,991


$
(2,298
)Other comprehensive income (loss)Net unrealized holding gain (loss) on residual interests


1,107



(332
)Unrealized gain (loss) on interest rate swap


(141
)


424Comprehensive income (loss)

$
9,957


$
(2,206
)




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NOTE 6.    SUBSEQUENT EVENTLOSS ON EARLY EXTINGUISHMENT OF DEBT





The Company entered into an amended and restated credit agreement dated as of August 2, 2002. As a result, the Company will be recording a loss on early extinguishment
of debt of approximately $2.0 million in its third quarter, to write-off unamortized debt issuance costs related to its prior term loan and revolving credit facilities.





ITEM 2.    
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND RESULTS OF OPERATIONS.





OVERVIEW





The Company believes it is the leading designer, manufacturer and marketer of
stand-alone commercial laundry equipment in North America and a leader worldwide. Under the well-known brand names of Speed Queen, UniMac, Huebsch and Ajax, the Company produces a full line of commercial washing machines and dryers with load
capacities from 16 to 250 pounds as well as presses and finishing equipment. The Companys commercial products are sold to four distinct customer groups: (i) laundromats; (ii) multi-housing laundries, consisting primarily of common laundry
facilities in apartment buildings, universities and military installations; (iii) on-premise laundries, consisting primarily of in-house laundry facilities of hotels, hospitals, nursing homes and prisons; and (iv) drycleaners.





This discussion and analysis should be read in conjunction with the Financial Statements and Notes thereto included in this
report and in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations set forth in the Companys Annual Report on Form 10-K (file no. 333-56857) filed with the Securities and Exchange
Commission, which includes the audited financial position and operating results of the Company as of and for the year ended December 31, 2001.





RESULTS OF OPERATIONS





The following table sets forth the Companys historical net revenues for the periods
indicated:





Quarter EndedJune 30, 2002

June 30, 2001(Dollars in millions)Net revenues:Commercial laundry

$
59.0

$
59.5Service parts


9.1


8.6$
68.1

$
68.1





The following table sets forth certain condensed historical financial data for the Company
expressed as a percentage of net revenues for each of the periods indicated:




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Quarter EndedJune 30, 2002


June 30, 2001Net revenues

100.0
%

100.0
%Cost of sales

70.6
%

75.1
%Gross profit

29.4
%

24.9
%Selling, general and administrative expense

11.4
%

11.2
%Nonrecurring costs

0.6
%

Operating income

17.4
%

13.7
%Net income before cumulative effect of accounting change

7.7
%

1.2
%





Net revenues.    Net revenues for the
quarters ended June 30, 2002 and June 30, 2001 were both $68.1 million. As compared to the prior year, commercial laundry revenue was $0.5 million lower while service parts revenue was $0.5 million higher. The decrease in commercial laundry revenue
was due primarily to lower international revenue of $1.2 million, partially offset by higher North American equipment revenue of $0.3 million and higher earnings from the Companys off-balance sheet equipment financing program of $0.4 million.
Revenue from international customers was lower largely due to the discontinuance of sales to a foreign customer under a private label contract and lower sales to South Africa and Australia.





Gross profit.    Gross profit for the quarter ended June 30, 2002 increased $3.0 million, or 18.2%, to $20.0 million from $17.0 million for the
quarter ended June 30, 2001. This increase was primarily attributable to favorable manufacturing efficiencies, a recent price increase, the higher earnings from the Companys off-balance sheet equipment financing program, and $0.5 million of
favorable impact in 2002 resulting from a change in accounting principle whereby goodwill is no longer amortized. (See Note 3). Gross profit as a percentage of net revenues increased to 29.4% for the quarter ended June 30, 2002 from 24.9% for the
quarter ended June 30, 2001. This 4.5% increase was primarily attributable to the manufacturing efficiencies, price increase, the higher earnings from the Companys off-balance sheet equipment financing program and accounting principle change.





Selling, general and administrative expense.    Selling, general and administrative
expenses for the quarter ended June 30, 2002 increased $0.2 million, or 1.9%, to $7.8 million from $7.6 million for the quarter ended June 30, 2001. The increase in selling, general and administrative expenses was primarily due to higher independent
development expenses of $0.4 million and higher pension expenses of $0.4 million which were partially offset by lower one-time expenses related to the relocation of Cincinnati, Ohio production lines to Marianna, Florida of $0.6 million. Selling,
general and administrative expenses as a percentage of net revenues increased to 11.4% for the quarter ended June 30, 2002 from 11.2% for the quarter ended June 30, 2001.





Nonrecurring costs.    Nonrecurring costs for the six months ended June 30, 2002 were $0.4 million. The 2002 costs were due to the write-off of
costs incurred while pursuing an initial public offering through a Canadian Income Trust in the second quarter. Due to market conditions, management determined that such a public offering would not be advantageous to the Company at such time.
Nonrecurring costs as a percentage of net revenues were 0.6% for the six months ended June 30, 2002.




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Operating income.    As a result of the foregoing, operating income for the quarter ended June
30, 2002 increased $2.5 million, or 26.8%, to $11.8 million from $9.3 million for the quarter ended June 30, 2001. Operating income as a percentage of net revenues increased to 17.4% for the quarter ended June 30, 2002 from 13.7% for the quarter
ended June 30, 2001.





Interest expense.    Interest expense for the quarter ended June
30, 2002 decreased $1.9 million, or 23.1%, to $6.6 million from $8.5 million for the quarter ended June 30, 2001. The second quarter of 2001 included an unfavorable non-cash adjustment of $0.3 million to reflect changes in the fair values of the
Companys interest rate swap agreements. Interest expense was also lower in 2002 as a result of a reduction in total debt outstanding of $21.0 million, or 6.2% since March of 2001, and also as a result of lower interest rates.





Net income before cumulative effect of accounting change.    As a result of the foregoing, net
income before cumulative effect of accounting change for the quarter ended June 30, 2002 increased $4.5 million to $5.3 million from $0.8 million for the quarter ended June 30, 2001. Net income before cumulative effect of accounting change as a
percentage of net revenues increased to 7.7% for the quarter ended June 30, 2002 from 1.2% for the quarter ended June 30, 2001.





Cumulative effect of accounting change.    Effective April 1, 2001, the Company adopted the provisions of Emerging Issues Task Force (EITF) Issue No. 99-20 Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets. In accordance with the impairment provisions of EITF 99-20, upon adoption in 2001 the Company recognized a $2.0 million non-cash write-down of the
Companys retained interests in its securitization transactions. The impairment was primarily driven by faster prepayment trends than had been anticipated at the time of sale.





Net income (loss).    As a result of the foregoing, net income (loss) for the quarter ended June 30, 2002 increased $6.5 million to net income of
$5.3 million as compared to a net loss of $1.2 million for the quarter ended June 30, 2001. Net income (loss) as a percentage of net revenues increased to 7.7% for the quarter ended June 30, 2002 from (1.8%) for the quarter ended June 30, 2001.





The following table sets forth the Companys historical net revenues for the periods indicated:





Six Months EndedJune 30, 2002

June 30, 2001(Dollars in millions)Net revenues:Commercial laundry

$
110.1

$
112.7Service parts


17.8


18.1$
127.9

$
130.8





The following table sets forth certain condensed historical financial data for the Company
expressed as a percentage of net revenues for each of the periods indicated:




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Six Months EndedJune 30, 2002


June 30, 2001Net revenues

100.0
%

100.0
%Cost of sales

71.0
%

74.8
%Gross profit

29.0
%

25.2
%Selling, general and administrative expense

11.6
%

11.5
%Nonrecurring costs

0.3
%

Operating income

17.1
%

13.7
%Net income (loss) before cumulative effect of accounting change

7.0
%

(0.2
%)





Net revenues.    Net revenues for the
six months ended June 30, 2002 decreased $2.9 million, or 2.2%, to $127.9 million from $130.8 million for the six months ended June 30, 2001. This decrease was primarily attributable to lower commercial laundry revenue of $2.6 million and lower
service parts revenue of $0.3 million. The decrease in commercial laundry revenue was due primarily to lower North American equipment revenue of $1.0 million, lower international revenue of $1.4 million, and lower earnings from the Companys
off-balance sheet equipment financing program of $0.2 million. The decrease in North American equipment revenues was primarily due to lower revenues from on-premise laundries partially offset by higher revenues from multi-housing laundries. Revenue
from international customers was lower largely due to the discontinuance of sales to a foreign customer under a private label contract.





Gross profit.    Gross profit for the six months ended June 30, 2002 increased $4.1 million, or 12.5%, to $37.1 million from $33.0 million for the six months ended June 30, 2001. This increase was
primarily attributable to favorable manufacturing efficiencies and $1.0 million of favorable impact in 2002 resulting from a change in accounting principle whereby goodwill is no longer amortized. (See Note 3). Gross profit as a percentage of net
revenues increased to 29.0% for the six months ended June 30, 2002 from 25.2% for the six months ended June 30, 2001.





Selling, general and administrative expense.    Selling, general and administrative expenses for the six months ended June 30, 2002 decreased $0.4 million, or 2.3%, to $14.7 million from $15.1 million for
the six months ended June 30, 2001. The decrease in selling, general and administrative expenses was primarily due to lower one-time expenses related primarily to the relocation of Cincinnati, Ohio production lines to Marianna, Florida of $0.8
million, and a lower loss on sales of qualified accounts receivable of $0.4 million, partially offset by higher pension expense of $0.7 million, and higher sales and marketing expenses of $0.3 million. Selling, general and administrative expenses as
a percentage of net revenues increased to 11.6% for the six months ended June 30, 2002 from 11.5% for the six months ended June 30, 2001.





Nonrecurring costs.    Nonrecurring costs for the six months ended June 30, 2002 were $0.4 million. The 2002 costs were due to the write-off of costs incurred while pursuing an initial public
offering through a Canadian Income Trust in the second quarter. Due to market conditions, management determined that such a public offering would not be advantageous to the Company at such time. Nonrecurring costs as a percentage of net revenues
increased to 0.3% for the six months ended June 30, 2002.




12




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##### Table of Contents

Operating income.    As a result of the foregoing, operating income for the six months ended
June 30, 2002 increased $4.0 million, or 22.5%, to $21.9 million from $17.9 million for the six months ended June 30, 2001. Operating income as a percentage of net revenues increased to 17.1% for the six months ended June 30, 2002 from 13.7% for the
six months ended June 30, 2001.





Interest expense.    Interest expense for the six
months ended June 30, 2002 decreased $5.3 million, or 29.0%, to $12.9 million from $18.2 million for the six months ended June 30, 2001. Interest expense in 2002 includes a favorable non-cash adjustment of $0.9 million to reflect changes in the fair
values of interest rate swap agreements which expired during the first quarter of 2002. Interest expense in 2001 included an unfavorable non-cash adjustment of $1.5 million related to these agreements. Interest expense was also lower in 2002 as a
result of a reduction in total debt outstanding of $18.6 million, or 5.5% since December of 2000, and also as a result of lower interest rates.





Net income (loss) before cumulative effect of accounting change.    As a result of the foregoing, net income before cumulative effect of accounting change for the six months
ended June 30, 2002 increased $9.3 million to net income before cumulative effect of accounting change of $9.0 million as compared to a net loss before cumulative effect of accounting change of $0.3 million for the six months ended June 30, 2001.
Net income before cumulative effect of accounting change as a percentage of net revenues increased to 7.0% for the six months ended June 30, 2002 from (0.2%) for the six months ended June 30, 2001.





Cumulative effect of accounting change.    Effective April 1, 2002, the Company adopted the provisions of
Emerging Issues Task Force (EITF) Issue No. 99-20 Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets. In accordance with the impairment provisions of EITF 99-20,
upon adoption in 2001 the Company recognized a $2.0 million non-cash write-down of the Companys retained interests in its securitization transactions. The impairment was primarily driven by faster prepayment trends than had been anticipated at
the time of sale.





Net income (loss).    As a result of the foregoing, net income for
the six months ended June 30, 2002 increased $11.3 million to net income of $9.0 million as compared to a net loss of $2.3 million for the six months ended June 30, 2001. Net income (loss) as a percentage of net revenues increased to 7.0% for the
six months ended June 30, 2002 from (1.8%) for the six months ended June 30, 2001.





LIQUIDITY AND CAPITAL RESOURCES





The Companys principal sources of liquidity are cash flows generated from operations and borrowings under its $75.0
million revolving credit facility, (the Revolving Credit Facility). The Companys principal uses of liquidity are to meet debt service requirements, finance the Companys capital expenditures and provide working capital. The
Company expects that capital expenditures in 2002 will not exceed $6.0 million. The Company expects the ongoing requirements for debt service, capital expenditures and working capital will be funded by internally generated cash flow and borrowings
under the Revolving Credit Facility.





As of June 30, 2002, the Company has $318.0 million of combined indebtedness
outstanding, consisting of outstanding debt of $188.0 million under the Term Loan Facility, $110.0 million of senior subordinated notes and $18.6 million of junior subordinated notes, $0.7 million of borrowings




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pursuant to a Wisconsin Community Development Block Grant Agreement, and $0.7 million of borrowings pursuant to an equipment financing
transaction with Alliant Energy  Wisconsin Power & Light Company. At June 30, 2002 there were no borrowings under the Companys Revolving Credit Facility. Letters of credit issued on the Companys behalf under the Revolving
Credit Facility totaled $15.0 million at June 30, 2002. As a result, at June 30, 2002 the Company had $60.0 million of its $75.0 million Revolving Credit Facility available subject to certain limitations under the Companys $275 million credit
agreement dated May 5, 1998 (the Senior Credit Facility). After considering such limitations, which relate primarily to the maximum ratio of consolidated debt to EBITDA (as defined by the Senior Credit Facility), the Company could have
borrowed $37.6 million at June 30, 2002 in additional indebtedness under the Revolving Credit Facility. Additionally, at June 30, 2002 the Company could have sold additional trade receivables of approximately $6.7 million to finance its operations.





On August 2, 2002 the Company amended and restated its Term Loan and Revolving Credit Facilities. The new Term
Loan Facility, in the amount of $193.0 million, extends the facility expiration date from May 5, 2005 to August 6, 2007. The new Term Loan Facility amortizes quarterly and is repayable in the following aggregate amounts:





Year

Amount Due(Dollars in millions)2002

$
5.02003

$
10.02004

$
12.52005

$
15.02006

$
20.02007

$
130.5





The new Revolving Credit Facility, in the amount of $45.0 million,
extends the facility termination date from May 5, 2003 to August 6, 2007.





The new credit facilities continue to
be subject to certain financial ratios and tests, similar to those included in the prior facilities. The new credit facilities allow a maximum ratio of consolidated debt to EBITDA at December 31, 2002 of 6.0 whereas under the prior credit facilities
the maximum allowed under this ratio was 5.25 at December 31, 2002. Management believes that future cash flows from operations, together with available borrowings under the Revolving Credit Facility, will be adequate to meet the Companys
anticipated requirements for capital expenditures, working capital, interest payments, scheduled principal payments and other debt repayments while achieving all required covenant requirements under the new credit facilities.





The Term Loan Facility is also subject to mandatory prepayment with the proceeds of certain debt incurrences, asset sales and a
portion of Excess Cash Flow (as defined in its amended and restated credit agreement dated as of August 2, 2002).





The Companys Asset Backed Facility provides $250.0 million of off-balance sheet financing for trade receivables and equipment loans. The finance programs have been and will continue to be




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structured in a manner that qualifies for off-balance sheet treatment in accordance with generally accepted accounting principles. It is
expected that under the Asset Backed Facility, the Company will continue to act as originator and servicer of the equipment financing promissory notes and the trade receivables. The Companys Asset Backed Facility is scheduled to expire on May
5, 2003. The Company currently expects to replace this facility within the fourth quarter of 2002.





The
Companys ability to make scheduled payments of principal of, or to pay the interest or liquidated damages, if any, on, or to refinance, its indebtedness, or to fund planned capital expenditures, will depend upon its future performance, which,
in turn, is subject to general economic, financial, competitive and other factors that are beyond its control. Based upon the current level of operations and anticipated growth, management believes that future cash flow from operations, together
with available borrowings under the new Revolving Credit Facility, will be adequate to meet the Companys anticipated requirements for capital expenditures, working capital, interest payments and scheduled principal payments. There can be no
assurance, however, that the Companys business will continue to generate sufficient cash flow from operations in the future to service its debt and make necessary capital expenditures after satisfying certain liabilities arising in the
ordinary course of business. If unable to do so, the Company may be required to refinance all or a portion of its existing debt, to sell assets or to obtain additional financing. There can be no assurance that any such refinancing would be available
or that any such sales of assets or additional financing could be obtained.





Historical





Cash generated from operations for the six months ended June 30, 2002 of $10.2 million was principally derived from operations (net income
adjusted for depreciation, amortization, non-cash interest and gains on sale of property, plant and equipment) which was partially offset by lower sales of accounts receivable under the Asset Backed Facility, and an increase in ineligible loans
under the Asset Backed Facility. The working capital investment in accounts receivable at June 30, 2002 of $15.9 million increased $5.5 million as compared to the balance of $10.4 million at December 31, 2001, which was primarily attributable to
selling less accounts receivable through Alliance Laundry Receivable Warehouse (ALRW), a special-purpose single member limited liability company. The investment in notes receivable at June 30, 2002 of $10.1 million increased $1.6 million
as compared to the balance of $8.5 million at December 31, 2001, which was primarily attributable to the increase in ineligible loans under the Asset Backed Facility. The investment in inventory at June 30, 2002 of $26.3 million decreased $3.6
million as compared to the balance of $29.9 million at December 31, 2001. Accounts payable at June 30, 2002 of $11.1 million decreased $1.1 million as compared to the balance of $12.2 million at December 31, 2001.





Net cash provided by operating activities for the six months ended June 30, 2002 of $10.2 million increased by $9.5 million as compared to
the six months ended June 30, 2001. This increase was primarily due to lower net cash used in changes in assets and liabilities of $3.6 million, and an increase in net cash provided by operations of $5.9 million for the six months ended June 30,
2002 as compared to the six months ended June 30, 2001. The lower net cash impact from changes in assets and liabilities for the six months ended June 30, 2002 of $3.6 million was largely due to decreased working capital changes in notes receivable
and beneficial interests in securitized financial assets, which were partially offset by lower accounts payable.




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Capital Expenditures





The Companys capital expenditures for the six months ended June 30, 2002 and June 30, 2001 were $1.2 million and $3.1 million, respectively. Capital spending in 2002 was principally oriented toward product enhancements
and manufacturing process improvements, while spending in 2001 was principally oriented toward reducing manufacturing costs and transitioning press and finishing equipment production from a prior facility to the Companys Marianna, Florida
manufacturing facility.





Loss on Early Extinguishment of Debt





The Company entered into an amended and restated credit agreement dated as of August 2, 2002. As a result, the Company will be recording a loss on early extinguishment of
debt of approximately $2.0 million in its third quarter, to write-off unamortized debt issuance costs related to its prior term loan and revolving credit facilities.





RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS





In June 2001, the
Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations. This statement addresses the financial accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The Company is currently reviewing this statement to determine its effect on the
Companys financial statements.





In May 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002. This statement, among other things, rescinds SFAS No. 4,
Reporting Gains and Losses from Extinguishment of Debt and provides that debt extinguishments that do not meet the criteria for classification as extraordinary items should not be classified as extraordinary. SFAS No. 145 is effective
for fiscal years beginning after May 15, 2002.





In June 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 146, Accounting for Exit or Disposal Activities. This statement addresses the recognition, measurement, and reporting of costs associated with exit and disposal activities, including
restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force (EITF) has set forth in EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring). The scope of the current statement also includes (1) costs related to terminating a contract that is not a capital lease and (2) termination benefits that employees who
are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS 146 will be effective for exit or disposal activities that are
initiated after December 31, 2002.




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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





The Company is potentially exposed to market risk associated with changes in interest and foreign exchange rates. From time to time the Company may enter into derivative
financial instruments to hedge its interest rate exposures and to hedge exchange rate fluctuations between United States dollars and foreign currencies. An instrument will be treated as a hedge if it is effective in offsetting the impact of
volatility in the Companys underlying exposures. The Company does not enter into derivatives for speculative purposes. There have been no material changes in the Companys market risk exposures as compared to those discussed in the
Companys Annual Report on Form 10-K (file no. 333-56857), except as previously discussed, the Companys interest rate swaps matured during the first quarter of 2002.





FORWARD-LOOKING STATEMENTS





With the exception of the reported
actual results, the information presented herein contains predictions, estimates or other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as
amended, including items specifically discussed in the Note 3  Commitments and Contingencies section of this document. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause
actual results, performance or achievements of the Company to differ materially from those expressed or implied by such forward-looking statements. Although the Company believes that its plans, intentions and expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no assurance that such plans, intentions, expectations, objectives or goals will be achieved. Important factors that could cause actual results to differ materially from
those included in forward-looking statements include: impact of competition; continued sales to key customers; possible fluctuations in the cost of raw materials and components; possible fluctuations in currency exchange rates, which affect the
competitiveness of the Companys products abroad; market acceptance of new and enhanced versions of the Companys products; the impact of substantial leverage and debt service on the Company and other risks listed from time to time in the
Companys reports, including but not limited to the Companys Annual Report on Form 10-K (file no. 333-56857).




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PART II

OTHER INFORMATIONItem 1.

Legal Proceedings.       None.Item 2.

Changes in Securities.       None.Item 3.

Defaults upon Senior Securities.       None.Item 4.

Submission of Matters to a Vote of Security Holders.       None.Item 5.

Other Information.       None.Item 6.

Exhibits and Reports on Form 8-K.(a)    List of Exhibits.10.1  Amended and Restated Credit Agreement, dated as of
August 2, 2002.10.2  Intercreditor Agreement, dated as of August 2,
2002.10.3  Amended and Restated Guarantee and Collateral
Agreement, dated as of August 2, 2002.(b)    Reports on Form 8-K.       None.





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SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, Alliance
Laundry Systems LLC has duly caused this quarterly report to be signed on its behalf by the undersigned, thereto duly authorized, in the city of Ripon, state of Wisconsin, on the 7th day of August 2002.








Signature

Title

Date/s/    THOMAS
LESPERANCE

Chairman and CEO

8-7-02Thomas LEsperance/s/    BRUCE P. ROUNDS

Vice President and Chief Financial Officer

8-7-02Bruce P. Rounds








Pursuant to the
requirements of the Securities Exchange Act of 1934, Alliance Laundry Corp. has duly caused this quarterly report to be signed on its behalf by the undersigned, thereto duly authorized, in the city of Ripon, state of Wisconsin, on the 7th day of
August 2002.








Signature

Title

Date/s/    THOMAS
LESPERANCE

Chairman and CEO

8-7-02Thomas LEsperance/s/    BRUCE P. ROUNDS

Vice President and Chief Financial Officer

8-7-02Bruce P. Rounds








Pursuant to the
requirements of the Securities Exchange Act of 1934, Alliance Laundry Holdings LLC has duly caused this quarterly report to be signed on its behalf by the undersigned, thereto duly authorized, in the city of Ripon, state of Wisconsin, on the 7th day
of August 2002.








Signature

Title

Date/s/    THOMAS
LESPERANCE

Chairman and CEO

8-7-02Thomas LEsperance/s/    BRUCE P. ROUNDS

Vice President and Chief Financial Officer

8-7-02Bruce P. Rounds




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