ALLIANCE LAUNDRY HOLDINGS LLC Annual Report for the Year Ended December 31, 2012 Alliance Laundry Holdings LLC Index to Annual Report Year Ended December 31, 2012 Page CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION ................... 2 PART I. ITEM 1.BUSINESS.......................................................................................................... 3 ITEM 1A.RISK FACTORS ................................................................................................ 18 ITEM 2.PROPERTIES ..................................................................................................... 27 ITEM 3.LEGAL PROCEEDINGS ................................................................................... 28 ITEM 4.MINE SAFETY DISCLOSURES ...................................................................... 28 PART II. ITEM 5.MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS .................................................... 28 ITEM 6.SELECTED FINANCIAL DATA ...................................................................... 28 ITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................ 30 ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .............................................................................................. 46 ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ................... 49 ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ......................................... 99 PART III. ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS .................................................. 99 ITEM 11.EXECUTIVE COMPENSATION ...................................................................... 103 ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS .... 116 ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ............... 119 ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES .................................................................... 120 EXHIBIT AEARNINGS TO FIXED CHARGES ................................................................. .121 EXHIBIT BSUBSIDIARIES OF THE COMPANY .............................................................. 122 Throughoutthisannualreport,werefertoAllianceLaundryHoldingsLLC,aDelawarelimitedliabilitycompany,as AllianceHoldings,and,togetherwithitsconsolidatedoperations,astheCompany,Alliance,we,our,and us,unlessotherwiseindicated.AnyreferencetoAllianceLaundryreferstoourwholly-ownedsubsidiary,Alliance LaundrySystemsLLC,aDelawarelimitedliabilitycompany,anditsconsolidatedoperations,unlessotherwiseindicated. AnyreferencetoALHrefersto ALH Holding Inc., a Delaware corporation and Alliance Holdings parent entity. Unless the context otherwise requires, references to United States & Canada, Europe, Latin America, Asia and Middle East&Africaaretoeachofourreportingsegments,asfurtherdescribedinManagementsDiscussionandAnalysisof FinancialConditionandResultsofOperationsandNote17-SegmentInformation,totheConsolidatedFinancial Statements. 2CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION Withtheexceptionofthereportedactualresults,theinformationpresentedhereincontains predictions,estimatesorotherforward-lookingstatementswithinthemeaningofSection27Aofthe SecuritiesActof1933,asamended,andSection21EoftheSecuritiesActof1934,asamended, includingitemsspecificallydiscussedinNote 18CommitmentsandContingencies,tothe ConsolidatedFinancialStatementssectionofthisdocument.Suchforward-lookingstatementsinvolve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievementsofourbusinesstodiffermateriallyfromthoseexpressedorimpliedbysuchforward-lookingstatements.Althoughwebelievethatourplans,intentionsandexpectationsreflectedinsuch forward-lookingstatementsarebasedonreasonableassumptions,wecangivenoassurancethatsuch plans,intentions,expectations,objectivesorgoalswillbeachieved.Importantfactorsthatcouldcause actual results to differ materially from those included in forward-looking statements include: the ability to borrow funds under the December 2012 Revolving Credit Facility(as defined in Note 15 - Debt,to theConsolidatedFinancialStatements);theabilitytosuccessfullyimplementoperatingstrategiesand trendsaffectingthebusiness,liquidity,financialconditionandresultsofoperationsoftheCompany; unfavorable economic conditions in the United States and other markets in which we operate; the impact of competition; continued sales to key customers; possible fluctuations in the cost of raw materials and components;possiblefluctuationsincurrencyexchangerates,whichaffectthecompetitivenessofour productsabroad;possiblefluctuationsininterestrates,whichaffectsourearningsandcashflows;the impact of substantial leverage and debt service on us; possible loss of suppliers; risks related to our asset backedsecuritizationfacility,includinganinabilitytoreplaceorafailurebytheadministrativeagent andnoteholderstoextendthefacilityonadvantageoustermsoratall;dependenceonkeypersonnel; laborrelations;potentialliabilityforenvironmental,healthandsafetymatters;potentialfuturelegal proceedingsandlitigationaswellasthosesetforthinItem1AhereofunderRiskFactors.All statementsotherthanstatementsofhistoricalfactsincludedintheseFinancialStatements,including, without limitation, the statements under Managements Discussion and Analysis of Financial Condition andResultsofOperationsandBusiness,andlocatedelsewherehereinregardingindustryprospects, theCompanysstrategyandtheCompanysfinancialpositionareforward-lookingstatements.Insome cases,youcanidentifyforward-lookingstatementsbywordssuchasanticipate,believe,could, estimate,expect,intend,may,plan,predict,potential, should, will, and would, or the negatives thereof, variations thereof or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and we undertake no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. 3PART I. ITEM 1.BUSINESS General Throughoutthisannualreportthetermstand-alonecommerciallaundryequipmentrefersto commerciallaundryequipmentexcludingtheconsumerlaundrymarket,drycleaningequipmentand customengineered,continuousprocesslaundrysystemsandthetermstand-alonecommerciallaundry equipmentindustryincludeslaundromats,multi-housinglaundriesandon-premiselaundriesand excludes consumer laundry, drycleaners and continuous process laundries. Ourbusinessbeganin1908whenweintroducedahand-operatedwashertothemarketplace. IndustryleadingfeatureswereintroducedundertheSpeedQueenbrandwiththeintroductionof stainlesssteelwashtubsin1938andautomaticwashersanddryersin1952.InJanuary2005Ontario TeachersPensionPlanBoard(OTPP)indirectlyacquiredthemajorityoftheequityinterestsof AllianceLaundrythroughALHHoldingInc.(ALH)andourmanagementindirectlyownedthe remainder of Alliance Laundrys equity interests through ALH. ALH owns 100% of the equity interests ofAllianceHoldings.AsofDecember31,2012,82.6%ofthecapitalstockofALHwasownedby OTPPwhile16.8%ofthecapitalstockofALHwasownedbyourcurrentmanagement.OnJuly14, 2006wecompletedtheacquisitionofsubstantiallyallofLaundrySystemGroupNVs(LSG) commerciallaundrydivision (CLD) operations which manufactures and markets commercial laundry productssimilartoAllianceLaundry(theCLDAcquisition).AsaresultoftheCLDAcquisitionwe haveaEuropeanheadquartersandmanufacturingfacilityinWevelgem,Belgiumandsalesofficesin Belgium,NorwayandSpain(theEuropeanOperations).CLDalsohadmanufacturingfacilitiesand sales offices in the United States which have been consolidated into Alliance Laundrys operations. Webelievethatwearetheleadingdesigner,manufacturerandmarketerintheworldof commercial laundry equipment used in laundromats, multi-housing laundries and on-premise laundries. We produce a full line of commercial washing machines and dryers with load capacities from 12 to 200 pounds under the well-known brand names of Speed Queen, UniMac, Huebsch, IPSO and Cissell. WehavebeenaleaderintheNorthAmericanstand-alonecommerciallaundryequipmentindustryfor more than ten years. With the addition of our European Operations and Alliance Laundrys export sales to Europe, we are also a leader in the European stand-alone commercial laundry equipment industry. Our netrevenuesfortheyearendedDecember31,2012were$505.5million,ofwhich$357.0million and $52.2 million were from our United States & Canada and Europe segments, respectively. Net revenues from our other segments totaled $96.3 million for the year ended December 31, 2012. Weattributeoursuccessinthisindustryto:(i) thequality,reliabilityandfunctionalityofour products;(ii) thebreadthofourproductofferings;(iii) ourextensivedistributornetworkandstrategic allianceswithkeycustomers;(iv) ourinvestmentinnewproductdevelopmentandmanufacturing capabilitiesand(v) thesuccessfulexecutionofselectiveacquisitions.Asaresultofourindustry position, we generate significant recurring sales of replacement equipment and service parts. In addition tosalesofstand-alonecommerciallaundryequipmentinUnitedStates&Canada,wealsosell commercial laundry equipment and service parts internationally through our U.S. operations and through ourEuropeanOperations.OuroperatingsegmentsotherthanUnitedStates&Canadagenerated equipmentandservicepartsrevenueof$148.5million,$141.2million,and$128.8millionin2012, 2011and2010,respectively.For2012,2011and2010,wegeneratedtotalnetrevenuesof$505.5 million,$458.0millionand$426.0million,respectively,andAdjustedEBITDA(asdefinedinItem7 4LiquidityandCapitalResourcesunderEBITDAandAdjustedEBITDA)of$94.4million,$83.9 million and $81.0 million, respectively. IntheUnitedStates&Canadasegment,weservethreedistinctcommerciallaundryend-customer groups: (i) laundromats; (ii) multi-housing laundries, consisting primarily of common laundry facilitiesinapartmentbuildings,universitiesandmilitaryinstallations;and(iii) on-premiselaundries, consistingprimarilyofin-houselaundryfacilitiesinhotels,hospitals,nursinghomesandprisons.Our primarymeansofservingtheseend-customersisthroughanetworkofdistributorsandrouteoperators through our U.S. operations. We have approximately 555 United States & Canada distributors and over 150internationaldistributorsservedthroughouroperationsbasedintheUnitedStates.Approximately 140 distributors are also served through our European Operations. Our distributors purchase equipment fromusandthenre-sellandinstallitforlaundromatandon-premiseend-customers.Weservemulti-housingend-customersintheUnitedStatesand Canada through a network of approximately 120 route operators.Routeoperatorspurchaseequipmentfromusandthenobtainleasesfrommulti-housing property managers to place the equipment into common laundry rooms. We believe that we have the most extensive distribution network in North America which gives us a significant competitive advantage. We estimate that our distributors and route operators have either the number one or number two market position in over 80% of North American markets. We believe that the superior quality and loyalty of our distribution network has been a significant factor in achieving this market position in each of our three commercial laundry end-customer groups. WeestimatethattheUnitedStates&Canadastand-alonecommerciallaundryequipment industrygeneratedmorethan$500millionofrevenuein2012.Theindustrysrevenuesareprimarily drivenbypopulationgrowthandthereplacementcycleoflaundryequipment.United States & Canada consumers view clean clothes as a necessity with economic conditions historically having limited effect onthefrequencyofuse,andthereforetheusefullife,oflaundryequipment.Asaresult,theindustrys revenues have been relatively stable over time and through past economic downturns. With capital investments totaling $52.1 million for the five years ended December 31, 2012, we havedevelopedmanynewproducts,redesignedexistingproductsandmodernizedourmanufacturing facilities in Ripon, Wisconsin and Wevelgem, Belgium. We believe our considerable investment in our product lines and manufacturing capabilities have strengthened and will continue to enhance our market leadership position. The Companys internet address is http://www.alliancelaundry.com. Through the investor section atthataddress,theCompanysannualreport,quarterlyreportsandnewsreleasesareavailable,freeof chargeassoonasreasonablypracticableaftertheyareissued.Theinformationcontainedonthe Companys website is not included in, or incorporated by reference into, this annual report. Company Strengths MarketLeaderwithSignificantInstalledBase.Webelievethatwearethemarketleaderinthe overallNorthAmericanstand-alonecommerciallaundryequipmentindustry.Inadditiontobeinga marketleaderinNorthAmerica,webelievethatwearealeaderinsalestoeachofourthreeprimary commerciallaundryend-customergroups.Asaresultofbeingamarketleaderforovertenyears,we believethatwehaveoneofthelargestinstalledbasesofequipmentinNorthAmerica,comprisedof morethantwomillionmachines.Asignificantmajorityofourrevenueisattributabletoreplacement 5sales which are driven by our large installed base combined with an average ten year estimated life per machine. ExtensiveandLoyalDistributionNetworks.Wehavedevelopedanextensivedistribution network in North America with over 555 distributors and over 120 route operators. We estimate that our laundromatandon-premiselaundrydistributorsandmulti-housingrouteoperatorshaveeitherthe numberoneornumbertwomarketpositioninover80%ofNorthAmericanmarkets.Theseleading distributorsandrouteoperatorsareattractedby our industry-leading brand equity, broad product array, new product introductions, significant installed base and our comprehensive value-added support which includes training, joint promotion efforts and extensive electronic and call center support of installation and service. These factors lead to high costs for distributors and route operators to switch manufacturers especially when combined with their substantial investments in service parts inventories and in training their sales and installation personnel with respect to our highly engineered products. Our end-customers place great value on the proven reliability of our products, backed by years of demonstrated experience in the field, as this significantly impacts their long-term repair and maintenance expenses. We have not historicallyexperiencedanysignificantturnoverofourdistributorsandrouteoperators.Asignificant number have been customers for over ten years. Comprehensive and Innovative Product Offering. We believe our product lines lead the industry in reliability, breadth of offerings, functionality and advanced features. In addition, we believe we are the onlymanufacturerinNorthAmericatoproduceafullcommercialproductline(includingtopload washers,dryers,frontloadwashers,washer-extractorsandtumblerdryersforallcommercialcustomer groups) thereby providing most customers with a single source solution for their stand-alone commercial laundryequipmentneeds.AtDecember31,2012,ourengineeringorganizationwasstaffedwithover 100engineers,designers,techniciansandsupportstaffwho,alongwithourmarketingandsales personnel,andwithinputfromourmajorcustomers,worktoredesignandenhanceourproductsto bettermeetcustomerneeds.Manyofournewproductsplaceanemphasisonenergyefficiencyand feature new electronic controls facilitating ease of use as well as improving performance and reliability.In2009welaunchedanewelectroniccontrolplatform.Byincludingthenewcontrolplatformacross most of our product offerings, we have been able to streamline the manufacturing process and simplify our maintenance and servicing operations.Industry exclusive features were added, such as variable vend rateoptionsandimprovedprogrammingandauditcapabilities,whichcanincreaseanequipment owners revenue and reduce their operating expenses,. LeadingNorthAmericanandEuropeanBrands.Wemarketandsellourproductsunderthe widely recognized brand names Speed Queen, UniMac, Huebsch, IPSO and Cissell. We believe that we have industry-leading brand equity and brand recognition based upon historical customer survey results. StrongandIncentivizedManagementTeam.LedbyourChiefExecutiveOfficerMichael Schoeb, we have assembled a strong and experienced management team. Our senior management team averagesover15yearsofexperienceinthecommerciallaundryequipmentandapplianceindustries. Thismanagementteamhasexecutednumerousstrategicinitiatives,including:(i) developingstrategic allianceswithkeycustomers;(ii) acquiringandsuccessfullyintegratingthecommerciallaundry businessesofUniMac,IPSOandCissell;(iii) implementingmanufacturingcostandquality improvement programs and (iv) implementing ongoing refinements to our product offerings. In addition, current management owns 16.8% of the Companys common equity, and could own up to 24.8% of the Companyscommonequityifmanagementsserviceandperformancestockoptions,outstandingasof March4,2013,becomeexercisable(asdefinedinNote19-StockBasedCompensation,tothe Consolidated Financial Statements). 6Business Strategy Ourstrategyistocontinueourstrongfinancialperformanceandselectivelypursuegrowth opportunitiesbyofferingtoourcustomersafulllineofthemostreliableandfunctionalstand-alone commercial laundry equipment together with industry-leading, comprehensive value-added services. The key elements of our strategy are as follows: Build on Our Customer One Initiative. Customer One is the primary cornerstone of our business strategyanddemonstratesourcommitmenttomaintainingacustomer-focusedculture.Westriveto consistently exceed our customers demands for superior product quality and reliability and we provide comprehensive and responsive service. We devote significant time and resources to train our personnel toeffectivelyserveourcustomers.Webelievethesuccessofourcustomerrelationshipeffortshas facilitated our industry-leading reputation and our long-term relationships with key customers which will help to facilitate the continued growth of our U.S. and international business. DevelopandStrengthenRelationshipswithKeyCustomers.Wehavedevelopedandwill continue to pursue long-term relationships with key customers and will pursue supply agreements where appropriate.Therelationshipsthatweestablishwithourcustomersarecomprehensiveandinclude training,extensivetechnicalsupportandpromotionalactivities.Inaddition,wemodelourproduct developmenteffortstomeetevolvingcustomerpreferencesbyworkingwithkeycustomerstodevelop newproducts,featuresandvalue-addedservices.Wehavenotexperiencedanysignificantcustomer turnover. ContinuetoImproveManufacturingOperations.Weseektocontinuouslyenhanceourproduct quality and reduce costs through ongoing refinements to our manufacturing processes. We have achieved such improvements in our manufacturing facilities and intend to continue doing so at Ripon and at our Belgiumfacilitythroughcollaborationamongkeycustomers,suppliersandourengineeringand marketingpersonnel. We have continuously reduced our manufacturing costs through improvements in raw material usage and labor efficiency and through plant consolidations with the most recent occurring in2011.SeeNote3-RestructuringandOtherCosts,totheConsolidatedFinancialStatementsfor furtherdiscussion.Since2000,wehavebeenusingademandflowproductionsystemonourhigher volumeproductlines.Thisproductionmethodhasresultedinsignificantimprovementsinassembly efficiency,inventorylevels,customerorderleadtimesandproductionquality.Since2008,wehave successfullyexecutednumerouskaizenprojectsattheRiponandBelgiumfacilitiestofurthersupport our lean manufacturing strategy. ContinuetoDevelopOurInternationalBusiness-Wehaveastrongrecordofgrowthin internationalmarketsduetothestrengthofourproducts,wellrecognizedbrands,acontinual strengtheningofourdistributorbaseandcontinualinvestmentininfrastructureandcustomersupport services.Weseektocontinuethatgrowthandpursuefurthermarketexpansionthroughsignificant investment in organic growth and selective acquisitions. ContinuetoPursueStrategicAcquisitions.Ourpresentmanagementteamhassuccessfully negotiatedandintegratedacquisitionssince1994,includingtheCLDAcquisitioninJuly2006,that takenasawhole,havesignificantlyincreasedoursales.Weintendtocontinueourconsiderationof strategic acquisitions, both domestically and internationally. We will focus on opportunities that provide or enhance the supply of full product lines to our customers and expand the markets for our products. By doing this, we can improve our already strong market positions, increase our growth as well as achieve significant acquisition synergies.7ExpandintotheU.S.ConsumerLaundryMarket.Were-enteredtheU.S.consumerlaundry market in October 2004. We are leveraging the strong brand equity of our Speed Queen name in order to recaptureaportionofourhistoricmarketshareandaretargetingthemidtohigh-endU.S.consumer laundry markets with products that are designed to have useful lives approximately twice that of typical consumer laundry equipment. We believe that our push into the mid to high-end U.S. consumer laundry markets will continue to allow us to expand our sales and diversify our customer base. Industry Overview WebelievethattheNorthAmericanmarketforstand-alonecommerciallaundry equipment has grownatacompoundannualrateofapproximately0.9%since2002.NorthAmericancommercial laundry equipment sales historically have been relatively insulated from business and economic cycles as economicconditionstendnottoaffectthefrequencyofuseorreplacementofcommerciallaundry equipment. We believe the Companys growth will be sustained by continued population expansion and bycustomersincreasinglytradinguptoequipmentwithenhancedfunctionalityandthereforehigher average selling prices. Manufacturersofstand-alonecommerciallaundryequipmentcompeteontheirabilitytosatisfy severalcustomercriteria,including:(i) equipmentreliabilityanddurability;(ii) performancecriteria suchaswaterandenergyefficiency,loadcapacityandeaseofuse;(iii) theavailabilityofinnovative technologies such as cashless payment systems and advanced electronic controls, which improve ease of use and management audit capabilities; (iv) the ability to swiftly and reliably provide servicing for their equipment;and(v) thesupplyofvalue-addedservicessuchasrapidsparepartsdelivery,equipment financing and computer-aided assistance in the design of commercial laundries. Trends and Characteristics NorthAmericanGrowthDrivers.WebelievethatcontinuedpopulationexpansioninNorth America will continue to drive steady demand for garment and textile laundering by all customer groups. Webelievepopulationgrowthhashistoricallysupportedreplacementsalesandmodestgrowthinthe installedbaseofcommerciallaundryequipment.AccordingtotheU.S.CensusBureau,theUnited States population has grown at a compound annual rate of 0.9% since 2000 and is projected to grow at approximately 0.8% per year, on average, over the next ten years. Inaddition,customersareincreasinglytradinguptoequipmentwithenhancedfunctionalityat higher average selling prices. For example, the larger national and regional customers in the laundromat andmulti-housingcustomergroupsaremorelikelytotakeadvantageofrecentlyavailableelectronic features, such as cashless payment systems and advanced electronic controls, which we believe provide thesecustomerswithacompetitiveadvantage.Customerscontinuetomovetowardequipmentwith improved water and energy efficiency as the result of escalating energy costs, government and consumer pressure and a focus on containing operating costs. LimitedEndUseCyclicality.NorthAmericancommerciallaundryequipmentsaleshistorically have been relatively insulated from business and economic cycles because economic conditions tend not todramaticallyaffectthefrequencyofuse,orreplacement,oflaundryequipment.Theusefullifeof commercial laundry equipment, and thus the timing of replacement of the equipment, are also generally unaffectedbyeconomicconditions.Theusefullifeofstand-alonecommerciallaundryequipmentis generally 7 to 14 years.8InternationalGrowth.Weanticipategrowthindemandforcommerciallaundryequipmentin internationalmarkets.Wealsobelievethisisparticularlytrueindevelopingcountrieswherelaundry needsarecurrentlylessfullydevelopedthaninNorthAmericaandcertaininternationalmarkets.We believe that continued development and growth of disposable income in these countries will cultivate an increasedneedanddemandforlaundryservicesaddressablebyourproducts.Webelievewehave positionedAlliancetobenefitfromthisgrowththroughour2006acquisition and integration of CLDs European Operations as well as our continued investment in infrastructure and customer support services worldwide. Reducing Customer Operating Costs. The time required to wash and dry a given load of laundry, whichwerefertoascycletime,hasasignificantimpactontheeconomicsofacommerciallaundry operation. Accordingly, commercial laundry equipment manufacturers produce equipment that provides progressivelyshortercycletimesthroughimprovedtechnologyandproductinnovation.Thisshorter cycletimedecreaseslaborcostsandincreasesthevolumeoflaundrythatcanbeprocessedinagiven time period. Examples of methods for reducing cycle time are: (i) shortening fill, drain and wash times (ii) decreasingwaterextractiontimebyincreasingspinspeedand(iii)shorteningdryingtimethrough efficient air flow and the use of electronic dryness sensors. The higher spin speed substantially increases waterextractionandtherebylowersmoistureretention.Forlaundromatandmulti-housinglaundry owners,thelowermoistureretentionresultsinreducedenergybillsforclothesdryingoperations. Overall,thisimprovementprovidesfasterdryingtimeswithlowerenergycostsandthepotentialfor increased revenue-generating cycles per day. Customer Categories Stand-aloneCommercialLaundryEquipment.Eachofthestand-alonecommerciallaundry equipmentindustrysthreeprimarycustomergroups,laundromatoperators,multi-housinglaundry operatorsandon-premiselaundryoperators,isservedthroughadifferentdistributionchannelandhas differentrequirementswithrespecttoequipmentloadcapacity,performanceandoperatingfeatures. Vendedequipmentpurchasedbymulti-housingrouteoperatorsismostsimilartoconsumermachines soldtoretailcustomers.Equipmentpurchasedbylaundromatsandon-premiselaundrieshasgreater durability,deliversincreasedcapacity,providesmoresophisticatedcleaningandfasterdrying capabilities and is generally purchased through distributors. Laundromats.Weestimatethatlaundromatsrepresentedthelargestcustomergroupwithinthe UnitedStates&Canadastand-alonecommerciallaundryequipmentindustryin2012.Therearean estimated 26,300 laundromats in the United States & Canada. These laundromats typically provide walk-in,self-servicewashinganddryingandprimarilypurchasecommercialtoploadwashers,washer-extractorsandtumblers.Washer-extractorsandtumblersarelarger-capacity,higher-performance washing machines and matching large capacity dryers, respectively. Laundromats have historically been ownedandoperatedbysoleproprietorswhotypicallyrelyondistributorstofindlocationsforstores, design the laundromat, provide and install equipment, provide technical and repair support and provide broaderbusinessservices.Forexample,distributorsfrequentlyhostseminarsforpotentiallaundromat proprietorstoexplainlaundromatinvestmentopportunities.Independentlaundromatproprietorsalso look to distributors and manufacturers to assist in arranging equipment financing. Given the laundromat ownersrelianceontheservicesofitslocaldistributor,webelievethatastrongdistributornetworkin local markets differentiates manufacturers which serve this customer group. Inadditiontodistributorrelationships,webelievethatlaundromatownerschooseamong differentmanufacturersproductsbasedon,amongotherthings:(i) reputation,reliabilityandeaseand 9costofrepair;(ii) availabilityofequipmentfinancing;(iii) thewaterandenergyefficiencyofthe products(approximately26%ofannualgrosswashanddryrevenueoflaundromatsisconsumedby utility costs, according to the Coin Laundry Association, or CLA); and (iv) the efficient use of physical spaceinthestore(approximately30%ofannualgrossrevenueoflaundromatsisexpendedonrent according to the CLAs 2012 Coin Laundry Industry Survey). Multi-HousingLaundries.Weestimatethatmulti-housinglaundriesrepresentedthesecond largestcustomergroupwithintheUnitedStates&Canadastand-alonecommerciallaundryequipment industryin2012.Theselaundriesincludecommonlaundryfacilitiesinmulti-familyapartmentand condominiumcomplexes,universitiesandmilitaryinstallationsaswellasequipmentforin-unithook ups. Mostproductssoldtomulti-housinglaundriesaresmall-chassistoploadandfrontloadwashers andsmall-chassis dryers that are vended, but similar in appearance to those sold to the retail consumer market, and offer a variety of enhanced durability and performance features such as audit functions that keeptrackof the number of cycles and the amount of money that has been collected. We estimate that toploadwasherssoldtomulti-housinglaundriestypicallylastmorethan10,000cycleswhichis approximately twice as long as the expected life of a consumer machine. Multi-housinglaundriesaremanagedprimarilybyrouteoperatorswhopurchase,installand servicetheequipmentundercontractswithpropertymanagementcompanies.Routeoperatorspayrent (whichmayincludeaportionofthelaundrysrevenue)topropertymanagementcompanies.Route operatorsaretypicallydirectcustomersofcommerciallaundryequipmentmanufacturerslikeAlliance Laundry and tend to maintain their own service and technical staffs. Route operators compete for long-termcontractsonthebasisof,amongother things: (i) the reputation and durability of their equipment; (ii) the level of maintenance and quality of theirrepair service; (iii) the ability of property management companies to audit laundry equipment revenue and (iv) the water and energy efficiency of products. Webelievereliabilityanddurabilityarekeycriteriaforrouteoperatorsandtheirproperty management customers in selecting equipment because these criteria help to minimize equipment down timeandrepaircosts.We also believe route operators prefer water and energy efficient equipment that offersenhancedelectronicmonitoringandtrackingfeaturesdemandedbypropertymanagement companies. Route operators are reluctant to change equipment suppliers given their investments in spare partsinventoriesandinsalesandrepairtechniciantrainingparticularlyaslaundryequipmentbecomes more technically sophisticated. Therefore, we believe a large installed base of laundry equipment gives a commerciallaundryequipmentmanufacturerasignificantcompetitiveadvantageandahighlikelihood of substantial, recurring and predictable replacement sales. On-PremiseLaundries.Weestimatethaton-premiselaundries(OPL)representedthethird largestcustomergroupwithintheUnitedStates&Canadastand-alonecommerciallaundryequipment industry in 2012. On-premise commercial laundries are located at a wide variety of businesses that wash orprocesstextilesorlaundryinlargequantitiessuchashotelsandmotels,hospitals,nursinghomes, prisons, sports facilities, car washes and fire stations. Productsmanufacturedforon-premiselaundriesincludewasher-extractors,tumblerdryersand flatwork finishers. The washer-extractors and tumbler dryers are primarily in larger capacities, up to 200 poundsperload,andprocesssignificantlylargerloadsoftextilesandgarmentsinshortertimesthan equipmenttypicallysoldtolaundromatsormulti-housingcustomergroups.Efficientwashing,drying andfinishing(i.e.reducedcycletime)ofhotelsheets,forexample,reducesbothahotelslinen 10requirementsandlaborcostsofwashinganddryinglinens.Webelievethatinatypicalon-premise laundry within a hotel, up to 50% of the operating cost is labor. On-premise laundries typically purchase equipment through a distributor who provides a range of sales,installationandrepairservicesonbehalfofmanufacturers.Aswithlaundromats,webelievea strongdistributornetworkisacriticalelementofsalessuccess.On-premiselaundriesselecttheir equipmentbasedontheavailabilityofspecifiedproductfeatures,including,amongotherthings: (i) reputationandreliabilityofproducts;(ii) loadcapacityandcycletime;(iii) waterandenergy efficiency and (iv) ease of use. In addition, the availability of technical support and service is important when an on-premise laundry operator selects an equipment supplier. Consumer Laundry. Were-enteredtheU.S.consumerlaundrymarketinOctober2004afterthe expiration of a non-compete agreement. Products sold in this segment include topload washers, frontload washers and standard dryers all of which we sell through distributors. Within this sales segment we are leveragingthestrongbrandequityofourSpeedQueennameinordertorecaptureaportionofour historic market share and are targeting the mid to high-end U.S. consumer laundry markets with products which are designed to have useful lives approximately twice that of typical consumer laundry equipment. We believe that our push into the mid to high-end consumer laundry markets has allowed us to continue to diversify our customer base. Products and Services We offer a full line of stand-alone commercial laundry washers and dryers with service parts and value-addedservicessupportingourproducts.Ourproductsrangefromsmallwashersanddryers, primarily for use in laundromats and multi-housing laundry rooms, to large laundry equipment with load capacities of up to 200 pounds used in on-premise laundries. Our brands include Speed Queen, UniMac, Huebsch, IPSO and Cissell which are sold throughout North America and in over 125 foreign countries. Wealsobenefitfromdomesticandinternationalsalesofservicepartsforourlargeinstalledbaseof commerciallaundryequipment.Wealsoselllaundryequipmentunderprivatelabelbrandsinorderto takeadvantageofdistributionnetworksofothercompaniesastheyfilltheirneedtoroundouttheir product offerings. Washers Washers include washer-extractors, topload washers and frontload washers. Washer-Extractors.Wemanufacturewasher-extractors,ourlargestwasherproducts,toprocess from 12 to 200 pounds of laundry per load. As part of the cleaning cycle, washer-extractors extract water fromlaundrywith spin speeds that produce over 460 G-force, thereby reducing water retention and the timeandenergycostsforthedryingcycle.TheseproductsareprimarilysoldundertheSpeedQueen, UniMac, Huebsch, IPSO and Cissell brands. Washer-extractors that process up to 80 pounds of laundry per load are sold to laundromats and washer-extractors that process up to 200 pounds of laundry per load are sold to on-premise laundries. Washer-extractors are built to be extremely durable in order to handle the enormous G-force generated by spinning several hundred pounds of water-soaked laundry. Also, the equipmentisinconstantuseandmustbedurableenoughtoavoidfrequentbreakdownswhichwould increase operating costs and downtime for the user. In 2008, washer-extractors available for sale under our Cissell brand were expanded with six new capacities ranging from 18 to 165 pounds. 11In 2009, we rolled out a new electronic control platform, which is marketed under the Quantum, Galaxy,andMSeriesnames,acrossmostofourproductofferings.Thisnewcontrolplatformhas allowedustostreamlinethemanufacturingprocessandsimplifyourmaintenanceandservicing operations.In addition, we have added industry exclusive features and flexibility to the products which include variable vend rate options and improved programming and audit capabilities. In2011,theSpeed QueenandHuebschbrands introducednewwasher-extractorspoweredby newQuantumandGalaxyelectroniccontrols,respectively.Thewasher-extractorallowsavended laundrytodifferentiateitselffromthecompetitionbyofferingcustomersauniquechoiceforwashing extra-large items such as quilts, sleeping bags and rugs. In 2012, all major washer-extractors products at both our Ripon and Belgium facilities underwent significantanddramaticmarketimprovements.Hardmountandsoftmountwasher-extractorsreceived some of the most significant changes in the history of the company. The changes include redesigned and robotically welded frames, improved door lock systems, new plumbing systems, higher water and energy efficiency, enhanced electronic controls, higher spin speed and custom variable speed drives. ToploadWashers.Toploadwashersaresmall-chassiswasherswiththe capabilitytoprocessup to16poundsoflaundryperloadwithspinspeedsthatproduceupto150G-force.Theseproductsare soldprimarilytomulti-housinglaundries,laundromatsandconsumersundertheSpeedQueenand Huebsch brands. In 2008, we expanded our product offering under the IPSO brand to include topload washers and matching dryers to complement IPSOs existing line of vended laundry equipment. In2009,weintroducedanewelectroniccontrolplatformtothelineofcommercialtopload washers. In 2012, new higher water and energy efficiency topload washers were introduced to the market both domestically and internationally. FrontloadWashers.FrontloadwashersaresoldundertheSpeedQueen,IPSOandHuebsch brandstobothlaundromatandmulti-housingcustomers.Ourfrontloadwashersadvanceddesignuses 22% to 57% less water than our topload washers and can process up to 18 pounds of laundry per load. Furthermore, decreased usage of hot water and superior water extraction in the high G-force spin cycle reduceenergyconsumption.Ourfrontloadwasherisavailablewithfrontcontrols(frontaccessibility complies with Americans with Disabilities Act regulations) or rear controls and can be purchased with a matching small-chassis dryer (single or stacked with front or rear controls). OurfrontloadwashersdisplaytheU.S.federalgovernmentsENERGYSTARmark.The ENERGYSTARlabelwasdesignedbytheU.S.federalgovernmenttodenoteproductsthatuseless energy, thereby saving money on utility bills, while helping to protect the environment. Along with our 18 poundwashloadcapacity,ourfrontloadwasherhasaspinspeedofupto1,000revolutionsper minute, providing significant dryer energy savings. In2009,weintroducedanewfrontloadwasherandmatchingdryertoIPSOdistributionthat featuresstainlesssteelcabinetryforcommercialapplications.Wealsointroducedanewelectronic controlplatformtothelineofcommercialfrontloadwashersaswellasanewvariablespeedmotor 12drive. The new drive utilizes state-of-the-art drive components and benefits from reduced manufacturing costs. Dryers Dryers include tumbler dryers, standard dryers and stacked dryers. We also sell a line of stacked combination frontload washers and dryers. Tumbler Dryers. Tumblers are very large dryers with the capability of drying up to 170 pounds of laundry per load. Tumblers are sold primarily to laundromats and on-premise laundries under all five of our brands. In2008,severalnewproductswereintroducedincludinga55poundcapacitytumblerthat incorporates an axial airflow design which delivers high energy efficiency and shorter drying times. Also new were 50 Hertz versions of our 45 pound capacity stacked tumbler and expansion of the CARE fire suppression system option to 25, 30 and 35 pound capacity on-premise laundry tumbler dryers. In 2009, we introduced a new electronic control platform to commercial tumblers and dryers. We also introduced new electrical system designs on the 50 through 170 pound tumblers to better streamline the manufacturing process and standardize the electrical systems throughout the entire tumbler line. In2011,weintroducedtheOver-DryPrevention Technology(OPTIDRY)optiontoour tumblerlineacrossallbrands. OPTIDRYisanindustry-exclusivedesignusingrotarytransfer switchesandsensorstoaccuratelygaugeloaddryness.Thistechnologyallowson-premise laundries to have significant utility and labor savings as well as reduced processing cycle times. In 2012, a number of options were added to the tumbler platform primarily for the international markets.Differentvoltageconfigurations,reversingoptionsandanewon-premiselaundryversionof OPTIDRY were introduced. StandardDryers. Standard dryers are small capacity dryers with the capability of processing up to 18 pounds of laundry per load. Standard dryers, including stacked dryers, are primarily sold under the SpeedQueen,UniMac,HuebschandIPSObrands.Ourstandarddryerscapacity,measuring7.1cubic feet, is among the largest in the industry. StackedDryersandStackedFrontloadWashersandDryers.Toenableourmulti-housing customers to conserve valuable floor space, we offer a stacked unit consisting of two 18 pound standard dryersandofferastackedcombination unit consisting of an 18 pound frontload washer paired with an 18 pound standard dryer. Service Parts Webenefitfromtherecurringsalesofservicepartsusedtosupportourlargeinstalledbaseof equipment.Theexpectedfieldservicelifeofourequipmentis7to14years.Weofferimmediate response service whereby many of our parts are available on a 24-hour turnaround basis for emergency repair parts orders. The demand for service parts generated by the large installed base provides us with a source of higher margin revenue which is recurring and predictable. 13Ourwebsitesenableauthorizeddistributorsandrouteoperatorstoregisterproducts,process warrantyclaimsandorderpartsonline.Theseonlineservicesoffercustomersflexibility,short processing time and reduced order processing errors. Other Value-Added Services Managementbelievesweofferanunmatchedrangeofcomplementarycustomerservicesand support including technical support and on-call installation and repair service through our highly trained distributors.Webelieveourcustomersattachsignificantimportance to these value-added services. We offer services that we believe are significant drivers of high customer satisfaction and retention, such as equipmentfinancing,laundromatsiteselectionassistance,investmentseminartrainingmaterials, computer-aided commercial laundry room design and sales and service training for distributors. We offer ourcustomersaccesstoAlliancePartsConnection,acomprehensiveon-linepartslook-upprogram allowing search and visual capabilities for our products and component parts, with connectivity to our e-commercebusinesssectiontoallowthemtoplaceorders.WealsoofferourcustomersaCD-ROM based parts look up program called SearchIt, which is continually updated to include service manuals, troubleshootingguides,partspricinginformationandapartsorderingpicklist.Ourlaundrydesign serviceprovidesconstructiondrawingsand3-dimensionallayoutsofproposedlaundryfacilitiesand provides a cost analysis for new or updated laundry facilities. Our public websites provide information on all of our products and services, including equipment sizingandcostanalysistoolsandtheabilitytodownloadproductliterature,installationandoperating instructions,programmingmanuals,technicalbulletinsandwarrantyinformation.Theyalsoprovide product selection assistance, education centers, an online consumer magazine, distributor locators, dealer locators, servicer locators, product comparison guides and energy and water consumption guides. Wealsohaveapassword-protectedwebsiteforourdistributorsandrouteoperators.In2007,a newfinancesitewaslaunchedforourexistingcoinstorefinancecustomersallowingthemtomanage their accounts online. In 2011, we increased the ease and convenience to our customers by offering them an online credit application tool for coin store financing. In2009,theCompanylaunchedALSU-AllianceLaundrySystemsUniversity.Thisglobal online training tool is a first for the commercial laundry industry and delivers training in several areas to ourauthorizeddistributorsandrouteoperators.Salestrainingfocusesonthesalesprocess and product featuresandbenefits.Servicetrainingassistsservicetechniciansinunderstandingtheoperationofour equipmentandteachesthemhowtodiagnoseandcorrectissuesquicklyandaccurately.ALSUglobal coursesdeliversalestraininginsevenlanguagestosupportinternationaldistributors.TheService Techniciancertificationprogramallowsthecompanytorecognizeandleverageourdistributions professional skills in appliance servicing. In 2012, the ALSU site was redesigned by adding competitive selling classes and mobile access to ALSU courses. AnewinternationalSpeedQueenwebsitewaslaunchedin2011with8languagesto accommodateworldwidevisitors.In2012,twonewsiteswerere-launched:anInternationalIPSO websitethatshowcasesnewtechnologiesandrecentproductlaunchesandanupdatedcorporatesite www.alliancelaundry.comthathighlightsAllianceLaundrysglobalscale,thelaundryinvestment opportunity and our commitment to Customer One. Webelieveourextensiveservices,inadditiontothedependabilityandfunctionalityofour products, will continue to differentiate our products from the competition. 14Customers Our customers include approximately: (i) 165 distributors to laundromats; (ii) 390 distributors to on-premiselaundries;(iii) 120routeoperatorsservingmulti-housinglaundries;(iv) 150international distributorsservedthroughourU.S.operations;and(v) 140distributorsservedthroughourEuropean Operations.Our top ten customers accounted for 25.7% of our 2012 net revenues. Our largest customer represents less than 10% of our total revenues. Sales and Marketing Sales Force Webelievethatourglobalsalesforceforthecommerciallaundryindustryisthelargestinthe world and is structured to serve the specific needs of each of our customer groups. In addition, through ourextensivemarketingandsupportstaff,weprovidecustomersanddistributorswithawiderange of value-addedservicessuchasadvertisingmaterials,trainingmaterials,computer-aidedcommercial laundry room design, product development and technical service support. Marketing Programs We support our sales force and distributors through a balanced marketing program of advertising andindustrytradeshows.Advertisingactivitiesincludeavarietyofforms,suchasinternetwebsite developmentandsupport,multi-mediaprojects,printliterature,directmailandpublicrelations activities.Inaddition,ourrepresentativesattendedover80tradeshowsin2012tointroducenew products, maintain contact with customers, develop new customer relationships and generate sales leads for our products. Equipment Financing Throughourspecial-purposefinancingsubsidiaries,weofferanextensiveequipmentfinancing programtoend-users,primarilylaundromatowners,toassistintheirpurchasesofnewequipment. Typical terms include two to ten year loans with an average principal amount of approximately $77,000. We believe that our equipment financing program is among the industrys most comprehensive and that the program is an important component of our marketing activities. In addition, this program provides us with an additional source of recurring income. Thefinancingprogramisstructuredtohelpminimizeourriskofloss.Weadheretostrict underwritingproceduresincludingcomprehensiveapplicantcreditanalysis(generallyincludingcredit bureau, bank, trade and landlord references and site analysis including demographics of the location and multipleyearpro-formacashflowprojections)andsecurityintheformofcollateralanddistributor assistanceinremarketingcollateralintheeventofdefault.Asaresultoftheserisk management tools, lossesfromtheprogramhavebeenminimal.Netwrite-offsforequipmentloanshaveaveraged approximately1.2%forthefiveyearperiodendedDecember31,2012,andwereapproximately1.0% for the year ended December 31, 2012. For additional information about the financing program, see the discussionunderManagementsDiscussionandAnalysisofFinancialConditionandResultsof Operations-LiquidityandCapitalResources,Note 2-SignificantAccountingPoliciesandNote 4- Asset Backed Facility, to the Consolidated Financial Statements. 15Research and Development AsofDecember31,2012,ourengineeringorganizationisstaffedwithover100engineers, designers and technicians who have developed numerous proprietary innovations that we utilize in select products.Ourrecentresearchanddevelopmenteffortshavefocusedprimarilyoncontinuous improvementinthereliability,performance,capacity,energyand water conservation, sound levels and regulatorycomplianceofourcommerciallaundryequipment.Ourengineersandtechnicalpersonnel, togetherwithourmarketingandsalespersonnel,collaboratewithour major customers to redesign and enhance our products to better meet customer needs. Our cumulative research and development spending exceeded $51.9 million for the five year period 2008 through 2012. Competition Within the North American stand-alone commercial laundry equipment industry, we have several largecompetitors.However,webelievethatwearetheonlyparticipantintheNorthAmericanstand-alonecommerciallaundryequipmentindustrytoservesignificantlyallthreeofourcustomergroups (laundromats,multi-housinglaundriesandon-premiselaundries)withafulllineoftoploadwashers, washer-extractors,frontloadwashers,tumblerdryersandstandarddryers.Withrespecttolaundromats, ourprincipalcompetitorsincludeLaundrylux(theexclusiveNorthAmericandistributorofElectrolux professionallaundryproducts),WhirlpoolCorporationandDexterLaundry,Inc.Inmulti-housing,our principal competitors are Whirlpool Corporation and LG. In on-premise laundry, we compete primarily with Pellerin Milnor Corporation, American Dryer Corporation and Continental Girbau, Inc. WithintheInternationalstand-alonecommerciallaundryequipmentindustry,wehaveseveral large competitors. The largest manufacturer and marketer of stand-alone commercial laundry equipment inEuropeisElectroluxprofessionallaundryproducts.Theotherlargeinternationalmanufacturersand marketersofstand-alonecommerciallaundryequipmentareGirbau,S.A.,MieleProfessionaland Primus N.V. Manufacturing WeoperatemanufacturingfacilitieslocatedinRipon,WisconsinandWevelgem,Belgium with an aggregate footprint of more than 850,000 square feet. The facilities are organized to focus on specific product groups although each facility serves multiple customer groups. The Ripon facility produces our small-chassistoploadwashers,large-chassiswasher-extractors,frontloadwashers,smallchassisdryers andtumblerdryers.OurWevelgemfacilityproducesprimarilylarge-chassiswasher-extractorsand pressesandfinishingequipment.Ourmanufacturing plantsprimarilyengageinfabricating, machining, painting,assemblingandfinishingoperations.Wealsooperateourfinishedgoodsandserviceparts distribution centers in Ripon, Wisconsin. A lease for production space in Ripon, Wisconsin was entered into in November 2005 and, with amendments, has an option to be extended to March 2021. In 2008, we leasedwarehousespaceinWevelgem,Belgiumandleasedadditionalwarehousespacein2011.This space is used for the distribution of washer-extractors and tumbler dryers produced in the United States andBelgiumforEuropeancustomers.Webelievethatourexistingmanufacturingfacilities,including the20122013expansiondescribedbelow,provideadequateproductioncapacitytomeetexpected product demand. InJune2012theCompanycommittedtoa$13.0millioncapitalprojecttoexpandoursmall chassisproductionline.Theexpansionisnecessarytoaddresscapacityconstraintscausedbysales 16growthtoconsumerlaundry,multi-housingandinternationalcustomers.Theexpectationisthatthis project will be materially completed by the fourth quarter of 2013. Wepurchasesubstantiallyallrawmaterialsandcomponentsfromavarietyofindependent suppliers.Keymaterialinputsformanufacturingprocessesincludemotors,stainlessandcarbonsteel, aluminum castings, electronic controls, corrugated boxes and plastics. For the majority of raw materials andcomponents,webelievetherearereadilyavailablealternativesourcesofrawmaterialsfromother suppliers.Wehavedevelopedlong-termrelationshipswithmanyofoursuppliersandhavesourced materials from eight of our ten largest suppliers for at least five years. We are committed to achieving continuous improvement in all aspects of our business in order to maintainourindustryleadingposition.OurmanufacturingfacilitiesinRipon,Wisconsinandin Wevelgem,BelgiumareISO9001:2008certified.ISO9001isasetofstandardsdealingwithquality management systems for quality assurance in design/development, production, installation and servicing that are published by the International Standardization Organization. Intellectual Property and Licenses Wehave21trademarks,certainofwhichareregisteredintheUnitedStatesandanumberof foreign jurisdictions, as of December 2012. Our widely recognized brand names Speed Queen, UniMac, Huebsch, IPSOandCissellareidentifiedwithandimportanttothesaleofourproducts.Generally, registeredtrademarkshaveaperpetuallife,providedthattheyarerenewedonatimelybasisand continue to be used properly as trademarks, subject only to the rights of third parties to seek cancellation of the marks. Wecurrentlyhave44 patents. Our business is not dependent to any significant extent upon any singleorrelatedgroupofpatents.WebelievethatourmostsignificantpatentsaretheControllerfor BridgingaHostComputerandNetworkedLaundryMachinesissuedin2008,theLaundryMachine ControlSystemforLoadImbalanceDetectionandExtractionSpeedSelectionissuedin2009andthe Laundry Dryer with Improved Tumbler Air Flow Passage Openings issued in 2007. Ourbusinessisnotdependenttoamaterialdegreeoncopyrightsortradesecretsalthoughwe considertheCustomerOne,Quantum,Galaxy,WashAlert,C.A.R.E., SearchItand OPTIDRY systems, as well as our upgraded Micro-electronic Display Control, to be developments that are important to our business. Other than licenses to commercially available third-party software, we do not believe our licenses to third-party intellectual property are significant to the business. Regulations and Laws Environmental, Health and Safety Matters OurCompanyanditsoperationsaresubjecttocomprehensiveandfrequentlychangingfederal, stateandlocalenvironmentalandoccupationalhealthandsafetylawsandregulations,includinglaws andregulationsgoverningemissionsofairpollutants,dischargesofwasteandstormwaterandthe transportation, storage and disposal of wastes, including solid and hazardous wastes. We are also subject topotentialliabilityfornon-compliancewithotherenvironmentallawsandfortheinvestigationand remediationofenvironmentalcontamination(includingcontaminationcausedbyotherparties)atthe propertiesweownoroperate(orformerlyownedoroperated)andatotherpropertieswherethe Companyorpredecessorshavecarriedonbusinessorhavearrangedforthedisposalofhazardous 17substances.Asaresult,fromtimetotime,weareinvolvedinadministrativeandjudicialproceedings and inquiries relating to environmental matters. There can be no assurance that we will not be involved insuchproceedingsinthefutureandthattheaggregateamountoffutureclean-upcostsandother environmentalliabilities(includingpotentialfinesandcivildamages)willnothaveamaterialadverse effectonourbusiness,financialconditionandresultsofoperations.Webelievethatourfacilitiesand operations are in material compliance with all environmental, health and safety laws. In our opinion, any liabilityrelatedtomatterspresentlypendingwillnothaveamaterialeffectonourfinancialposition, liquidity or results of operations after considering provisions already recorded. Federal,stateandlocalgovernmentscouldenactlawsorregulationsconcerningenvironmental mattersthataffectouroperationsorfacilitiesorincreasethecostofproducing,orotherwiseadversely affect the demand for, our products. We cannot predict the environmental liabilities that may result from legislationorregulationsadoptedinthefuture,theeffectofwhichcouldberetroactive.Norcanwe predicthowexistingorfuturelawsandregulationswillbeadministeredorinterpretedorwhat environmentalconditionsmaybefoundtoexistatourfacilitiesoratotherpropertieswherewe or our predecessors have arranged for the disposal of hazardous substances. CertainenvironmentalinvestigatoryandremedialworkisunderwayatourRipon,Wisconsin manufacturingfacility.WithrespecttotheRiponfacility,thisworkisbeingconductedbyuswiththe supportofanenvironmentalconsultant.Infurtherancethereof,during2005 the Wisconsin Department ofNaturalResourcesrequestedtheinstallationandmonitoringofagroundwellattheRiponfacility. ThefirstgroundwellhasbeenmonitoredinaccordancewithaworkplansetupbetweenAlliance Laundry and the Wisconsin Department of Natural Resources. Consistent with our plans, the Company installedfouradditionalwellsinlate2008andearly2009withinthegeneralareaofthefirstwell.A workplanfortheadditionalmonitoringwellshasbeenagreedtobetweenAllianceLaundryandthe Wisconsin Department of Natural Resources that will at least run through 2013. We currently expect to incurcostsoflessthan$100,000through2013relatedtotheseadditionalwells.Therecanbeno assurance,however,thatwewillnotincuradditionalremedialcostsinthefuturewithrespecttothe Ripon facility. Other Regulation In addition to environmental regulation, our operations are also subject to other federal, state and local laws, including those relating to protection of public health and worker safety. Employees Wearedependentonthecontinuedservicesofourseniormanagementteamandcertainother key employees. We currently have an employment agreement with Michael D. Schoeb, Chief Executive OfficerandPresident.WehavealsoenteredintoseveranceprotectionagreementsinJanuaryof2005 withthemajorityofourseniormanagementteamasdiscussedmorefullyinItem11-Executive Compensation-SeveranceBenefits.Wedonotmaintainlifeinsurancepolicieswithrespecttokey employees. AsofDecember31,2012,wehad1,613employeesofwhich198wereassociatedwithour EuropeanOperations.TheUnitedSteelWorkersunionrepresented1,051employeesatourWisconsin facilities. In addition, 189 employees at our Belgium facilities were represented by a works council and a union delegation as of December 31, 2012. We believe that current labor relations are good and no labor disruptions are anticipated in the foreseeable future.18OnDecember13,2010,theUnitedSteel Workers union entered into a new contract (the New LaborAgreement)thatreplacedtheAmendedLaborAgreementdatedSeptember28,2005.TheNew LaborAgreementcontainsprovisionsthatareusualandcustomaryforagreementsofthistypeandit expires on February 28, 2017. There have been no work stoppages at any of our Wisconsin facilities for more than 45 years. Weareapartytocertainfederalandsector collective bargaining agreements in Belgium which aremandatoryandregulateitemssuchasworkinghours,pay premiums, vacation, early retirement age andsocialfundcontributions. These agreements are negotiated at a national, sector and local level and can be unlimited in duration. ITEM 1A. RISK FACTORS The business, prospects and value of the Company are subject to a number of risk factors, which are identified in this and prior years quarterly and annual reports. Oursubstantialindebtednesscouldadverselyaffectourfinancialhealthandpreventusfrom fulfilling our obligations under the agreements governing our debt. We are highly leveraged. As of December 31, 2012 we had $751.6 million (prior to original issue discountof$3.0million)ofconsolidatedindebtednessoutstandingofwhich$266.6millionrelatedto our securitization activities and $485.0 million related to indebtedness outstanding under our December 2012Credit Facilities, excluding unused commitments under our revolving credit facility and letters of credit.Oursubstantialindebtednesscouldhaveimportantconsequencestolendersandcreditors.For example, it could: make it more difficult for us to satisfy our obligations with respect to our indebtedness; increase our vulnerability to general adverse economic and industry conditions; require us to dedicate a substantial portion of cash flow from operations to payments on our indebtedness,therebyreducingtheavailabilityofourcashflowtofundworkingcapital, capitalexpenditures,acquisitions,researchanddevelopmentefforts,growthininternational markets and other general corporate needs; limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; place us at a competitive disadvantage compared to our competitors with less debt; subjectustotheriskofincreasedsensitivitytointerestrateincreasesonourindebtedness withvariableinterestrates,includingourborrowingsunderourDecember2012Credit Facilities; and limit our ability to borrow additional funds. Our December 2012 Credit Facilities contain representations, warranties and covenants which if breachedcouldleadtoaneventofdefaultandcould,thereby,acceleratethepaymentofourdebt.In addition, our ability to access borrowings under the revolving portion of our December 2012 Revolving CreditFacilityissubjecttoourcompliancewiththecovenantsandotherprovisionsofthefacility including,generally,aTotalLeverageRatio.Ourabilitytosatisfythistestcanbeaffectedbyevents beyond our control, including prevailing and future economic, financial and industry conditions, and we cannot provide assurance that we will continue to meet this test in the future. For additional information 19about this financial ratio and other covenants, see Managements Discussion and Analysis of Financial Condition and Results of Operations. If Adjusted EBITDA for the year ended December 31, 2012 was approximately$24.3millionlower,wewouldnotbeabletomeettheTotalLeverageRatiotestunder ourFirstLienCreditAgreement.Thefinancialandotherrestrictivecovenantscontainedinour December 2012 Credit Facilities could also generally limit our ability to engage in activities that may be in our long-term best interests, and our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt. Any amendment toorwaiverofthecovenantswouldlikelyinvolvesubstantialupfrontfees,significantlyhigherannual interestcostsandothertermssignificantlylessfavorabletousthanthosecontainedintheDecember 2012 Credit Facilities. Werequireasignificantamountofcashtoserviceourindebtedness.Ourabilitytogeneratecash depends on many factors beyond our control. Ourabilitytomakescheduledpaymentsofprincipalandinterestwithrespecttoour indebtedness,ourabilityto fund our planned capital expenditures, our intended growth in international marketsandourresearchanddevelopmenteffortswilldependonourabilitytogeneratecashandon futurefinancialresults.This,toacertainextent,issubject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Therecan be no assurances that our business will generate sufficient cash flow from operations toenableustopayourindebtednessortofundotherliquidityneeds.Ifwefailtomakeanyrequired payment under the agreements governing our indebtedness or fail to comply with the required covenants containedinthem,wewouldbeindefault,andourlenderswouldhavetheabilitytorequirethatwe immediately repay our outstanding indebtedness. If the lenders required immediate payment, we may not have sufficient assets to satisfy our obligations under our indebtedness. Wealsocouldbeforcedtosellassetstomakeupforanyshortfallinourpaymentobligations underunfavorablecircumstances.TheDecember2012CreditFacilitiesgoverningourdebtlimitour ability to sell assets and restrict the use of proceeds from any such sale. Furthermore, the December 2012 Credit Facilities are secured by substantially all of our assets. Therefore, we may not be able to sell our assets quickly enough or for sufficient amounts to enable us to meet our debt service obligations. In addition, we may need to refinance all or a portion of our indebtedness on or before maturity. Wecannotassurethatwewillbeabletorefinanceanyofourindebtedness,includingtheDecember 2012 Credit Facilities, on commercially reasonable terms or at all. Significantadversechangesinthefinancialmarketsandglobaleconomycouldhaveamaterial adverse effect on our business. Worldeconomicconditions,whileimproving,arestillrelativelyweakwhichhascaused volatilityanddisruptioninthemarketsinwhichweoperate.Suchweakness,volatilityanddisruption were accompanied by, and to some extent the resultof, increasing raw material costs, lack of available credit and fluctuating foreign currency exchange rates. Each of the foregoing, as well as the health of the U.S.,Europeandglobaleconomy,generallyaffectsdemandforourproducts.Significantadverse changesineconomicactivityandconditionsintheU.S.,Europeandtheothermarketsinwhichwe operatemayadverselyaffectourfinancialconditionandresultsofoperations.Therecanbeno assurancesthatgovernmentresponsestodisruptionsinthefinancialmarketsoranyotherexpected developments will alleviate such weakness or market volatility. 20Theglobaleconomicdownturnhastightenedcreditmarketsandloweredliquiditylevels althoughthisisimprovinginsome geographic regions more than others. Lower credit availability may increaseborrowingcostsforourcustomersandsuppliers.Inaddition,someofourcustomersand suppliersmayexperiencefinancialproblemsduetoreducedaccesstocreditandlowerrevenues. Financial duress may prompt some of our suppliers to seek to renegotiate supply terms with us, eliminate orreduceproductionofcertaincomponentswepurchaseorfileforbankruptcyprotection.Inaddition, someofourcustomersmaybeunabletoobtainfinancingtopurchaseproductsormeettheirpayment obligations to us. In addition, continued negative economic conditions could result in the insolvency of one or more of our customers. The occurrence of any or all of these events could have a material adverse effect on our business, financial condition and results of operations. Concerns regarding the European debt crisis and market perceptions concerning the instability of the euro,thepotentialre-introductionofindividualcurrencieswithintheEurozone,orthepotential dissolution of the euro entirely, could have an adverse impact on our business. Concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet futurefinancialobligations,theoverallstabilityoftheeuroandthesuitabilityoftheeuroasasingle currency given the diverse economic and political circumstances in individual Eurozone countries. These concernscouldleadtothere-introductionofindividualcurrenciesinoneormoreEurozonecountries, or,inmoreextremecircumstances,thepossibledissolutionoftheeurocurrencyentirely.Shouldthe eurodissolveentirely,thelegalandcontractualconsequencesforholdersofeuro-denominated obligations would be determined by laws in effect at such time. These potential developments, or market perceptionsconcerningtheseandrelatedissues,couldadverselyaffectthevalueofoureuro- denominatedassetsandobligations.Inaddition,concernsovertheeffectofthisfinancialcrisison financialinstitutionsinEuropeandgloballycouldhaveanadverseimpactonthecapitalmarkets generally,andmorespecificallyontheabilityofourcustomers,suppliersandlenderstofinancetheir respectivebusinesses,toaccessliquidityatacceptablefinancingcosts,ifatall,ontheavailabilityof supplies and materials and on the demand for our products. Our net revenues depend on a limited number of significant customers. Our top ten equipment customers accounted for approximately 25.7% of our 2012 net revenues. No one customer accounts for more than 10% of the Companys 2012 net revenues. Many arrangements are by purchase order and are terminable at will at the option of either party. Our business also depends upon the financial viability of our customers. A significant decrease or interruption in business from one ormoreofoursignificantcustomerscouldresultinlossoffuturebusinessandcouldhaveamaterial adverse effect on our business, financial condition and results of operations. Ourinabilitytofundourfinancingprogramstoend-customerscouldresultinthelossofsalesand adversely affect our operations. Weofferanextensivefinancingprogramtoend-customers,primarilylaundromatowners,to assist them in their purchases of new equipment from our distributors or, in the case of route operators, from us. Typical terms include two to ten year loans with an average principal amount of approximately $77,000.WeprovidethesefinancingprogramsthroughourAssetBackedFacility,whichisa$330.0 million revolving facility entered into by Alliance Laundry Equipment Receivables Trust 2009-A, a trust formed by Alliance Laundry Equipment Receivables 2009 LLC, our special purpose bankruptcy remote subsidiary,andbackedbyequipmentloansandtradereceivablesoriginatedbyus.InJune,2011,the AssetBackedFacilitywasamendedtoextendtheterminationdatethroughJune16,2013withthe optiontoextendforonemoreyear.Thetrustisutilizedtofinancebothequipmentloansandtrade 21receivables.Ifcertainlimitsinthesizeoftheassetbackedfacilityarereached(eitheroverallsizeor certain sublimits), additional indebtedness may be required to fund the financing programs. Our inability toincursuchindebtednesstofundthefinancingprogramsorourinabilitytosecuritizesuchassets throughourbankruptcyremotesubsidiarycouldlimitourabilitytoprovideourend-customerswith financingwhichcouldresultinthelossofsalesandhaveamaterialadverseeffectonourbusiness, financial condition and results of operations. In addition, a significant increase in the cost of funding our financingsubsidiariescouldhaveamaterialadverseeffectonourbusiness,financialconditionand results of operations. BeginninginJune2013wecouldbeunabletoutilizeourassetbackedfacility.Aninabilityto refinance or replace this facility could have an adverse impact on our business. As discussed further in Note 4 - Asset Backed Facility, to the Consolidated Financial Statements, Alliance Laundry, through a special-purpose bankruptcy remote subsidiary, Alliance Laundry Equipment Receivables2009LLCandatrust,AllianceLaundryEquipmentReceivablesTrust2009-A(ALERT 2009A),enteredintoa$330.0millionrevolvingfacilityandbackedbyequipmentloansandtrade receivablesoriginatedbyus.InJune2011,theAssetBackedFacilitywasamendedtoextendthe terminationdatethroughJune 16, 2013 with the noteholders option to extend for an additional year if requested by ALERT 2009A. Through June 16, 2013, the revolving period of the Asset Backed Facility (the Revolving Period), Alliance Laundry is permitted, from time to time, to sell its trade receivables andcertainequipmentloanstothespecial-purposesubsidiary,whichinturnwilltransferthemtothe trust.AftertheRevolvingPeriod(orearlierintheeventofarapidamortizationeventoraneventof default), the trust will not be permitted to request new borrowings under the facility and the outstanding borrowings will amortize over a period of up to nine years. Duringthe2008-2009globaleconomicdownturn,theasset-backedsecuritizationmarket decreased the availability of liquidity, credit and credit capacity for certain issuers.Although the asset-backedsecuritizationmarkethasimprovedsinceJune2009,asignificantadversechangeinmarket conditionscouldhaveamaterialadverseeffectonourabilitytorefinancethefacilityon advantageous terms or at all. An inability to refinance or replace this facility prior to June 2013 could have a material adverseeffectonourbusiness,financialconditionandresultsofoperations,includingourrevenues, EBITDA, liquidity and leverage. Net equipment financing revenue in 2012 of $8.5 million is included in the Equipment financing, net revenue line of the Consolidated Statements of Comprehensive Income. As ofDecember 31,2012,theamountduetoinvestorsunderourassetbackedfacilityforaccountsand loansreceivablewas$42.5millionand$224.1million,respectively.Ifweareunabletorefinanceor replace the facility prior to June 2013, our EBITDA could decrease over time due to the loss in revenue generatedbynewfinancingsandourleveragecouldincreaseasaresultofhavingtofinanceaccounts receivables on our balance sheet. In either case, our liquidity could be materially and adversely affected. Pricefluctuationsorshortagesofrawmaterialsandthepossiblelossofsupplierscouldadversely affect our operations. Themajorrawmaterialsandcomponentswepurchaseforourproductionprocessaremotors, stainlessandcarbonsteel,aluminumcastings,electroniccontrols,corrugatedboxesandplastics.The priceandavailabilityof these raw materials and components are subject to market conditions affecting supplyanddemand.Manyofthecommoditiesthataffectourrawmaterialandcomponentcostshave fluctuatedsignificantly,bothupanddown,overthepastseveralyears.Furthermore,mostofthe commoditiesthatwouldaffectourcostshaveincreasedsincethebeginningof2009.Wetakestepsto contain such cost fluctuations, by using hedge instruments or by implementing price increases. However, there can be no assurance that increases in raw material or component costs (to the extent we are unable 22topassonsuchhighercoststocustomers)orfuturepricefluctuationsinrawmaterialswillnothavea material adverse effect on our business, financial condition and results of operations. We also purchase a portion of these raw materials and component parts from foreign suppliers using foreign currency. As a result,wearesubjecttoexchangeratefluctuationsthatcouldhaveamaterialadverseeffectonour business,financialconditionandresultsofoperations.Inaddition,becausewemaintainlimitedraw materialandcomponentinventories,evenbriefunanticipateddelaysindeliverybysuppliersincluding thoseduetocapacityconstraints,labordisputes,impairedfinancialconditionofsuppliers,weather emergenciesornaturaldisasters,mayimpairourabilitytosatisfyourcustomersandcouldadversely affect our financial performance. We operate in a competitive market. Within the North American stand-alone commercial laundry equipment industry, we have several largecompetitors.Withrespecttolaundromats,ourprincipalcompetitorsincludeLaundrylux(the exclusiveNorthAmericandistributorofElectroluxprofessionallaundryproducts),Whirlpool Corporation and Dexter Laundry, Inc. In multi-housing, our key competitors are Whirlpool Corporation andLG.Inon-premiselaundry,wecompeteprimarilywithPellerinMilnorCorporation,American DryerCorporation,LaundryluxandContinentalGirbau,Inc.WithintheInternationalstand-alone commerciallaundryequipmentindustry,wehaveseverallargecompetitorswhichincludeElectrolux professional laundry products, Girbau, S.A., Miele Professional and Primus N.V. Therecanbenoassurancethatsignificantnewcompetitorsorincreasedcompetitionfrom existingcompetitorswillnothaveamaterialadverseeffectonourbusiness,financialconditionand results of operations. Certain of our principal competitors have greater financial resources and/or are less leveraged than us and may be better able to withstand market conditions within the commercial laundry equipment industry. There can be no assurance that we will not encounter increased competition in the futurewhichcouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsof operations. In addition, we may face competition from companies outside of the United States that may have lowercostsofproduction(includinglabororrawmaterials).Thesecompaniesmaypassalongthese lower production costs as price decreases for customers and our revenues and profits could be adversely affected. Energy efficiency and water usage standards could adversely affect our industry. Certain of our washer products are subject to federal and state laws and regulations which pertain to energy efficiency and/or water usage. There are federal standards for energy and water efficiency for both residential and small chassis commercial washers. There is also a federal energy efficiency standard for residential dryers. Theseexistinglawsandregulations,alongwithanticipatedenergyefficiencyandwaterusage lawsandcorrespondingstandards,maycreateshort-termmarketconditionswhichareeconomically disadvantageoustousandmayhaveamaterialadverseeffectonourbusiness,financialconditionand results of operations. WeincreasinglymanufactureandsellourproductsoutsideoftheUnitedStates&Canada,which may present additional risks to our business. For the year ended December 31, 2012 approximately 29% of our net revenue was attributable to productssoldoutsideoftheUnitedStates&Canadacomparedwithapproximately16%fortheyear-23ended December 31, 2005, the year prior to the CLD Acquisition. Expanding international sales is part of our growth strategy. In addition to export sales to foreign countries, we have a manufacturing facility andsalesofficeslocatedinEurope.Internationaloperationsgenerallyaresubjecttovariousrisks, includingpolitical,military,religiousandeconomicinstability,locallabormarketconditions,the impositionofforeigntariffs,theimpactofforeigngovernmentregulations,theeffectsofincomeand withholdingtax,governmentalexpropriationanddifferencesinbusinesspractices.Wemayincur increasedcostsandexperiencedelaysordisruptionsinproductdeliveriesandpaymentsinconnection withinternationalmanufacturingandsalesthatcouldcausealossofrevenue.Unfavorablechangesin thepolitical,regulatoryandbusinessclimateofvariousforeignjurisdictionscouldhaveamaterial adverse effect on our business, financial condition and results of operations. We are exposed to the risk of foreign currency fluctuations. Some of our operations are or will be conducted by subsidiaries in foreign countries. The results of the operations and the financial position of these subsidiaries will be reported in the relevant foreign currenciesandthentranslatedintoU.S.dollarsattheapplicableexchangeratesforinclusioninour Consolidated Financial Statements which are stated in U.S. dollars. The exchange rates between many of thesecurrenciesandtheU.S.dollarhavefluctuatedsignificantlyinrecentyearsandmayfluctuate significantlyinthefuture.Suchfluctuationsmayhaveamaterialadverseeffectonourresultsof operationsandfinancialpositionandmaysignificantlyaffectthecomparabilityofourresultsbetween financial periods. In addition, we incur currency transaction risk whenever one of our operating subsidiaries enters into a transaction using a different currency than its functional currency. We attempt to reduce currency transaction risk by: matching cash flows and payments in the same currency and entering into foreign exchange contracts for hedging purposes. We actively strive to hedge these foreign currency transaction risks but cannot provide assurance thatwewillbesuccessfulindoingso.TheexchangeratesbetweentheeuroandtheU.S.dollarhave fluctuatedsignificantlyinrecentyearsandmayfluctuatesignificantlyinthefuture.Suchfluctuations may have a material effect on our net sales, financial condition, profitability and/or cash flows and may significantly affect the comparability of our results between financial periods. We are dependent on key personnel. Wearedependentonthecontinuedservicesandperformanceofourseniormanagementteam and certain other key employees, including Michael Schoeb, our Chief Executive Officer. Mr. Schoebs EmploymentAgreementwithusisforfiveyears,throughJanuary17,2017,andmaybeextendedby mutual agreement.We do not maintain life insurance policies with respect to key employees. Adverse relations with employees could harm our business. AsofDecember31,2012,approximately1,051ofouremployeesatourWisconsinfacilities wererepresentedbyTheUnitedSteelWorkersunion.Inaddition,ourEuropeanemployeesbelongto Belgium trade unions. The current collective bargaining agreement covering employees at our Wisconsin facilitieswasapprovedDecember13,2010andexpiresFebruary28,2017.TheWisconsinlabor agreementrequirescertainminimumfulltimehourlyemploymentlevels,unlesscausedbyspecified events,suchassalesfluctuationsoreventsbeyondthereasonablecontroloftheCompany.However, therecanbenoassurancethatwecansuccessfullymaintainsuchemploymentlevelsatourWisconsin 24facilities, successfully negotiate new agreements and prevent work stoppages by certain employees. Any such work stoppages could have a material adverse effect on our business, financial condition and results of operations. Significantdifferencesbetweenactualresultsandestimatesoftheamountoffutureobligations under our pension plans could adversely affect our financial results. WemaintaindefinedbenefitpensionplansthatcoveramajorityofourU.S.employees,which imposeonuscertainpaymentobligationstowardthefundingoftheplans.Indeterminingourfuture paymentobligationsundertheplans,weassumecertainratesofreturnontheplanassetsandgrowth rates of certain costs. Significant adverse changes in credit or capital markets could result in actual rates of return and growth rates being materially lower than projected and increase pension expense in future years.Thiscouldsignificantlyincreaseourpaymentobligationsundertheplans,requireustotakea significant charge to Member(s) equity/(deficit) within the Consolidated Financial Statements, and, as a result, adversely affect our business, financial condition and results of operations. Thecontrollingequityholderofourparentcompanycouldexerciseitsinfluenceoverustothe detriment of other security holders. OTPPcontrols,indirectlythroughALHandAllianceHoldings,82.6%ofourvotingsecurities andhassignificantinfluence over our management and is able to determine the outcome of all matters required to be submitted to the shareholders for approval including the election of our directors and the approval of mergers, consolidations and the sale of all or substantially all of our assets. The interests of OTPPasanequityownercouldbeinconflictwithinterestsofourcreditors.OTPPmayalsohavean interest in pursuing acquisitions, divestitures, financings or other transactions that, in its judgment, could enhance its equity investment even though such transactions might involve risks to creditors. In addition, certain determinations that need to be made under covenants in the December 2012 Credit Facilities will not be made by the managing member of Alliance Laundry. Instead, these decisions will be made by the Board of Directors of our ultimate parent company, ALH.It is not clear under either the laws of the state of Delaware or applicable federal bankruptcy law what, if any, duties the Board of Directors of ALH will owe to Alliance Laundry and its debt holders. In the absence of any such duties, the Board of Directors ofALHcouldmakedeterminationsundertheDecember2012CreditFacilitiesthatarenotinthebest interest of our debt holders and creditors. The nature of our business exposes us to potential liability for environmental claims and we could be adversely affected by environmental, health and safety requirements. We are subject to comprehensive and frequently changing federal, state and local environmental, healthandsafetylawsandregulations,includinglawsandregulationsgoverningemissionsofair pollutantsandgases,dischargesofwasteandstormwaterandthedisposalofhazardouswastes.We cannot predict the environmental liabilities that may result from legislation or regulations adopted in the future and the effect of which could be retroactive. Nor can we predict how existing or future laws and regulations will be administered or interpreted orwhat environmental conditions may be found to exist atourfacilitiesoratotherpropertieswhereweorourpredecessorshavearrangedforthedisposalof hazardoussubstances.Theenactmentofmorestringentlawsorstricterinterpretationofexistinglaws could require additional expenditures by us which could have a material adverse effect on our business, financial condition and results of operations. Wearealsosubjecttoliabilityfortheinvestigationandremediationofenvironmental contamination (including contamination caused by other parties) at the properties we own or operate and 25at other properties where we or our predecessors have arranged for the disposal of hazardous substances. Asaresult, from time to time we are involved in administrative and judicial proceedings and inquiries relatingtoenvironmentalmatters.Therecanbenoassurancethatwewillnotbeinvolvedinsuch proceedings in the future and we cannot be sure that our existing insurance or additional insurance will provide adequate coverage against potential liability resulting from any such administrative and judicial proceedingsandinquiries.Theaggregateamountoffutureclean-upcostsandotherenvironmental liabilitiescouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsof operations. CertainenvironmentalinvestigatoryandremedialworkisunderwayatourRipon,Wisconsin manufacturingfacility.Thisworkisbeingconductedbyuswiththesupportofanenvironmental consultant.Infurtherancethereof,during2005theWisconsinDepartmentofNaturalResources requested the installation and monitoring of a ground well at the Ripon facility. The first ground well has beenmonitoredinaccordancewithaworkplansetupbetweenAllianceLaundryandtheWisconsin DepartmentofNaturalResources.Consistentwithourplans,theCompanyinstalledfouradditional wells in late 2008 and early 2009 within the general area of the first well. A work plan for the additional monitoringwellshasbeenagreedtobetweenAllianceLaundryandtheWisconsinDepartmentof NaturalResourcesthatwillatleastrunthrough2013.Wecurrentlyexpecttoincurcostsoflessthan $100,000through2013relatedtotheseadditionalwells.Therecanbenoassurance,however,thatwe will not incur additional remedial costs in the future with respect to the Ripon facility. Ouroperationsarealsosubjecttovarioushazardsincidentaltothemanufacturingand transportation of commercial laundry equipment. These hazards can cause personal injury and damage to and destruction of property and equipment. There can be no assurance that, as a result of past or future operations,there will not be claims of injury by employees or members of the public. Furthermore, we alsohaveexposuretopresentandfutureclaimswithrespecttoworkersafety,workerscompensation and other matters. There can be no assurance as to the actual amount of these liabilities or the timing of them. Regulatory developments requiring changes in operating practices or influencing demand for, and thecostofproviding,ourproductsandservicesortheoccurrenceofmaterialoperationalproblems, includingbutnotlimitedtothe above events, mayalso have a material adverse effect on our business, financial condition and results of operations. We may incur product liability expenses. Weareexposedtopotentialproductliabilityrisksthatarisefromthesalesofourproducts.In additiontodirectexpendituresfordamages,settlementsanddefensecosts,thereisapossibilityof adverse publicity as a result of product liability claims. We cannot be sure that our existing insurance or anyadditionalinsurancewillprovideadequatecoverageagainstpotentialliabilitiesandanysuch liabilitiescouldadverselyaffectourbusiness,financialconditionandresultsofoperationsandour ability to service our indebtedness. Increased or unexpected product warranty claims could adversely affect us. Weprovideourcustomersawarrantycoveringworkmanshipand,insomecases,materialson products we manufacture. Standard product warranties vary from one to three years for most parts with certaincomponentsextendingtotenyears.Ifaproductfailstocomplywiththewarranty,wemaybe obligated, at our expense, to correct any defect by repairing or replacing the defective product. Although wemaintainwarrantyreservesinanamountbasedprimarilyonthenumberofunitsshippedandon historicalandanticipatedwarrantyclaims,therecanbenoassurancethatfuturewarrantyclaimswill followhistoricalpatternsorthatwecanaccuratelyanticipatetheleveloffuturewarrantyclaims.An 26increase in the rate of warranty claims or the occurrence of unexpected warranty claims could materially and adversely affect our business, financial condition and results of operations. We may encounter certain risks when implementing our business strategy to grow our international business. Thecontinuedexecutionofourstrategytogrowourinternationalbusinesscouldcauseusto incur unforeseen capital expenditures, divert managements attention from our core businesses and cause us to incur losses on assets devoted to the strategy. Any failure to continue to successfully execute this strategy could adversely affect our business, financial condition and results of operations and our ability to service our indebtedness. We are subject to risks of future legal proceedings. Atanygiventime,weareadefendantinvariouslegalproceedingsandlitigationarisinginthe ordinarycourseofbusiness.Althoughwemaintaininsurancepolicies,wecanmakenoassurancethat this insurance will be adequate to protect us from all material expenses related to potential future claims forpersonalandpropertydamageorthattheselevelsofinsurancewillbeavailableinthefutureat economicalpricesoratall.Asignificantjudgmentagainstus,thelossofasignificantpermitorother approvalortheimpositionofasignificantfineorpenaltycouldhaveamaterialadverseeffectonour business, financial condition and results of operations. Changes in accounting standards may adversely affect us. OurfinancialstatementsaresubjecttotheapplicationofU.S.generallyacceptedaccounting principles(GAAP)whichareperiodicallyrevisedand/orexpanded.Accordingly,fromtimetotime, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, includingtheFinancialAccountingStandardsBoard(FASB).Thepotentialimpactofaccounting pronouncements that have been issued but not yet implemented is disclosed in our annual and quarterly financial statements. An assessment of proposed standards is not provided as such proposals are subject to change through the exposure process and, therefore, their effects on our financial statements cannot be meaningfullyassessed.Itispossiblethatfutureaccountingstandardswearerequiredtoadoptcould change the current accounting treatment that we apply to our Consolidated Financial Statements and that suchchangescouldhaveamaterialadverseeffectonourbusiness,financialconditionandresultsof operations. Interest rate fluctuations could have an adverse effect on our financial results. We are exposed to market risk associated with adverse movements in interest rates. Specifically, weareprimarilyexposedtochangesin the fair value of our fixed rate debt and to changes in earnings andrelatedcashflowsonourvariableinterestratedebtobligationsincludingobligationsoutstanding underourDecember2012CreditFacilities.SeeItem7AQuantitativeandQualitativeDisclosures About Market Risk, for an additional discussion of such market risks. 27ITEM 2. PROPERTIES Thefollowingtableprovidescertaininformationregardingoursignificantfacilitiesasof December 31, 2012: Approximate Owned/Location Function/Products Square Feet LeasedProduction FacilitiesRipon, WI... Manufacture small washers, dryers and tumbler dryers 572,900 OwnedRipon, WI... Manufacture washer-extractors 149,000 Leased1 Wevelgem, Belgium.... Manufacture washer-extractors 131,053 OwnedSubtotal 852,953 Regional Distribution CentersRipon, WI..... Washers, washer-extractors