Exhibit 99.1
NEWS RELEASE
ASSOCIATED MATERIALS REPORTS THIRD QUARTER RESULTS
CUYAHOGA FALLS, Ohio, November 3 —Associated Materials Incorporated (“AMI” or the “Company”)today announced third quarter 2003 net sales from continuing operations of $223.8 million, a 26.7% increase over $176.7 million for the same period in 2002. For the nine months ended September 27, 2003, net sales from continuing operations were $515.1 million or 13.8% higher than $452.6 million for the same period in 2002. The results for 2003 include the operations of the Company’s Gentek Holdings, Inc. subsidiary (“Gentek”) subsequent to its acquisition on August 29, 2003, which contributed $27.1 million of net sales. Excluding the impact of the Gentek acquisition, net sales from continuing operations increased 11.3% for the third quarter of 2003 and increased 7.8% for the nine months ended September 27, 2003. As discussed below, results of continuing operations exclude the Company’s AmerCable division, which was sold on June 24, 2002.
Net income for the third quarter of 2003 was $9.6 million. This compares to net income of $7.8 million for the same period in 2002. For the nine months ended September 27, 2003, net income was $14.9 million compared to net income of $1.8 million for the same period in 2002. Excluding the impact of the Gentek acquisition, net income was $8.5 million and $13.8 million for the third quarter of 2003 and nine months ended September 27, 2003, respectively.
EBITDA (as defined below) for the third quarter of 2003 was $29.5 million compared to $22.2 million for the third quarter of 2002. EBITDA for the third quarter of 2003 includes a cost of sales expense of $1.4 million relating to an inventory fair value adjustment recorded at the time of the acquisition of Gentek. Excluding the impact of the Gentek acquisition, EBITDA for the third quarter of 2003 was $27.1 million. A reconciliation of EBITDA to net income (loss) is included in the table below.
EBITDA for the nine months ended September 27, 2003 was $55.0 million compared to $30.9 million for the same period in 2002. EBITDA for the nine months ended September 27, 2003 includes a cost of sales expense of $1.4 million relating to an inventory fair value adjustment recorded at the time of the acquisition of Gentek. Excluding the impact of the Gentek acquisition, EBITDA for the nine months ended September 27, 2003 was $52.6 million. EBITDA for the nine months ended September 30, 2002 includes $1.9 million of EBITDA relating to the AmerCable division, merger transaction costs of $9.3 million, debt extinguishment costs of $7.6 million and a cost of sales expense of $1.9 million relating to an inventory fair value adjustment recorded at the time of the merger transaction with Harvest Partners.
Michael Caporale, President and Chief Executive Officer, commented, “Associated Materials continued its strong performance in the third quarter. We experienced significant sales and EBITDA growth compared to a very strong third quarter of 2002.”
Mr. Caporale continued, “Since the close of the acquisition of Gentek, we are even more excited about the prospects of the combined company. Gentek has excellent brands, products, and people, which will benefit Associated Materials for many years to come. As I have stated
previously, we strongly believe in the brand equity of the Revere® and Gentek® names. We will maintain distinct separation of these brands from our Alside brand by continuing to offer differentiated product, sales and marketing support. Revere® and Gentek® customers will continue to receive the same excellent service and support that they have enjoyed in the past.”
Results of Continuing Operations
Sales from continuing operations increased 26.7% during the third quarter of 2003 compared to the same period in 2002, primarily driven by increased window sales along with sales from the Company’s Gentek subsidiary. Gross profit in the third quarter of 2003 was $64.2 million, or 28.7% of net sales as compared to gross profit of $53.9 million, or 30.5% of net sales, in the third quarter of 2002. The decrease in gross profit margin percentage is due to lower margin window sales comprising a larger proportion of total sales in 2003 and the inclusion of Gentek’s operations for the month of September, which includes a cost of sales expense of $1.4 million relating to an inventory fair value adjustment recorded at the time of the Gentek acquisition. Additionally, Gentek’s gross margin percentage is typically lower than Alside’s as a larger proportion of its sales are to independent distributors versus contractors through company-owned distribution centers. Selling, general and administrative expense increased to $38.3 million, or 17.1% of net sales, for the third quarter of 2003 versus $34.6 million, or 19.6% of net sales, for the same period in 2002. The increase in selling, general and administrative expense is primarily a result of the three new supply centers added in 2003 along with the acquisition of Gentek. Income from operations was $25.9 million in the third quarter of 2003 compared to $19.3 million for the same period in 2002.
Sales from continuing operations increased 13.8% for the nine months ended September 27, 2003 compared to the same period in 2002, primarily driven by increased window sales along with sales from the Company’s Gentek subsidiary. Gross profit increased to $149.2 million, or 29.0% of net sales, for the nine months ended September 27, 2003 compared to $135.7 million, or 30.0% of net sales, for the same period in 2002. The decrease in gross profit margin percentage was primarily a result of window sales comprising a larger proportion of total sales in 2003 compared to the same period in 2002. Selling, general and administrative expense increased to $103.3 million, or 20.1% of net sales, for the nine months ended September 27, 2003 compared to $97.3 million, or 21.5% of net sales, for the same period in 2002. The increase in selling, general and administrative expense is primarily a result of the three new supply centers added in 2003 along with the seven new supply centers added in 2002, which had nine full months of expense in 2003. Income from operations was $45.9 million for the nine months ended September 27, 2003 compared to $38.4 million for the same period in 2002.
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Predecessor and Successor Results of Operations
Accounting principles generally accepted in the United States require operating results prior to the merger transaction with Harvest Partners completed on April 19, 2002 to be presented as the Predecessor’s results in the historical financial statements. Operating results subsequent to the merger transaction with Harvest Partners are presented as the Successor’s results in the historical financial statements. AmerCable’s results are included in continuing operations of the Predecessor as it was the Successor’s decision to divest this division.
Net income for the third quarter of 2003 was $9.6 million, which includes income from operations of $25.9 million, interest expense of $9.7 million, gain on foreign currency transactions of $0.2 million and an income tax provision of $6.8 million. Interest expense includes accelerated amortization of deferred financing fees of approximately $3.9 million as a result of amending and restating the Company’s credit facility in order to complete the Gentek acquisition. Net income for the third quarter of 2002 was $7.8 million, which includes income from operations of $19.3 million, interest expense of $6.0 million and an income tax provision of $5.5 million.
Net income for the nine months ended September 27, 2003 was $14.9 million, which includes income from operations of $45.9 million, interest expense of $20.6 million, gain on foreign currency transactions of $0.2 million and an income tax provision of $10.6 million. Interest expense includes accelerated amortization of deferred financing fees of approximately $3.9 million as a result of amending and restating the Company’s credit facility in order to complete the Gentek acquisition. The Predecessor had net sales and a net loss of $180.2 million and $5.8 million, respectively, for the period from January 1, 2002 to April 18, 2002. The Predecessor’s net loss includes income from operations of $6.6 million, interest expense of $2.1 million, $9.3 million of transaction costs associated with the Predecessor’s strategic review process and merger transaction with Harvest Partners and an income tax provision of $1.0 million. The Successor had net sales and net income of $290.6 million and $7.5 million, respectively, for the period from April 19, 2002 to September 30, 2002. The Successor’s net income includes income from operations of $32.3 million, interest expense of $11.0 million, $7.6 million of debt extinguishment costs, an income tax provision of $5.7 million and the loss from discontinued operations of $0.5 million, net of tax, for the Company’s AmerCable division.
Non-GAAP Financial Measures
The Company has changed the way it describes its historical financial performance in its earnings releases in connection with the adoption by the SEC of Regulation G and other rules affecting the use and disclosure of non-GAAP financial measures. Accordingly, EBITDA as used in this release has not been adjusted for items that may impact its comparability to prior periods, including items such as AmerCable’s results of operations, merger transaction costs, debt extinguishment costs and certain cost of sales
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expenses relating to inventory fair value adjustments recorded at the time of the merger transaction with Harvest Partners and the acquisition of Gentek.
* * *
Associated Materials management will host its third quarter earnings conference call on Monday, November 3 at 11 a.m. Eastern Time. The toll free dial-in number for the call is (877) 363-0523. A replay of the call will be available through November 10, 2003 by dialing (888) 769-9756 and entering the conference call identification number of 7802485. The conference call and replay will also be available via webcast, which along with this news release can be accessed via the Company’s web site athttp://www.associatedmaterials.com .
* * *
Associated Materials is a leading manufacturer of exterior residential building products, which are distributed through company-owned distribution centers and independent distributors across the United States and Canada. Associated Materials produces a broad range of vinyl siding and accessories, vinyl windows, and aluminum and steel siding and accessories as well as vinyl fencing, decking and railing and vinyl garage doors. Associated Materials is a privately held, wholly owned subsidiary of Associated Materials Holdings Inc., which is controlled by affiliates of Harvest Partners, Inc. For more information, please visit the company’s website athttp://www.associatedmaterials.com.
Founded in 1981, Harvest Partners has approximately $1 billion of invested and committed capital, and is focused on management buyouts and growth financings of profitable, medium-sized specialty services, manufacturing and value-added distribution businesses, with a particular emphasis on multinational transactions. Harvest has significant additional capital available through its limited partners, which include numerous U.S., European and Asian industrial corporations and financial institutions. For more information on Harvest Partners please visit its web site athttp://www.harvpart.com.
This press release contains certain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) relating to Associated Materials that are based on the beliefs of Associated Materials’ management. When used in this press release, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” and similar expressions identify forward-looking statements. Such statements reflect the current views of Associated Materials’ management with respect to Associated Materials’ ability to profit from the acquisition of Gentek, including Associated Materials’ ability to grow the Gentek brands as expected. Associated Materials’ ability to profit from its initiatives will depend on a number of factors, including primarily customer acceptance of Gentek’s products and the achievement of anticipated synergies. Such statements also reflect the current views of Associated Materials’ management with respect to its operations and results of operations regarding the availability of consumer
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credit, interest rates, employment trends, levels of consumer confidence, consumer preferences, national and regional trends in new housing starts, raw material costs, pricing pressures, costs of environmental compliance, level of competition within our market, availability of alternative building products, shifts in market demand, and general economic conditions. These statements are subject to certain risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended.
For Further Information
At the Company: | At Abernathy MacGregor Group Inc.: | |
D. Keith LaVanway | Alison Brandt | |
Chief Financial Officer | Media | |
(330) 922-2004 | (212) 371-5999 |
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ASSOCIATED MATERIALS INCORPORATED
Condensed Predecessor / Successor Statements of Operations(a)
(Unaudited)
(in thousands)
One | ||||||||||||||||||||||||||
Three | Three | Nine | Hundred | One Hundred | Nine | |||||||||||||||||||||
Months | Months | Months | Eight Days | Sixty-Five | Months | |||||||||||||||||||||
Ended | Ended | Ended | Ended | Days Ended | Ended | |||||||||||||||||||||
September 27, | September 30, | September 27, | April 18, | September 30, | September 30, | |||||||||||||||||||||
2003 | 2002 | 2003 | 2002 | 2002 | 2002 | |||||||||||||||||||||
Successor | Successor | Successor | Predecessor | Successor | Combined | |||||||||||||||||||||
Net sales | ||||||||||||||||||||||||||
Building products | $ | 223,806 | $ | 176,673 | $ | 515,113 | $ | 161,959 | $ | 290,633 | $ | 452,592 | ||||||||||||||
AmerCable | – | – | – | 8,271 | – | 18,271 | ||||||||||||||||||||
Total | 223,806 | 176,673 | 515,113 | 180,230 | 290,633 | 470,863 | ||||||||||||||||||||
Gross profit | ||||||||||||||||||||||||||
Building products | 64,219 | 53,893 | 149,187 | 47,102 | 88,562 | 135,664 | ||||||||||||||||||||
AmerCable | – | – | – | 2,777 | – | 2,777 | ||||||||||||||||||||
Total | 64,219 | 53,893 | 149,187 | 49,879 | 88,562 | 138,441 | ||||||||||||||||||||
Selling, general and administrative expense | ||||||||||||||||||||||||||
Building products | 38,270 | 34,557 | 103,284 | 41,080 | 56,224 | 97,304 | ||||||||||||||||||||
AmerCable | – | – | – | 2,192 | – | 2,192 | ||||||||||||||||||||
Total | 38,270 | 34,557 | 103,284 | 43,272 | 56,224 | 99,496 | ||||||||||||||||||||
Income from operations | ||||||||||||||||||||||||||
Building products | 25,949 | 19,336 | 45,903 | 6,022 | 32,338 | 38,360 | ||||||||||||||||||||
AmerCable | – | – | – | 585 | – | 585 | ||||||||||||||||||||
Total | 25,949 | 19,336 | 45,903 | 6,607 | 32,338 | 38,945 | ||||||||||||||||||||
Interest, net(b) | 9,706 | 6,002 | 20,627 | 2,068 | 10,983 | 13,051 | ||||||||||||||||||||
Foreign currency gain | (199 | ) | – | (199 | ) | – | – | – | ||||||||||||||||||
Income from continuing operations before other non-operating expenses and income taxes | 16,442 | 13,334 | 25,475 | 4,539 | 21,355 | 25,894 | ||||||||||||||||||||
Merger transaction costs(c) | – | – | – | 9,319 | – | 9,319 | ||||||||||||||||||||
Debt extinguishment costs(d) | – | – | – | – | 7,579 | 7,579 | ||||||||||||||||||||
Income (loss) from continuing operations before income taxes | 16,442 | 13,334 | 25,475 | (4,780 | ) | 13,776 | 8,996 | |||||||||||||||||||
Income taxes | 6,823 | 5,535 | 10,572 | 977 | 5,718 | 6,695 | ||||||||||||||||||||
Net income (loss) from continuing operations | 9,619 | 7,799 | 14,903 | (5,757 | ) | 8,058 | 2,301 | |||||||||||||||||||
Loss from discontinued operations | – | – | – | – | (521 | ) | (521 | ) | ||||||||||||||||||
Net income (loss) | $ | 9,619 | $ | 7,799 | $ | 14,903 | $ | (5,757 | ) | $ | 7,537 | $ | 1,780 | |||||||||||||
Reconciliation of net income (loss) to EBITDA(e)(f) (g): | ||||||||||||||||||||||||||
Net income (loss) | $ | 9,619 | $ | 7,799 | $ | 14,903 | $ | (5,757 | ) | $ | 7,537 | $ | 1,780 | |||||||||||||
Interest – Continuing operations | 9,706 | 6,002 | 20,627 | 2,068 | 10,983 | 13,051 | ||||||||||||||||||||
– Discontinued operations(h) | – | – | – | – | 1,213 | 1,213 | ||||||||||||||||||||
Taxes – Continuing operations | 6,823 | 5,535 | 10,572 | 977 | 5,718 | 6,695 | ||||||||||||||||||||
– Discontinued operations | – | – | – | – | (370 | ) | (370 | ) | ||||||||||||||||||
Depreciation and Amortization | ||||||||||||||||||||||||||
– Continuing operations | 3,362 | 2,849 | 8,874 | 3,969 | 4,246 | 8,215 | ||||||||||||||||||||
– Discontinued operations | – | – | – | – | 318 | 318 | ||||||||||||||||||||
EBITDA | $ | 29,510 | $ | 22,185 | $ | 54,976 | $ | 1,257 | $ | 29,645 | $ | 30,902 | ||||||||||||||
Selected Cash Flow Data: | ||||||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 22,710 | $ | 23,339 | $ | 18,453 | $ | (18,258 | ) | $ | 36,961 | $ | 18,703 | |||||||||||||
Net cash used in investing activities | (120,323 | ) | (4,820 | ) | (126,164 | ) | (3,597 | ) | (357,544 | ) | (361,141 | ) | ||||||||||||||
Net cash provided by (used in) financing activities | 103,500 | (10,000 | ) | 102,592 | (245 | ) | 334,636 | 334,391 | ||||||||||||||||||
Net cash used in discontinued operations | – | – | – | – | (1,076 | ) | (1,076 | ) | ||||||||||||||||||
September 27, | December 31, | |||||||||||||||||||||||||
2003 | 2002 | �� | ||||||||||||||||||||||||
Selected Balance Sheet Data: | ||||||||||||||||||||||||||
Cash | $ | 7,938 | $ | 13,022 | ||||||||||||||||||||||
Accounts receivable, net | 145,049 | 67,861 | ||||||||||||||||||||||||
Inventory | 108,436 | 60,369 | ||||||||||||||||||||||||
Accounts payable | 69,072 | 31,319 | ||||||||||||||||||||||||
Accrued liabilities | 58,563 | 34,319 | ||||||||||||||||||||||||
Long-term debt | 345,000 | 242,408 |
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(a) | Operating results prior to the merger transaction with Harvest Partners completed on April 19, 2002, are presented as the Predecessor’s results of operations and include 108 days from January 1, 2002 to April 18, 2002. Operating results subsequent to the merger transaction with Harvest Partners are presented as the Successor’s results of operations. For the 2002 periods presented this includes 165 days from April 19, 2002 to September 30, 2002. AmerCable’s results are included in continuing operations of the Predecessor prior to the merger transaction with Harvest Partners. Subsequent to the merger transaction with Harvest Partners, AmerCable’s results are treated as discontinued operations due to the Successor’s decision to divest this division. Operating results for 2003 also include the results of the Company’s Gentek Holdings subsidiary subsequent to its acquisition on August 29, 2003. | |
(b) | The 2003 periods include accelerated amortization of $3.9 million of debt issuance costs as a result of amending and restating the Company’s credit facility for the Gentek Holdings acquisition. | |
(c) | Merger transaction costs include investment banking and legal fees incurred by the Predecessor in conjunction with the strategic review process and subsequent merger transaction with Harvest Partners. | |
(d) | Debt extinguishment costs include $4.9 million for the extinguishment of substantially all of the Successor’s assumed 9 1/4% senior subordinated notes and $2.7 million for the expense of financing fees related to an interim credit facility utilized for the merger transaction with Harvest Partners, which was repaid shortly thereafter. | |
(e) | EBITDA is calculated as net income (loss) plus interest, taxes, depreciation and amortization. The Company considers EBITDA to be an important indicator of its operational strength and performance of its business. The Company has included EBITDA because it believes it is used by certain investors as one measure of a company’s ability to service its debt. EBITDA should be considered in addition to, not as a substitute for the Company’s net income or loss or to cash flows as well as other measures of financial performance in accordance with accounting principles generally accepted in the United States. EBITDA has not been prepared in accordance with accounting principles generally accepted in the United States. Therefore, EBITDA as presented by the Company, may not be comparable to similarly titled measures reported by other companies. | |
(f) | AmerCable’s EBITDA is calculated as its net income (loss) plus interest, taxes, depreciation and amortization. For the periods through the date of its sale AmerCable’s EBITDA is calculated as follows: |
January 1, 2002 | April 19, 2002 | January 1, 2002 | |||||||||||
To | To | To | |||||||||||
April 18, 2002 | June 24, 2002 | June 24, 2002 | |||||||||||
Predecessor | Successor | Combined | |||||||||||
Reconciliation of net income (loss) to EBITDA: | |||||||||||||
Net income (loss) | $ | 359 | $ | (521 | ) | $ | (162 | ) | |||||
Interest – Discontinued operations(h) | – | 1,213 | 1,213 | ||||||||||
Taxes – Continuing operations | 226 | – | 226 | ||||||||||
– Discontinued operations | – | (370 | ) | (370 | ) | ||||||||
Depreciation and Amortization | |||||||||||||
– Continuing operations | 635 | – | 635 | ||||||||||
– Discontinued operations | – | 318 | 318 | ||||||||||
EBITDA | $ | 1,220 | $ | 640 | $ | 1,860 | |||||||
(g) | As mentioned above, the 2003 results of operations include the results of Gentek subsequent to its acquisition on August 29, 2003. A reconciliation of EBITDA excluding the impact of the Gentek acquisition for the quarter and nine months ended September 27, 2003 is as follows: |
Three | Nine | |||||||||
Months | Months | |||||||||
Ended | Ended | |||||||||
September 27, | September 27, | |||||||||
2003 | 2003 | |||||||||
Reconciliation of EBITDA excluding the impact of the Gentek acquisition: | ||||||||||
EBITDA as presented above | $ | 29,510 | $ | 54,976 | ||||||
Less EBITDA from the impact of the Gentek acquisition calculated as: | ||||||||||
Net income | 1,099 | 1,099 | ||||||||
Interest | 59 | 59 | ||||||||
Taxes | 779 | 779 | ||||||||
Depreciation and Amortization | 485 | 485 | ||||||||
EBITDA from the impact of the Gentek acquisition | 2,422 | 2,422 | ||||||||
EBITDA excluding impact of Gentek acquisition | $ | 27,088 | $ | 52,554 | ||||||
EBITDA from the impact of the Gentek acquisition includes a cost of sales adjustment of $1.4 million related to an inventory fair value adjustment recorded at the time of the acquisition. |
(h) | Includes accelerated amortization of $0.8 million of debt issuance costs as a result of using the proceeds from the sale of AmerCable to permanently reduce the credit facility |
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