Exhibit 99.1
Unaudited Pro Forma Condensed Consolidated Statements of Operations
Year Ended January 3, 2004
Nine Months Ended September 27, 2003
The unaudited pro forma condensed consolidated statements of operations for the
year ended January 3, 2004 and the nine months ended September 27, 2003 are
based on the historical financial statements of Associated Materials
Incorporated ("Associated Materials" or the "Company") and the historical
consolidated financial statements of Gentek Holdings, Inc. ("Gentek Holdings")
and on the assumptions and adjustments described in the notes to the unaudited
pro forma condensed consolidated financial data. The pro forma adjustments are
based upon available information, preliminary estimates and certain assumptions
that we believe are reasonable, and are described in the accompanying notes.
On August 29, 2003, we acquired all of the issued and outstanding shares of
capital stock of Gentek Holdings, the parent company of Gentek Building
Products, Inc. and Gentek Building Products Limited, which we collectively refer
to as "Gentek". The unaudited pro forma condensed consolidated statement of
operations data has been prepared as if the acquisition of Gentek had occurred
as of the beginning of 2003. The pro forma statements should not be considered
indicative of actual results of operations that would have been achieved had the
acquisition of Gentek occurred at the beginning of 2003 and do not purport to
indicate results of operations for any future period.
-1-
Associated Materials Incorporated
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended January 3, 2004
(in thousands)
Historical
--------------------------------------
Year Six Months Two Months
Ended Ended Ended Gentek
January 3, June 30, August 29, Holdings
2004 2003 2003 Acquisition
Associated Gentek Gentek Pro Forma Pro Forma
Materials Holdings Holdings Adjustments Combined
---------- ---------- ---------- ----------- ---------
Net sales ...................................... $ 779,836 $ 132,911 $ 58,443 $ (1,314)(a) $ 969,876
Cost of sales .................................. 561,525 116,093 48,738 (1,314)(a) 714,545
-- -- -- (10,497)(b)
---------- ---------- ---------- ----------- ---------
Gross profit ................................... 218,311 16,818 9,705 10,497 255,331
Selling, general and administrative expense .... 149,571 14,697 4,009 10,164(b) 178,441
---------- ---------- ---------- ----------- ---------
Income from operations ......................... 68,740 2,121 5,696 333 76,890
Interest expense, net .......................... 27,369 936 340 (2,464)(c) 26,181
Foreign currency (gain) ........................ (548) (239) (41) -- (828)
Other .......................................... -- 141 -- -- 141
Merger transaction costs ....................... -- 26 3,055 -- 3,081
---------- ---------- ---------- ----------- ---------
Income from operations before income taxes ..... 41,919 1,257 2,342 2,797 48,315
Income taxes ................................... 17,388 1,571 1,268 (176)(d) 20,051
---------- ---------- ---------- ----------- ---------
Net income (loss) .............................. $ 24,531 $ (314) $ 1,074 $ 2,973 $ 28,264
========== ========== ========== =========== =========
EBITDA (e) ..................................... $ 85,403 $ 4,943 $ 3,598 $ 333 $ 94,277
Adjusted EBITDA (e) ............................ $ 86,805 $ 8,069 $ 6,792 $ -- $ 101,666
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Associated Materials Incorporated
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended January 3, 2004
(Amounts in thousands)
(a) Elimination of sales and cost of sales between the Company and Gentek
Holdings for the eight months ended August 29, 2003. Neither the Company
nor Gentek Holdings had significant quantities of inventory on hand at the
end of the period as a result of these transactions.
(b) Details of the pro forma adjustments to cost of sales and selling, general
and administrative expenses to reflect the following: (i) the
reclassification of supply center expenses and certain freight costs from
cost of sales to selling, general and administrative expense to conform to
the Company's presentation and (ii) elimination of the annual management
services fee payable to Gentek Holdings' former parent company.
Cost of sales:
Reclassification of certain costs ......................... $(10,497)
========
Selling, general and administrative expenses:
Reclassification of certain cost of sales expenses ........ $ 10,497
Management services fee ................................... (333)
--------
$ 10,164
========
(c) The pro forma adjustments to interest expense reflect the following:
Commitment fee on revolving credit facility ..................... $ 272
Term loan ....................................................... 7,534
Revolving portion of credit facility ............................ 473
9 3/4% senior subordinated notes ................................ 16,088
Existing 9 1/4% senior subordinated notes not tendered .......... 56
Amortization of deferred financing costs ........................ 1,758
--------
Pro forma interest expense ...................................... 26,181
--------
Less: historical interest expense, net:
Company ................................................... (27,369)
Gentek Holdings - Six Months Ended June 30, 2003 .......... (936)
Gentek Holdings - Two Months Ended August 29, 2003 ........ (340)
--------
Total adjustment ................................................ $ (2,464)
========
Interest expense was calculated as follows: (i) commitment fee on unused
portion of the revolving credit facility of 1/2%; (ii) a rate of 3.97%
(average London Interbank Offered Rate ("LIBOR") for the year ended
December 31, 2003 of 1.22% + 2.75%) on the term loan portion of the credit
facility arranged at the time of the acquisition of Gentek Holdings, (iii)
a rate of 4.22% (average LIBOR for the year ended December 31, 2003 of
1.22% + 3.00%) on the revolving loan portion of the credit facility
arranged at the time of the acquisition of Gentek Holdings, (iv) an
interest rate of 9 3/4% on the senior subordinated notes; (v) an interest
rate of 9 1/4% on the 9 1/4% senior subordinated notes not tendered at the
time of the merger transaction with an affiliate of
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Harvest Partners (the April 2002 merger transaction) through the date of
redemption; and (vi) one year of amortization of deferred financing costs.
The effect of a 1/8% increase or decrease in interest rates would increase
or decrease total pro forma interest expense by $0.3 million for the year
ended January 3, 2004.
(d) This amount represents the necessary adjustment to reflect a pro forma
income tax provision of 41.5%.
(e) EBITDA is calculated as net income (loss) plus interest, taxes,
depreciation and amortization. Adjusted EBITDA excludes certain items and
AmerCable's operating results. The Company considers Adjusted EBITDA to be
an important indicator of its operational strength and performance of its
business. The Company has included Adjusted EBITDA because it is a key
financial measure used by management to (i) assess the Company's ability
to service its debt and / or incur debt and meet the Company's capital
expenditure requirements; (ii) internally measure the Company's operating
performance; and (iii) determine the Company's incentive compensation
programs. In addition, the Company's credit facility has certain covenants
that use ratios utilizing this measure of Adjusted EBITDA. The definition
of EBITDA under the Company's credit facility does not exclude the results
of AmerCable. The Company has, however, excluded the results of AmerCable
when calculating Adjusted EBITDA as AmerCable is not included in the
Company's continuing operations. The definition of EBITDA under the
indenture governing the 9 3/4% notes due 2012 also excludes certain items.
Adjusted EBITDA has not been prepared in accordance with accounting
principles generally accepted in the United States. Adjusted EBITDA as
presented by the Company may not be comparable to similarly titled
measures reported by other companies. Such supplementary adjustments to
EBITDA may not be in accordance with current SEC practices or the rules
and regulations adopted by the SEC that apply to registration statements
filed under the Securities Act and periodic reports filed under the
Securities Exchange Act of 1934. Accordingly, the SEC may require that
Adjusted EBITDA be presented differently in filings made with the SEC than
as presented in this release, or not be presented at all. Adjusted EBITDA
is not a measure determined in accordance with GAAP and should not be
considered as an alternative to, or more meaningful than, net income
(loss) (as determined in accordance with GAAP), as a measure of the
Company's operating results or cash flows from operations (as determined
in accordance with GAAP) or as a measure of the Company's liquidity. The
reconciliation of net income (loss) to EBITDA and Adjusted EBITDA is as
follows:
Historical
------------------------------------
Year Six Months Two Months
Ended Ended Ended Gentek
January 3, June 30, August 29, Holdings
2004 2003 2003 Acquisition
Associated Gentek Gentek Pro Forma Pro Forma
Materials Holdings Holdings Adjustments Combined
---------- ---------- ---------- ----------- ---------
Net income (loss) .................. $ 24,531 $ (314) $ 1,074 $ 2,973 $ 28,264
Interest ........................... 27,369 936 340 (2,464) 26,181
Taxes .............................. 17,388 1,571 1,268 (176) 20,051
Depreciation and amortization ...... 16,115 2,750 916 -- 19,781
---------- ---------- ---------- ----------- ---------
EBITDA ............................. 85,403 4,943 3,598 333 94,277
Merger transaction costs (i) ....... -- 26 3,055 -- 3,081
Cost of sales adjustment (ii) ...... 1,402 -- -- -- 1,402
Certain warranty related costs (iii) -- 2,850 56 -- 2,906
Management fees (iv) ............... -- 250 83 (333) --
---------- ---------- ---------- ----------- ---------
Adjusted EBITDA .................... $ 86,805 $ 8,069 $ 6,792 $ -- $ 101,666
========== ========== ========== =========== =========
(i) Eliminates merger transaction costs, which includes $3.1 million of
investment banking and legal fees incurred by Gentek in conjunction
with the Company's acquisition of them.
(ii) Eliminates a cost of sales expense relating to an inventory fair
value adjustment recorded at the time of the Gentek acquisition
totaling $1.4 million.
(iii) Eliminates certain warranty costs incurred by Gentek related to
defects of specific colors of steel siding manufactured between 1992
and 1995 for which the Company has recorded an actuarially
determined reserve as part of our preliminary purchase price
allocation representing the fair value of the liability at the date
of the acquisition and for which the Company received a reduction in
the purchase price.
(iv) Eliminates management services fee paid to Gentek's former parent
company.
-4-
Associated Materials Incorporated
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 27, 2003
(in thousands)
Nine Months Six Months Two Months
Ended Ended Ended Gentek
September 27, June 30, August 29, Holdings
2003 2003 2003 Acquisition
Associated Gentek Gentek Pro Forma Pro Forma
Materials Holdings Holdings Adjustments Combined
------------- ---------- ---------- ----------- ---------
Net sales ................................. $ 515,113 $ 132,911 $ 58,443 $ (1,314)(a) $ 705,153
Cost of sales ............................. 365,926 116,093 48,738 (1,314)(a) 518,946
-- -- -- (10,497)(b)
------------- ---------- ---------- ----------- ---------
Gross profit .............................. 149,187 16,818 9,705 10,497 186,207
Selling, general and administrative expense 103,284 14,697 4,009 10,164(b) 132,154
------------- ---------- ---------- ----------- ---------
Income from operations .................... 45,903 2,121 5,696 333 54,053
Interest expense, net ..................... 20,627 936 340 (2,228)(c) 19,675
Foreign currency gain ..................... (199) (239) (41) -- (479)
Other ..................................... -- 141 -- -- 141
Merger transaction costs .................. -- 26 3,055 -- 3,081
------------- ---------- ---------- ----------- ---------
Income from operations before income taxes 25,475 1,257 2,342 2,561 31,635
Income taxes .............................. 10,572 1,571 1,268 (282)(d) 13,129
------------- ---------- ---------- ----------- ---------
Net income (loss) ......................... $ 14,903 $ (314) $ 1,074 $ 2,843 $ 18,506
============= ========== ========== =========== =========
EBITDA (e) ................................ $ 54,976 $ 4,943 $ 3,598 $ 333 $ 63,850
Adjusted EBITDA (e) ....................... $ 56,378 $ 8,069 $ 6,792 $ -- $ 71,239
-5-
Associated Materials Incorporated
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 27, 2003
(Amounts in thousands)
(a) Elimination of sales and cost of sales between the Company and Gentek
Holdings for the eight months ended August 29, 2003. Neither the Company
nor Gentek Holdings had significant quantities of inventory on hand at the
end of the period as a result of these transactions.
(b) Details of the pro forma adjustments to cost of sales and selling, general
and administrative expenses to reflect the following: (i) the
reclassification of supply center expenses and certain freight costs from
cost of sales to selling, general and administrative expense to conform to
the Company's presentation and (ii) elimination of the annual management
services fee payable to Gentek Holdings' former parent company.
Cost of sales:
Reclassification of certain costs ......................... $(10,497)
========
Selling, general and administrative expenses:
Reclassification of certain cost of sales expenses ........ $ 10,497
Management services fee ................................... (333)
--------
$ 10,164
========
(c) The pro forma adjustments to interest expense reflect the following:
Commitment fee on revolving credit facility ..................... $ 203
Term loan ....................................................... 5,675
Revolving portion of credit facility ............................ 356
9 3/4% senior subordinated notes ................................ 12,066
Existing 9 1/4% senior subordinated notes not tendered .......... 56
Amortization of deferred financing costs ........................ 1,319
--------
Pro forma interest expense ...................................... 19,675
--------
Less: historical interest expense, net:
Company ................................................... (20,627)
Gentek Holdings - Six Months Ended June 30, 2003 .......... (936)
Gentek Holdings - Two Months Ended August 29, 2003 ........ (340)
--------
Total adjustment ................................................ $ (2,228)
========
Interest expense was calculated as follows: (i) commitment fee on unused
portion of the revolving credit facility of 1/2%; (ii) a rate of 3.98%
(average LIBOR for the nine months ended September 30, 2003 of 1.23% +
2.75%) on the term loan portion of the credit facility arranged at the
time of the acquisition of Gentek Holdings, (iii) a rate of 4.23% (average
LIBOR for the nine months ended September 30, 2003 of 1.23% + 3.00%) on
the revolving loan portion of the credit facility arranged at the time of
the acquisition of Gentek Holdings, (iv) an interest rate of 9 3/4% on the
senior subordinated notes; (v) an interest rate of 9 1/4% on the 9 1/4%
senior subordinated notes not tendered at the time of the April 2002
merger transaction through the date of redemption; and (vi) nine months of
amortization of deferred financing costs.
-6-
The effect of a 1/8% increase or decrease in interest rates would increase
or decrease total pro forma interest expense by $0.2 million for the nine
months ended September 27, 2003.
(d) This amount represents the necessary adjustment to reflect a pro forma
income tax provision of 41.5%.
(e) EBITDA is calculated as net income (loss) plus interest, taxes,
depreciation and amortization. Adjusted EBITDA excludes certain items and
AmerCable's operating results. The Company considers Adjusted EBITDA to be
an important indicator of its operational strength and performance of its
business. The Company has included Adjusted EBITDA because it is a key
financial measure used by management to (i) assess the Company's ability
to service its debt and / or incur debt and meet the Company's capital
expenditure requirements; (ii) internally measure the Company's operating
performance; and (iii) determine the Company's incentive compensation
programs. In addition, the Company's credit facility has certain covenants
that use ratios utilizing this measure of Adjusted EBITDA. The definition
of EBITDA under the Company's credit facility does not exclude the results
of AmerCable. The Company has, however, excluded the results of AmerCable
when calculating Adjusted EBITDA as AmerCable is not included in the
Company's continuing operations. The definition of EBITDA under the
indenture governing the 9 3/4% notes due 2012 also excludes certain items.
Adjusted EBITDA has not been prepared in accordance with accounting
principles generally accepted in the United States. Adjusted EBITDA as
presented by the Company may not be comparable to similarly titled
measures reported by other companies. Such supplementary adjustments to
EBITDA may not be in accordance with current SEC practices or the rules
and regulations adopted by the SEC that apply to registration statements
filed under the Securities Act and periodic reports filed under the
Securities Exchange Act of 1934. Accordingly, the SEC may require that
Adjusted EBITDA be presented differently in filings made with the SEC than
as presented in this release, or not be presented at all. Adjusted EBITDA
is not a measure determined in accordance with GAAP and should not be
considered as an alternative to, or more meaningful than, net income
(loss) (as determined in accordance with GAAP), as a measure of the
Company's operating results or cash flows from operations (as determined
in accordance with GAAP) or as a measure of the Company's liquidity. The
reconciliation of net income (loss) to EBITDA and Adjusted EBITDA is as
follows:
Historical
---------------------------------------
Nine Months Six Months Two Months
Ended Ended Ended Gentek
September 27, June 30, August 29, Holdings
2003 2003 2003 Acquisition
Associated Gentek Gentek Pro Forma Pro Forma
Materials Holdings Holdings Adjustments Combined
------------- ---------- ---------- ----------- ---------
Net income (loss).......................... $ 14,903 $ (314) $ 1,074 $ 2,843 $ 18,506
Interest .................................. 20,627 936 340 (2,228) 19,675
Taxes 10,572 1,571 1,268 (282) 13,129
Depreciation and amortization.............. 8,874 2,750 916 -- 12,540
------------- ---------- ---------- ----------- ---------
EBITDA .................................. 54,976 4,943 3,598 333 63,850
Merger transaction costs (i)............... -- 26 3,055 -- 3,081
Cost of sales adjustment (ii).............. 1,402 -- -- -- 1,402
Certain warranty related costs (iii)....... -- 2,850 56 -- 2,906
Management fees (iv)....................... -- 250 83 (333) --
------------- ---------- ---------- ----------- ---------
Adjusted EBITDA............................ $ 56,378 $ 8,069 $ 6,792 $ -- $ 71,239
============= ========== ========== =========== =========
(i) Eliminates merger transaction costs, which includes $3.1 million of
investment banking and legal fees incurred by Gentek in conjunction
with the Company's acquisition of them.
(ii) Eliminates a cost of sale expense relating to an inventory fair
value adjustment recorded at the time of the Gentek acquisition
totaling $1.4 million.
(iii) Eliminates certain warranty costs incurred by Gentek related to
defects of specific colors of steel siding manufactured between 1992
and 1995 for which the Company has recorded an actuarially
determined reserve as part of our preliminary purchase price
allocation representing the fair value of the liability at the date
of the acquisition and for which the Company received a reduction in
the purchase price.
(iv) Eliminates management services fee paid to Gentek's former parent
company.
-7-