FOR IMMEDIATE RELEASE
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NEWS RELEASE
ASSOCIATED MATERIALS REPORTS FOURTH QUARTER
AND YEAR-END RESULTS
CUYAHOGA FALLS, Ohio, February 21 -- Associated Materials Incorporated ("AMI")
today announced fourth quarter 2002 net sales from continuing operations of
$158.7 million, a 9.9% increase over $144.4 million for the same period in 2001.
For the year ended December 31, 2002, net sales from continuing operations were
$611.3 million or 16.5% higher than $524.5 million for the same period in 2001.
As discussed below, results of continuing operations for all periods presented
exclude the Company's AmerCable division, which was sold on June 24, 2002.
EBITDA (as defined below) for the fourth quarter of 2002 was $16.7 million
compared to $18.1 million for the same period in 2001. EBITDA and Adjusted
EBITDA (as defined below) were the same for the fourth quarter of 2002. Adjusted
EBITDA for the fourth quarter of 2001, excluding EBITDA of $1.5 million from the
AmerCable division, was $16.6 million. EBITDA increased $0.1 million or 1.0% in
the fourth quarter of 2002 compared to Adjusted EBITDA for the same period in
the prior year.
EBITDA for the year ended December 31, 2002 was $47.6 million compared to $59.0
million in the same period in 2001. EBITDA for the year ended December 31, 2002
includes $1.9 million of EBITDA relating to our AmerCable division, merger
transaction costs of $9.3 million, pre-tax extraordinary expenses of $7.6
million and a cost of sales adjustment of $1.9 million relating to an inventory
fair value adjustment recorded at the time of the merger of the Company on April
19, 2002. Adjusted EBITDA, excluding the amounts discussed above, was $64.6
million for the year ended December 31, 2002. EBITDA for the year ended December
31, 2001 includes EBITDA of $8.4 million relating to our AmerCable division and
a charge of $2.4 million for the write-down of our investment in Amercord Inc.
Adjusted EBITDA for the year ended December 31, 2001, excluding the amounts
discussed above, was $53.1 million. Adjusted EBITDA increased $11.5 million or
21.7% for the year ended December 31, 2002 compared to the same period in the
prior year. The increase in Adjusted EBITDA is primarily a result of the
Company's increased sales volume.
Michael Caporale, President and Chief Executive Officer, commented, "Associated
Materials' fourth quarter results completed another strong year for the company.
Our sales from continuing operations have increased over 40% during the past two
years while our Adjusted EBITDA has increased over 60% during the same period.
By continuing to capitalize on our competitive advantages - our company-owned
distribution network, product innovation, and operational excellence - we have
been able to consistently deliver solid results."
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Results of Continuing Operations
Unit sales of vinyl windows increased 20% while unit sales of vinyl siding
decreased 3% during the fourth quarter of 2002 compared to the same period in
2001. The decrease in unit sales of vinyl siding is primarily a result of the
continuing macroeconomic uncertainties, which are impacting the entire vinyl
siding industry. According to available industry data, the vinyl siding industry
decreased 5% during the fourth quarter of 2002 compared to the same period in
2001. Gross profit in the fourth quarter of 2002 was $43.7 million, or 27.5% of
net sales. This compares to $43.5 million, or 30.1% of net sales, in the fourth
quarter of 2001. The decrease in gross profit margin percentage was a result of
window sales comprising a larger proportion of total sales in the fourth quarter
of 2002 compared to the same period in 2001, increased resin costs, and
short-term manufacturing inefficiencies resulting from process and product
changes implemented at the company's vinyl siding manufacturing facilities.
Selling, general and administrative expense increased to $29.9 million, or 18.8%
of net sales, for the fourth quarter of 2002 versus $29.4 million, or 20.3% of
net sales, in the same period in 2001. Income from operations decreased to $13.8
million, or 8.7% of net sales, for the fourth quarter of 2002 compared to $14.1
million, or 9.8% of net sales, for the same period in 2001.
Unit sales of vinyl windows and vinyl siding increased 38% and 6%, respectively,
for the year ended December 31, 2002 compared to the same period in 2001. Gross
profit increased to $179.3 million, or 29.3% of net sales, for the year ended
December 31, 2002 compared to $156.6 million, or 29.9% of net sales, for the
same period in 2001. The decrease in gross profit margin was a result of window
sales comprising a larger proportion of total sales in 2002 compared to 2001.
SG&A expense increased to $127.2 million, or 20.8% of net sales, for the year
ended December 31, 2002 versus $112.8 million, or 21.5% of net sales, in the
same period in 2001. SG&A expense increased as a result of seven new supply
centers added during 2002, personnel added to support sales growth at existing
supply centers, additional marketing investments to drive higher sales volumes,
and increased commission expense resulting from the higher sales. Income from
operations increased to $52.2 million, or 8.5% of net sales, for the year ended
December 31, 2002 compared to $43.9 million, or 8.4% of net sales, for the same
period in 2001.
Predecessor and Successor Results of Operations
Accounting principles generally accepted in the United States require operating
results prior to the merger completed on April 19, 2002 to be presented as the
Predecessor's results in the historical financial statements. Operating results
subsequent to the merger are presented as the Successor's results in the
historical financial statements and include 257 days from April 19, 2002 to
December 31, 2002. AmerCable's results are included in continuing operations of
the Predecessor. Subsequent to the merger, AmerCable's results are treated as
discontinued operations due to the Successor's decision to sell this division.
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The Successor had net sales and net income of $449.3 million and $12.2 million,
respectively, for the period from April 19, 2002 to December 31, 2002. The
Successor's results include the loss from discontinued operations of $0.5
million, net of tax, for the Company's AmerCable division and extraordinary
items of $4.4 million, net of tax, for the extinguishment of substantially all
of the Successor's assumed 9 1/4% senior subordinated notes and financing fees
related to an interim credit facility utilized for the merger which was repaid
shortly thereafter.
The Predecessor had net sales and a net loss of $180.2 million and $5.8 million
for the period from January 1, 2002 to April 18, 2002. The Predecessor's results
include $9.3 million of transaction costs associated with the Predecessor's
strategic review process and merger.
Merger
On April 19, 2002, the cash tender offer for AMI's common stock for $50 per
share was completed with the Company becoming a privately held, wholly-owned
subsidiary of Associated Materials Holdings Inc. (which is controlled by
affiliates of Harvest Partners, Inc.).
Sale of AmerCable
On June 24, 2002, the Company completed the sale of its AmerCable division to
AmerCable Incorporated, a newly-formed entity controlled by Wingate Partners
III, L.P. and members of AmerCable's management for cash proceeds of
approximately $28.3 million and the assumption of certain liabilities. The
proceeds from the sale were used to repay a portion of the Company's
indebtedness.
* * *
Associated Materials management will host its fourth quarter earnings conference
call on Friday, February 21 at 11 a.m. Eastern Time. The toll free dial-in
number for the call is (866) 686-6743. A replay of the call will be available
through February 28, 2003 by dialing (888) 843-8996 and entering the conference
call identification number of 6699776. The conference call and replay will also
be available via webcast, which can be accessed via the Company's web site at
http://www.associatedmaterials.com.
* * *
Associated Materials is a leading manufacturer of exterior residential building
products, which are distributed through 90 company-owned Supply Centers across
the United States. The Company produces a broad range of vinyl siding and vinyl
window product lines as well as vinyl fencing, decking and railing and vinyl
garage doors.
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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 at http://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, as they relate to
Associated Materials or its management, identify forward-looking statements.
Such statements reflect the current views of the Company's management with
respect to its operations and results of operations regarding the availability
of consumer 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 Carolyn Miles
Chief Financial Officer Media
(330) 922-2004 (212) 371-5999
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ASSOCIATED MATERIALS INCORPORATED
Condensed Predecessor / Successor Statements of Operations (a)
(in thousands)
Two
One Hundred
Hundred Fifty-Seven
Three Months Ended Eight Days Days Year Ended
------------------- Ended Ended ---------------------
December December April 18, December December December
31, 2002 31, 2001 2002 31, 2002 31, 2002 31, 2001
---------- ----------- ----------- ------------ ------------ -----------
Successor Predecessor Predecessor Successor Combined Predecessor
--------- ----------- ----------- --------- -------- -----------
Net sales
Alside.................................. $158,691 $144,441 $161,959 $449,324 $611,283 $524,528
AmerCable............................... -- 15,358 18,271 -- 18,271 71,291
------- ------- ------- ------- ------- -------
Total............................... 158,691 159,799 180,230 449,324 629,554 595,819
Gross profit
Alside.................................. 43,685 43,487 47,102 132,247 179,349 156,626
AmerCable............................... -- 2,911 2,777 -- 2,777 13,827
------- ------- ------- ------- ------- -------
Total............................... 43,685 46,398 49,879 132,247 182,126 170,453
Selling, general and administrative expense
Alside & Corporate...................... 29,873 29,370 41,080 86,097 127,177 112,771
AmerCable............................... -- 1,726 2,192 -- 2,192 7,174
------- ------- ------- ------- ------- -------
Total............................... 29,873 31,096 43,272 86,097 129,369 119,945
======= ======= ======= ======= ======= =======
Income from operations
Alside & Corporate...................... 13,812 14,117 6,022 46,150 52,172 43,855
AmerCable............................... -- 1,185 585 -- 585 6,653
------- ------- ------- ------- ------- -------
Total............................... 13,812 15,302 6,607 46,150 52,757 50,508
Interest, net................................ 5,867 1,641 2,068 16,850 18,918 6,795
------- ------- ------- ------- ------- -------
Income from continuing operations before
other non-operating expenses, income
taxes and extraordinary items............. 7,945 13,661 4,539 29,300 33,839 43,713
Merger transaction costs (b)................. -- -- 9,319 -- 9,319 --
Loss on writedown of Amercord Inc............ -- -- -- -- -- 2,393
------- ------- ------- ------- ------- -------
Income (loss) from continuing operations
before income taxes and extraordinary
items .................................... 7,945 13,661 (4,780) 29,300 24,520 41,320
Income taxes................................. 3,298 5,259 977 12,161 13,138 15,908
------- ------- ------- ------- ------- -------
Income (loss) from continuing operations
before extraordinary items................ 4,647 8,402 (5,757) 17,139 11,382 25,412
Loss from discontinued operations............ -- -- -- (521) (521) --
Extraordinary items, net of tax (c).......... -- -- -- (4,434) (4,434) --
------- ------- ------- ------- ------- -------
Net income (loss)............................ $ 4,647 $8,402 $ (5,757) $ 12,184 $ 6,427 $25,412
======= ======= ======= ======= ======= =======
Reconciliation of net income (loss) to EBITDA (d):
- --------------------------------------------------
Net income (loss) ........................... $ 4,647 $8,402 $ (5,757) $ 12,184 $ 6,427 $25,412
Interest - Continuing operations............. 5,867 1,641 2,068 16,850 18,918 6,795
- Discontinued operations (e)....... -- -- -- 1,213 1,213 --
Taxes - Continuing operations............. 3,298 5,259 977 12,161 13,138 15,908
- Extraordinary items............... -- -- -- (3,145) (3,145) --
- Discontinued operations........... -- -- -- (370) (370) --
Depreciation and amortization
- Continuing operations............. 2,923 2,773 3,969 7,169 11,138 10,919
- Discontinued operations........... -- -- -- 318 318 --
------- ------- ------- ------- ------- -------
EBITDA ...................................... $16,735 $18,075 $ 1,257 $46,380 $47,637 $59,034
======= ======= ======= ======= ======= =======
Reconciliation of EBITDA to Adjusted EBITDA (f):
- ------------------------------------------------
EBITDA....................................... $16,735 $18,075 $ 1,257 $46,380 $ 47,637 $59,034
Extraordinary items, pre-tax (c)............. -- -- -- 7,579 7,579 --
AmerCable's EBITDA (g)....................... -- (1,498) (1,220) (640) (1,860) (8,361)
Loss on writedown of Amercord Inc............ -- -- -- -- -- 2,393
Merger transaction costs (b)................. -- -- 9,319 -- 9,319 --
Cost of sales adjustment (h)................. -- -- -- 1,891 1,891 --
------- ------- ------- ------- ------- -------
Adjusted EBITDA.............................. $16,735 $16,577 $ 9,356 $55,210 $64,566 $53,066
======= ======= ======= ======= ======= =======
Selected Balance Sheet Data
- ---------------------------
Cash......................................... $13,022 $ 28,869
Accounts receivable, net..................... 67,861 65,784
Inventory.................................... 60,369 74,574
Accounts payable............................. 31,319 29,579
Accrued liabilities.......................... 34,319 35,356
Long-term debt............................... 242,408 75,000
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(a) Operating results prior to the merger 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 are presented as the Successor's results of
operations and include 257 days from April 19, 2002 to December 31,
2002. AmerCable's results are included in continuing operations of the
Predecessor prior to the merger. Subsequent to the merger, AmerCable's
results are treated as discontinued operations due to the Successor's
decision to sell this division.
(b) 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.
(c) Extraordinary items include $4.9 million ($2.8 million net of tax) for
the extinguishment of substantially all of the Successor's assumed 9
1/4% senior subordinated notes and $2.7 million ($1.6 million net of
tax) for the expense of financing fees related to an interim credit
facility utilized for the merger which was repaid shortly thereafter.
(d) EBITDA is calculated as net income (loss) plus interest, taxes,
depreciation and amortization. The Company has included EBITDA because
it believes that EBITDA is used by certain investors as one measure of
a company's historical ability to service its debt. EBITDA should not
be considered an alternative to, or more meaningful than, net income as
an indicator of a company's operating performance or to cash flows as a
measure of liquidity. 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.
(e) 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.
(f) Adjusted EBITDA represents EBITDA plus certain non-recurring items less
AmerCable's operating results. The Company believes that Adjusted
EBITDA presents a more meaningful discussion than EBITDA since Adjusted
EBITDA corresponds to EBITDA as it is defined in the Company's credit
facility and indenture governing the 9 3/4% senior subordinated notes
as it excludes non-recurring items. The credit facility and indenture
governing the 9 3/4% Notes have certain financial covenants that use
ratios utilizing the Company's 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 will not be
included in the Company's ongoing operations. The non-recurring items
and results of AmerCable are expected to have no ongoing cash
requirements and no impact on the Company's ongoing operations.
Adjusted EBITDA has not been prepared in accordance with accounting
principles generally accepted in the United States. Therefore, Adjusted
EBITDA as presented by the Company, may not be comparable to similarly
titled measures reported by other companies.
(g) AmerCable's EBITDA is calculated as its net income plus interest,
taxes, depreciation and amortization.
(h) The cost of sales adjustment is the expense of an inventory fair value
adjustment recorded at the time of the merger.
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