EXHIBIT 99.1
FOR IMMEDIATE RELEASE
NEWS RELEASE
ASSOCIATED MATERIALS REPORTS FIRST QUARTER RESULTS
CUYAHOGA FALLS, Ohio, May 2 -- Associated Materials Incorporated ("AMI") today
announced first quarter 2003 net sales from continuing operations of $110.9
million, essentially flat compared to $111.1 million for the same period in
2002. As discussed below, results of continuing operations exclude the Company's
AmerCable division, which was sold on June 24, 2002.
Net loss for the first quarter of 2003 was $5.0 million. This compares to a net
loss of $1.5 million for the same period in 2002. Cash used in operations was
$13.5 million for the first quarter in 2003 as compared to cash used in
operations of $12.0 million for the same period in 2002.
EBITDA for the first quarter of 2003 was a loss of $0.4 million compared to
earnings of $2.2 million for the same period in 2002. EBITDA for the three
months ended March 31, 2002 includes $0.6 million of EBITDA relating to the
AmerCable division and merger transaction costs of $2.0 million. A
reconciliation of EBITDA to net loss is included in the table below.
Michael Caporale, President and Chief Executive Officer, commented, "Despite
severe winter weather conditions in many of our key geographic areas as well as
historically low consumer confidence, Associated Materials' sales from
continuing operations were equal to those of the strong first quarter of 2002.
However, AMI's sales mix continued to shift from vinyl siding to vinyl windows,
which have a lower margin percentage. In addition, our selling, general and
administrative expenses were higher than last year due to increased costs
associated with the seven new supply centers we opened over the past twelve
months."
Mr. Caporale further commented, "Although there was a decline in sales of
existing homes and single-family housing starts early in 2003, we believe
consumers will continue to invest in their homes as interest rates remain at
historically low levels."
Results of Continuing Operations
Unit sales of vinyl siding decreased 15% while unit sales of vinyl windows
increased 8% during the first quarter of 2003 compared to the same period in
2002. The decrease in unit sales of vinyl siding is primarily a result of the
severe winter weather conditions in many of the Company's key geographic areas
as well as continued macroeconomic uncertainties, including historically low
consumer confidence. According to available industry data, the vinyl siding
industry decreased 5% during the first quarter of 2003 compared to the same
period in 2002. The Company believes its vinyl siding performance was below the
industry in the first quarter due to its competitors' customers building
inventory in advance of industry-wide price increases effective April 1st and as
a result of special promotions offered during the slower winter months. As the
majority of
the Company's vinyl siding sales are made directly to contractors
through its company-owned supply centers, its revenue would not be significantly
impacted by the above mentioned factors. Gross profit in the first quarter of
2003 was $28.2 million, or 25.4% of net sales. This compares to gross profit of
$30.7 million, or 27.6% of net sales, in the first quarter of 2002. The decrease
in gross profit margin percentage was primarily a result of window sales
comprising a larger proportion of total sales in the first quarter of 2003
compared to the same period in 2002 along with increased resin costs. Selling,
general and administrative expense increased to $31.3 million, or 28.2% of net
sales, for the first quarter of 2003 versus $29.6 million, or 26.6% of net
sales, for the same period in 2002. The increase in selling, general and
administrative expense is primarily a result of the seven new supply centers
added over the past twelve months. The loss from operations was $3.1 million in
the first quarter of 2003 compared to income from operations of $1.1 million for
the same period in 2002.
Cash Flows
Cash used in operations was $13.5 million for the first quarter of 2003 compared
to cash used in operations of $12.0 million for the same period in 2002, with
both periods reflecting the operating results for each quarter and seasonal
working capital needs. Cash used in investing activities was $2.3 million for
the first quarter of 2003 compared to cash used in investing activities of $3.1
million for the same period in 2002. Investing activities for both periods
consist entirely of capital expenditures. Net cash provided by financing
activities of $5.7 million for the first quarter of 2003 consisted of borrowings
totaling $6.6 million under the revolving portion of the Company's credit
facility offset by the redemption of the remaining $0.9 million of 9 1/4% notes.
This compares to net cash used in financing activities of $0.2 million for the
first quarter of 2002, which consisted of $0.3 million of dividends paid offset
by $0.1 million received from the exercise of stock options. As of March 29,
2002, AMI's total debt was $248.1 million, which consisted of $165 million of 9
3/4% notes along with $76.5 million of term loans and $6.6 million of revolving
loans under its credit facility.
Predecessor and Successor Results of Operations
On April 19, 2002, the cash tender offer for AMI's then outstanding common stock
for $50 per share was completed. As a result the Company became a privately
held, wholly-owned subsidiary of Associated Materials Holdings Inc. (which is
controlled by affiliates of Harvest Partners, Inc.).
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. AmerCable's results are included in continuing
operations of the Predecessor as it was the Successor's decision to divest this
division.
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The net loss of $5.0 million for the first quarter of 2003 includes the loss
from operations of $3.1 million, interest expense of $5.4 million and a tax
benefit of $3.6 million. This compares to a net loss of $1.5 million for the
same period of 2002, which includes income from operations of $1.1 million,
income from operations from the Company's former AmerCable division of $0.1
million, interest expense of $1.7 million, $2.0 million of merger transaction
costs associated with the strategic review process and merger and a tax benefit
of $1.0 million.
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.
Change of Fiscal Year End
AMI elected to change its fiscal year from a calendar year to a 52 / 53 week
fiscal year that ends on the Saturday closest to December 31st. The first
quarter of fiscal 2003 began on January 1, 2003 and ended on March 29, 2003. The
Company's 2003 fiscal year end will be January 3, 2004.
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 and merger transaction costs.
* * *
Associated Materials management will host its first quarter earnings conference
call on Friday, May 2 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 May
9, 2003 by dialing (888) 769-9756 and entering the conference call
identification number of 7043177. 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 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
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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.
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, changes in weather conditions and
general economic conditions. These statements are subject to certain risks and
uncertainties. More detailed information about these factors may be found in
filings by Associated Materials with the Securities and Exchange Commission,
including its most recent annual report on Form 10-K. 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
and Other Selected Financial Information(a)
(in thousands)
Three Months Ended
March 29, March 31,
2003 2002
Successor Predecessor
--------- -----------
Net sales
Alside............................. $110,944 $ 111,062
AmerCable.......................... - 12,136
-------- ---------
Total.......................... 110,944 123,198
Gross profit
Alside............................. 28,168 30,691
AmerCable.......................... - 1,729
-------- ---------
Total.......................... 28,168 32,420
Selling, general and administrative expense
Alside............................. 31,310 29,572
AmerCable.......................... - 1,647
-------- ---------
Total.......................... 31,310 31,219
-------- ---------
Income (loss) from operations
Alside............................. (3,142) 1,119
AmerCable.......................... - 82
-------- ---------
Total.......................... (3,142) 1,201
Interest, net........................... 5,438 1,669
-------- ---------
Loss before other non-operating expenses and
income taxes......................... (8,580) (468)
Merger transaction costs (b)............ - 2,002
-------- ---------
Loss before income taxes................ (8,580) (2,470)
Income taxes............................ (3,560) (951)
--------- ----------
Net loss................................ $ (5,020) $ (1,519)
========= ==========
Reconciliation of net loss to EBITDA (c) (d):
- ---------------------------------------------
Net loss ............................... $ (5,020) $ (1,519)
Interest................................ 5,438 1,669
Taxes................................... (3,560) (951)
Depreciation and amortization........... 2,717 2,979
-------- ---------
EBITDA ............................... $ (425) $ 2,178
========= =========
Selected Cash Flow Data
- -----------------------
Net cash used in operating activities... $(13,526) $ (11,993)
Net cash used in investing activities
(capital expenditures)............... (2,335) (3,118)
Net cash provided by (used in) financing
activities........................... 5,692 (245)
March 29, December 31,
2003 2002
Selected Balance Sheet Data Successor
- --------------------------- ---------
Cash.................................... $ 2,853 $ 13,022
Accounts receivable, net................ 62,252 67,861
Inventory............................... 65,366 60,369
Accounts payable........................ 27,505 31,319
Accrued liabilities..................... 28,815 34,319
Long-term debt.......................... 248,100 242,408
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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 the period
from January 1, 2002 to March 31, 2002. Operating results subsequent to the
merger are presented as the Successor's results of operations and include
the period from January 1, 2003 to March 29, 2003. AmerCable's results are
included in continuing operations of the Predecessor prior to the merger.
(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) EBITDA is calculated as net 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, as it is defined in the Company's credit facility and
indenture governing the 9 3/4% notes, 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 EBITDA. 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.
(d) AmerCable's EBITDA for the three months ended March 31, 2002 is calculated
as its net income of $0.1 million, plus depreciation and amortization of
$0.5 million. AmerCable's interest and taxes for this period were less than
$0.1 million.