Exhibit 99.1
FOR IMMEDIATE RELEASE
NEWS RELEASE
ASSOCIATED MATERIALS REPORTS SECOND QUARTER RESULTS
CUYAHOGA FALLS, Ohio, August 1 -- Associated Materials Incorporated ("AMI" or
"Company") today announced second quarter 2003 net sales from continuing
operations of $180.4 million, a 9.4% increase over $164.9 million for the same
period in 2002. For the six months ended June 28, 2003, net sales from
continuing operations were $291.3 million or 5.6% higher than $275.9 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 income for the second quarter of 2003 was $10.3 million. This compares to a
net loss of $4.5 million for the same period in 2002. For the six months ended
June 28, 2003, net income was $5.3 million compared to a net loss of $6.0
million for the same period in 2002.
EBITDA (as defined below) for the second quarter of 2003 was $25.9 million
compared to $6.5 million for the second quarter of 2002. EBITDA for the second
quarter of 2002 includes $1.3 million of EBITDA relating to the AmerCable
division, costs of $7.3 million related to the Company's merger transaction with
Harvest Partners, Inc., 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. A reconciliation of EBITDA to net income
(loss) is included in the table below.
EBITDA for the six months ended June 28, 2003 was $25.5 million compared to $8.7
million for the same period in 2002. EBITDA for the six months ended June 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.
Michael Caporale, President and Chief Executive Officer, commented, "I'm very
pleased with Associated Materials' second quarter results, particularly when
compared to the very strong operating results of the second quarter of 2002 and
following a difficult first quarter of 2003."
Mr. Caporale continued, "The macroeconomic drivers which impact the building
products industry continued to be positive in the second quarter. Consumer
confidence increased in the second quarter from earlier in the year and interest
rates remain at historical lows. Sales of existing homes and single-family
housing starts also improved from the first quarter. The fundamentals which
drive the new construction and remodeling markets continue to remain strong."
Results of Continuing Operations
Sales from continuing operations increased 9.4% during the second quarter of
2003 compared to the same period in 2002, primarily driven by increased window
sales, partially offset by a decrease in vinyl siding sales. Gross profit in the
second quarter of 2003 was $56.8 million, or 31.5% of net sales as compared to
gross profit of $51.1 million, or 31.0% of net sales, in the second quarter of
2002. Included in the gross profit margin for the quarter ended June 30, 2002
was a cost of sales expense of $1.9 million relating to an inventory fair value
adjustment recorded at the time of the merger. Excluding this adjustment, gross
profit margin percentage decreased primarily as 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 $33.7
million, or 18.7% of net sales, for the second quarter of 2003 versus $33.2
million, or 20.1% 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 seven new supply centers added in
2002, which had three full months of expense in 2003. Income from operations was
$23.1 million in the second quarter of 2003 compared to $17.9 million for the
same period in 2002.
Sales from continuing operations increased 5.6% for the six months ended June
28, 2003 compared to the same period in 2002, primarily driven by increased
window sales, partially offset by a decrease in vinyl siding sales. Gross profit
increased to $85.0 million, or 29.2% of net sales, for the six months ended June
28, 2003 compared to $81.8 million, or 29.6% 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 $65.0 million, or 22.3% of net sales, for the six months ended June
28, 2003 compared to $62.7 million, or 22.7% 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 six full months of expense in
2003. Income from operations was $20.0 million for the six months ended June 28,
2003 compared to $19.0 million for the same period in 2002.
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. 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 second quarter of 2003 was $10.3 million, which includes
income from operations of $23.1 million, interest expense of $5.5 million and an
income tax provision of $7.3 million. The Predecessor had net sales and a net
loss of $57.0 million
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and $4.2 million, respectively, for the period from April 1, 2002 to April 18,
2002. The Predecessor's net loss includes income from operations of $5.4
million, interest expense of $0.4 million, $7.3 million of transaction costs
associated with the Predecessor's strategic review process and merger and an
income tax provision of $1.9 million. The Successor had net sales and a net loss
of $114.0 million and $0.3 million, respectively, for the period from April 19,
2002 to June 30, 2002. The Successor's net loss includes income from operations
of $13.0 million, interest expense of $5.0 million, $7.6 million of debt
extinguishment costs, an income tax provision of $0.2 million and the loss from
discontinued operations of $0.5 million, net of tax, for the Company's AmerCable
division.
Net income for the six months ended June 28, 2003 was $5.3 million, which
includes income from operations of $20.0 million, interest expense of $10.9
million and an income tax provision of $3.7 million. 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 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 and an income tax provision of $1.0 million. The Successor's results
are discussed above.
Acquisition of Gentek Holdings, Inc.
On July 31, 2003, AMI signed a definitive agreement to acquire all of the issued
and outstanding shares of capital stock of Gentek Holdings, Inc. Gentek
Holdings, Inc. is the parent of Gentek Building Products, Inc. and Gentek
Building Products Limited (collectively Gentek). Gentek manufactures and
distributes vinyl, aluminum and steel siding and accessories and vinyl windows.
Sale of AmerCable
On June 24, 2002, AMI 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.
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 the cost of sales expense relating to an inventory
fair value adjustment recorded at the time of the merger.
* * *
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Associated Materials management will host its second quarter earnings conference
call on Friday, August 1 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
August 8, 2003 by dialing (888) 843-8996 and entering the conference call
identification number of 7303973. 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 91 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. AMI is a privately held, wholly owned subsidiary of Associated
Materials Holdings Inc., which is controlled by affiliates of Harvest Partners,
Inc.
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 identify forward-looking
statements. Such statements reflect the current views of Associated Materials'
management with respect to Associated Materials' ability to consummate and
profit from the acquisition of Gentek Holdings, including Associated Materials'
ability to amend its existing credit facility, and 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 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
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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 Seventy- Three Hundred Seventy-
Months Eighteen Days Three Days Months Six Months Eight Days Three Days Six Months
Ended Ended Ended Ended Ended Ended Ended Ended
June 28, April 18, June 30, June 30, June 28, April 18, June 30, June 30,
2003 2002 2002 2002 2003 2002 2002 2002
---------------------------------------------------------------------------------------------------------
Succcessor Predecessor Successor Combined Successor Predecessor Successor Combined
---------- ----------- --------- --------- --------- ----------- --------- --------
Net sales
Alside................. $180,363 $50,897 $113,960 $164,857 $291,307 $161,959 $113,960 $275,919
AmerCable.............. - 6,135 - 6,135 - 18,271 - 18,271
-------- --------- -------- -------- -------- -------- -------- --------
Total.............. 180,363 57,032 113,960 170,992 291,307 180,230 113,960 294,190
Gross profit
Alside................. 56,800 16,411 34,669 51,080 84,968 47,102 34,669 81,771
AmerCable.............. - 1,048 - 1,048 - 2,777 - 2,777
-------- --------- -------- -------- -------- ------- -------- --------
Total.............. 56,800 17,459 34,669 52,128 84,968 49,879 34,669 84,548
Selling, general and
administrative expense
Alside................. 33,704 11,508 21,667 33,175 65,014 41,080 21,667 62,747
AmerCable.............. - 545 - 545 - 2,192 - 2,192
-------- --------- -------- -------- -------- ------- -------- --------
Total.............. 33,704 12,053 21,667 33,720 65,014 43,272 21,667 64,939
Income from operations
Alside................. 23,096 4,903 13,002 17,905 19,954 6,022 13,002 19,024
AmerCable.............. - 503 - 503 - 585 - 585
-------- --------- -------- -------- -------- ------- -------- --------
Total.............. 23,096 5,406 13,002 18,408 19,954 6,607 13,002 19,609
Interest, net............... 5,483 399 4,981 5,380 10,921 2,068 4,981 7,049
-------- --------- -------- -------- -------- ------- -------- --------
Income from continuing
operations before other
non-operating expenses and
income taxes............... 17,613 5,007 8,021 13,028 9,033 4,539 8,021 12,560
Merger transaction
costs (b).................. - 7,317 - 7,317 - 9,319 - 9,319
Debt extinguishment
costs (c).................. - - 7,579 7,579 - - 7,579 7,579
-------- --------- -------- -------- -------- ------- -------- --------
Income (loss) from
continuing operations
before income taxes........ 17,613 (2,310) 442 (1,868) 9,033 (4,780) 442 (4,338)
Income taxes................ 7,309 1,928 183 2,111 3,749 977 183 1,160
-------- --------- -------- -------- -------- ------- -------- --------
Net income (loss)
from continuing
operations................. 10,304 (4,238) 259 (3,979) 5,284 (5,757) 259 (5,498)
Loss from discontinued
operations ................ - - (521) (521) - - (521) (521)
-------- --------- -------- --------- -------- --------- --------- ---------
Net income (loss)........... $10,304 $(4,238) $(262) $(4,500) $5,284 $(5,757) $(262) $(6,019)
======== ========= ======== ========= ======== ========= ========= =========
Reconciliation of net income
(loss) to EBITDA (d)(e):
Net income (loss)........... 10,304 $(4,238) $(262) $(4,500) $5,284 $(5,757) $(262) $(6,019)
Interest -Continuing
operations...... 5,483 399 4,981 5,380 10,921 2,068 4,981 7,049
-Discontinued
operations (f).. - - 1,213 1,213 - - 1,213 1,213
Taxes -Continuing
operations...... 7,309 1,928 183 2,111 3,749 977 183 1,160
-Discontinued
operations...... - - (370) (370) - - (370) (370)
Depreciation and Amortization
-Continuing
operations...... 2,795 990 1,397 2,387 5,512 3,969 1,397 5,366
-Discontinued
operations...... - - 318 318 - - 318 318
-------- --------- --------- -------- -------- --------- --------- ---------
EBITDA ..................... $25,891 $(921) $7,460 $6,539 $25,466 $1,257 $7,460 $8,717
======== ========= ========= ======== ======== ========= ========= =========
Selected Cash Flow Data:
Net cash provided by
(used in) operating
activities................. $9,269 $(6,265) $13,622 $7,357 $(4,257) $(18,258) $13,622 $(4,636)
Net cash used in investing
activities................. (3,506) (479) (352,724) (353,203) (5,841) (3,597) (352,724) (356,321)
Net cash provided by
(used in) financing
activities................. (6,600) - 344,636 344,636 (908) (245) 344,636 344,391
Net cash used in
discontinued operations.... - - (1,076) (1,076) - - (1,076) (1,076)
June 28, December 31,
2003 2002
----------------------------
Selected Balance Sheet Data:
Cash........................................... $ 2,016 $ 13,022
Accounts receivable, net....................... 87,079 67,861
Inventory...................................... 70,779 60,369
Accounts payable............................... 42,650 31,319
Accrued liabilities............................ 33,502 34,319
Long-term debt................................. 241,500 242,408
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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 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. For the 2002 periods presented this includes 73 days from
April 19, 2002 to June 30, 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 divest 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) 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, which
was repaid shortly thereafter.
(d) 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.
(e) AmerCable's EBITDA is calculated as its net income (loss) plus
interest, taxes, depreciation and amortization. For the periods
presented above AmerCable's EBITDA is calculated as follows:
One
Seventy- Three Hundred Seventy-
Eighteen Three Days Months Eight Days Three Days Six Months
Days Ended Ended Ended Ended Ended Ended
April 18, June 30, June 30, April 18, June 30, June 30,
2002 2002 2002 2002 2002 2002
------------------------------------------------------------------------
Predecessor Successor Combined Predecessor Successor Combined
----------- --------- -------- ----------- --------- --------
Reconciliation of net income (loss) to EBITDA:
Net income (loss) .................................... $309 $(521) $(212) $ 359 $(521) $(162)
Interest -Discontinued operations (f)................ - 1,213 1,213 - 1,213 1,213
Taxes -Continuing operations...................... 194 - 194 226 - 226
-Discontinued operations.................... - (370) (370) - (370) (370)
Depreciation and Amortization
-Continuing operations...................... 158 - 158 635 - 635
-Discontinued operations.................... - 318 318 - 318 318
------- ------- ------- ------- ------- -------
EBITDA .............................................. $661 $ 640 $1,301 $1,220 $ 640 $1,860
======= ======= ======= ======= ======= =======
(f) 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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