SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-24956
ASSOCIATED MATERIALS INCORPORATED
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 75-1872487
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(State or Other Jurisdiction of Incorporation of Organization) (I.R.S. Employer Identification No.)
3773 State Rd, Cuyahoga Falls, Ohio 44223
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (330) 929 -1811
-----------------------------
Not Applicable
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Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Indicate by check X whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
--- ---
Shares of Common Stock, $.01 par value outstanding at September 30, 2002: 100
ASSOCIATED MATERIALS INCORPORATED
REPORT FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets................................................. 1
December 31, 2001 - Predecessor and September 30, 2002
(Unaudited) - Successor
Statements of Operations (Unaudited)........................... 2
Three months ended September 30, 2001 - Predecessor
Three months ended September 30, 2002 - Successor
Nine months ended September 30, 2001 - Predecessor
One hundred eight days ended April 18, 2002 - Predecessor
One hundred sixty-five days ended September 30, 2002 - Successor
Statements of Cash Flows (Unaudited)........................... 3
Nine months ended September 30, 2001 - Predecessor
One hundred eight days ended April 18, 2002 - Predecessor
One hundred sixty-five days ended September 30, 2002 - Successor
Notes to Financial Statements (Unaudited)...................... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
Item 4 Controls and Procedures..................................... 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................... 15
Item 2. Changes in Securities and Use of Proceeds................. 15
Item 3. Defaults Upon Senior Securities........................... 15
Item 4. Submission of Matters to a Vote of Security Holders....... 15
Item 5. Other Information......................................... 15
Item 6. Exhibits and Reports on Form 8-K.......................... 15
SIGNATURES........................................................... 16
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASSOCIATED MATERIALS INCORPORATED
BALANCE SHEETS
(In Thousands)
(Unaudited)
December 31, September 30,
2001 2002
---- ----
Predecessor Successor
----------- ---------
ASSETS
Current assets:
Cash and cash equivalents ....................... $ 28,869 $ 19,746
Accounts receivable, net ........................ 65,784 79,872
Inventory ....................................... 74,574 68,159
Income taxes receivable ......................... -- 2,371
Other current assets ............................ 3,394 4,172
-------- --------
Total current assets ............................ 172,621 174,320
Property, plant and equipment, net ................. 77,733 99,134
Goodwill ........................................... -- 199,348
Other intangible assets, net ....................... -- 107,190
Other assets ....................................... 3,953 12,440
-------- --------
Total assets ................................. $254,307 $592,432
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................ $ 29,579 $ 50,869
Accrued liabilities ............................. 35,356 42,842
Income taxes payable ............................ 1,498 --
-------- --------
Total current liabilities ....................... 66,433 93,711
Deferred income taxes .............................. 5,091 62,886
Other liabilities .................................. 5,108 6,059
Long-term debt ..................................... 75,000 252,408
Stockholders' equity ............................... 102,675 177,368
-------- --------
Total liabilities and stockholders' equity ... $254,307 $592,432
======== ========
See accompanying notes.
- 1 -
ASSOCIATED MATERIALS INCORPORATED
STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands)
Three Months
Ended Three Months Ended Nine Months Ended
September 30, September 30, September 30,
2001 2002 2001
------------ ------------------ -----------------
Predecessor Successor Predecessor
-----------------------------------------------------
Net sales .................................................. $ 168,664 $ 176,673 $ 436,020
Cost of sales .............................................. 119,072 122,780 311,965
--------- --------- ---------
Gross profit ............................................... 49,592 53,893 124,055
Selling, general and administrative expense ................ 30,450 34,557 88,849
--------- --------- ---------
Income from operations ..................................... 19,142 19,336 35,206
Interest expense, net ...................................... 1,721 6,002 5,154
Merger transaction costs ................................... -- -- --
Loss on writedown of Amercord Inc. ......................... -- -- 2,393
--------- --------- ---------
Income (loss) from continuing operations before income taxes
and extraordinary items ................................. 17,421 13,334 27,659
Income taxes ............................................... 6,707 5,535 10,649
--------- --------- ---------
Income (loss) from continuing operations ................... 10,714 7,799 17,010
Loss from discontinued operations .......................... -- -- --
Extraordinary items, net of tax ............................ -- -- --
--------- --------- ---------
Net income (loss) .......................................... $ 10,714 $ 7,799 $ 17,010
========= ========= =========
One Hundred Eight One Hundred Sixty -
Days Ended Five Days Ended
April 18, September 30,
2002 2002
------------------ -------------------
Predecessor Successor
---------------------------------------
Net sales .................................................. $ 180,230 $ 290,633
Cost of sales .............................................. 130,351 202,071
--------- --------
Gross profit ............................................... 49,879 88,562
Selling, general and administrative expense ................ 43,272 56,224
--------- --------
Income from operations ..................................... 6,607 32,338
Interest expense, net ...................................... 2,068 10,983
Merger transaction costs ................................... 9,319 --
Loss on writedown of Amercord Inc. ......................... -- --
--------- --------
Income (loss) from continuing operations before income taxes
and extraordinary items ................................. (4,780) 21,355
Income taxes ............................................... 977 8,863
--------- ---------
Income (loss) from continuing operations ................... (5,757) 12,492
Loss from discontinued operations .......................... -- (521)
Extraordinary items, net of tax ............................ -- (4,434)
--------- ---------
Net income (loss) .......................................... $ (5,757) $ 7,537
========= =========
See accompanying notes.
- 2 -
ASSOCIATED MATERIALS INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
One Hundred One Hundred
Nine Months Eight Days Sixty-Five Days
Ended Ended Ended
September 30, April 18, September 30,
2001 2002 2002
-----------------------------------------------
Predecessor Predecessor Successor
----------- ----------- ---------
OPERATING ACTIVITIES
Income (loss) from continuing operations ............................ $ 17,010 $ (5,757) $ 12,492
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization ................................. 8,146 3,969 4,246
Loss on the write-down of Amercord Inc. ....................... 2,393 -- --
Tax benefit from stock option exercise ......................... -- 113 --
Cost of sales expense related to an inventory fair value
purchase accounting
adjustment .................................................... -- -- 1,891
Amortization of deferred financing costs ...................... -- -- 953
Changes in operating assets and liabilities:
Accounts receivable, net ................................... (28,938) (6,246) (15,942)
Inventories ................................................ (5,982) (5,170) (6,661)
Income taxes ............................................... 10,585 (616) 1,351
Accounts payable and accrued liabilities ................... 22,651 (4,326) 38,574
Other ...................................................... (171) (225) 57
--------- --------- ---------
Net cash provided by (used in) operating activities ................. 25,694 (18,258) 36,961
INVESTING ACTIVITIES
Acquisition of Predecessor's equity ................................. -- -- (379,230)
Proceeds from sale of AmerCable ..................................... -- -- 28,332
Proceeds from sale of short-term investment ......................... 5,019 -- --
Proceeds from sale of assets ........................................ 114 220 35
Additions to property, plant and equipment .......................... (12,312) (3,817) (6,681)
--------- --------- ---------
Net cash used in investing activities ............................... (7,179) (3,597) (357,544)
FINANCING ACTIVITIES
Equity contribution from Holdings ................................... -- -- 164,807
Proceeds from issuance of 9 3/4% Senior Subordinated Notes .......... -- -- 165,000
Proceeds from borrowings under term loan ............................ -- -- 125,000
Repayments of term loan ............................................. -- -- (38,500)
Repayment of 9 1/4% Senior Subordinated Notes ....................... -- -- (74,092)
Debt extinguishment costs ........................................... -- -- (7,579)
Net proceeds from issuance of common stock .......................... 487 -- --
Repurchase of Class B shares ........................................ (19,500) -- --
Dividends paid ...................................................... (1,101) (339) --
Treasury stock acquired ............................................. (2,051) -- --
Stock options ....................................................... 995 94 --
--------- --------- ---------
Net cash provided by (used in) financing activities ................. (21,170) (245) 334,636
--------- --------- ---------
Net increase (decrease) in cash from continuing operations .......... (2,655) (22,100) 14,053
Net cash used in discontinued operations ............................ -- -- (1,076)
Cash at beginning of period ......................................... 15,879 28,869 6,769
--------- --------- ---------
Cash at end of period ............................................... $ 13,224 $ 6,769 $ 19,746
========= ========= =========
Supplemental information:
Cash paid for interest .............................................. $ 7,150 $ 4,479 $ 3,326
========= ========= =========
Cash paid for income taxes .......................................... $ 1,144 $ 2,254 $ 6,357
========= ========= =========
See accompanying notes.
- 3 -
ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited financial statements of Associated Materials Incorporated
(the "Company") have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial reporting, the
instructions to Form 10-Q, and Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of the
interim financial information have been included.
The Company's results of operations prior to the date of the merger
transaction (see Note 2) are presented as the results of the Predecessor. The
results of operations, including the merger transaction and results thereafter,
are presented as the results of the Successor and include one hundred sixty-five
days from April 19, 2002 to September 30, 2002. In addition, as discussed in
Note 3, the Company completed the sale of its AmerCable division on June 24,
2002. AmerCable's results through April 18, 2002 are included in the results of
continuing operations of the Predecessor. Subsequent to April 18, 2002,
AmerCable's results are presented as discontinued operations of the Successor as
it was the Successor's decision to divest this division.
The Company is a manufacturer of exterior residential building products,
which are distributed through 89 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, vinyl decking and vinyl garage doors.
Because most of the Company's building products are intended for exterior use,
the Company's sales and operating profits tend to be lower during periods of
inclement weather. Therefore, the results of operations for any interim period
are not necessarily indicative of the results of operations for a full year. The
Company's net income and comprehensive income are the same for all periods
presented.
NOTE 2 - MERGER TRANSACTION
On March 16, 2002, the Company entered into a merger agreement ("Merger
Agreement") with Associated Materials Holdings, Inc. ("Holdings") and its wholly
owned subsidiary, Simon Acquisition Corp. The Merger Agreement provided for the
acquisition of all shares of the Company's then outstanding common stock through
a cash tender offer for $50.00 per share. The Merger Agreement also required
that the Company commence a tender offer to purchase all of its outstanding
9-1/4% Senior Subordinated Notes due March 1, 2008 ("9-1/4% Notes").
On April 19, 2002, the cash tender offer for the Company's then
outstanding common stock and the cash tender offer for approximately $74.0
million of the Company's then outstanding 9-1/4% Notes was completed. Simon
Acquisition Corp. was then merged with and into the Company with the Company
continuing as a privately held, wholly owned subsidiary of Holdings (which is
controlled by affiliates of Harvest Partners, Inc.). Following the completion of
the merger transaction, the Company's then outstanding shares of common stock
were delisted from NASDAQ.
The merger has been accounted for using the purchase method of accounting.
The total purchase consideration of $379.2 million has been allocated to
tangible and intangible assets acquired and liabilities assumed based on
respective fair values at the date of acquisition based on preliminary valuation
estimates and certain assumptions. The preliminary allocation of purchase price
has resulted in $199.3 million in goodwill and $108.3 million in other
intangibles, including $8.6 million of patents with estimated useful lives of 10
years and $99.7 million assigned to trademarks of which $26.7 million have
remaining useful lives of 15 years and $73.0 million have indefinite lives (See
Note 6). The preliminary allocation of purchase price is reflected in the
September 30, 2002 balance sheet; however, it is subject to adjustment as the
allocation is based on a preliminary valuation and certain estimates. The
purchase consideration of $379.2 million, tender offer of the 9-1/4% Notes of
$74.0 million and debt extinguishment costs of $7.6 million were financed
through: (1) the issuance of $165 million of 9-3/4% Senior Subordinated Notes
due 2012 ("9-3/4% Notes"), (2) $125 million from a new $165 million credit
facility ("credit facility"), (3) $164.8 million cash contribution from Holdings
and (4) cash of approximately $6.0 million, representing a portion of the
Company's total cash on hand of $6.8 million.
- 4 -
In connection with the merger, the Predecessor incurred merger related
costs, including legal and investment banking fees, which have been classified
as merger transaction costs in the Predecessor's accompanying statements of
operations.
NOTE 3 - 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 net proceeds of
approximately $28.3 million and the assumption of certain liabilities pursuant
to an asset purchase agreement. The Company used the net proceeds to repay a
portion of its credit facility. No gain or loss on the sale of AmerCable was
recorded in the statements of operations, as the fair value assigned to
AmerCable's net assets acquired in the merger transaction approximated the net
proceeds received from the subsequent sale of AmerCable.
NOTE 4 - PRO FORMA INFORMATION
The following pro forma information for the three and nine months ended
September 30, 2002 and 2001 was prepared as if the merger transaction and sale
of AmerCable occurred as of the beginning of each period presented. On a pro
forma basis, the Company would have had (in thousands):
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
--------- -------- -------- --------
Net sales ....................... $176,673 $150,942 $452,592 $380,087
Income before extraordinary items $ 6,694 $ 5,673 $ 12,421 $ 4,191
Net income ...................... $ 6,694 $ 5,673 $ 7,987 $ 4,191
The pro forma information is not necessarily indicative of the results
that would have occurred had the merger transaction and sale of AmerCable
occurred at the beginning of the periods presented, nor is it necessarily
indicative of future results. The pro forma results of operations for all
periods presented include a $1.9 million expense related to an inventory fair
value adjustment recorded at the time of the merger transaction. In addition,
the pro forma results of operations for the nine months ended September 30, 2001
include a $2.4 million loss on the writedown of Amercord Inc.
NOTE 5 - INVENTORIES
Inventories are valued at the lower of cost (first in, first out) or
market. Inventories consisted of the following (in thousands):
December 31, September 30,
2001 2002
Predecessor Successor
----------- ---------
Raw materials......................................... $21,102 $15,112
Work-in-process....................................... 4,597 4,338
Finished goods and purchased stock.................... 48,875 48,709
------- -------
$74,574 $68,159
======= =======
- 5 -
NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill of $199.3 million consists of the purchase price for the merger
transaction in excess of the fair value of the tangible and intangible net
assets acquired. Other intangible assets consist of the Company's trademarks and
tradename of $99.7 million and patents of approximately $8.6 million. The
Company has determined one trademark and the Alside tradename totaling $73.0
million have an indefinite useful life. The remaining $26.7 million of
trademarks are being amortized on a straight-line basis over their estimated
remaining useful lives of 15 years. Patents are being amortized on a
straight-line basis over their estimated remaining useful lives of 10 years.
Accumulated amortization and amortization expense was approximately $1.1 million
as of and for the 165 days ended September 30, 2002. Estimated annual
amortization expense is approximately $2.6 million. The Company is required to
test goodwill and intangible assets with indefinite lives for impairment on an
annual basis or more frequently if events or circumstances change that would
impact the value of these assets.
NOTE 7 - LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
December 31, September 30,
2001 2002
Predecessor Successor
----------- ---------
9-3/4% Notes.......................................... $ -- $165,000
Term loan under credit facility....................... -- 86,500
9-1/4% Notes.......................................... 75,000 908
------- --------
$75,000 $252,408
======= ========
In connection with the merger transaction, on April 23, 2002 the Company
issued $165 million of the 9-3/4% Notes due in 2012 that pay interest
semi-annually. In conjunction with the merger, the Company entered into a new
$165 million credit facility, which included $125 million of term loans due
through 2009 that bear interest at the London Interbank Offered Rate (LIBOR)
plus 3.50%, payable quarterly, and up to $40 million of available borrowings
provided by revolving loans which expire in 2007. The term loan has been
permanently reduced by $38.5 million which resulted in approximately $1.1
million of accelerated amortization of deferred financing costs.
The credit facility and the indenture governing the 9-3/4% Notes contain
restrictive covenants that, among other things, limit the Company's ability to
incur additional indebtedness, make loans or advances to subsidiaries and other
entities, invest in capital expenditures, sell its assets or declare dividends.
In addition, under the credit facility the Company is required to achieve
certain financial ratios relating to leverage, coverage of fixed charges and
coverage of interest expense. The Company was in compliance with its covenants
as of September 30, 2002.
The Company has one subsidiary, which is a wholly owned subsidiary having
no assets, liabilities or operations. This subsidiary fully and unconditionally
guarantees the Company's 9-3/4% Notes.
In connection with the merger transaction, on April 19, 2002 the Company
completed a cash tender offer for approximately $74.0 million of the Company's
9-1/4% Notes. The tender offer premium paid for the 9-1/4% Notes was
approximately $7.3 million, of which $4.9 million is included as an
extraordinary item representing the portion of the premium in excess of the fair
market value of the 9-1/4% Notes. The Company was then obligated to make a
change of control offer for the approximate $1.0 million of remaining
outstanding 9-1/4% Notes at a price of 101% of the principal amount thereof,
plus accrued and unpaid interest. The change of control offer was completed on
June 21, 2002 with approximately $0.1 million of 9-1/4% Notes being tendered.
NOTE 8 - STOCKHOLDER'S EQUITY
As discussed in Note 2, the Company is a wholly owned subsidiary of
Holdings. The Company has the authority to issue 1,000 shares of $.01 par value
common stock, of which 100 shares are issued and outstanding at September 30,
2002.
- 6 -
NOTE 9 - INCOME TAXES
As a result of relocating the Company's corporate office from Texas to
Ohio, the Successor's state and local income tax rate increased, raising the
Company's total effective tax rate to 41.5% from 38.5%. In addition, the
Predecessor's tax provision includes an estimate for $7.3 million of merger
transaction costs that may not be deductible for income tax purposes.
NOTE 10 - EXTRAORDINARY ITEMS
Extraordinary items include $4.9 million ($2.8 million net of tax) for the
premium paid to extinguish substantially all of the Successor's assumed 9-1/4%
Notes and $2.7 million ($1.6 million net of tax) for the financing fees related
to an interim credit facility utilized for the merger transaction which was
repaid shortly thereafter.
NOTE 11 - IMPACT OF RECENTLY ISSUED BUT NOT ADOPTED ACCOUNTING STANDARDS
In April 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 145, - "Rescission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." The provisions of SFAS No. 145 related to the rescission
of SFAS No. 4 require that any gain or loss on extinguishment of debt that was
classified as an extraordinary item in prior periods presented be reclassified.
The Successor recorded extraordinary items of $4.4 million, net of tax, related
to debt extinguishment. The Company is required to adopt the provisions of this
standard in its fiscal year beginning on January 1, 2003.
In July 2002, the FASB issued SFAS No. 146 - "Accounting for Costs
Associated with Exit or Disposal Activities." The provisions of SFAS No. 146
require companies to recognize costs associated with exit or disposal activities
as they are incurred rather than at the date of a commitment to an exit or
disposal plan. The statement replaces guidance previously provided by Emerging
Issues Task Force Number 94-3 - "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)". The adoption of this standard will not
impact the Company's financial statements. The Company is required to adopt the
provisions of this standard in its fiscal year beginning on January 1, 2003.
- 7 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
On March 16, 2002, the Company entered into a merger agreement ("Merger
Agreement") with Associated Materials Holdings, Inc. ("Holdings") and its wholly
owned subsidiary, Simon Acquisition Corp. The Merger Agreement provided for the
acquisition of all shares of the Company's then outstanding common stock through
a cash tender offer for $50.00 per share. The Merger Agreement also required
that the Company commence a tender offer to purchase all of its outstanding
9-1/4% Notes. On April 19, 2002, the cash tender offer for the Company's then
outstanding common stock and the cash tender offer for approximately $74.0
million of the Company's then outstanding 9-1/4% Notes was completed. Simon
Acquisition Corp. was then merged with and into the Company with the Company
continuing as a privately held, wholly owned subsidiary of Holdings (which is
controlled by affiliates of Harvest Partners, Inc.).
The Company's results of operations prior to the date of the merger
transaction are presented as the results of the Predecessor. The results of
operations, including the merger transaction and results thereafter, are
presented as the results of the Successor and include 165 days from April 19,
2002 to September 30, 2002. In addition, the Company completed the sale of its
AmerCable division on June 24, 2002. AmerCable's results through April 18, 2002
are included in the results of continuing operations of the Predecessor.
Subsequent to April 18, 2002, AmerCable's results are presented as discontinued
operations of the Successor as it was the Successor's decision to divest this
division.
The following table sets forth for the periods indicated the results of
the Company's operations by segment:
- 8 -
CONDENSED PREDECESSOR / SUCCESSOR STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
One
Three Three Hundred
Months Months Eight Days
Ended Ended Ended
September 30, September 30, April 18,
2002 2001 2002
--------- ----------- -----------
SUCCESSOR PREDECESSOR PREDECESSOR
--------- ----------- -----------
Net sales
Alside............................................. $176,673 $150,942 $161,959
AmerCable.......................................... -- 17,722 18,271
-------- -------- --------
Total........................................ 176,673 168,664 180,230
Gross profit
Alside............................................. 53,893 46,075 47,102
AmerCable.......................................... -- 3,517 2,777
-------- -------- --------
Total........................................ 53,893 49,592 49,879
Selling, general and administrative expense
Alside............................................. 33,280 27,565 39,774
Corporate.......................................... 1,277 1,042 1,306
-------- -------- --------
Subtotal..................................... 34,557 28,607 41,080
AmerCable.......................................... -- 1,843 2,192
-------- -------- --------
Total........................................ 34,557 30,450 43,272
-------- -------- --------
Income (loss) from operations
Alside............................................. 20,613 18,510 7,328
Corporate.......................................... (1,277) (1,042) (1,306)
-------- -------- --------
Subtotal............................... 19,336 17,468 6,022
AmerCable.......................................... -- 1,674 585
-------- -------- --------
Total........................................ 19,336 19,142 6,607
Interest, net............................................ 6,002 1,721 2,068
-------- -------- --------
Income from continuing operations before other
non-operating expenses, income taxes and
extraordinary items................................... 13,334 17,421 4,539
Merger transaction costs (a)............................. -- -- 9,319
Loss on writedown of Amercord Inc........................ -- -- --
-------- -------- --------
Income (loss) from continuing operations before income
taxes and extraordinary items......................... 13,334 17,421 (4,780)
Income taxes............................................. 5,535 6,707 977
-------- -------- --------
Income (loss) from continuing operations before
extraordinary items................................... 7,799 10,714 (5,757)
Loss from discontinued operations........................ -- -- --
Extraordinary items, net of tax (b)...................... -- -- --
-------- -------- ---------
Net income (loss)........................................ $ 7,799 $ 10,714 $ (5,757)
======== ======== =========
Reconciliation of net income (loss) to EBITDA (c):
Net income (loss) ....................................... $ 7,799 $ 10,714 $(5,757)
Interest - Continuing operations...................... 6,002 1,721 2,068
- Discontinued operations (d)................ -- -- --
Taxes - Continuing operations...................... 5,535 6,707 977
- Extraordinary items........................ -- -- --
- Discontinued operations.................... -- -- --
Depreciation and amortization
- Continuing operations...................... 2,849 2,797 3,969
- Discontinued operations.................... -- -- --
-------- -------- --------
EBITDA ................................................ $ 22,185 $21,939 $ 1,257
======== ======= =======
Reconciliation of EBITDA to Adjusted EBITDA (e):
EBITDA................................................... $ 22,185 $21,939 $1,257
Extraordinary items, pre-tax (b)......................... -- -- --
AmerCable's EBITDA (f)................................... -- (2,139) (1,220)
Loss on writedown of Amercord Inc........................ -- -- --
Merger transaction costs (a)............................. -- -- 9,319
Cost of sales adjustment (g)............................. -- -- --
-------- -------- --------
Adjusted EBITDA.......................................... $ 22,185 $19,800 $ 9,356
======== ======= =======
One
Hundred
Sixty-Five Days Nine Months Nine Months
Ended Ended Ended
September 30, September 30, September 30,
2002 2002 2001
--------- -------- -----------
SUCCESSOR COMBINED PREDECESSOR
--------- -------- -----------
Net sales
Alside............................................. $290,633 $ 452,592 $380,087
AmerCable.......................................... -- 18,271 55,933
-------- --------- --------
Total........................................ 290,633 470,863 436,020
Gross profit
Alside............................................. 88,562 135,664 113,139
AmerCable.......................................... -- 2,777 10,916
-------- --------- --------
Total........................................ 88,562 138,441 124,055
Selling, general and administrative expense
Alside............................................. 54,732 94,506 79,413
Corporate.......................................... 1,492 2,798 3,988
-------- --------- --------
Subtotal..................................... 56,224 97,304 83,401
AmerCable.......................................... -- 2,192 5,448
-------- --------- --------
Total........................................ 56,224 99,496 88,849
-------- --------- --------
Income (loss) from operations
Alside............................................. 33,830 41,158 33,726
Corporate.......................................... (1,492) (2,798) (3,988)
-------- --------- --------
Subtotal............................... 32,338 38,360 29,738
AmerCable.......................................... -- 585 5,468
-------- --------- --------
Total........................................ 32,338 38,945 35,206
Interest, net............................................ 10,983 13,051 5,154
-------- --------- --------
Income from continuing operations before other
non-operating expenses, income taxes and
extraordinary items................................... 21,355 25,894 30,052
Merger transaction costs (a)............................. -- 9,319 --
Loss on writedown of Amercord Inc........................ -- -- 2,393
-------- --------- --------
Income (loss) from continuing operations before income
taxes and extraordinary items......................... 21,355 16,575 27,659
Income taxes............................................. 8,863 9,840 10,649
-------- --------- --------
Income (loss) from continuing operations before
extraordinary items................................... 12,492 6,735 17,010
Loss from discontinued operations........................ (521) (521) --
Extraordinary items, net of tax (b)...................... (4,434) (4,434) --
-------- --------- --------
Net income (loss)........................................ $ 7,537 $ 1,780 $17,010
======== ========= ========
Reconciliation of net income (loss) to EBITDA (c):
Net income (loss) ....................................... $ 7,537 $ 1,780 $17,010
Interest - Continuing operations...................... 10,983 13,051 5,154
- Discontinued operations (d)................ 1,213 1,213 --
Taxes - Continuing operations...................... 8,863 9,840 10,649
- Extraordinary items........................ (3,145) (3,145) --
- Discontinued operations.................... (370) (370) --
Depreciation and amortization
- Continuing operations...................... 4,246 8,215 8,146
- Discontinued operations.................... 318 318 --
-------- --------- --------
EBITDA ................................................ $ 29,645 $ 30,902 $ 40,959
======== ======== ========
Reconciliation of EBITDA to Adjusted EBITDA (e):
EBITDA................................................... $ 29,645 $ 30,902 $ 40,959
Extraordinary items, pre-tax (b)......................... 7,579 7,579 --
AmerCable's EBITDA (f)................................... (640) (1,860) (6,863)
Loss on writedown of Amercord Inc........................ -- -- 2,393
Merger transaction costs (a)............................. -- 9,319 --
Cost of sales adjustment (g)............................. 1,891 1,891 --
-------- --------- --------
Adjusted EBITDA.......................................... $ 38,475 $ 47,831 $ 36,489
======== ======== ========
- 9 -
(a) Merger transaction costs include investment banking and legal fees
incurred by the Predecessor in conjunction with the merger transaction
with Harvest Partners.
(b) 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%
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.
(c) 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.
(d) 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.
(e) 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 in the indenture governing the 9-3/4% 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 nonrecurring 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.
Adjusted 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 plus interest, taxes,
depreciation and amortization.
(g) The cost of sales adjustment is the expense of an inventory fair value
adjustment recorded at the time of the merger.
Three Months Ended September 30, 2002 Compared to Three Months Ended
September 30, 2001
Alside and Corporate
Subsequent to the merger transaction and sale of AmerCable, Alside and
Corporate represent the ongoing operations of the Company.
Net sales increased 17.0% to $176.7 million for the three months ended
September 30, 2002 compared to $150.9 million for the same period in 2001 due to
increased sales of vinyl windows and vinyl siding. Unit sales of vinyl windows
and vinyl siding increased 32% and 5%, respectively, for the third quarter of
2002 compared to the same period in 2001. The increase in sales volume is the
result of the Company's marketing investment and nationwide distribution network
of supply centers. The Company also believes that the increased sales volume can
be attributed to consumers' demand for professional remodeling services
including vinyl replacement windows and vinyl siding as a means to enhance home
values during a time of historically low interest rates. Gross profit increased
to $53.9 million, or 30.5% of net sales, in the third quarter of 2002 compared
to $46.1 million, or 30.5% of net sales, for the third quarter of 2001. Selling,
general and administrative expense increased to $34.6 million, or 19.6% of net
sales, in the third quarter of 2002 versus $28.6 million, or 19.0% 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 commissions resulting from the higher sales. Income from
operations increased to $19.3 million, or 10.9% of net sales, for the third
quarter of 2002 compared to $17.5 million, or 11.6% of net sales, for the same
period in 2001.
EBITDA and Adjusted EBITDA
EBITDA for the third quarter of 2002 was $22.2 million compared to $21.9
million in the same period in 2001. EBITDA and Adjusted EBITDA were the same for
the third quarter of 2002. Adjusted EBITDA for the third quarter of 2001,
excluding EBITDA of $2.1 million from the Company's AmerCable division, was
$19.8 million. EBITDA increased $2.4 million or 12.0% in the third quarter of
2002 compared to Adjusted EBITDA for the same period in the prior year. The
increase in EBITDA is primarily a result of the Company's increased sales
volume.
Nine Months Ended September 30, 2002 Compared to Nine Months Ended September
30, 2001
Alside and Corporate
Net sales increased 19.1% to $452.6 million for the nine months ended
September 30, 2002 compared to $380.1 million for the same period in 2001 due to
increased sales of vinyl windows and vinyl siding. Unit sales of
- 10 -
vinyl windows and vinyl siding increased 47% and 9%, respectively, for the nine
months ended September 30, 2002 compared to the same period in 2001. Net sales
increased for the reasons identified in the three-month discussion above. Gross
profit increased to $135.7 million, or 30.0% of net sales, for the nine months
ended September 30, 2002 compared to $113.1 million, or 29.8% of net sales, for
the same period in 2001. SG&A expense increased to $97.3 million, or 21.5% of
net sales, for the nine months ended September 30, 2002 versus $83.4 million, or
21.9% of net sales, in the same period in 2001. SG&A expense increased for the
reasons identified in the three-month discussion above. Income from operations
increased to $38.4 million, or 8.5% of net sales, for the nine months ended
September 30, 2002 compared to $29.7 million, or 7.8% of net sales, for the same
period in 2001.
EBITDA and Adjusted EBITDA
EBITDA for the nine months ended September 30, 2002 was $30.9 million
compared to $41.0 million for the same period in 2001. EBITDA for the nine
months ended September 30, 2002 includes $1.9 million of EBITDA relating to the
Company's AmerCable division, merger transaction costs of $9.3 million, pre-tax
extraordinary expenses 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. Adjusted EBITDA, excluding the amounts discussed above,
was $47.8 million for the nine months ended September 30, 2002. EBITDA for the
nine months ended September 30, 2001 includes EBITDA of $6.9 million relating to
the Company's AmerCable division and a charge of $2.4 million for the write-down
of the Company's investment in Amercord Inc. Adjusted EBITDA for the nine months
ended September 30, 2001, excluding the amounts discussed above, was $36.5
million. Adjusted EBITDA increased $11.3 million or 31.1% for the nine months
ended September 30, 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.
Successor and Predecessor Results
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.
Interest expense during this period was $11.0 million and consisted primarily of
interest on the 9-3/4% Notes, term loan and revolving loans under the credit
facility, an interim credit facility temporarily utilized for the merger
transaction and amortization of deferred financing costs. As a result of
relocating the Company's corporate office from Texas to Ohio, the Successor's
state and local income tax rate increased, raising the Company's total effective
tax rate to 41.5% from 38.5%. The Successor's results include extraordinary
items of $4.4 million, net of tax, for the premium paid to extinguish $74.0
million of the Successor's assumed 9-1/4% Notes and financing fees related to an
interim credit facility utilized for the merger transaction which was repaid
shortly thereafter and a loss from discontinued operations of $0.5 million, net
of tax, for the Company's AmerCable division.
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. Interest expense
was $2.0 million and consisted primarily of interest on the Company's 9-1/4%
Notes for the time period from January 1, 2002 to April 18, 2002. The
Predecessor's results include $9.3 million of transaction costs consisting of
investment banking and legal fees in conjunction with the strategic review
process and subsequent merger transaction. The Predecessor's results of
operations for the nine months ended September 30, 2001 include the $2.4 million
charge for the write-down of its investment in Amercord Inc. In addition to
recording income taxes at an effective rate of 38.5%, the Predecessor's tax
provision for 2002 includes an estimate for $7.3 million of the merger
transaction costs that may not be deductible for income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2002, the Company had cash and cash equivalents of $19.7
million and available borrowing capacity of approximately $37.4 million under
the revolving portion of its credit facility. Outstanding letters of credit as
of September 30, 2002, totaled $2.6 million securing various insurance letters
of credit.
For the 108 days ended April 18, 2002, net cash used in operations of the
Predecessor was $18.3 million. For the 165 days ended September 30, 2002 net
cash provided by operations of the Successor was $37.0 million. Cash flows from
operations of the Predecessor also include the working capital needs of
AmerCable for the period from January 1, 2002 to April 18, 2002. AmerCable's
cash flows for the period from April 19, 2002 to June 24, 2002 are shown as net
cash used in discontinued operations. The net $18.7 million of cash provided by
operations ($18.3 million of cash used in the Predecessor and $37.0 million of
cash provided by the Successor) for the nine months ended September 30, 2002
compares to $25.7 million of cash provided by operations of the Predecessor for
the same period in 2001. The decrease in cash from operations in 2002 was due
primarily to payment of merger transaction costs by the Predecessor, increased
inventory from opening seven new supply centers and
- 11 -
supporting increased sales partially offset by improved operating results
and increased accounts payable due to timing of vendor payments.
For the 108 days ended April 18, 2002, capital expenditures of the
Predecessor totaled $3.8 million, which includes AmerCable's capital
expenditures of $1.9 million. For the 165 days ended September 30, 2002, capital
expenditures of the Successor totaled $6.7 million. The combined capital
expenditures of the Predecessor, excluding AmerCable, and the Successor totaled
$8.6 million for the nine months ended September 30, 2002. This compares to
capital expenditures of $9.9 million ($12.3 million less $2.4 million of
AmerCable's capital expenditures) for the same period in 2001. Capital
expenditures in the 2002 period were primarily for production equipment to
enhance capacity, reduce costs and redesign certain product lines and the
opening of seven new supply centers.
Cash flows from the Successor's investing activities also include the
merger transaction for $379.2 million and net proceeds from the sale of
AmerCable totaling $28.3 million.
Cash flows from the Successor's financing activities include: (1) the
issuance of $165 million of 9-3/4% Notes due 2012, (2) $125 million from a new
$165 million credit facility, (3) $164.8 million cash contribution from Holdings
and (4) cash of approximately $6.0 million, representing a portion of the
Company's total cash on hand of $6.8 million to finance the merger transaction
of $379.2 million, tender offer of the 9-1/4% Notes of $74.0 million and debt
extinguishment costs of $7.6 million. The tender offer premium paid for the
9-1/4% Notes was approximately $7.3 million, of which $4.9 million is included
as an extraordinary item representing the portion of the premium in excess of
the fair market value of the 9-1/4% Notes. Upon completion of the merger
transaction, the Company was then obligated to make a change of control offer
for the approximate $1.0 million of remaining outstanding 9-1/4% Notes at a
price of 101% of the principal amount thereof, plus accrued and unpaid interest.
The change of control offer was completed on June 21, 2002 with an additional
approximate $0.1 million of the 9-1/4% Notes being tendered. The Company
permanently reduced borrowings under the term loan by $38.5 million using the
net proceeds from the sale of AmerCable and operating cash flows.
The Company's 9-3/4% Notes pay interest semi-annually. The Company's
credit facility includes $86.5 million of outstanding term loans due through
2009 that bear interest at the London Interbank Offered Rate (LIBOR) plus 3.50%,
payable quarterly, and up to $40 million of available borrowings provided by
revolving loans, which expire in 2007.
The credit facility and the indenture governing the 9-3/4% Notes contain
restrictive covenants that, among other things, limit the Company's ability to
incur additional indebtedness, make loans or advances to subsidiaries and other
entities, invest in capital expenditures, sell its assets or declare dividends.
In addition, under the credit facility the Company is required to achieve
certain financial ratios relating to leverage, coverage of fixed charges and
coverage of interest expense. The Company was in compliance with these covenants
as of September 30, 2002.
The Company intends to discharge the remaining approximate $0.9 million of
9-1/4% Notes pursuant to the indenture governing such notes on or after March 1,
2003. The Company expects the remaining 9-1/4% Notes will be redeemed at
104.625% of the principal amount of such notes plus accrued and unpaid interest
through the date of purchase.
The Company has guaranteed a $3.0 million note secured by Amercord's real
property. Should the guarantee be exercised by Amercord's lender, the Company
and Ivaco, Inc. have the option to assume the loan. Ivaco, Inc. has indemnified
the Company for 50% of any loss under the guarantee. The Company believes that
it is adequately secured under its guarantee of the $3.0 million Amercord note
such that no losses are anticipated with respect to this guarantee.
The Company believes that for the foreseeable future cash flows from
operations and its borrowing capacity under its credit facility will be
sufficient to satisfy its obligations to pay principal and interest on its
outstanding debt, maintain current operations, and provide sufficient capital
for presently anticipated capital expenditures. There can be no assurances,
however, that the cash generated by the Company will be sufficient for these
purposes.
RETIREMENT PLANS
Defined benefit pension plans are subject to additional minimum pension
liability requirements under SFAS 87, "Employers' Accounting for Pensions".
Preliminary estimates by the Company's actuary indicate that the Company may be
required to record an additional minimum pension liability totaling
approximately $6.4 million for its defined benefit pension plans as of December
31, 2002. The additional minimum pension liability would be recorded as a charge
to stockholders' equity. The Company will finalize its review of the pension
obligations upon the conclusion of the annual actuarial valuations of the
pension plans in the fourth quarter.
EFFECTS OF INFLATION
The Company believes that the effects of inflation have not been material
to its operating results for each of the past three years, including interim
periods. The Company's principal raw material, vinyl resin, has been subject
- 12 -
to rapid price changes. Through price increases, the Company has historically
been able to pass on significant resin cost increases. The results of operations
for individual quarters can and have been negatively impacted by a delay between
the time of vinyl resin cost increases and price increases in the Company's
products. However, over longer periods of time, the impact of the cost increases
in vinyl resin has historically not been material. Resin prices have
significantly increased throughout 2002. For the three and nine months ended
September 30, 2002, the Company has been able to offset the impact of the resin
cost increase with price increases to its customers. While the Company expects
that any additional significant resin cost increases in 2002 will be offset by
price increases to its customers, there can be no assurances that the Company
will be able to pass on any future price increases.
CERTAIN FORWARD-LOOKING STATEMENTS
This report 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 report, the words "anticipate," "believe,"
"estimate," "expect," "intend," and similar expressions, as they relate to
Associated Materials Incorporated 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 its market, availability
of alternative building products, shifts in market demand, and general economic
conditions. These statements are subject to certain risks and uncertainties.
Certain factors that might cause a difference are discussed in more detail in
Item 3 of this quarterly report on Form 10-Q. 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.
- 13 -
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
The Company has outstanding borrowings under the term loan of its credit
facility and may borrow under the revolving credit facility from time to time
for general corporate purposes, including working capital and capital
expenditures. Interest under the credit facility is based on the variable London
Interbank Offered Rate (LIBOR). At September 30, 2002, the Company had
borrowings of $86.5 million under the term loan. The effect of a 1/8% increase
or decrease in interest rates would increase or decrease total interest expense
for the nine months ended September 30, 2002 by approximately $81,000.
FOREIGN CURRENCY EXCHANGE RISK
The Company's revenues are primarily from domestic customers and are
realized in U.S. dollars. Accordingly, the Company believes its direct foreign
currency exchange risk is not material. In the past, the Company has hedged
against foreign currency exchange rate fluctuations on specific sales or
equipment purchasing contracts. At September 30, 2002, the Company had no
currency hedges in place.
COMMODITY PRICE RISK
See Item 2. "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Effects of Inflation" for a discussion of the market
risk related to the Company's principal raw material, vinyl resin.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. The Company's President
and Chief Executive Officer and Vice President and Chief Financial
Officer, after evaluating the effectiveness of the Company's "disclosure
controls and procedures" within ninety days prior to the filing date of
this quarterly report, have concluded that as of such evaluation date, the
Company's disclosure controls and procedures were effective.
(b) Changes in internal controls. There were no significant changes in the
Company's internal controls or in other factors that could significantly
affect such internal controls subsequent to their evaluation.
- 14 -
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising in the
ordinary course of business, none of which, after giving effect to the Company's
existing insurance coverage, is expected to have a material adverse effect on
the Company.
From time to time, the Company is involved in a number of proceedings and
potential proceedings relating to environmental and product liability matters.
The Company handles these claims in the ordinary course of business and
maintains product liability insurance covering certain types of claims. Although
it is difficult to estimate the Company's potential exposure to these matters,
the Company believes that the resolution of these matters will not have a
material adverse effect on the Company's financial position, results of
operations or liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
Exhibit
Number Description
- ------ -----------
10.1 Employment Agreement, dated as of July 1, 2002, between
the Company and Michael Caporale, Jr. (incorporated by
reference to exhibit 10.14 of the Company's Registration
Statement on Form S-4/A, File No. 333-92010, filed on
September 12, 2002)
10.2 Employment Agreement, dated as of August 21, 2002, between
the Company and D. Keith LaVanway. (incorporated by
reference to exhibit 10.15 of the Company's Registration
Statement on Form S-4/A, File No. 333-92010, filed on
September 12, 2002)
10.3 Agreement, dated as of January 1, 1998, between Shintech
Incorporated and the Alside Division of the Company.
(incorporated by reference to exhibit 10.16 of the
Company's Registration Statement on Form S-4/A, File No.
333-92010, filed on September 12, 2002)+
10.4 Associate Materials Holdings Inc. Stock Option Award
Agreement, dated September 4, 2002, between Associated
Materials Holdings Inc. and Michael J. Caporale, Jr.
(incorporated by reference to exhibit 10.17 of the
Company's Registration Statement on Form S-4/A, File No.
333-92010, filed on October 10, 2002)
10.5 Associated Materials Holdings Inc. Stock Option Award
Agreement, dated September 4, 2002, between Associated
Materials Holdings Inc. and Michael J. Caporale, Jr.
(incorporated by reference to exhibit 10.18 of the
Company's Registration Statement on Form S-4/A, File No.
333-92010, filed on October 10, 2002)
10.6 Employment Agreement, dated as of August 21, 2002, between
the Company and Kenneth L. Bloom. (incorporated by
reference to exhibit 10.19 of the Company's Registration
Statement on Form S-4/A, File No. 333-92010, filed on
October 10, 2002)
10.7 Employment Agreement, dated as of August 21, 2002, between
the Company and Robert M. Franco. (incorporated by
reference to exhibit 10.20 of the Company's Registration
Statement on Form S-4/A, File No. 333-92010, filed on
October 10, 2002)
99.1 Certification of the Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
99.2 Certification of the Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
+ Certain provisions of this exhibit have been omitted pursuant to a request
for confidential treatment of information in accordance with Rule 406 of
the Securities Act.
Reports on Form 8-K
None.
- 15 -
SIGNATURES
Pursuant to the Securities Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
ASSOCIATED MATERIALS INCORPORATED
---------------------------------
(Registrant)
Date: November 14, 2002 By: /s/ Michael J. Caporale., Jr.
--------------------------------------------
Michael J. Caporale, Jr.
President, Chief Executive Officer and
Director
(Principal Executive Officer)
By: /s/ D. Keith LaVanway
--------------------------------------------
D. Keith LaVanway
Vice President, Chief Financial Officer
Treasurer and Secretary
(Principal Financial and Accounting Officer)
- 16 -
CERTIFICATION
I, Michael J. Caporale, Jr., President, Chief Executive Officer and Director,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Associated Materials
Incorporated;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
these entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within ninety days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weakness in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
By: /s/ Michael J. Caporale, Jr.
-------------------------
Michael J. Caporale, Jr.
President, Chief Executive Officer and
Director
(Principal Executive Officer)
- 17 -
CERTIFICATION
I, D. Keith LaVanway, Vice President, Chief Financial Officer, Treasurer and
Secretary, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Associated Materials
Incorporated;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
these entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within ninety days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weakness in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
By: /s/ D. Keith LaVanway
-----------------------------
D. Keith LaVanway
Vice President, Chief Financial Officer,
Treasurer and Secretary
(Principal Financial Officer and
Principal Accounting Officer)
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EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.1 Employment Agreement, dated as of July 1, 2002, between
the Company and Michael Caporale, Jr. (incorporated by
reference to exhibit 10.14 of the Company's Registration
Statement on Form S-4/A, File No. 333-92010, filed on
September 12, 2002)
10.2 Employment Agreement, dated as of August 21, 2002, between
the Company and D. Keith LaVanway. (incorporated by
reference to exhibit 10.15 of the Company's Registration
Statement on Form S-4/A, File No. 333-92010, filed on
September 12, 2002)
10.3 Agreement, dated as of January 1, 1998, between Shintech
Incorporated and the Alside Division of the Company.
(incorporated by reference to exhibit 10.16 of the
Company's Registration Statement on Form S-4/A, File No.
333-92010, filed on September 12, 2002)+
10.4 Associate Materials Holdings Inc. Stock Option Award
Agreement, dated September 4, 2002, between Associated
Materials Holdings Inc. and Michael J. Caporale, Jr.
(incorporated by reference to exhibit 10.17 of the
Company's Registration Statement on Form S-4/A, File No.
333-92010, filed on October 10, 2002)
10.5 Associated Materials Holdings Inc. Stock Option Award
Agreement, dated September 4, 2002, between Associated
Materials Holdings Inc. and Michael J. Caporale, Jr.
(incorporated by reference to exhibit 10.18 of the
Company's Registration Statement on Form S-4/A, File No.
333-92010, filed on October 10, 2002)
10.6 Employment Agreement, dated as of August 21, 2002, between
the Company and Kenneth L. Bloom. (incorporated by
reference to exhibit 10.19 of the Company's Registration
Statement on Form S-4/A, File No. 333-92010, filed on
October 10, 2002)
10.7 Employment Agreement, dated as of August 21, 2002, between
the Company and Robert M. Franco. (incorporated by
reference to exhibit 10.20 of the Company's Registration
Statement on Form S-4/A, File No. 333-92010, filed on
October 10, 2002)
99.1 Certification of the Chief Executive Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
99.2 Certification of the Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
+ Certain provisions of this exhibit have been omitted pursuant to a request
for confidential treatment of information in accordance with Rule 406 of
the Securities Act.
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