Exhibit 99.2
Unaudited Pro Forma Condensed Consolidated Financial Data
The unaudited pro forma condensed consolidated statement of operations for the
year ended December 31, 2002 and the six months ended June 28, 2003 and the
unaudited pro forma condensed consolidated balance sheet as of June 28, 2003 are
based on the historical financial statements of Associated Materials
Incorporated ("Associated Materials" or the "Company") and the historical
unaudited consolidated financial statements of Gentek Holdings, Inc. ("Gentek
Holdings") and on the assumptions and adjustments described in the notes to the
unaudited pro forma condensed consolidated financial data, including assumptions
relating to the consideration paid for Gentek Holdings and to the assets and
liabilities acquired, based on preliminary estimates of their respective fair
values.
The acquisition of Gentek Holdings was completed effective August 29, 2003. The
acquisition of Gentek Holdings has been accounted for using the purchase method
of accounting. The total purchase price of the acquisition has been allocated to
the tangible and intangible assets and liabilities acquired based upon their
estimated fair values. The purchase price allocation is preliminary, based on
facts currently known to Associated Materials and is subject to adjustment as
the final valuation for the fair value of the acquired tangible property, plant
and equipment, intangible assets and warranty liability related to certain steel
siding has not been completed. As a result, the actual allocation is subject to
the completion of these valuations and therefore may differ. The purchase
consideration of the Gentek Holdings acquisition was $112.1 million. In
addition, Associated Materials paid $5.6 of financing costs, repaid $76.5
million of existing Company term loans and $0.6 million of accrued interest
under the Company's existing credit facility. The Gentek Holdings purchase
consideration, financing costs and the repayment of term loans and accrued
interest were financed by borrowing $190.0 million under term loans and $10.2
million of revolving loans under the amended and restated credit facility and
resulted in the Company receiving approximately $5.4 million in cash.
On March 16, 2002, Associated Materials 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 by
Simon Acquisition Corp. through a cash tender offer of $50.00 per share. The
Merger Agreement also required that the Company commence a tender offer to
purchase all of its then 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. The completion of the aforementioned transactions constitute the
merger transaction. Holdings is controlled by affiliates of Harvest Partners,
Inc. ("Harvest Partners"). The purchase consideration of $379.5 million, tender
offer of $74.0 million of 9-1/4% notes 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 $6.3 million,
representing a portion of the Company's total cash of $6.8 million on hand at
the time of the acquisition.
On June 24, 2002, the Company completed the sale of its AmerCable division to
AmerCable Incorporated, a newly-formed entity controlled by members of
AmerCable's management and Wingate Partners III, L.P., for cash proceeds of
approximately $28.3 million and the assumption of certain liabilities pursuant
to an asset purchase agreement dated as of the same date. The Company used the
net proceeds to repay a portion of its credit facility. AmerCable is a leading
manufacturer of specialty electrical cable products primarily used in the
mining, marine and offshore drilling industries. In 2001, AmerCable accounted
for approximately 12% of the Company's total net sales.
The unaudited pro forma balance sheet data has been presented as if the
acquisition of Gentek Holdings had occurred as of June 28, 2003, and the pro
forma condensed consolidated statements of operations data has been prepared as
if the acquisition had occurred as of the beginning of 2002. The unaudited
1
pro forma condensed consolidated statement of operations for the year ended
December 31, 2002 consists of the historical financial statements of Associated
Materials for its Predecessor period from January 1st to April 18th and its
Successor period from April 19th to December 31st. In addition, the pro forma
condensed consolidated statement of operations for the year ended December 31,
2002 contemplates that the merger transaction with Harvest Partners and sale of
AmerCable occurred as of the beginning of 2002. However, this statement excludes
the effect of non-recurring expenses of Company deferred financing fees of
$3.9 million, net of a tax benefit of $1.6 million.
2
Associated Materials Incorporated
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 28, 2003
(in thousands)
Historical
------------------------
Associated Gentek Pro Forma Pro Forma
Materials Holdings Adjustments Combined
--------- -------- ----------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 2,016 $ 2,794 $ -- $ 4,810
Accounts receivable, net 87,079 44,620 (860)(a) 130,839
Inventory 70,779 44,855 1,402 (b) 117,036
Income taxes receivable 1,034 -- 1,626 (c) 2,660
Deferred income taxes 3,653 -- -- 3,653
Other current assets 4,882 1,192 -- 6,074
--------- --------- --------- ---------
Total current assets 169,443 93,461 2,168 265,072
Property, plant and equipment, net 100,563 29,710 -- 130,273
Goodwill 197,461 -- 37,422 (b) 234,883
Trademarks and trade names, net 96,712 1,615 -- 98,327
Patents, net 5,854 860 -- 6,714
Other assets 10,635 2,684 (79)(b) 14,891
(1,829)(c)
3,480 (d),(f)
--------- --------- --------- ---------
Total assets $ 580,668 $ 128,330 $ 41,162 $ 750,160
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 42,650 $ 26,719 $ -- $ 69,369
Accrued liabilities 33,502 13,403 (1,030)(e),(f) 45,875
Income taxes payable -- 704 -- 704
Current portion of long-term debt -- 29,061 (29,061)(f) --
--------- --------- --------- ---------
Total current liabilities 76,152 69,887 (30,091) 115,948
Deferred income taxes 58,976 1,670 (7,906)(b) 49,883
(2,857)(b)
Other liabilities 20,987 15,014 (860)(a) 43,349
(264)(b)
8,472 (b)
Long-term debt 241,500 13,400 190,000 (f) 360,220
5,220 (f)
(76,500)(f)
(13,400)(f)
Stockholders' equity 183,053 28,359 (2,293)(c) 180,760
(28,359)(g)
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 580,668 $ 128,330 $ 41,162 $ 750,160
========= ========= ========= =========
3
Associated Materials Incorporated
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 28, 2003
(Amounts in thousands)
(a) Elimination of receivables/payables between the Company and Gentek
Holdings at June 28, 2003 related to warranty claims owed to the Company
by Gentek Holdings.
(b) Represents the purchase price allocated to fair value of net assets
acquired in connection with the Gentek Holdings acquisition as follows:
Acquisition price of Gentek Holdings .......................................................... $111,745
Fees related to the acquisition ............................................................... 375
--------
Total purchase consideration .................................................................. 112,120
Less: historical Gentek debt not assumed by the Company ...................................... (42,461)
Less: historical net book value of assets acquired ........................................... (28,359)
--------
Purchase price in excess of historical net book value of assets acquired ...................... 41,300
Adjustments to reflect fair market value:
Inventory ............................................................................... (1,402)
Elimination of Gentek Holdings' deferred financing costs ................................ 79
Increase in pension liability ........................................................... 8,472
Reduction of postretirement benefit obligation .......................................... (264)
Elimination of Gentek Holdings' valuation allowance on deferred tax assets .............. (7,906)
Deferred tax asset as a result of the acquisition ....................................... (2,857)
--------
Preliminary goodwill and intangible assets as a result of the acquisition ..................... $ 37,422
========
(c) Expense of Company deferred financing fees of $3,919 (including $1,829 of
historical Company fees and $2,090 of fees paid to finance the Gentek
Holdings acquisition), net of a tax benefit of $1,626. In connection with
the acquisition of Gentek Holdings, the Company substantially modified its
term loan facility. As a result, the Company has expensed certain debt
issuance costs in connection with the substantial modification, which
occurred directly as a result of the acquisition of Gentek Holdings.
(d) Deferred financing costs paid in connection with obtaining financing for
the Gentek Holdings acquisition.
(e) Payment of accrued interest, assuming repayment of existing Company loans
under the credit facility as the facility was modified in connection with
the acquisition of Gentek Holdings.
4
(f) Represents the sources and uses of the acquisition of Gentek Holdings as
follows:
Sources:
Credit facility - term loan ............................................ $190,000
Credit facility - revolver ............................................. 5,220
--------
$195,220
========
Uses:
Acquisition price of Gentek Holdings' equity ........................... $ 69,284
Fees related to the acquisition ........................................ 375
Current portion of Gentek Holdings' debt repaid in connection with the
acquisition ...................................................... 29,061
Long-term portion of Gentek Holdings' debt repaid in connection with the
acquisition ...................................................... 13,400
--------
Total Gentek Holdings acquisition price ................................ 112,120
Capitalized deferred financing fees related to the acquisition ......... 3,480
Financing fees related to the acquisition that were expensed due to
significant modification of the Company's term loans ............. 2,090
Repayment of existing Company term loans ............................... 76,500
Accrued interest on existing Company term loans ........................ 1,030
--------
$195,220
========
(g) Elimination of historical equity of Gentek Holdings.
5
Associated Materials Incorporated
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For The Year Ended December 31, 2002
(in thousands)
Historical
----------------------------
Associated Associated Associated
Materials Materials Materials
108 Days 257 Days Pro Forma
Ended April Ended AmerCable Merger Year
18, December 31, Pro Forma Transaction Ended
2002 2002 Adjustments Pro Forma December 31,
Predecessor Successor (a) Adjustments 2002
----------- --------- --- ----------- ----
Net sales ........................ $ 180,230 $ 449,324 $ (18,271) $ -- $ 611,283
Cost of sales .................... 130,351 317,077 (15,494) (383) (b) 431,551
--------- --------- --------- --------- ---------
Gross profit ..................... 49,879 132,247 (2,777) 383 179,732
Selling, general and
administrative expense ..... 43,272 86,097 (2,192) 326 (b) 127,503
--------- --------- --------- --------- ---------
Income from operations ........... 6,607 46,150 (585) 57 52,229
Interest expense, net ............ 2,068 16,850 -- 5,371 (c) 24,289
Foreign currency loss ............ -- -- -- -- --
Other expense, net ............... -- -- -- -- --
Merger transaction costs ......... 9,319 -- -- (9,319) (d) --
Debt extinguishment costs ........ -- 7,579 -- -- 7,579
--------- --------- --------- --------- ---------
Income (loss) from continuing
operations before income taxes (4,780) 21,721 (585) 4,005 20,361
Income taxes ..................... 977 9,016 (225) (1,318) (e) 8,450
--------- --------- --------- --------- ---------
Net income (loss) ................ $ (5,757) $ 12,705 $ (360) $ 5,323 $ 11,911
========= ========= ========= ========= =========
Historical
------------
Gentek Pro Forma
Holdings Gentek Combined
Year Holdings Year
Ended Acquisition Ended
December 31, Pro Forma December 31,
2002 Adjustments 2002
---- ----------- ----
Net sales ........................ $ 260,060 $ (4,068) (f) $ 867,275
Cost of sales .................... 218,769 (4,068) (f) 633,428
(12,824) (g)
--------- ------- ---------
Gross profit ..................... 41,291 12,824 233,847
Selling, general and
administrative expense ..... 26,363 13,726 (g) 167,592
--------- --------- ---------
Income from operations ........... 14,928 (902) 66,255
Interest expense, net ............ 1,934 854 (h) 27,077
Foreign currency loss ............ 419 -- 419
Other expense, net ............... 715 -- 715
Merger transaction costs ......... -- -- --
Debt extinguishment costs ........ -- -- 7,579
--------- --------- ---------
Income (loss) from continuing
operations before income taxes 11,860 (1,756) 30,465
Income taxes ..................... 2,690 1,503 (i) 12,643
--------- --------- ---------
Net income (loss) ................ $ 9,170 $(3,259) $ 17,822
========= ========= =========
6
Associated Materials Incorporated
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2002
(Amounts in thousands)
(a) These pro forma adjustments reflect Associated Materials' sale of the
AmerCable division, which was completed on June 24, 2002 and the resulting
elimination of AmerCable's results of operations from January 1, 2002
through April 18, 2002. From April 19, 2002, through the date of its sale,
AmerCable's results of operations were presented as results of
discontinued operations as it was the Successor's decision to divest this
division.
(b) Details of the pro forma adjustments to cost of sales and selling, general
and administrative expenses reflect the following: (i) the elimination of
compensation expense related to the corporate chief executive officer
("CEO") and the corporate chief financial officer ("CFO"), who were
terminated upon consummation of the merger transaction with Harvest
Partners, (ii) incremental depreciation and amortization of tangible and
intangible assets recorded in conjunction with the merger transaction with
Harvest Partners, (iii) the annual management services fee payable to
Harvest Partners for services including those historically provided by the
CEO and CFO and (iv) elimination of historical amortization of deferred
financing costs.
Cost of sales:
Net decrease in depreciation and amortization ............................................ $(383)
=====
Selling, general and administrative expenses:
CEO and CFO compensation ................................................................. $(252)
Increase in depreciation and amortization ................................................ 459
Management services fee .................................................................. 188
Amortization of historical deferred financing costs ...................................... (69)
-----
$ 326
=====
(c) The pro forma adjustments to interest expense reflect the following:
Commitment fee on revolving credit facility ......................... $ 200
Term loan ........................................................... 5,869
9-3/4% senior subordinated notes .................................... 16,088
Existing 9-1/4% senior subordinated notes not tendered .............. 84
Amortization of deferred financing costs ............................ 2,048
--------
Pro forma interest expense .......................................... 24,289
--------
Less: historical interest expense, net - Predecessor ......... (2,068)
- Successor ........... (16,850)
--------
Total adjustment .................................................... $ 5,371
========
Interest expense was calculated as follows: (i) commitment fee on unused
portion of the revolving credit facility of -1/2%; (ii) a rate of 5.29%
(average London Interbank Offered Rate ("LIBOR") for the year ended
December 31, 2002 of 1.79% + 3.50%) on the credit facility arranged at the
time of the merger transaction with Harvest Partners, net of repayment
using the proceeds from the sale of AmerCable, including the annual
administration fee of $75 on the credit facility; (iii) an interest rate
of 9-3/4% on the senior subordinated notes; (iv) an interest rate of
9-1/4% on the 9-1/4% senior subordinated notes not tendered; and (vi)
twelve months of amortization of deferred financing costs.
7
The effect of a 1/8% increase or decrease in interest rates would increase
or decrease total pro forma interest expense by $0.1 million for the year
ended December 31, 2002.
(d) Represents the elimination of merger transaction costs including
investment banking and legal fees incurred by the Predecessor in
conjunction with the merger transaction with Harvest Partners.
(e) As a result of relocating the Company's corporate office from Texas to
Ohio, the Company's state and local income tax rate increased, raising the
Company's total effective tax rate to 41.5%. This amount represents the
necessary adjustment to reflect a pro forma income tax provision of 41.5%.
(f) Elimination of sales and cost of sales between the Company and Gentek
Holdings for the year ended December 31, 2002. Neither the Company nor
Gentek had significant quantities of inventory on hand at the end of the
period as a result of these transactions.
(g) Details of the pro forma adjustments to cost of sales and selling, general
and administrative expenses to reflect the following: (i) the
reclassification of supply center expenses and certain freight costs from
cost of sales to selling, general and administrative expenses to conform
to the Company's presentation, (ii) cost of sales expense of an inventory
fair value adjustment recorded at the time of the Gentek Holdings'
acquisition, and (iii) elimination of the annual management services fee
payable to Gentek Holdings' parent company.
Cost of sales:
Reclassification of certain costs ................ $(14,226)
Expense of inventory fair value adjustment ....... 1,402
--------
$(12,824)
========
Selling, general and administrative expenses:
Reclassification of certain cost of sales expenses $ 14,226
Management services fee .......................... (500)
--------
$ 13,726
========
8
(h) The pro forma adjustments to interest expense reflect the following:
Commitment fee on revolving credit facility ....................... $ 277
Term loan ......................................................... 8,620
Revolving portion of credit facility .............................. 250
9-3/4% senior subordinated notes .................................. 16,088
Existing 9-1/4% senior subordinated notes not tendered ............ 84
Amortization of deferred financing costs .......................... 1,758
--------
Pro forma interest expense ........................................ 27,077
Less: historical interest expense, net:
Predecessor ................................................. (2,068)
Successor ................................................... (16,850)
Gentek Holdings ............................................. (1,934)
Merger transaction with Harvest Partners pro forma adjustment (5,371)
--------
Total adjustment .................................................. $ 854
========
Interest expense was calculated as follows: (i) commitment fee on unused
portion of the revolving credit facility of 1/2%; (ii) a rate of 4.54%
(average London Interbank Offered Rate ("LIBOR") for the year ended
December 31, 2002 of 1.79% + 2.75%) on the term loan portion of the credit
facility arranged at the time of the acquisition of Gentek Holdings, (iii)
a rate of 4.79% (average London Interbank Offered Rate ("LIBOR") for the
year ended December 31, 2002 of 1.79% + 3.00%) on the revolving loan
portion of the credit facility arranged at the time of the acquisition of
Gentek Holdings, (iv) an interest rate of 9-3/4% on the senior
subordinated notes; (v) an interest rate of 9-1/4% on the 9-1/4% senior
subordinated notes not tendered at the time of the merger transaction with
Harvest Partners; and (vi) twelve months of amortization of deferred
financing costs.
The effect of a 1/8% increase or decrease in interest rates would increase
or decrease total pro forma interest expense by $0.2 million for the year
ended December 31, 2002.
(i) This amount represents the necessary adjustment to reflect a pro forma
income tax provision of 41.5%.
9
Associated Materials Incorporated
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Six Months Ended June 28, 2003
(in thousands)
Gentek
Holdings
Historical Acquisition
Associated Gentek Pro Forma Pro Forma
Materials Holdings Adjustments Combined
--------- -------- ----------- --------
Net sales ................................................. $ 291,307 $ 132,911 $ (976) (a) $ 423,242
Cost of sales ............................................. 206,339 116,093 (976) (a) 313,891
(7,565) (b)
--------- --------- --------- ---------
Gross profit .............................................. 84,968 16,818 7,565 109,351
Selling, general and administrative expense ............... 65,014 14,723 7,315 (b) 87,052
--------- --------- --------- ---------
Income from operations .................................... 19,954 2,095 250 22,299
Interest expense, net ..................................... 10,921 936 1,200 (c) 13,057
Foreign currency gain ..................................... -- (239) -- (239)
Other ..................................................... -- 141 -- 141
--------- --------- --------- ---------
Income (loss) from continuing operations before income
taxes .................................................. 9,033 1,257 (950) 9,340
Income taxes .............................................. 3,749 1,571 (1,444) (d) 3,876
--------- --------- --------- ---------
Net income (loss) ......................................... $ 5,284 $ (314) $ 494 $ 5,464
========= ========= ========= =========
10
Associated Materials Incorporated
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Six Months Ended June 28, 2003
(Amounts in thousands)
(a) Elimination of sales and cost of sales between the Company and Gentek
Holdings for the six months ended June 28, 2003. Neither the Company nor
Gentek Holdings had significant quantities of inventory on hand at the
end of the period as a result of these transactions.
(b) Details of the pro forma adjustments to cost of sales and selling, general
and administrative expenses to reflect the following: (i) the
reclassification of supply center expenses and certain freight costs from
cost of sales to selling, general and administrative expenses to conform
to the Company's presentation, (ii) elimination of cost of sales for
transactions between the Company and Gentek Holdings, and (iii)
elimination of the annual management services fee payable to Gentek
Holdings' parent company.
Cost of sales:
Reclassification of certain costs ................ $(7,565)
=======
Selling, general and administrative expenses:
Reclassification of certain cost of sales expenses $ 7,565
Management services fee .......................... (250)
-------
$ 7,315
=======
(c) The pro forma adjustments to interest expense reflect the following:
Commitment fee on revolving credit facility .......... $ 138
Term loan ............................................ 3,828
Revolving portion of credit facility ................. 112
9-3/4% senior subordinated notes ..................... 8,044
Existing 9-1/4% senior subordinated notes not tendered 56
Amortization of deferred financing costs ............. 879
--------
Pro forma interest expense ........................... 13,057
--------
Less: historical interest expense, net:
Company ........................................ (10,921)
Gentek Holdings ................................ (936)
--------
Total adjustment ..................................... $ 1,200
========
Interest expense was calculated as follows: (i) commitment fee on unused
portion of the revolving credit facility of 1/2%; (ii) a rate of 4.03%
(average London Interbank Offered Rate ("LIBOR") for the six months ended
June 28, 2003 of 1.28% + 2.75%) on the term loan portion of the credit
facility arranged at the time of the acquisition of Gentek Holdings, (iii)
a rate of 4.28% (average London Interbank Offered Rate ("LIBOR") for the
six months ended June 28, 2003 of 1.28% + 3.00%) on the revolving loan
portion of the credit facility arranged at the time of the acquisition of
Gentek Holdings, (iv) an interest rate of 9-3/4% on the senior
subordinated notes; (v) an interest rate of 9-1/4% on the 9-1/4% senior
subordinated notes not tendered at the time of the merger transaction with
Harvest Partners through the date of redemption; and (vi) six months of
amortization of deferred financing costs.
11
The effect of a 1/8% increase or decrease in interest rates would increase
or decrease total pro forma interest expense by $0.1 million for the six
months ended June 28, 2003.
(d) This amount represents the necessary adjustment to reflect a pro forma
income tax provision of 41.5%.
12