Exhibit 99.1
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Twelve Months Ended April 3, 2004
The unaudited pro forma condensed consolidated statement of operations for the
twelve months ended April 3, 2004 is based on the historical financial
statements of Associated Materials Incorporated ("Associated Materials" or the
"Company") and the historical 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
statement of operations. The pro forma adjustments are based upon available
information, preliminary estimates and certain assumptions that we believe are
reasonable, and are described in the accompanying notes.
On August 29, 2003, we acquired all of the issued and outstanding shares of
capital stock of Gentek Holdings, the parent company of Gentek Building
Products, Inc. and Gentek Building Products Limited, which we collectively refer
to as "Gentek". The unaudited pro forma condensed consolidated statement of
operations data has been prepared as if the acquisition of Gentek had occurred
as of the beginning of the twelve-month period. The pro forma statement should
not be considered indicative of actual results of operations that would have
been achieved had the acquisition of Gentek occurred at the beginning of the
twelve-month period and does not purport to indicate results of operations for
any future period.
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Associated Materials Incorporated
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Twelve Months Ended April 3, 2004
(in thousands)
Historical
----------------------------
Twelve Months Five Months
Ended Ended Gentek
April 3, August 29, Holdings
2004 2003 Acquisition
Associated Gentek Pro Forma Pro Forma
Materials Holdings Adjustments Combined
--------- -------- ----------- --------
Net sales .......................... $ 873,213 $ 136,140 $ (782)(a) $ 1,008,571
Cost of sales ...................... 632,715 115,964 (782)(a) 740,894
(7,003)(b)
----------- ----------- ----------- -----------
Gross profit ....................... 240,498 20,176 7,003 267,677
Selling, general and administrative
expense ....................... 178,153 11,018 6,795(b) 195,966
----------- ----------- ----------- -----------
Income from operations ............. 62,345 9,158 208 71,711
Interest expense, net .............. 27,943 883 (2,601)(c) 26,225
Foreign currency (gain) ............ (542) (320) -- (862)
Other .............................. -- 141 -- 141
Merger transaction costs ........... -- 3,081 -- 3,081
----------- ----------- ----------- -----------
Income from operations before income
taxes ........................... 34,944 5,373 2,809 43,126
Income taxes ....................... 14,492 2,840 565(d) 17,897
----------- ----------- ----------- -----------
Net income ......................... $ 20,452 $ 2,533 $ 2,244 $ 25,229
=========== =========== =========== ===========
EBITDA (e) ......................... $ 81,391 $ 8,581 $ 208 $ 90,180
Adjusted EBITDA (e) ................ $ 97,291 $ 14,654 $ -- $ 111,945
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Associated Materials Incorporated
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Twelve Months Ended April 3, 2004
(Amounts in thousands)
(a) Elimination of sales and cost of sales between the Company and Gentek
Holdings for the five months ended August 29, 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 expense to reflect the following: (i) the
reclassification of supply center expenses and certain freight costs
from cost of sales to selling, general and administrative expense to
conform to the Company's presentation and (ii) elimination of the
annual management services fee payable to Gentek Holdings' former
parent company.
Cost of sales:
Reclassification of certain costs ................ $(7,003)
=======
Selling, general and administrative expenses:
Reclassification of certain cost of sales expenses $ 7,003
Management services fee .......................... (208)
-------
$ 6,795
=======
(c) The pro forma adjustments to interest expense reflect the following:
Commitment fee on revolving credit facility ............ $ 244
Term loan .............................................. 7,437
Revolving portion of credit facility ................... 698
9-3/4% senior subordinated notes ....................... 16,088
Amortization of deferred financing costs ............... 1,758
--------
Pro forma interest expense ............................. 26,225
--------
Less: historical interest expense, net:
Company ........................................... (27,943)
Gentek Holdings - Five Months Ended August 29,
2003 ........................................... (883)
--------
Total adjustment ....................................... $ (2,601)
========
Interest expense was calculated as follows: (i) commitment fee on
unused portion of the revolving credit facility of 1/2%; (ii) a rate
of 3.91% (average London Interbank Offered Rate ("LIBOR") for the
twelve months ended March 31, 2004 of 1.16% + 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 4.16% (average LIBOR for the twelve
months ended March 31, 2004 of 1.16% + 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; and (v) 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 $0.3 million
for the twelve months ended April 3, 2004.
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(d) This amount represents the necessary adjustment to reflect a pro forma
income tax provision of 41.5%.
(e) EBITDA is calculated as net income plus interest, taxes, depreciation
and amortization. Adjusted EBITDA excludes certain items. The Company
considers Adjusted EBITDA to be an important indicator of its
operational strength and performance of its business. The Company has
included Adjusted EBITDA because it is a key financial measure used by
management to (i) assess the Company's ability to service its debt and
/ or incur debt and meet the Company's capital expenditure
requirements; (ii) internally measure the Company's operating
performance; and (iii) determine the Company's incentive compensation
programs. In addition, the Company's credit facility has certain
covenants that use ratios utilizing this measure of Adjusted EBITDA.
The definition of EBITDA under the indenture governing the 9-3/4% notes
due 2012 also excludes certain items. Adjusted EBITDA has not been
prepared in accordance with accounting principles generally accepted in
the United States ("GAAP"). Adjusted EBITDA as presented by the Company
may not be comparable to similarly titled measures reported by other
companies. Such supplementary adjustments to EBITDA may not be in
accordance with current SEC practices or the rules and regulations
adopted by the SEC that apply to periodic reports filed under the
Securities Exchange Act of 1934. Accordingly, the SEC may require that
Adjusted EBITDA be presented differently in filings made with the SEC
than as presented in this report, or not be presented at all. Adjusted
EBITDA is not a measure determined in accordance with GAAP and should
not be considered as an alternative to, or more meaningful than, net
income (as determined in accordance with GAAP) as a measure of the
Company's operating results or cash flows from operations (as
determined in accordance with GAAP) or as a measure of the Company's
liquidity. The reconciliation of net income to EBITDA and Adjusted
EBITDA is as follows:
Historical
--------------------------
Twelve Months Five Months
Ended Ended Gentek
April 3, August 29, Holdings
2004 2003 Acquisition
Associated Gentek Pro Forma Pro Forma
Materials Holdings Adjustments Combined
--------- -------- ----------- --------
Net income ......................... $ 20,452 $ 2,533 $ 2,244 $ 25,229
Interest ........................... 27,943 883 (2,601) 26,225
Taxes .............................. 14,492 2,840 565 17,897
Depreciation and amortization ...... 18,504 2,325 -- 20,829
-------- -------- -------- --------
EBITDA ............................. 81,391 8,581 208 90,180
Merger transaction costs (i) ....... -- 3,081 -- 3,081
Cost of sales adjustment (ii) ...... 1,402 -- -- 1,402
Certain warranty related costs (iii) -- 2,784 -- 2,784
Management fees (iv) ............... -- 208 (208) --
Management bonus (v) ............... 14,498 -- -- 14,498
-------- -------- -------- --------
Adjusted EBITDA .................... $ 97,291 $ 14,654 $ -- $111,945
======== ======== ======== ========
(i) Eliminates merger transaction costs, which includes $3.1 million of
investment banking and legal fees incurred by Gentek Holdings in
conjunction with the acquisition by the Company.
(ii) Eliminates a cost of sales expense relating to an inventory fair value
adjustment recorded at the time of the Gentek Holdings acquisition
totaling $1.4 million.
(iii) Eliminates certain warranty costs incurred by Gentek Holdings related
to defects of specific colors of steel siding manufactured between
1992 and 1995 for which the Company has recorded an actuarially
determined reserve representing the fair value of the liability at
the date of the acquisition and for which the Company received a
reduction in the purchase price.
(iv) Eliminates management services fee paid to Gentek Holdings' former
parent company.
(v) Eliminates the management bonus paid in recognition of management's
efforts with respect to the successful acquisition of Gentek Holdings,
the Company's performance since the April 2002 merger transaction, as
well as the completion of AMH Holdings, Inc.'s (our indirect parent
company) offering of senior discount notes.
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