EXHIBIT 99.1
NEWS RELEASE
ASSOCIATED MATERIALS REPORTS SECOND QUARTER RESULTS
CUYAHOGA FALLS, Ohio, August 9 -- ASSOCIATED MATERIALS INCORPORATED ("AMI" OR
THE "COMPANY") today announced second quarter 2004 net sales of $301.6 million,
a 67.2% increase over $180.4 million for the same period in 2003. For the six
months ended July 3, 2004, net sales were $505.9 million or 73.7% higher than
$291.3 million for the same period in 2003. The results for 2004 include the
operations of the Company's subsidiary, Gentek Holdings, Inc. ("Gentek").
Gentek, which was acquired by AMI on August 29, 2003, contributed $93.8 million
and $159.2 million of net sales for the second quarter and six months ended
July 3, 2004, respectively.
Net income for the second quarter of 2004 was $16.7 million. This compares to
net income of $10.3 million for the same period in 2003. For the six months
ended July 3, 2004, net income was $7.6 million compared to net income of $5.3
million for the same period in 2003. Gentek contributed $3.9 million and $4.4
million of net income for the second quarter and six months ended July 3, 2004,
respectively.
EBITDA (as defined below) for the second quarter of 2004 was $39.8 million. This
compares to EBITDA of $25.9 million for the same period in 2003. For the six
months ended July 3, 2004, EBITDA was $35.4 million compared to EBITDA of $25.5
million for the same period in 2003. Gentek contributed $8.4 million and $11.0
million of EBITDA in the second quarter of 2004 and six months ended July 3,
2004, respectively.
Adjusted EBITDA (as defined below) for the six months ended July 3, 2004 was
$49.9 million. Adjusted EBITDA for the six months ended July 3, 2004 excludes a
bonus paid to certain members of company management totaling approximately $14.5
million related to the completion of the offering of senior discount notes on
March 4, 2004 by the Company's indirect parent company, AMH Holdings, Inc.
("AMH"). There were no adjustments to EBITDA for the second quarter of 2004 or
for the quarter and six months ended June 28, 2003. A reconciliation of net
income to EBITDA and to Adjusted EBITDA is included below.
Michael Caporale, President and Chief Executive Officer, commented, "I am very
pleased with our second quarter results. We continued to experience strong sales
and EBITDA growth."
Mr. Caporale continued, "Even with the recently announced federal interest rate
increase, we remain optimistic about the underlying fundamentals of our
industry. Mortgage rates continue to be at relatively low historical levels,
consumer confidence continues to be strong, and consumers continue to invest in
their homes."
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RESULTS OF OPERATIONS
Net sales increased 67.2% during the second quarter of 2004 compared to the same
period in 2003, driven by increased vinyl window and vinyl siding sales along
with net sales from Gentek. Gross profit in the second quarter of 2004 was $83.3
million, or 27.6% of net sales, compared to gross profit of $56.8 million, or
31.5% of net sales, in the second quarter of 2003. The decrease in gross profit
margin percentage is primarily due to the impact of the results contributed by
Gentek as Gentek's gross margin percentage is typically lower than Alside's as a
larger proportion of Gentek's net sales are to independent distributors versus
contractors through company-owned distribution centers. Additionally, a portion
of Gentek's net sales are from metal products, which typically have a lower
margin percentage than vinyl windows and vinyl siding. Selling, general and
administrative expense increased to $48.0 million, or 15.9% of net sales, for
the second quarter of 2004 versus $33.7 million, or 18.7% of net sales, for the
same period in 2003. The increase in selling, general and administrative expense
is a result of the impact of the acquisition of Gentek, as well as the result of
adding two new Alside supply centers in 2004. Income from operations was $35.3
million in the second quarter of 2004 compared to $23.1 million for the same
period in 2003.
Net sales increased 73.7% for the six months ended July 3, 2004 compared to the
same period in 2003, driven by increased vinyl window and vinyl siding sales
along with net sales from Gentek. Gross profit increased to $133.7 million, or
26.4% of net sales, compared to gross profit of $85.0 million, or 29.2% of net
sales, for the same period in 2003. The decrease in gross profit margin
percentage was a result of the impact of the Gentek acquisition. Selling,
general and administrative expense increased to $107.9 million, or 21.3% of net
sales, for the six months ended July 3, 2004 versus $65.0 million, or 22.3% of
net sales, for the same period in 2003. The increase in selling, general and
administrative expense is the result of a management bonus paid in relation to
AMH's offering of senior discount notes on March 4, 2004, the impact of the
acquisition of Gentek, as well as the result of adding two new Alside supply
centers in 2004 along with the three new supply centers added in 2003, which had
a full six months of expense in 2004. Income from operations was $25.7 million
for the six months ended July 3, 2004 compared to $20.0 million for the same
period in 2003.
AMH
AMH remains in the process of registering notes with the Securities and Exchange
Commission, which will be exchanged for its outstanding 11 1/4% senior discount
notes on substantially equivalent terms. The attached consolidating financial
information for the quarter and six months ended July 3, 2004 includes AMI and
AMH, which conducts all of its operating activities through AMI. Including AMH's
interest expense, which primarily consists of accretion on AMH's 11 1/4% senior
discount notes, AMH's consolidated net income was $11.7 million and $1.0 million
for the quarter and six months ended July 3, 2004, respectively.
* * *
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Management will host its second quarter earnings conference call on Monday,
August 9th at 11 a.m. Eastern Time. The toll free dial-in number for the call is
(877) 363-0523. A replay of the call will be available through August 16, 2004
by dialing (888) 769-9756 and entering the conference call identification number
of 9413421. The conference call and replay will also be available via webcast,
which along with this news release can be accessed via the Company's web site at
http://www.associatedmaterials.com.
* * *
Associated Materials Incorporated is a leading manufacturer of exterior
residential building products, which are distributed through company-owned
distribution centers and independent distributors across North America. AMI
produces a broad range of vinyl windows, vinyl siding, aluminum trim coil,
aluminum and steel siding and accessories, as well as vinyl fencing, decking and
railing. AMI is a privately held, wholly-owned subsidiary of Associated
Materials Holdings Inc., a wholly-owned subsidiary of AMH Holdings, Inc., which
is controlled by affiliates of Harvest Partners, Inc. For more information,
please visit the Company's website at http://www.associatedmaterials.com.
Founded in 1981, Harvest Partners has approximately $1 billion of invested and
committed capital, and is focused on management buyouts and growth financings of
profitable, middle-market specialty services, manufacturing and value-added
distribution businesses, with a particular emphasis on multinational
transactions. Harvest has significant capital available through its managed
funds, which include numerous U.S. and European industrial corporations and
financial institutions. For more information on Harvest Partners please visit
its website at http://www.harvpart.com.
This press release contains certain forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) relating to AMI
that are based on the beliefs of AMI's management. When used in this press
release, the words "may," "will," "should," "expect," "intend," "estimate,"
"anticipate," "believe," "predict," "potential" or "continue" or similar
expressions identify forward-looking statements. Such statements reflect the
current views of AMI's management with respect to its operations and results of
operations regarding the home building industry, economy, interest rates,
availability of consumer credit, employment trends, levels of consumer
confidence, consumer preferences, raw material costs and availability, national
and regional trends in new housing starts, weather conditions, its ability to
comply with certain financial covenants in loan documents governing its
indebtedness, level of competition within its market, availability of
alternative building products, its level of indebtedness, costs of environmental
compliance, potential conflict between Alside and Gentek distribution channels,
achievement of anticipated synergies and operational efficiencies from the
acquisition of Gentek, shifts in market demand, and general economic conditions.
These statements are subject to certain risks and uncertainties. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions or estimates prove incorrect, actual results may vary materially
from those described herein as expected, intended, estimated, anticipated,
believed or predicted.
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For Further Information
At the Company: At Abernathy MacGregor Group Inc.:
D. Keith LaVanway Alison Brandt
Chief Financial Officer Media
(330) 922-2004 (212) 371-5999
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ASSOCIATED MATERIALS
CONDENSED STATEMENTS OF OPERATIONS (a)
(UNAUDITED)
QUARTERS ENDED JULY 3, 2004 AND JUNE 28, 2003
(IN THOUSANDS)
AMI AMH
----------------------------- AMH Eliminations Consolidated
Quarter Quarter Quarter Quarter Quarter
Ended Ended Ended Ended Ended
June 28, July 3, July 3, July 3, July 3,
2003 2004 2004 2004 2004
-------------------------------------------------------------------------
Net sales................................ $ 180,363 $ 301,602 $ - $ - $ 301,602
Gross profit............................. 56,800 83,325 - - 83,325
Selling, general and administrative
expense ................................ 33,704 48,040 - - 48,040
--------- --------- ------- ---------- ---------
Income from operations................... 23,096 35,285 - - 35,285
Interest expense, net.................... 5,483 6,254 7,516 - 13,770
Foreign currency loss.................... - 609 - - 609
--------- --------- ------- ---------- ---------
Income (loss) before income taxes........ 17,613 28,422 (7,516) - 20,906
Income taxes............................. 7,309 11,703 (2,541) - 9,162
--------- --------- ------- ---------- ---------
Income (loss) before equity income from
subsidiaries.......................... 10,304 16,719 (4,975) - 11,744
Equity income from subsidiaries.......... - - 16,719 (16,719) -
--------- --------- ------- ---------- ---------
Net income............................... $ 10,304 $ 16,719 $ 11,744 $ (16,719) $ 11,744
========= ========= ======== ========== =========
Other Data:
EBITDA (b)(c)............................ $ 25,891 $ 39,813
Adjusted EBITDA (b)(c)................... 25,891 39,813
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ASSOCIATED MATERIALS
CONDENSED STATEMENTS OF OPERATIONS (a)
(UNAUDITED)
SIX MONTHS ENDED JULY 3, 2004 AND JUNE 28, 2003
(IN THOUSANDS)
<Table>
<Caption>
AMI AMH
----------------------------- AMH Eliminations Consolidated
Six Months Six Months Six Months Six Months Six Months
Ended Ended Ended Ended Ended
June 28, July 3, July 3, July 3, July 3,
2003 2004 2004 2004 2004
--------------------------------------------------------------------------
Net sales................................ $ 291,307 $ 505,923 $ - $ - $ 505,923
Gross profit............................. 84,968 133,680 - - 133,680
Selling, general and administrative
expense ................................ 65,014 107,932 - - 107,932
--------- --------- --------- ---------- ---------
Income from operations................... 19,954 25,748 - - 25,748
Interest expense, net.................... 10,921 12,266 9,940 - 22,206
Foreign currency loss.................... - 615 - - 615
--------- --------- --------- ---------- ---------
Income (loss) before income taxes........ 9,033 12,867 (9,940) - 2,927
Income taxes............................. 3,749 5,247 (3,361) - 1,886
--------- --------- --------- ---------- ---------
Income (loss) before equity income from
subsidiaries.......................... 5,284 7,620 (6,579) - 1,041
-
Equity income from subsidiaries.......... - 7,620 (7,620) -
--------- --------- --------- ---------- ---------
Net income............................... $ 5,284 $ 7,620 $ 1,041 $ (7,620) $ 1,041
========= ========= ======== ========== =========
Other Data:
EBITDA (b)(c)............................ $ 25,466 $ 35,376
Adjusted EBITDA (b)(c)................... 25,466 49,874
AMI AMH
----------------------------- AMH Consolidated
January 3, July 3, July 3, July 3,
2004 2004 2004 2004
------------ ---------------- --------------- ---------------
Selected Balance Sheet Data:
- ----------------------------
Cash $ 4,282 $ 2,655 $ 34 $ 2,689
Accounts receivable, net................. 106,975 152,471 - 152,471
Inventory................................ 97,907 122,327 - 122,327
Accounts payable......................... 49,881 81,633 - 81,633
Accrued liabilities...................... 53,234 47,401 144 47,545
Long-term debt........................... 305,000 331,159 267,869 599,028
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(a) Operating results for the quarter and six months ended July 3, 2004 include
the results of the Company's Gentek Holdings subsidiary, which was acquired
on August 29, 2003.
(b) 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 release,
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 the Company's net income to
EBITDA and Adjusted EBITDA is as follows (in thousands):
Six Six
Quarter Quarter Months Months
Ended Ended Ended Ended
June 28, July 3, June 28, July 3,
2003 2004 2003 2004
--------- ---------- --------- ----------
Reconciliation of net income to EBITDA and
------------------------------------------
Adjusted EBITDA (c):
--------------------
Net income.................................. $ 10,304 $ 16,719 $ 5,284 $ 7,620
Interest.................................... 5,483 6,254 10,921 12,266
Taxes....................................... 7,309 11,703 3,749 5,247
Depreciation and amortization............... 2,795 5,137 5,512 10,243
-------- -------- -------- --------
EBITDA 25,891 39,813 25,466 35,376
Management bonus (d)........................ - - - 14,498
-------- -------- -------- --------
Adjusted EBITDA............................. $ 25,891 $ 39,813 $ 25,466 $ 49,874
======== ======== ======== ========
(c) The 2004 results of operations include the results of Gentek. A
reconciliation of Gentek's net income to EBITDA for the quarter and six
months ended July 3, 2004 are as follows (in thousands):
Quarter Six Months
Ended Ended
July 3, July 3,
2004 2004
--------------------
Reconciliation of Gentek's net income to EBITDA:
------------------------------------------------
Net income..................................... $ 3,900 $ 4,365
Interest....................................... 102 138
Taxes ........................................ 2,609 2,938
Depreciation and amortization.................. 1,739 3,580
------- --------
Gentek's EBITDA................................ $ 8,350 $ 11,021
======= ========
(d) Represents a management bonus paid in connection with the completion on
March 4, 2004 of AMH's offering of senior discount notes.
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