Exhibit 99.1
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Twelve Months Ended July 3, 2004
The unaudited pro forma condensed consolidated statement of operations for the
twelve months ended July 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.
Associated Materials Incorporated
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Twelve Months Ended July 3, 2004
(in thousands)
Historical
-----------------------------
Twelve Months Two Months
Ended Ended Gentek
July 3, August 29, Holdings
2004 2003 Acquisition
Associated Gentek Pro Forma Pro Forma
Materials Holdings Adjustments Combined
----------- ----------- ----------- -----------
Net sales .......................... $ 994,452 $ 58,443 $ (337)(a) $ 1,052,558
Cost of sales ...................... 727,429 48,738 (337)(a) 772,983
(2,847)(b)
----------- ----------- ----------- -----------
Gross profit ....................... 267,023 9,705 2,847 279,575
Selling, general and administrative
expense ....................... 192,489 4,009 2,975(b) 199,473
----------- ----------- ----------- -----------
Income from operations ............. 74,534 5,696 (128) 80,102
Interest expense, net .............. 28,714 340 (2,969)(c) 26,085
Foreign currency loss (gain) ....... 67 (41) - 26
Merger transaction costs ........... - 3,055 - 3,055
----------- ----------- ----------- -----------
Income from operations before income
taxes ........................... 45,753 2,342 2,841 50,936
Income taxes ....................... 18,886 1,268 984(d) 21,138
----------- ----------- ----------- -----------
Net income ......................... $ 26,867 $ 1,074 $ 1,857 $ 29,798
=========== =========== =========== ===========
EBITDA (e) ........................ $ 95,313 $ 3,598 $ 83 $ 98,994
Adjusted EBITDA (e) ................ $ 111,213 $ 6,792 $ - $ 118,005
Associated Materials Incorporated
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Twelve Months Ended July 3, 2004
(Amounts in thousands)
(a) Elimination of sales and cost of sales between the Company and Gentek
Holdings for the two 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; and (iii)
incremental depreciation and amortization of tangible and intangible assets
recorded in conjunction with the acquisition.
Cost of sales:
Reclassification of certain costs........................ $ (2,932)
Net increase in depreciation and amortization............ 85
-----------
$ (2,847)
===========
Selling, general and administrative expenses:
Reclassification of certain cost of sales expenses....... $ 2,932
Management services fee.................................. (83)
Net increase in depreciation and amortization............ 126
-----------
$ 2,975
===========
(c) The pro forma adjustments to interest expense reflect the following:
Commitment fee on revolving credit facility................... $ 272
Term loan..................................................... 7,499
Revolving portion of credit facility.......................... 468
9 3/4% senior subordinated notes.............................. 16,088
Amortization of deferred financing costs...................... 1,758
---------
Pro forma interest expense.................................... 26,085
---------
Less: historical interest expense, net:
Company................................................. (28,714)
Gentek Holdings - Two Months Ended August 29, 2003...... (340)
----------
Total adjustment.............................................. $ (2,969)
==========
Interest expense was calculated as follows: (i) commitment fee on unused
portion of the revolving credit facility of 1/2%; (ii) a rate of 3.95%
(average London Interbank Offered Rate ("LIBOR") for the twelve months
ended June 30, 2004 of 1.20% + 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 4.20% (average LIBOR for the twelve months ended June 30,
2004 of 1.20% + 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 July 3, 2004.
(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 Two Months
Ended Ended Gentek
July 3, August 29, Holdings
2004 2003 Acquisition
Associated Gentek Pro Forma Pro Forma
Materials Holdings Adjustments Combined
---------- ---------- ----------- ---------
Net income ......................... $ 26,867 $ 1,074 $ 1,857 $ 29,798
Interest ........................... 28,714 340 (2,969) 26,085
Taxes .............................. 18,886 1,268 984 21,138
Depreciation and amortization ...... 20,846 916 211 21,973
-------- -------- -------- --------
EBITDA ............................. 95,313 3,598 83 98,994
Merger transaction costs (i) ....... - 3,055 - 3,055
Cost of sales adjustment (ii) ...... 1,402 - - 1,402
Certain warranty related costs (iii) - 56 - 56
Management fees (iv) ............... - 83 (83) -
Management bonus (v) ............... 14,498 - - 14,498
-------- -------- -------- --------
Adjusted EBITDA .................... $111,213 $ 6,792 $ - $118,005
======== ======== ======== ========
(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 (the Company's indirect
parent company) offering of senior discount notes.