EXHIBIT 99.1
NEWS RELEASE
ASSOCIATED MATERIALS REPORTS THIRD QUARTER RESULTS
CUYAHOGA FALLS, Ohio, November 8, 2004 -- ASSOCIATED MATERIALS INCORPORATED
("AMI" OR THE "COMPANY") today announced third quarter 2004 net sales of $314.4
million, a 40.5% increase over $223.8 million for the same period in 2003. For
the nine months ended October 2, 2004, net sales were $820.3 million or 59.3%
higher than $515.1 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
$97.7 million and $256.8 million of net sales for the third quarter and nine
months ended October 2, 2004, respectively. Gentek contributed $27.1 million of
net sales for the quarter and nine months ended September 27, 2003.
Net income for the third quarter of 2004 was $19.9 million. This compares to net
income of $9.6 million for the same period in 2003. For the nine months ended
October 2, 2004, net income was $27.5 million compared to net income of $14.9
million for the same period in 2003. Gentek contributed $6.5 million and $10.9
million of net income for the third quarter and nine months ended October 2,
2004, respectively. Gentek contributed $1.1 million of net income for the
quarter and nine months ended September 27, 2003.
EBITDA (as defined below) for the third quarter of 2004 was $43.7 million. This
compares to EBITDA of $29.5 million for the same period in 2003. Adjusted EBITDA
(as defined below) for the third quarter of 2003 was $30.9 million. There were
no adjustments to EBITDA for the third quarter of 2004. Adjusted EBITDA for the
quarter ended September 27, 2003 excludes a cost of sales expense of $1.4
million relating to an inventory fair value adjustment recorded at the time of
the acquisition of Gentek. Gentek contributed $11.7 million of EBITDA for the
third quarter of 2004 and $2.4 million and $3.8 million of EBITDA and adjusted
EBITDA, respectively, for the same period in 2003.
EBITDA was $79.1 million for the nine months ended October 2, 2004 compared to
EBITDA of $55.0 million for the same period in 2003. Adjusted EBITDA for the
nine months ended October 2, 2004 was $93.6 million compared to adjusted EBITDA
of $56.4 million for the same period in 2003. Adjusted EBITDA for the nine
months ended October 2, 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"). Adjusted EBITDA for the nine months
ended September 27, 2003 excludes a cost of sales expense of $1.4 million
relating to an inventory fair value adjustment recorded at the time of the
acquisition of Gentek. Gentek contributed $22.7 million of EBITDA for the nine
months ended October 2, 2004, and $2.4 million and $3.8 million of EBITDA and
adjusted EBITDA, respectively, for the same period in 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 third quarter results. Despite continued significant cost
increases on our key raw materials, we delivered strong sales and EBITDA
growth."
Mr. Caporale continued, "Despite the recent increases in short-term interest
rates, the fundamentals of our industry continued to be strong in the quarter.
Existing home sales and single family housing starts continued at historically
strong levels. Mortgage interest rates remained at relatively low levels.
Consumer confidence, however, was lower due to continuing overall macroeconomic
uncertainties. Overall, we continue to remain optimistic about the long term
fundamentals of our industry."
RESULTS OF OPERATIONS
Net sales increased 40.5% during the third quarter of 2004 compared to the same
period in 2003, driven by increased vinyl window, vinyl siding and third party
manufactured product sales along with a full quarter of net sales from Gentek.
Gross profit in the third quarter of 2004 was $87.1 million, or 27.7% of net
sales, compared to gross profit of $64.2 million, or 28.7% of net sales, in the
third quarter of 2003. The decrease in gross profit margin percentage was due
primarily to the impact of the results contributed by Gentek for the full
quarter of 2004 as Gentek's gross margin percentage is typically lower than
Alside's as a larger portion of Gentek's sales are to independent distributors
versus contractors through company-owned supply centers. Additionally, a portion
of Gentek's sales are from metal products, which typically have a lower margin
percentage than vinyl windows and vinyl siding. Also contributing to the lower
gross margin percentage were increased costs of the Company's key raw materials
- - vinyl resin, aluminum and steel. Selling, general and administrative expense
increased to $48.7 million, or 15.5% of net sales, for the third quarter of 2004
versus $38.3 million, or 17.1% 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 for the full quarter of 2004, the result of
adding three new Alside supply centers and one new Gentek supply center in 2004,
and increases in expenses at existing supply centers to support the increased
sales. Income from operations was $38.3 million in the third quarter of 2004
compared to $25.9 million for the same period in 2003.
Net sales increased 59.3% for the nine months ended October 2, 2004 compared to
the same period in 2003, driven by increased vinyl window, vinyl siding and
third party manufactured product sales along with a full nine months of net
sales from Gentek. Gross profit increased to $220.7 million, or 26.9% of net
sales, compared to gross profit of $149.2 million, or 29.0% of net sales, for
the same period in 2003. The decrease in gross profit margin percentage was
primarily a result of the impact of the Gentek acquisition along with the impact
from the increased costs of vinyl resin, aluminum, and steel. Selling, general
and administrative expense increased to $156.6 million, or 19.1% of net sales,
for the nine months ended October 2, 2004 versus $103.3 million, or 20.1% 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, the impact of adding three new Alside supply centers and
one Gentek supply center in 2004 along with the three new supply centers added
in 2003, which had a full nine months of expense in 2004, as well as increases
in expenses at existing supply centers to support the increased sales. Income
from operations was $64.1 million for the nine months ended October 2, 2004
compared to $45.9 million for the same period in 2003.
AMH
On October 29, 2004, AMH completed an offer to exchange the entire principal
amount at maturity of its outstanding 11-1/4% senior discount notes for an equal
amount at maturity of notes with substantially equivalent terms that have been
registered under the Securities Act. The attached consolidating financial
information for the quarter and nine months ended October 2, 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 $15.1 million and $16.1
million for the quarter and nine months ended October 2, 2004, respectively.
* * *
Management will host its third quarter earnings conference call on Monday,
November 8th at 11 a.m. Eastern Time. The toll free dial-in number for the call
is (866) 686-6743 and the conference call identification number is 10078026. A
replay of the call will be available through November 15, 2004 by dialing (888)
769-9756 and entering the above conference call identification number. 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, 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
and AMH that are based on the beliefs of AMI's and AMH'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 and AMH's management with respect to the Company's
operations and results of operations regarding the home building industry,
economy, interest rates, foreign currency exchange 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, the Company's 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, increase in
capital expenditure requirements 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.
For Further Information
At the Company:
D. Keith LaVanway
Chief Financial Officer
(330) 922-2004
ASSOCIATED MATERIALS INCORPORATED
AMH HOLDINGS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (a)
(UNAUDITED)
QUARTERS ENDED OCTOBER 2, 2004 AND SEPTEMBER 27, 2003
(IN THOUSANDS)
AMI AMH
---------------------------- AMH Eliminations Consolidated
Quarter Quarter Quarter Quarter Quarter
Ended Ended Ended Ended Ended
September 27, October 2, October 2, October 2, October 2,
2003 2004 2004 2004 2004
------------- ---------- ---------- ------------- -------------
Net sales.............................. $ 223,806 $ 314,408 $ - $ - $ 314,408
Gross profit........................... 64,219 87,061 - - 87,061
Selling, general and administrative
expense................................ 38,270 48,716 - - 48,716
------------- ---------- ---------- ------------- -------------
Income from operations................. 25,949 38,345 - - 38,345
Interest expense, net.................. 9,706 6,218 7,191 - 13,409
Foreign currency gain.................. (199) (35) - - (35)
------------- ---------- ---------- ------------- -------------
Income (loss) before income taxes...... 16,442 32,162 (7,191) - 24,971
Income taxes........................... 6,823 12,297 (2,386) - 9,911
------------- ---------- ---------- ------------- -------------
Income (loss) before equity income from
subsidiaries........................ 9,619 19,865 (4,805) - 15,060
Equity income from subsidiaries........ - - 19,865 (19,865) -
------------- ---------- ---------- ------------- -------------
Net income............................. $ 9,619 $ 19,865 $ 15,060 $ (19,865) $ 15,060
============= ========== ========== ============= =============
Other Data:
EBITDA (b)(c).......................... $ 29,510 $ 43,702
Adjusted EBITDA (b)(c)................. 30,912 43,702
ASSOCIATED MATERIALS INCORPORATED
AMH HOLDINGS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (a)
(UNAUDITED)
NINE MONTHS ENDED OCTOBER 2, 2004 AND SEPTEMBER 27, 2003
(IN THOUSANDS)
AMI AMH
---------------------------- AMH Eliminations Consolidated
Nine Months Nine Months Nine Months Nine Months Nine Months
Ended Ended Ended Ended Ended
September 27, October 2, October 2, October 2, October 2,
2003 2004 2004 2004 2004
------------- ---------- ---------- ------------- -------------
Net sales.............................. $ 515,113 $ 820,331 $ - $ - $ 820,331
Gross profit........................... 149,187 220,741 - - 220,741
Selling, general and administrative
expense................................ 103,284 156,648 - - 156,648
------------- ---------- ---------- ------------- -------------
Income from operations................. 45,903 64,093 - - 64,093
Interest expense, net.................. 20,627 18,484 17,131 - 35,615
Foreign currency (gain) loss........... (199) 580 - - 580
------------- ---------- ---------- ------------- -------------
Income (loss) before income taxes...... 25,475 45,029 (17,131) - 27,898
Income taxes........................... 10,572 17,544 (5,747) - 11,797
------------- ---------- ---------- ------------- -------------
Income (loss) before equity income from
subsidiaries........................ 14,903 27,485 (11,384) - 16,101
Equity income from subsidiaries........ - - 27,485 (27,485) -
------------- ---------- ---------- ------------- -------------
Net income............................. $. 14,903 $ 27,485 $ 16,101 $ (27,485) $ 16,101
============= ========== ========== ============= =============
Other Data:
EBITDA (b)(c).......................... $ 54,976 $ 79,078
Adjusted EBITDA (b)(c)................. 56,378 93,576
AMI AMH
---------------------- AMH Consolidated
January 3, October 2, October 2, October 2,
2004 2004 2004 2004
---------- ---------- ---------- ------------
Selected Balance Sheet Data:
Cash $ 4,282 $ 3,686 $ 34 $ 3,720
Accounts receivable, net............... 106,975 160,897 - 160,897
Inventory.............................. 97,907 128,368 - 128,368
Accounts payable....................... 49,881 82,405 - 82,405
Accrued liabilities.................... 53,234 57,577 13 57,590
Long-term debt......................... 305,000 307,376 274,806 582,182
(a) Operating results for the complete quarter and nine months ended October
2, 2004 include the results of the Company's Gentek Holdings subsidiary,
which was acquired on August 29, 2003. Operating results for the quarter
and nine months ended September 27, 2003 include the results of Gentek
Holdings subsequent to the acquisition date.
(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
indentures governing the notes 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):
Nine Nine
Quarter Quarter Months Months
Ended Ended Ended Ended
September October September October 2,
27, 2003 2, 2004 27, 2003 2004
--------- -------- --------- ----------
Reconciliation of net income to EBITDA and
Adjusted EBITDA (c):
Net income.................................. $ 9,619 $ 19,865 $ 14,903 $ 27,485
Interest.................................... 9,706 6,218 20,627 18,484
Taxes....................................... 6,823 12,297 10,572 17,544
Depreciation and amortization............... 3,362 5,322 8,874 15,565
--------- -------- --------- ----------
EBITDA 29,510 43,702 54,976 79,078
Cost of sales adjustment.................... 1,402 - 1,402 -
Management bonus (d)........................ - - - 14,498
--------- -------- --------- ----------
Adjusted EBITDA............................. $ 30,912 $ 43,702 $ 56,378 $ 93,576
========= ======== ========= ==========
(c) The 2004 results of operations include the results of Gentek for the full
periods presented. The results of operations for the quarter and nine
months ended September 27, 2003 only include the results of Gentek for the
period subsequent to its acquisition on August 29, 2003. A reconciliation
of Gentek's net income to EBITDA and adjusted EBITDA for the quarter and
nine months ended September 27, 2003 and October 2, 2004 is as follows (in
thousands):
Quarter
and
Nine Months Nine
Ended Quarter Months
September Ended Ended
27, October 2, October 2,
2003 2004 2004
----------- ---------- ----------
Reconciliation of Gentek's net income to EBITDA
and Adjusted EBITDA:
Net income..................................... $ 1,099 $ 6,508 $ 10,873
Interest....................................... 59 154 292
Taxes ........................................ 779 3,247 6,185
Depreciation and amortization.................. 485 1,794 5,374
----------- ---------- ----------
Gentek's EBITDA................................ 2,422 11,703 22,724
Cost of sales adjustment....................... 1,402 - -
----------- ---------- ----------
Gentek's Adjusted EBITDA....................... $ 3,824 $ 11,703 $ 22,724
=========== ========== ==========
(d) Represents a management bonus paid in connection with the completion on
March 4, 2004 of AMH's offering of senior discount notes.