-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TIjyYRGvLaVFwcswFgS1EOOeD1hPhyiRYQIzHvrMaxB8si/tg5W11hdFP3wZUYL7 IxAC49qAkMqArvQQ75Nzlw== 0000912057-99-003280.txt : 19991104 0000912057-99-003280.hdr.sgml : 19991104 ACCESSION NUMBER: 0000912057-99-003280 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990925 FILED AS OF DATE: 19991103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EURAMAX INTERNATIONAL PLC CENTRAL INDEX KEY: 0001026743 STANDARD INDUSTRIAL CLASSIFICATION: ROLLING DRAWING & EXTRUDING OF NONFERROUS METALS [3350] IRS NUMBER: 981066997 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-05978 FILM NUMBER: 99740219 BUSINESS ADDRESS: STREET 1: 5335 TRIANGLE PARKWAY STREET 2: SUITE 550 CITY: NORCROSS STATE: GA ZIP: 30092 BUSINESS PHONE: 7704497066 MAIL ADDRESS: STREET 1: 5535 TRIANGLE PKWY CITY: NORCROSS STATE: GA ZIP: 30092 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 25, 1999 ------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------- --------------- Commission file number 333-05978 ------------- EURAMAX INTERNATIONAL LIMITED (Exact name of registrant as specified in its charter) ENGLAND AND WALES 98-1066997 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5445 TRIANGLE PARKWAY, SUITE 350, NORCROSS, GEORGIA 30092 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 770-449-7066 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No As of November 3, 1999, Registrant had outstanding 1,000,000 Ordinary Shares and 34,000,000 Preference Shares. Page 1 of 28 Exhibit Index located on page 27 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (THOUSANDS OF U.S. DOLLARS) (UNAUDITED)
QUARTERS ENDED NINE MONTHS ENDED ---------------------------------- ---------------------------------- SEPTEMBER 25, SEPTEMBER 26, SEPTEMBER 25, SEPTEMBER 26, 1999 1998 1999 1998 ---------------- ----------------- ---------------- ----------------- Net sales $ 152,722 $ 160,211 $ 441,308 $ 463,734 Costs and expenses: Cost of goods sold 122,744 131,728 354,468 381,717 Selling and general 13,923 12,526 41,284 37,341 Depreciation and amortization 3,577 3,075 10,404 9,186 ---------------- ----------------- ---------------- ----------------- Earnings from operations 12,478 12,882 35,152 35,490 Interest expense, net (5,687) (5,815) (16,318) (17,949) Other income (expense), net 360 745 (442) 613 ---------------- ----------------- ---------------- ----------------- Earnings before income taxes 7,151 7,812 18,392 18,154 Provision for income taxes 3,041 2,913 7,813 7,298 ---------------- ----------------- ---------------- ----------------- Net earnings 4,110 4,899 10,579 10,856 Dividends on redeemable preference shares 1,738 1,514 5,038 4,390 ---------------- ----------------- ---------------- ----------------- Net earnings available for ordinary shareholders $ 2,372 $ 3,385 $ 5,541 $ 6,466 ================ ================= ================ =================
The accompanying notes are an integral part of these condensed consolidated financial statements. 2 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (THOUSANDS OF U.S. DOLLARS) (UNAUDITED)
SEPTEMBER 25, DECEMBER 25, 1999 1998 ------------------- ------------------- ASSETS Current assets: Cash and equivalents $ 13,872 $ 19,044 Accounts receivable, net 91,208 81,845 Inventories 78,629 74,735 Other current assets 6,034 4,585 ------------------- ------------------- Total current assets 189,743 180,209 Property, plant and equipment, net 118,308 117,080 Goodwill, net 85,747 76,047 Deferred income taxes 8,603 8,588 Other assets 8,074 6,725 ------------------- ------------------- $ 410,475 $ 388,649 =================== =================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Cash overdrafts $ 3,467 $ 1,513 Accounts payable 58,492 51,862 Accrued expenses and other current liabilities 22,621 20,904 Income taxes payable 9,407 3,478 Accrued interest payable 8,293 4,712 Current maturities of long-term debt 6,266 9,182 ------------------- ------------------- Total current liabilities 108,546 91,651 Long-term debt, less current maturities 211,590 208,496 Other liabilities 10,708 13,100 Deferred income taxes 15,978 19,398 ------------------- ------------------- Total liabilities 346,822 332,645 ------------------- ------------------- Redeemable preference shares 51,377 46,339 ------------------- ------------------- Ordinary shareholders' equity: Ordinary shares 1,000 1,000 Retained earnings 16,888 11,347 Accumulated other comprehensive loss (5,612) (2,682) ------------------- ------------------- Total ordinary shareholders' equity 12,276 9,665 ------------------- ------------------- $ 410,475 $ 388,649 =================== ===================
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (THOUSANDS OF U.S. DOLLARS) (UNAUDITED)
NINE MONTHS ENDED ------------------------------------------ SEPTEMBER 25, SEPTEMBER 26, 1999 1998 -------------------- ------------------- Net cash provided by operating activities $ 24,501 $ 23,165 -------------------- ------------------- Cash flows from investing activities: Purchases of businesses (23,155) - Proceeds from sales of assets 660 587 Capital expenditures (10,154) (9,451) -------------------- -------------------- Net cash used in investing activities (32,649) (8,864) -------------------- -------------------- Cash flows from financing activities: Repayments of long-term debt (34,039) (33,371) Proceeds from long-term debt 34,700 17,573 Proceeds from sale of currency swap - 7,580 Other 1,954 - -------------------- ------------------- Net cash provided by (used in) financing activities 2,615 (8,218) ------------------- -------------------- Effect of exchange rate changes on cash 361 (2,717) -------------------- -------------------- Net increase (decrease) in cash and equivalents (5,172) 3,366 Cash and equivalents at beginning of period 19,044 12,914 -------------------- -------------------- Cash and equivalents at end of period $ 13,872 $ 16,280 ==================== ==================== Non-cash investing and financing activities: Payables for non-compete agreement associated with purchase of business $ 500 $ - Dividends accrued on redeemable preference shares $ 5,038 $ 4,390
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 1. BASIS OF PRESENTATION: For purposes of this report, the "Company" or the "Group" refers to Euramax International Limited, formerly Euramax International plc, ("Euramax") and Subsidiaries, collectively. The Company was re-registered as a private limited company in the United Kingdom on September 29, 1999, at which time its name was changed to Euramax International Limited. The re-registration of Euramax was completed to relieve certain administrative and regulatory burdens in anticipation of a reorganization of the Company, more fully described in the following paragraphs. Euramax is a holding company organized by an investor group to acquire, through its wholly owned subsidiaries, certain portions of the fabricated products operations of Alumax Inc. ("Alumax"). The Acquisition was completed September 25, 1996. Aluminum Company of America acquired Alumax in May of 1998. For detailed information regarding the organization and the Acquisition, see Note 1 to the Consolidated Financial Statements of the Company as of and for the year ended December 25, 1998, set forth in the Company's Form 10-K. At the time of the Acquisition, the investor group believed a future listing of the Company on the London Stock Exchange or a future trade sale within the United Kingdom seemed more likely than a future listing or trade sale within the United States. Accordingly, the Group was structured with a United Kingdom holding company. However, since the Acquisition, the investor group and the board of directors of the Company believe that a future listing or trade sale of the group in the United Kingdom has become less likely than a listing or trade sale in the United States (although there are no immediate plans for any such sale or listing, and any decision to sell the Company or obtain a listing for its shares will only be made if and when the Company's board of directors considers this to be in the best interests of the Company and its shareholders). Additionally, the operation of the Group under a United Kingdom holding company has resulted in certain financial and administrative inefficiencies. The principal purpose of the reorganization will be to put into place a new holding company for the Group organized in the United States (the "Reorganization"). The Reorganization will be accomplished in part by means of a "scheme of arrangement" under section 425 of the United Kingdom Companies Act 1985, a United Kingdom judicial proceeding requiring the consent of the registered holders of the Company's Senior Subordinated Notes, the lenders under the Company's Credit Agreement, and the holders of each class of shares of Euramax. Subsequent to the Reorganization, the new United States holding company, Euramax International, Inc., will become the reporting company for the consolidated Group. In addition, Euramax International, Inc. and Amerimax Fabricated Products, Inc. will guarantee the Company's Senior Subordinated Notes. The Company believes that the Reorganization will have no material adverse effect on the operations of the Group or on the registered holders of the Senior Subordinated Notes. For detailed information regarding the Senior Subordinated Notes and the Credit Agreement, see Note 5 to the Consolidated Financial Statements of the Company as of and for the year ended December 25, 1998, set forth in the Company's Form 10-K. The Reorganization is expected to be complete by December 31, 1999. The Condensed Consolidated Financial Statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC"). In the opinion of the management of the Company, these statements include all adjustments necessary for a fair presentation of the results of all interim periods reported herein. All adjustments are of a normal recurring nature unless otherwise disclosed. Management believes that the disclosures made are adequate for a fair presentation of 5 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 1. BASIS OF PRESENTATION (CONTINUED): results of operations, financial position and cash flows. These Condensed Consolidated Financial Statements should be read in conjunction with the year-end consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 25, 1998. Operating results for the period ended September 25, 1999, are not necessarily indicative of future results that may be expected for the year ending December 31, 1999. On February 5, 1999, the Company's wholly owned subsidiary, Amerimax Home Products, Inc., purchased certain assets related to the building materials business of Unimet Manufacturing, Inc. ("Unimet") for approximately $3.3 million, including transaction expenses of approximately $135.4 thousand. Approximately $2.8 million was paid in cash. The remaining purchase price of $500.0 thousand, representing consideration for certain non-compete agreements, will be paid in equal installments over the next five years. On April 23, 1999, the Company's wholly owned subsidiary, Euramax Coated Products Limited, purchased all of the issued and outstanding capital stock of Color Clad plc ("Color Clad") for approximately $3.8 million, including transaction expenses of approximately $171.5 thousand. On June 3, 1999, the Company's wholly owned subsidiary, Amerimax Fabricated Products, Inc., purchased all of the issued and outstanding capital stock of Atlanta Metal Products, Inc. ("AMP") for approximately $16.5 million, including estimated adjustments for changes in working capital required by the purchase agreement and approximately $560.8 thousand of transaction expenses. The Color Clad and AMP acquisitions were financed through borrowings of senior secured revolving loans. Such borrowings were available under the Credit Agreement, which was amended April 6, 1999. In addition, the purchase prices of the above acquisitions have been allocated to the acquired assets and liabilities based upon their estimated fair market values at the acquisition dates under the purchase method of accounting. The pro forma operating results of the Company for the nine months ended September 25, 1999, assuming the above noted companies were acquired on January 1, 1999, would not have been materially different from the results presented in the Condensed Consolidated Financial Statements. Certain 1998 amounts have been reclassified to conform to current year presentation. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: For information regarding significant accounting policies, see Note 2 to the Consolidated Financial Statements of the Company for the year ended December 25, 1998, set forth in the Company's Annual Report on Form 10-K. In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000 (December 31, 2001 for the Company). SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. For fair-value hedge 6 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): transactions in which the Company is hedging changes in the fair value of an asset, liability, or firm commitment, changes in the fair value of the derivative instrument will generally be offset in the income statement by changes in the hedged item's fair value. For cash-flow hedge transactions, in which the Company is hedging the variability of cash flows related to a variable-rate asset, liability, or a forecasted transaction, changes in the fair value of the derivative instrument will be reported in other comprehensive income. The gains and losses on the derivative instrument that are reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are impacted by the variability of the cash flows of the hedged item. The ineffective portion of all hedges will be recognized in current-period earnings. Management is currently reviewing the provisions of SFAS No. 133 and does not believe that the Company's financial statements will be materially impacted upon adoption. 3. INVENTORIES: Inventories were comprised of:
SEPTEMBER 25, DECEMBER 25, 1999 1998 ------------------- ------------------ Raw materials $ 54,249 $ 53,247 Work in process 11,347 10,172 Finished products 13,033 11,316 ------------------- ------------------ $ 78,629 $ 74,735 =================== ==================
4. LONG-TERM OBLIGATIONS: Effective April 6, 1999, the Company amended its Credit Agreement to, among other items, allow for the Color Clad and AMP acquisitions, allow for the prepayment of the Term Loans under the Dutch Guilder facility, and to permanently waive the 1998 Excess Cash Flow Provision. For detailed information regarding the Company's long-term obligations, see Note 5 to the Consolidated Financial Statements of the Company for the year ended December 25, 1998, set forth in the Company's Annual Report on Form 10-K. 5. COMMITMENTS AND CONTINGENCIES: LITIGATION The Company is subject to legal proceedings and claims that have arisen in the ordinary course of business. Although occasional adverse decisions or settlements may occur, it is the opinion of the Company's management, based upon information available at this time, that the expected outcome of these matters, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company and its subsidiaries taken as a whole. 7 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 5. COMMITMENTS AND CONTINGENCIES (CONTINUED): ENVIRONMENTAL MATTERS The Company's operations are subject to federal, state, local and European environmental laws and regulations concerning the management of pollution and hazardous substances. The Company has been named as a defendant in lawsuits or as a potentially responsible party in state and Federal administrative and judicial proceedings seeking contribution for costs associated with the investigation, analysis, correction and remediation of environmental conditions at various hazardous waste disposal sites. The Company continues to monitor these actions and proceedings and to vigorously defend both its own interests as well as the interests of its affiliates. The Company's ultimate liability in connection with present and future environmental claims will depend on many factors, including its volumetric share of the waste at a given site, the remedial action required, the total cost of remediation, and the financial viability and participation of the other entities that also sent waste to the site. Once it becomes probable that the Company will incur costs in connection with remediation of a site and such costs can be reasonably estimated, the Company establishes or adjusts its reserve for its projected share of these costs. Based upon current law and information known to the Company concerning the size of the sites known to it, anticipated costs, their years of operations and the number of other potentially responsible parties, management believes that it has adequate reserves for the Company's potential share of the estimated aggregate liability for the costs of remedial actions and related costs and expenses. In addition, the Company establishes reserves for remedial measures required from time to time at its own facilities. Management believes that the reasonably probable outcomes of these matters will not materially exceed established reserves and will not have a material impact on the future financial position, net earnings or cash flows of the Company. The Company's reserves, expenditures and expenses for all environmental exposures were not significant for any of the dates or periods presented. In connection with the Acquisition of the Company from Alumax on September 25, 1996, the Company was indemnified by Alumax for substantially all of its costs, if any, related to environmental matters for occurrences arising prior to the closing date of the acquisition during the period of time it was owned directly or indirectly by Alumax. Such indemnification includes costs that may ultimately be incurred to contribute to the remediation of certain specified existing National Priorities List ("NPL") sites for which the Company had been named a potentially responsible party under the federal Comprehensive Environmental Response, Compensation, and Liability Information System ("CERCLA") as of the closing date of the acquisition, as well as certain potential costs for sites listed on state hazardous cleanup lists. With respect to all other environmental matters, Alumax's obligations are limited to $125.0 million. However, notwithstanding the indemnity, the Company does not believe that it has any significant probable liability for environmental claims. Further, the Company believes it to be unlikely that the Company would be required to bear environmental costs in excess of its pro rata share of such costs as a potentially responsible party under CERCLA. 6. COMPREHENSIVE INCOME: For the nine months ended September 25, 1999 and September 26, 1998, comprehensive income was approximately $7.6 million and $12.5 million, respectively. Other comprehensive income refers to revenue, expenses, gains and losses that are reflected in stockholders' equity but excluded from net earnings. For the Company, the components of other comprehensive income are principally foreign currency translation adjustments and minimum pension liability adjustments. Other comprehensive income (loss), net of tax, for the 8 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 6. COMPREHENSIVE INCOME (CONTINUED): nine months ended September 25, 1999 and September 26, 1998, was approximately ($2.9) million and $1.7 million, respectively. 7. SEGMENT INFORMATION: For detailed information regarding the Company's reportable segments, see Note 13 to the Consolidated Financial Statements of the Company for the year ended December 25, 1998, set forth in the Company's Annual Report on Form 10-K. The table below presents information about reported segments and a reconciliation of total segment sales to total consolidated sales and of total segment EBITDA to total consolidated earnings before income taxes, for the quarters and nine months ended September 25, 1999 and September 26, 1998.
QUARTERS ENDED NINE MONTHS ENDED ---------------------------------------- --------------------------------------- SEPTEMBER 25, 1999 SEPTEMBER 26, 1998 SEPTEMBER 25, 1999 SEPTEMBER 26, 1998 ------------------- ------------------- ------------------- ------------------- SALES European Roll Coating $ 31,768 $ 36,937 $ 103,136 $ 122,980 U.S. Fabrication 108,962 111,664 294,750 300,451 European Fabrication 12,637 13,217 45,399 48,963 ------------------- ------------------- ------------------- ---------------- Total segment sales 153,367 161,818 443,285 472,394 Eliminations (645) (1,607) (1,977) (8,660) ------------------- ------------------- ------------------- ---------------- Consolidated net sales $ 152,722 $ 160,211 $ 441,308 $ 463,734 =================== =================== =================== ================ EBITDA European Roll Coating $ 4,522 $ 4,702 $ 15,145 $ 17,511 U.S. Fabrication 11,353 11,358 27,950 25,076 European Fabrication 1,456 1,525 5,337 6,029 ------------------- ------------------- ------------------- ---------------- Total EBITDA for reportable segments 17,331 17,585 48,432 48,616 Expenses that are not segment specific (916) (883) (3,318) (3,327) Depreciation and amortization (3,577) (3,075) (10,404) (9,186) Interest expense, net (5,687) (5,815) (16,318) (17,949) ------------------- ------------------- ------------------- ---------------- Consolidated earnings before income taxes $ 7,151 $ 7,812 $ 18,392 $ 18,154 =================== =================== =================== ================
9 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 7. SEGMENT INFORMATION (CONTINUED): The following table reflects revenues from external customers by groups of similar products for the quarters and nine months ended September 25, 1999 and September 26, 1998:
QUARTERS ENDED NINE MONTHS ENDED ------------------------------- --------------------------------- SEPTEMBER 25, SEPTEMBER 26, SEPTEMBER 25, SEPTEMBER 26, CUSTOMERS/MARKETS PRIMARY PRODUCTS 1999 1998 1999 1998 - ------------------------- ---------------------------------- -------------- --------------- --------------- ---------------- Original Equipment Painted aluminum sheet and coil; Manufacturers ("OEMs") fabricated painted aluminum, laminated and fiberglass panels; RV doors, windows and roofing; and composite building panels $ 61,435 $ 64,432 $ 198,801 $ 212,855 Rural Contractors Steel and aluminum roofing and siding 32,926 37,185 87,469 91,819 Home Centers Raincarrying systems, roofing accessories, windows, doors, and shower enclosures 26,924 26,569 65,883 67,241 Manufactured Housing Steel siding and trim components 10,903 14,149 35,144 43,591 Distributors Metal coils, raincarrying systems and roofing accessories 8,761 5,785 20,882 17,622 Industrial and Standing seam panels and siding Architectural and roofing accessories Contractors 5,118 6,358 13,776 15,767 Home Vinyl replacement windows; metal Improvement roofing and insulated roofing Contractors panels; shower, patio and entrance doors; and awnings 6,655 5,733 19,353 14,839 -------------- --------------- --------------- ---------------- $ 152,722 $ 160,211 $ 441,308 $ 463,734 ============== =============== =============== ================
10 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 8. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS: On September 25, 1996, Euramax purchased the Company from Alumax. The acquisition was financed, in part, through Senior Subordinated Notes due 2006 (the "Notes"). The Notes are primary obligations of Euramax (the "Parent"). The United Kingdom and The Netherlands holding company subsidiaries of Euramax are co-obligors under the Notes (the "Co-obligors"). The United States holding company subsidiary of Euramax (the "Guarantor") has provided a full and unconditional guarantee of the Notes. The following Supplemental Condensed Combined Financial Statements as of and for the quarters and nine months ended September 25, 1999 and September 26, 1998, reflect the financial position and results of operations of each of the Parent, the Co-Obligors and Guarantor entities, and such combined information of the Non-Guarantor Subsidiaries. The Co-obligors and the Guarantor are wholly owned subsidiaries of Euramax and are each jointly, severally, fully, and unconditionally liable under the Notes. Separate complete financial statements of each Co-obligor and of the Guarantor are not presented because management has determined that they are not material to investors.
QUARTER ENDED SEPTEMBER 25, 1999 ----------------------------------------------------------------------------------------------- CO-OBLIGORS AND GUARANTOR SUBSIDIARIES ------------------------------------------------------ EURAMAX EURAMAX EURAMAX AMERIMAX EUROPEAN EUROPEAN INTERNATIONAL HOLDINGS, HOLDINGS HOLDINGS LIMITED INC. PLC B.V. NON-GUARANTOR CONSOLIDATED (PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS ------------ ------------ ------------ ------------- -------------- ------------ ------------- Net Sales $ - $ - $ - $ - $ 152,722 $ - $ 152,722 Cost and expenses: Cost of goods sold - - - - 122,744 - 122,744 Selling and general 726 - - - 13,197 - 13,923 Depreciation and amortization - - - - 3,577 - 3,577 ------------ ------------ ------------ ------------- -------------- ------------ ------------- Earnings (loss) from operations (726) - - - 13,204 - 12,478 Equity in earnings (loss) of subsidiaries 4,611 3,339 (836) 1,816 - (8,930) - Interest expense, net - (457) (158) (124) (4,948) - (5,687) Other income (expense), net - - 982 59 (681) - 360 ------------ ------------ ------------ ------------- -------------- ------------ ------------- Earnings (loss) before income taxes 3,885 2,882 (12) 1,751 7,575 (8,930) 7,151 Provision (benefit) for income taxes (225) (178) 263 (13) 3,194 - 3,041 ------------ ------------ ------------ ------------- -------------- ------------ ------------- Net earnings (loss) 4,110 3,060 (275) 1,764 4,381 (8,930) 4,110 Dividends on redeemable preference shares 1,738 - - - - - 1,738 ------------ ------------ ------------ ------------- -------------- ------------ ------------- Net earnings (loss) available for ordinary shareholders $ 2,372 $ 3,060 $ (275) $ 1,764 $ 4,381 $ (8,930) $ 2,372 ============ ============ =========== ============= ============== ============ =============
11 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 8. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
QUARTER ENDED SEPTEMBER 26, 1998 ------------------------------------------------------------------------------------------------- CO-OBLIGORS AND GUARANTOR SUBSIDIARIES ------------------------------------------------------ EURAMAX AMERIMAX EURAMAX EURAMAX INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN LIMITED INC. HOLDINGS PLC HOLDINGS B.V. NON-GUARANTOR CONSOLIDATED (PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS ------------ ------------- ------------ -------------- -------------- ------------- ------------- Net Sales $ - $ - $ - $ - $ 160,211 $ - $ 160,211 Cost and expenses: Cost of goods sold - - - - 131,728 - 131,728 Selling and general - - - - 12,526 - 12,526 Depreciation and amortization - - - - 3,075 - 3,075 ------------ ------------- ------------ -------------- -------------- ------------- ------------- Earnings from operations - - - - 12,882 - 12,882 Equity in earnings (loss) of subsidiaries 4,899 3,759 (490) (147) - (8,021) - Interest expense, net - (456) (199) (145) (5,015) - (5,815) Other income (expense), net - - 622 2,891 (2,768) - 745 ------------ ------------- ------------ -------------- -------------- ------------- ------------- Earnings (loss) before income taxes 4,899 3,303 (67) 2,599 5,099 (8,021) 7,812 Provision (benefit) for income taxes - (212) 71 1,077 1,977 - 2,913 ------------ ------------- ------------ -------------- -------------- ------------- ------------- Net earnings (loss) 4,899 3,515 (138) 1,522 3,122 (8,021) 4,899 Dividends on redeemable preference shares 1,514 - - - - - 1,514 ------------ ------------- ------------ -------------- -------------- ------------- ------------- Net earnings (loss) available for ordinary shareholders $ 3,385 $ 3,515 $ (138) $ 1,522 $ 3,122 $ (8,021) $ 3,385 ============ ============= ============ ============== ============== ============= ============
12 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 8. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
NINE MONTHS ENDED SEPTEMBER 25, 1999 ------------------------------------------------------------------------------------------------- CO-OBLIGORS AND GUARANTOR SUBSIDIARIES ------------------------------------------------------ EURAMAX AMERIMAX EURAMAX EURAMAX INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN LIMITED INC. HOLDINGS PLC HOLDINGS B.V. NON-GUARANTOR CONSOLIDATED (PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS ------------ ------------- ------------ -------------- -------------- ------------- ------------- Net Sales $ - $ - $ - $ - $ 441,308 $ - $ 441,308 Cost and expenses: Cost of goods sold - - - - 354,468 - 354,468 Selling and general 2,148 - - 2 39,134 - 41,284 Depreciation and amortization - - - - 10,404 - 10,404 ------------ ------------- ------------ -------------- -------------- ------------- ------------- Earnings (loss) from operations (2,148) (2) 37,302 - 35,152 Equity in earnings of subsidiaries 12,063 7,478 827 7,626 - (27,994) - Interest expense, net - (1,369) (25) (257) (14,667) - (16,318) Other income (expense), net (3) - (498) (4,093) 4,152 - (442) ------------ ------------- ------------ -------------- --------------- ------------- ------------ Earnings before income taxes 9,912 6,109 304 3,274 26,787 (27,994) 18,392 Provision (benefit) for income taxes (667) (534) (152) (1,495) 10,661 - 7,813 ------------ ------------- ------------ -------------- --------------- ------------- ------------ Net earnings 10,579 6,643 456 4,769 16,126 (27,994) 10,579 Dividends on redeemable preference shares 5,038 - - - - - 5,038 ------------ ------------- ------------ --------------- ------------- ------------- ------------- Net earnings available for ordinary shareholders $ 5,541 $ 6,643 $ 456 $ 4,769 $ 16,126 $ (27,994) $ 5,541 ============ ============= ============ ============== =============== ============= ============
13 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 8. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
NINE MONTHS ENDED SEPTEMBER 26, 1998 ------------------------------------------------------------------------------------------------- CO-OBLIGORS AND GUARANTOR SUBSIDIARIES ------------------------------------------------------ EURAMAX AMERIMAX EURAMAX EURAMAX INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN LIMITED INC. HOLDINGS PLC HOLDINGS B.V. NON-GUARANTOR CONSOLIDATED (PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS ------------ ------------ ------------ -------------- -------------- ------------- ------------- Net Sales $ - $ - $ - $ - $ 463,734 $ - $ 463,734 Cost and expenses: Cost of goods sold - - - - 381,717 - 381,717 Selling and general 128 - - - 37,213 - 37,341 Depreciation and amortization - - - - 9,186 - 9,186 ------------ ------------ ----------- ------------- -------------- ------------ ------------ Earnings (loss) from operations (128) - - - 35,618 - 35,490 Equity in earnings of subsidiaries 11,023 4,216 2,013 4,656 - (21,908) - Interest expense, net - (1,369) (628) (374) (15,578) - (17,949) Other income (expense), net - - 349 2,138 (1,874) - 613 ------------ ------------ ----------- ------------- -------------- ------------ ------------ Earnings before income taxes 10,895 2,847 1,734 6,420 18,166 (21,908) 18,154 Provision (benefit) for income taxes 39 (619) (91) 688 7,281 - 7,298 ------------ ------------ ----------- ------------- -------------- ------------ ------------ Net earnings 10,856 3,466 1,825 5,732 10,885 (21,908) 10,856 Dividends on redeemable preference shares 4,390 - - - - - 4,390 ------------ ------------ ----------- ------------- -------------- ------------ ------------ Net earnings available for ordinary shareholders $ 6,466 $ 3,466 $ 1,825 $ 5,732 $ 10,885 $(21,908) $ 6,466 ============ ============ =========== ============= ============== ============= ============
14 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 8. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
SEPTEMBER 25, 1999 ------------------------------------------------------------------------------------------------- CO-OBLIGORS AND GUARANTOR SUBSIDIARIES ------------------------------------------------------ EURAMAX AMERIMAX EURAMAX EURAMAX INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN LIMITED INC. HOLDINGS PLC HOLDINGS B.V. NON-GUARANTOR CONSOLIDATED (PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS ------------ ------------ ------------ -------------- -------------- ------------- ------------- ASSETS Current assets: Cash and equivalents $ - $ - $ - $ - $ 13,872 $ - $ 13,872 Accounts receivable, net 53 - - - 91,155 - 91,208 Inventories - - - - 78,629 - 78,629 Other current assets - - - - 6,034 - 6,034 ------------ ----------- ------------- ------------- ----------- ------------ ------------ Total current assets 53 - - - 189,690 - 189,743 Property, plant and equipment, net - - - - 118,308 - 118,308 Amounts due from parent/affiliates 74,773 86,225 45,834 43,594 45,826 (296,252) - Goodwill, net - - - - 85,747 - 85,747 Investment in consolidated subsidiaries 67,177 40,037 1,240 26,108 - (134,562) - Deferred income taxes - - - - 8,603 - 8,603 Other assets 1,656 - 670 707 5,041 - 8,074 ------------ ----------- ------------- ------------- ----------- ------------ ------------ $ 143,659 $ 126,262 $ 47,744 $ 70,409 $ 453,215 $ (430,814) $ 410,475 ============ =========== ============= ============= =========== ============= =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Cash overdrafts $ - $ - $ - $ - $ 3,467 $ - $ 3,467 Accounts payable - - - - 58,492 - 58,492 Accrued expenses and other current liabilities 29 - - - 22,592 - 22,621 Income taxes payable (1,554) (2,622) (1,335) 4,413 10,505 - 9,407 Accrued interest payable - 3,971 1,795 1,737 790 - 8,293 Current maturities of long-term debt - - - - 6,266 - 6,266 ------------ ----------- ------------- ------------- ----------- ------------ ----------- Total current liabilities (1,525) 1,349 460 6,150 102,112 - 108,546 Long-term debt, less current maturities 70,605 - 27,179 37,216 76,590 - 211,590 Amounts due to parent/affiliates 10,926 93,407 10,684 2,743 178,492 (296,252) - Other liabilities - - - - 10,708 - 10,708 Deferred income taxes - - - - 15,978 - 15,978 ------------ ----------- ------------- ------------- ----------- ------------ ----------- Total liabilities 80,006 94,756 38,323 46,109 383,880 (296,252) 346,822 ------------ ----------- ------------- ------------- ----------- ------------ ----------- Redeemable preference shares 51,377 - - - - - 51,377 ------------ ----------- ------------- ------------- ----------- ------------ ----------- Ordinary shareholders' equity: Ordinary shares 1,000 - 78 23 4,970 (5,071) 1,000 Paid-in capital - 17,000 6,922 9,077 89,458 (122,457) - Retained earnings (deficit) 16,888 14,767 4,475 17,731 (20,349) (16,624) 16,888 Accumulated other comprehensive loss (5,612) (261) (2,054) (2,531) (4,744) 9,590 (5,612) ------------ ----------- ------------- ------------- ----------- ------------ ----------- Total ordinary shareholders' equity 12,276 31,506 9,421 24,300 69,335 (134,562) 12,276 ------------ ----------- ------------- ------------- ----------- ------------ ----------- $ 143,659 $ 126,262 $ 47,744 $ 70,409 $ 453,215 $ (430,814) $ 410,475 ============ =========== ============= ============= =========== ============ ===========
15 EURAMAX INTERNATIONAL LIMITED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 8. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
DECEMBER 25, 1998 ------------------------------------------------------------------------------------------------- CO-OBLIGORS AND GUARANTOR SUBSIDIARIES ------------------------------------------------------ EURAMAX AMERIMAX EURAMAX EURAMAX INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN LIMITED INC. HOLDINGS PLC HOLDINGS B.V. NON-GUARANTOR CONSOLIDATED (PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS ------------ ------------ ------------ -------------- -------------- ------------- ------------- ASSETS Current assets: Cash and equivalents $ - $ - $ - $ - $ 19,044 $ - $ 19,044 Accounts receivable, net - - - - 81,845 - 81,845 Inventories - - - - 74,735 - 74,735 Other current assets - - - - 4,585 - 4,585 ------------ ----------- ----------- ------------ ----------- ------------ ------------ Total current assets - - - - 180,209 - 180,209 Property, plant and equipment, net - - - - 117,080 117,080 Amounts due from parent/affiliates 73,197 72,188 43,622 46,447 93,168 (328,622) - Goodwill, net - - - - 76,047 - 76,047 Investment in consolidated subsidiaries 57,951 32,559 357 20,846 - (111,713) - Deferred income taxes - - - - 8,588 8,588 Other assets 1,834 - 756 871 3,264 - 6,725 ------------ ----------- ----------- ------------ ----------- ------------ ------------ $ 132,982 $ 104,747 $ 44,735 $ 68,164 $ 478,356 $ (440,335) $ 388,649 ============ =========== =========== ============ =========== ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Cash overdrafts $ - $ - $ - $ - $ 1,513 $ - $ 1,513 Accounts payable - - - - 51,862 - 51,862 Accrued expenses and other current liabilities 305 - - - 20,599 - 20,904 Income taxes payable (882) (2,088) (1,207) 1,095 6,560 - 3,478 Accrued interest payable - 1,986 913 967 846 - 4,712 Current maturities of long- term debt - - - - 9,182 - 9,182 ------------ ----------- ----------- ------------ ----------- ------------ ------------ Total current liabilities (577) (102) (294) 2,062 90,562 - 91,651 Long-term debt, less current maturities 70,605 - 27,179 37,216 73,496 - 208,496 Amounts due to parent/affiliates 6,950 79,987 8,792 7,019 225,874 (328,622) - Other liabilities - - - - 13,100 - 13,100 Deferred income taxes - - - - 19,398 - 19,398 ------------ ----------- ----------- ------------ ----------- ------------ ------------ Total liabilities 76,978 79,885 35,677 46,297 422,430 (328,622) 332,645 ------------ ----------- ----------- ------------ ----------- ------------ ------------ Redeemable preference shares 46,339 - - - - - 46,339 ------------ ----------- ----------- ------------ ----------- ------------ ------------ Ordinary shareholders' equity: Ordinary shares 1,000 - 78 23 4,970 (5,071) 1,000 Paid-in capital - 17,000 6,922 9,077 89,458 (122,457) - Retained earnings (deficit) 11,347 8,124 4,019 12,962 (36,475) 11,370 11,347 Accumulated other comprehensive loss (2,682) (262) (1,961) (195) (2,027) 4,445 (2,682) ------------ ----------- ----------- ------------ ----------- ------------ ------------ Total ordinary shareholders' equity 9,665 24,862 9,058 21,867 55,926 (111,713) 9,665 ------------ ----------- ----------- ------------ ----------- ------------ ------------ $ 132,982 $ 104,747 $ 44,735 $ 68,164 $ 478,356 $ (440,335) $ 388,649 ============ =========== =========== ============ =========== ============ ============
16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements included elsewhere in this document, as well as the year-end consolidated financial statements and management's discussion and analysis included in the Company's Annual Report on Form 10-K for the year ended December 25, 1998. BUSINESS STRATEGY The Company's strategy is to expand its leadership position as a producer of aluminum and steel products and to further diversify product offerings, customers and geographic regions in which it operates. Under this strategy, the Company is pursuing organic growth through product development, new territories and new customers. Also under this strategy, during the nine months ended September 25, 1999, the Company successfully completed three acquisitions. On February 5, 1999, the Company acquired certain assets related to the building materials business of Unimet Manufacturing, Inc. ("Unimet"). The acquisition was completed to expand the Company's customer base for metal raincarrying systems sold to the home center, buying cooperative and building distributor markets in the United States. In addition, on April 23, 1999, the Company completed an acquisition of all of the outstanding shares of Color Clad plc, a U.K. corporation ("Color Clad"). Color Clad is a producer of aluminum exterior walls and roofs sold primarily to U.K. producers of recreational vehicles (caravans). The acquisition supplements the Company's leading position as a supplier of such products in Western Europe. Further, on June 3, 1999, the Company acquired all of the outstanding shares of Atlanta Metal Products, Inc. ("AMP"). AMP is a producer and distributor of custom and standard metal raincarrying, roofing, and accessory products for the building and construction market, primarily in the Southeast. The acquisition has enhanced the Company's position as a supplier of metal raincarrying and roofing products to the distributor market in the United States. The Company expects to continue identifying and acquiring businesses and assets as part of executing its strategy. RESULTS OF OPERATIONS QUARTER ENDED SEPTEMBER 25, 1999 AS COMPARED TO QUARTER ENDED SEPTEMBER 26, 1998 The following table sets forth the Company's Statements of Earnings data expressed as a percentage of net sales:
QUARTERS ENDED -------------------------------------------- SEPTEMBER 25, SEPTEMBER 26, 1999 1998 -------------------------------------------- STATEMENTS OF EARNINGS DATA: Net sales 100.0% 100.0% Costs and expenses: Cost of goods sold 80.4 82.2 Selling and general 9.1 7.8 Depreciation and amortization 2.3 1.9 -------------------------------------------- Earnings from operations 8.2 8.1 Interest expense, net (3.7) (3.6) Other income, net 0.2 0.5 -------------------------------------------- Earnings before income taxes 4.7 5.0 Provision for income taxes 2.0 1.8 -------------------------------------------- Net earnings 2.7% 3.2% ============================================
17 The following table sets forth the Net Sales and Earnings from Operations data for the United States and Europe for the quarters ended September 25, 1999 and September 26, 1998:
Net Sales Earnings from Operations ------------------------------------------------ -------------------------------------------- September 25, September 26, Increase/ September 25, September 26, Increase/ IN THOUSANDS 1999 1998 (decrease) 1999 1998 (decrease) --------------- --------------- ------------ ------------- -------------- ------------ United States $ 108,961 $ 111,663 (2.4)% $ 8,857 $ 8,716 1.6% Europe 43,761 48,548 (9.9)% 3,621 4,166 (13.1)% --------------- --------------- ------------- -------------- Totals $ 152,722 $ 160,211 (4.7)% $ 12,478 $ 12,882 (3.1)% =============== =============== ============= ==============
NET SALES. Net sales in the United States for the third quarter of 1999 were slightly lower when compared to the same period of 1998, reflecting a decrease of 2.4%. Sales in the United States benefited primarily from increases in sales to the recreational vehicle ("RV"), distributor and home improvement contractor markets, while sales continued to lag in the manufactured housing, rural contractor and industrial and architectural contractor markets. The increase in sales to the RV market coincides with what appears to be a record year for shipments of end-use products by the RV industry in the United States. In recent years the RV industry has thrived in an environment of low interest rates, low fuel prices and favorable demographics. Changes to one or more of these factors may preclude shipments from continuing at the current pace. The favorable increase in sales to the distributor market is attributable, in part, to the acquisition of AMP (see Note 1 to the Condensed Consolidated Financial Statements). The home improvement contractor market also experienced an increase in sales aided by an increase in the sale of vinyl windows. Lower sales to the manufactured housing market contributed to the decrease in sales and were primarily the result of lower realized sales prices caused by competition for a declining number of manufactured homes produced with steel siding. The Company continues to explore opportunities to increase its offering of substitute materials to this market. The decline in sales is also attributable to lower sales to the rural contractor market, which is primarily due to a decline in sales to the confinement market resulting from increased federal and state legislation effecting the swine confinement market. Further, sales to the industrial and architectural contractor markets lagged primarily due to a nationwide downturn of non-residential construction and lower realized selling prices resulting from competition for the reduced number of available projects. The Company's United States subsidiaries are included in the U.S. Fabrication Segment (see Note 7 to the Condensed Consolidated Financial Statements). Net sales in Europe for the quarter ended September 25, 1999, were approximately 9.9% lower than the quarter ended September 26, 1998. Approximately 48% of the decline reflects the weakening of the Pound Sterling, Dutch Guilder and French Franc relative to the U.S. Dollar. The balance of the decline relates to a softer market for industrial consumers of aluminum and steel coil in the United Kingdom and continental Europe. Further, the strength of the Pound Sterling relative to other foreign currencies has restricted the Company's ability to competitively export, to continental Europe, products produced in the United Kingdom. Offsetting the decline in sales to a variety of industrial consumers, third quarter 1999 sales to the RV (caravan) sector of the OEM market in both The Netherlands and the United Kingdom increased. These factors resulted in a net decrease in sales in the European Roll Coating Segment (see Note 7 to the Condensed Consolidated Financial Statements). COST OF GOODS SOLD. Cost of goods sold, as a percentage of net sales, decreased 1.8% for the quarter ended September 25, 1999, to 80.4% in 1999 from 82.2% in 1998. This decrease is primarily attributable to a decrease in the average raw material aluminum prices as compared to the prior year. SELLING AND GENERAL. Selling and general expenses, as a percentage of net sales, increased 1.3% for the 18 quarter ended September 25, 1999, to 9.1% in 1999 from 7.8% in 1998. This increase is primarily attributable to information technology expenses, product development, salary increases and professional fees related to the Reorganization. See Note 1 to the Condensed Consolidated Financial Statements for information regarding the Reorganization. DEPRECIATION AND AMORTIZATION. Depreciation and amortization, as a percentage of net sales, increased 0.4% for the quarter ended September 25, 1999, to 2.3% in 1999 from 1.9% in 1998, primarily related to 1999 acquisitions. EARNINGS FROM OPERATIONS. Despite decreases in net sales for the reasons stated above, the Company has maintained stable margins on a consolidated basis. Earnings from operations, as a percentage of net sales, were 8.2% of net sales for the quarter ended September 25, 1999, and 8.1% of sales for the quarter ended September 26, 1998. INTEREST EXPENSE, NET. Net interest expense decreased to $5.7 million for the quarter ended September 25, 1999, from $5.8 million for the quarter ended September 26, 1998, primarily due to lower average debt balances. OTHER EXPENSES, NET. Other expenses were not significant for the quarters ended September 25, 1999 and September 26, 1998. PROVISION FOR INCOME TAXES. The income tax provision for the period is based on the effective tax rate expected to be applicable for the full year. The effective rate for the provision for income taxes increased to 42.5% from 37.3% for the quarters ended September 25, 1999 and September 26, 1998, respectively. The increase in the effective rate is primarily due to higher forecasted U.S. earnings, which are taxed at a slightly higher rate than the European earnings, and non-deductible goodwill amortization resulting from acquisitions. NINE MONTHS ENDED SEPTEMBER 25, 1999 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER 26, 1998 The following table sets forth the Company's Statements of Earnings data expressed as a percentage of net sales:
NINE MONTHS ENDED -------------------------------------------- SEPTEMBER 25, SEPTEMBER 26, 1999 1998 -------------------------------------------- STATEMENTS OF EARNINGS DATA: Net sales 100.0% 100.0% Costs and expenses: Cost of goods sold 80.3 82.3 Selling and general 9.3 8.1 Depreciation and amortization 2.4 2.0 -------------------------------------------- Earnings from operations 8.0 7.6 Interest expense, net (3.7) (3.9) Other income (expense), net (.1) 0.1 -------------------------------------------- Earnings before income taxes 4.2 3.8 Provision for income taxes 1.8 1.6 -------------------------------------------- Net earnings 2.4% 2.2% ============================================
19 The following table sets forth the Net Sales and Earnings from Operations data for the United States and Europe for the nine months ended September 25, 1999 and September 26, 1998:
Net Sales Earnings from Operations --------------------------------------------- --------------------------------------------- September 25, September 26, Increase/ September 25, September 26, Increase/ IN THOUSANDS 1999 1998 (decrease) 1999 1998 (decrease) ---------------- ------------- ------------ ------------- ------------- ------------ United States $ 294,749 $ 300,449 (1.9)% $ 21,656 $ 17,375 24.6% Europe 146,559 163,285 (10.2)% 13,496 18,115 (25.5)% ------------- ----------- ----------- ----------- Totals $ 441,308 $ 463,734 (4.8)% $ 35,152 $ 35,490 (1.0)% ============== ============ ============ ============
NET SALES. Net sales in the United States, for the nine months ended September 25, 1999, reflect approximately $6.0 million in sales attributable to the acquisitions of Unimet and AMP. For the nine months ended September 25, 1999, as compared to the nine months ended September 25, 1998, sales in the Unites States also benefited primarily from increases in sales to distributors and home improvement contractors and, also, from increases in sales to RV manufacturers. Sales decreased to manufactured housing customers, rural contractors and industrial and architectural contractors, offsetting sales increases and resulting in a net decline in United States sales of approximately 1.9%. See "Quarter Ended September 25, 1999 as Compared to Quarter Ended September 26, 1999 Net Sales" for further discussion of the factors affecting sales in the United States, as the factors also apply to net sales for the nine months ended September 25, 1999, as compared to the nine months ended September 26, 1998. Sales in Europe for the nine months ended September 25, 1999, as compared to the prior year, declined approximately 10.2%. Approximately 16% of this decline reflects the weakening of the Pound Sterling, Dutch Guilder and French Franc relative to the U.S. Dollar. The balance of the decrease in sales in Europe is primarily attributable to a softer market for industrial consumers of aluminum and steel coil in the United Kingdom and continental Europe and export pricing pressures in the United Kingdom. In addition, net sales in both the United States and Europe declined due to lower average aluminum selling prices in 1999 as compared to 1998. The average price of aluminum on the London Metal Exchange for the nine months ended September 25, 1999, was approximately 4.9% lower than the average for the nine months ended September 25, 1998. Sales of aluminum-based products were approximately 53.4% of net sales for the nine months ended September 25, 1999. Offsetting the decline in sales, sales to the RV (caravan) sector of the OEM market increased for the nine months ended September 25, 1999, compared to the nine months ended September 26, 1998. COST OF GOODS SOLD. Cost of goods sold, as a percentage of net sales, decreased 2.0% for the nine months ended September 25, 1999, to 80.3% in 1999 from 82.3% in 1998. This decrease is primarily attributable to operational improvements realized at the Helena, Arkansas paintline facility, and a decrease in the average raw material aluminum prices. SELLING AND GENERAL. Selling and general expenses, as a percentage of net sales, increased 1.2% for the nine months ended September 25, 1999, to 9.3% in 1999 from 8.1% in 1998. This increase is primarily attributable to lower net sales, information technology expenses, product development, salary increases and professional fees related to the Reorganization. See Note 1 to the Condensed Consolidated Financial Statements for information regarding the Reorganization. DEPRECIATION AND AMORTIZATION. Depreciation and amortization, as a percentage of net sales, increased 0.4% for the nine months ended September 25, 1999, to 2.4% in 1999 from 2.0% in 1998, primarily related to the 1999 acquisitions. 20 EARNINGS FROM OPERATIONS. Despite decreases in net sales for the reasons stated above, the Company increased its earnings from operations, as percentage of net sales. As a percentage of net sales, earnings from operations increased to 8.0% for the nine months ended September 25, 1999, from 7.6% for the nine months ended September 26, 1998. The Company's geographic and market diversity, the diversity of its product offerings, and productivity improvements, have resulted in stable margins on a consolidated basis in a period of reduced demand in continental Europe and export pricing pressures in the United Kingdom. For the nine months ended September 25, 1999, as compared to the prior year, the improvement in earnings in the United States is primarily due to operational and market improvements, while the decline in European earnings is primarily attributable to softer European markets. INTEREST EXPENSE, NET. Net interest expense decreased to $16.3 million for the nine months ended September 25, 1999, from $17.9 million for the nine months ended September 26, 1998, primarily due to lower average debt balances. OTHER EXPENSES, NET. Other expenses were not significant for the nine months ended September 25, 1999 and September 26, 1998. PROVISION FOR INCOME TAXES. The income tax provision for the period is based on the effective tax rate expected to be applicable for the full year. The effective rate for the provision for income taxes was 42.5% for the nine months ended September 25, 1999, and 40.2% for the nine months ended September 26, 1998. The increase in the effective rate is primarily due to higher forecasted United States earnings, which are taxed at a slightly higher rate than the European earnings, and non-deductible goodwill resulting from acquisitions. LIQUIDITY AND CAPITAL RESOURCES LIQUIDITY. The Company's primary liquidity needs arise from debt service incurred in connection with acquisitions and the funding of capital expenditures. As of September 25, 1999, the Company had outstanding indebtedness of $217.9 million, as compared to $217.7 as of December 25, 1998. Included in such indebtedness was approximately $82.9 million under the Company's Credit Agreement, consisting of $31.9 million under the Company's Term Loans and $51.0 million under the Company's Revolving Credit Facility. The undrawn amount of the Revolving Credit Facility at September 25, 1999, was $49.0 million, which was available for working capital and general corporate purposes, subject to borrowing base limitations. As of September 25, 1999, this amount was fully available. Although the 1999 acquisitions were financed with borrowings under the Company's Credit Agreement, the increase in indebtedness was offset by repayments of debt resulting from reductions in working capital and cash flow generated from operations. The Company's leveraged financial position requires that a substantial portion of the Company's cash flow from operations be used to pay interest on the Notes, principal and interest under the Company's Credit Agreement and other indebtedness. Significant increases in the floating interest rates on the Term Loans and Revolving Credit Facility would result in increased debt service requirements, which may reduce the funds available for capital expenditures and other operational needs. In addition, the Company's leveraged position may impede its ability to obtain financing in the future for working capital, capital expenditures and general corporate purposes. Further, the Company's leveraged position may make it more vulnerable to economic downturns and may limit its ability to withstand competitive pressures. 21 The Company's primary source of liquidity is funds generated from operations, which are supplemented by borrowings under the Credit Agreement. Net cash provided by operating activities increased $1.3 million for the nine months ended September 25, 1999, compared to the nine months ended September 26, 1998. See Note 1 to the Condensed Consolidated Financial Statements for information regarding acquisitions completed during the nine months ended September 25, 1999, and the related purchase prices. The Company believes that cash generated from operations and, subject to borrowing base limitations, borrowings under the Company's Credit Agreement will be adequate to meet its needs for the foreseeable future, although no assurance to that effect can be given. CAPITAL EXPENDITURES. The Company's capital expenditures were $10.2 million and $9.5 million for the nine months ended September 25, 1999 and September 26, 1998, respectively. Capital expenditures in both periods primarily relate improvements in the Company's paintlines and to purchases and upgrades of fabricating equipment and information systems. In addition, the Company has made and will continue to make capital expenditures to comply with Environmental Laws. Environmental capital expenditures for the nine months ended September 25, 1999 and September 26, 1998, were not significant. WORKING CAPITAL MANAGEMENT. Working capital was $81.2 million as of September 25, 1999, compared to $88.6 million as of December 25, 1998. The decrease in working capital is primarily due to an increase in current liabilities as of September 25, 1999, compared to December 25, 1998, resulting from the timing of payments due. The Company expects to continue to aggressively manage working capital levels. IMPACT OF THE YEAR 2000 ISSUE The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the application year. Any of the Company's computers and equipment that have date-sensitive software, including embedded computer chips, may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure, operating equipment failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Company's plan to resolve the Year 2000 issue involves four phases: assessment, remediation, testing and implementation. To date, management has fully completed its assessment of the effect of the Year 2000 issue on its information systems, including the operating systems and equipment used in its manufacturing operations. Based on assessments conducted in 1997, the Company determined that it would be required to modify or replace significant portions of its software at two of its subsidiaries so that its computer systems will properly utilize dates beyond December 31, 1999. Based upon assessments conducted in 1998 with regard to operating equipment, the Company determined that it would not be required to modify or replace any material pieces of operating equipment in order for the equipment to properly utilize dates beyond December 31, 1999. With respect to remediation, two of the Company's subsidiaries are currently finalizing conversions to fully integrated third-party software packages that will process the majority of the Company's key transactions. These conversions, including the testing and implementation of the new systems, are 22 expected to be fully complete in the fourth quarter of 1999. Historical costs incurred through September 25, 1999, are approximately $2.5 million. The Company estimates the costs to complete the conversions to be approximately $240.0 thousand, which will be funded through operating cash flows. The total estimated costs of conversion to the integrated third party software packages also include the costs of conversion to the Euro (see "European Currency"). The Company is approximately 85% complete with the remediation phase related to the modification and replacement of the systems software located at the two subsidiaries. The Company believes that with the current modifications of existing software, the Year 2000 issue can be mitigated with respect to its significant processes. The Company is 100% complete on the testing phase for all other systems and operating equipment that the Company has assessed as being capable of properly utilizing dates beyond December 31, 1999. With respect to third parties, the Company has communicated with a majority of its major customers and its major vendors and suppliers to determine their state of readiness with respect to the Year 2000 issue. In addition, the Company conducted tests with several of its major vendors and suppliers during 1998 and 1999. All costs associated with supplier and vendor compliance were borne by the suppliers and vendors. Based upon the information provided by customers and suppliers and the tests which have been conducted with suppliers, the Company is not aware of any problems that would materially impact its results of operations, liquidity or capital resources. While the Company currently believes that it will be able to modify or replace its affected systems in time to minimize any detrimental effects on its operations, failure to do so, or the failure of the Company's major customers and suppliers to modify or replace their affected systems, could have a material adverse impact on the Company's results of operations, liquidity or consolidated financial position in the future. The most reasonably likely worst case scenario of failure by the Company or its customers and suppliers to resolve the Year 2000 issue in a timely fashion would be a temporary slowdown in operations at one or more of the Company's facilities and a temporary inability on the part of the Company to timely process orders and billings. In the event that modifications and replacements of systems are not completed timely, the Company's individual subsidiaries have identified and considered various contingency options, including identification of alternate suppliers and vendors, and including the processing of significant transactions by other facilities located within the Company whose systems are capable of properly utilizing dates beyond December 31, 1999. EUROPEAN CURRENCY As provided in the 1992 treaty on European Union, on January 1, 1999, a new single European currency, the "Euro," became a currency in its own right, replacing the currencies of the eleven initial members of the European Union ("participating countries"). Fixed conversion rates between the participating countries' existing currencies ("legacy currencies") and the Euro were established as of that date. The Euro is available for non-cash transactions. Between January 1, 1999 and January 1, 2002 (the "transition period"), the participating countries have the option of accounting for their transactions in either Euros or their legacy currencies. The legacy currencies are scheduled to remain legal tender as denominations of the Euro until at least January 1, 2002, but not later than July 1, 2002. Beginning July 1, 2002, legacy currencies will cease to exist. 23 SCHEDULE FOR INTRODUCTION OF THE EURO - Three of the Company's European subsidiaries are located in participating countries, but have elected the option of continuing to account for their transactions in their legacy currencies during at least the first half of the transition period. However, the Company, including subsidiaries located in both participating as well as non-participating countries, was able to transact business in the Euro as of January 1, 1999. This includes the ability to make and receive payments in the Euro, to invoice in the Euro, and to provide pricing in the Euro. ECONOMIC IMPACT ON THE COMPANY - The increased price transparency resulting from the use of a single currency in the participating countries may affect the ability of certain companies to price their products differently in the various European markets. A possible result of this pricing transparency is price harmonization at lower average prices for products sold in some markets. However, due to the niche markets in which the Company operates, the Company does not anticipate and has not experienced a materially negative impact on its net sales or earnings from operations resulting from the use of a single currency by the participating countries. In addition to the economic impact of pricing transparency, conversion to the Euro may reduce the Company's exposure to changes in foreign exchange rates due to the effect of having various assets and liabilities denominated in a single currency as opposed to various legacy currencies. However, because there will be less diversity in the Company's exposure to foreign currencies, movements in the Euro's value in U.S. dollars could have a more pronounced effect, positive or negative, on the Company's results. COSTS OF CONVERSION TO THE EURO - The Company's European subsidiaries located in participating countries have converted or are in the process of converting to new computer systems to prepare for the Year 2000. These systems will also be Euro-capable. The conversions are expected to be in the fourth quarter of 1999. The Company estimates that its costs to complete the conversions to the new systems, which relate to Year 2000 issues, the Euro and operational improvements, will be approximately $200.0 thousand in the fourth quarter of 1999, and will be funded through operating cash flows. Other costs of conversion to the Euro are not expected to be material. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000 (December 31, 2001 for the Company). SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. For fair-value hedge transactions in which the Company is hedging changes in the fair value of an asset, liability, or firm commitment, changes in the fair value of the derivative instrument will generally be offset in the income statement by changes in the hedged item's fair value. For cash-flow hedge transactions, in which the Company is hedging the variability of cash flows related to a variable-rate asset, liability, or a forecasted transaction, changes in the fair value of the derivative instrument will be reported in other comprehensive income. The gains and losses on the derivative instrument that are reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are impacted by the variability of the cash flows of the hedged item. The ineffective portion of all hedges will be recognized in current period earnings. Management is currently reviewing the provisions of SFAS No. 24 133 and does not believe that the Company's financial statements will be materially impacted by the adoption. ENVIRONMENTAL MATTERS The Company's exposure to environmental matters has not changed significantly from the year ended December 25, 1998. For detailed information regarding environmental matters, see "Management's Discussion and Analysis - Risk Management" set forth in the Company's Annual Report on Form 10-K for the year ended December 25, 1998. NOTE REGARDING FORWARD LOOKING STATEMENTS: The Management's Discussion and Analysis and other sections of this Form 10-Q may contain forward looking statements that are based on current expectations, estimates and projections about the industries in which the Company operates, management's beliefs and assumptions made by management. Words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," or variations of such words and similar expressions are intended to identify such forward looking statements. These forward-looking statements are based on a number of assumptions that could ultimately prove inaccurate, and, therefore, there can be no assurance that they will prove to be accurate. All such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Important factors that could cause future financial performance to differ materially and significantly from past results and from those expressed or implied in this document include, without limitation, the risks of acquisition of businesses (including limited knowledge of the businesses acquired and misrepresentations by sellers), changes in business strategy or development plans, the cyclical demand for the Company's products, the supply and/or price of aluminum and other raw materials, currency exchange rate fluctuations, environmental regulations, availability of financing, competition, reliance on key management personnel, ability to manage growth, loss of customers, and a variety of other factors. For further information on these and other risks, see the "Risk Factors" section of Item 1 of the Company's Annual Report on Form 10-K for the year ended December 25, 1998, as well as the Company's other filings with the Securities and Exchange Commission. The Company assumes no obligation to update publicly its forward looking statements, whether as a result of new information, future events or otherwise. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The following discussion about the Company's risk-management activities includes forward-looking statements that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statement. See "Note Regarding Forward Looking Statements" for additional information regarding the Private Securities Litigation Reform Act. The Company's management of market risk from changes in interest rates, exchange rates and commodity prices has not changed from the year ended December 25, 1998. For detailed information regarding the Company's risk management, see "Management's Discussion and Analysis - Risk Management" and "Item 7A. Quantitative and Qualitative Disclosures about Market Risk" set forth in the Company's Annual Report on Form 10-K for the year ended December 25, 1998. The Company's exposure to market risk from changes in interest rates and commodity prices have not changed significantly from the year ended December 25, 1998. The Company's exposure to market risk from changes in exchange rates has decreased since the year ended December 25, 1998. This analysis presents the hypothetical increase in foreign exchange loss and increase in interest expense 25 related to those financial instruments and derivative instruments held by the Company at September 25, 1999, which are sensitive to changes in foreign currency exchange risks. A hypothetical 10 percent decrease in foreign currency exchange rates would increase the Company's foreign currency exchange loss by approximately $263.2 thousand for the nine months ended September 25, 1999, as compared to the hypothetical increase in the Company's foreign currency exchange loss of approximately $1.9 million for the year ended December 25, 1998. The decrease in the hypothetical loss for the period ended September 25, 1999, is primarily attributable to the prepayment of the Company's unhedged Tranche B Term Loans under the Dutch Guilder facility (U.S. Dollar denominated debt) during the second quarter of 1999. All other factors remaining unchanged, a hypothetical 10 percent increase in foreign currency exchange rates for one year would increase interest expense by approximately $737.8 thousand as calculated at September 25, 1999, as compared to the hypothetical increase in the Company's interest expense of approximately $1.4 million as calculated at December 25, 1998. The decrease is primarily due to the effect of the weakening of the Dutch Guilder and Pound Sterling on the Company's currency swap payments (see Note 5 to the Consolidated Financial Statements for the year ended December 25, 1998, set forth in the Company's Annual Report on Form 10-K). PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a)(1) The following consolidated financial statements of Euramax International Limited and its subsidiaries are included in Part I, Item 1. Condensed Consolidated Statements of Earnings for the quarters and the nine months ended September 25, 1999 and September 26, 1998 Condensed Consolidated Balance Sheets at September 25, 1999 and December 25, 1998 Condensed Consolidated Statements of Cash Flows for the nine months ended September 25, 1999 and September 26, 1998 Notes to Condensed Consolidated Financial Statements (b) The Company filed no reports on Form 8-K during the three months ended September 25, 1999. 26 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED) (c) Exhibits: 2.1** Purchase Agreement dated as of April 28, 1997, among the Company and Genstar Capital Corporation ("GCC"), Ontario Teachers' Pension Plan Board and the Management Stockholders of Gentek Holdings, Inc. ("Holdings") as sellers GCC as sellers' representative; Holdings and Gentek Building Products, Inc. ("GBPI"). (Incorporated by reference to Exhibit 2.1 of the Registrant's Form 8-K filed August 1, 1997). 2.2 Proposals for the acquisition of the entire issued share capital of Euramax International Limited by Euramax International, Inc. to be effected by means of a Scheme of Arrangement under Section 425 of the Companies Act 1985 3.1* Articles of Association of Euramax International Limited 3.2* Memorandum and Articles of Association of Euramax European Holdings plc 3.3* Articles of Association of Euramax International B.V. 3.4* Articles of Incorporation of Amerimax Holdings, Inc. 3.5* Bylaws of Amerimax Holdings, Inc. 4.3* Indenture, dated as of September 25, 1996, by and among Euramax International Limited, Euramax European Holdings plc, Euramax European Holdings B.V., Amerimax Holdings, Inc. and the Chase Manhattan Bank, as Trustee. 4.4* Deposit Agreement, dated as of September 25, 1996, by and among Euramax International Limited, Euramax European Holdings plc, Euramax European Holdings B.V., and The Chase Manhattan Bank, as book-entry depositary 4.5* Registration Rights Agreement, dated as of September 25, 1996, by and among Euramax International Limited, Euramax European Holdings plc, Euramax European Holdings B.V., Amerimax Holdings, Inc. and J.P. Morgan Securities Inc. and Goldman Sachs & Co. 4.6* Purchase Agreement dated as of September 18, 1996, by and among Euramax International Limited, Euramax European Holdings plc, Euramax European Holdings B.V., Amerimax Holdings, Inc. and J.P. Morgan Securities Inc. and Goldman Sachs & Co. 10.26*** Incentive Compensation Plan effective January 1, 1997, by Euramax International Limited 10.27*** Phantom Stock Plan effective January 1, 1999, by Euramax International Limited 10.28**** Amendment and Waiver dated as of April 6, 1999, among Euramax International Limited, and its subsidiaries, Paribas (as Agent and Lender), and the Lenders, to the Amended and Restated Credit Agreement dated as of July 16, 1997. 27 Financial Data Schedule - ------------------------------------------------------------------------------ * Incorporated by reference to the Exhibit with the same number in the Registrant's Registration Statement on Form S-4 (333-05978) which became effective on February 7, 1997. ** Incorporated by reference to the Exhibit with the same number in the Registrant's Annual Report on Form 10-K (333-05978) which was filed on March 12, 1998. *** Incorporated by reference to the Exhibit with the same number in the Quarterly Report on Form 10-Q (333-05978) which was filed on April 26, 1999. **** Incorporated by reference to the Exhibit with the same number in the Quarterly Report on Form 10-Q (333-05978) which was filed on August 2, 1999. 27 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934, EURAMAX INTERNATIONAL LIMITED HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. EURAMAX INTERNATIONAL LIMITED
SIGNATURE TITLE DATE ---- /s/ J. DAVID SMITH Chief Executive Officer and President November 3, 1999 - ------------------------------ J. David Smith /s/ R. SCOTT VANSANT Chief Financial Officer and Secretary November 3, 1999 - ------------------------------ R. Scott Vansant
28 EX-2.2 2 EXHIBIT 2.2 Exhibit 2.2 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action to be taken, you should immediately consult your bank manager, solicitor, accountant or other independent professional adviser authorised under the Financial Services Act 1986. If you have sold or transferred all your shares in Euramax International Limited, please send this document and the accompanying proxy forms to the purchaser or transferee without delay. - ------------------------------------------------------------------------------- Proposals for the acquisition of the entire issued share capital of EURAMAX INTERNATIONAL LIMITED by EURAMAX INTERNATIONAL, INC. to be effected by means of a Scheme of Arrangement under Section 425 of the Companies Act 1985 - ------------------------------------------------------------------------------- A letter from the Chairman of Euramax International Limited is set out on pages 5 to 9 of this document. Notices of meetings of Euramax International Limited to be held on 16 November 1999 are set out on pages 52 to 61 of this document. The action you are recommended to take is set out on pages 22 and 23 of this document. Whether or not you intend to be present at the meetings convened by the above-mentioned notices, you are requested to complete and return the relevant forms of proxy so as to arrive as soon as possible and in any event no later than 48 hours before the time fixed for the relevant meeting. Forms of proxy for the Court Meetings (but not for the Extraordinary General Meeting) will be valid if handed to the Chairman of the relevant Court Meeting at the meeting. CONTENTS DEFINITIONS...................................................................................................1 PART I - LETTER FROM THE CHAIRMAN OF EURAMAX..................................................................5 PART II - EXPLANATORY STATEMENT..............................................................................10 PART III - SCHEME OF ARRANGEMENT.............................................................................24 APPENDIX I - STRUCTURE DIAGRAMS..............................................................................30 APPENDIX II - COMPARISON OF EURAMAX SHARES AND EURAMAX US SHARES.............................................31 APPENDIX III - GENERAL INFORMATION...........................................................................44 APPENDIX IV - COMPARISON OF LAWS.............................................................................48 NOTICES OF MEETINGS..........................................................................................51 Notice of Court Meeting of holders of Voting Ordinary Shares.............................................51 Notice of Court Meeting of holders of Non-voting Ordinary Shares.........................................53 Notice of Court Meeting of Holders of Dollar Preference Shares...........................................55 Notice of Court Meeting of Holders of Sterling Preference Shares.........................................57 Notice of Extraordinary General Meeting..................................................................59
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
1999 Latest time for receipt of forms of proxy for the Court Meetings+ - - from holders of Voting Ordinary Shares 8.30 am on 16 November - - from holders of Non-voting Ordinary Shares 8.45 am on 16 November - - from holders of Dollar Preference Shares 9.00 am on 16 November - - from holders of Sterling Preference Shares 9.15 am on 16 November Latest time for receipt of forms of proxy for the Extraordinary General Meeting 9.30 am on 16 November Court Meeting of holders of Voting Ordinary Shares 9.30 am on 16 November Court Meeting of holders of Non-voting Ordinary shares 9.45 am on 16 November Court Meeting of holders of Dollar Preference Shares 10.00 am on 16 November Court Meeting of holders of Sterling Preference Shares 10.15 am on 16 November Extraordinary General Meeting* 10.30 am* on 16 November Date of Court hearing of petition to sanction the Scheme 6 December Scheme Record Date 7 December Effective Date 8 December Certificates for Euramax US Shares despatched 9 December
+ forms of proxy will be valid if handed to the Chairman of the relevant Court Meeting at that meeting. * or so soon thereafter as the Court Meeting of the holders of Sterling Preference Shares has concluded or been adjourned. DEFINITIONS In this document and the appendices hereto, unless the context otherwise requires, the following words and expressions have the following meanings: "ACT" means the Companies Act 1985 (as amended); "BUSINESS DAY" means a day (other than a Saturday or Sunday) on which banks are generally open for business in London; "CAPITAL REDUCTION RESOLUTION" means the special resolution to cancel the Euramax Shares, to be proposed at the Extraordinary General Meeting; "COURT" means the High Court of Justice in England and Wales; "COURT MEETINGS" means the meetings of the holders of Voting Ordinary Shares, Non-voting Ordinary Shares, Dollar Preference Shares and Sterling Preference Shares convened by order of the Court, notices of which are set out on pages 52 to 59 of this document; "DIRECTORS" means the directors of Euramax as at the date of this document; "DOLLAR PREFERENCE SHARES" means the 33,925,000 14 per cent redeemable cumulative preference shares of US$1 each in the capital of Euramax; "EFFECTIVE DATE" means the date on which the Scheme becomes effective in accordance with its terms; "EURAMAX" or "THE COMPANY" means Euramax International Limited; "ENLARGED GROUP" means Euramax US and its subsidiaries following its acquisition of the issued share capital of the Company pursuant to the Scheme; "EURAMAX GROUP" means Euramax and its subsidiaries; "EURAMAX SHARES" means the Ordinary Shares and the Preference Shares; "EURAMAX US" means Euramax International, Inc.; "EURAMAX US SHARES" means the Voting US Shares and the Restricted Voting Euramax US Shares; "EURAMAX US STOCKHOLDERS' AGREEMENT" means the agreement proposed to be made between Euramax US and the persons who will, following the implementation of the Scheme be the holders of Euramax US Shares; "EXPLANATORY STATEMENT" means the explanatory statement relating to the Scheme, in compliance with section 426 of the Act set out in Part II of this document; "EXTRAORDINARY GENERAL MEETING" means the extraordinary general meeting of the Company convened in connection with the Restructuring Proposals, notice of which is set out on pages 60 and 61 of this document; "INSTITUTIONAL DIRECTORS" means the Directors for the time being holding office and appointed by ACP Holding Company and CVC European Equity Partners L.P. as the case may be (or to the extent provided in the Shareholders' Agreement, their respective transferees) pursuant to article 7 of the articles of association of the Company; "INSTITUTIONAL INVESTORS" means CVC European Equity Partners L.P., CVC European Equity Partners (Jersey) L.P., ACP Holding Company and Banque Paribas, Grand Cayman Branch, and/or (to the extent provided in the Shareholders' Agreement) their respective transferees; "MEETINGS" means the Court Meetings and the Extraordinary General Meeting; "NON-VOTING ORDINARY SHARES" means the 88,480 Non-voting Shares of US$1 each in the capital of Euramax; "NOTES" means the 11 1/4 per cent Senior Subordinated Notes due 2006 of Euramax issued by Euramax, Euramax European Holdings plc and Euramax European Holdings, B.V.; "NOTEHOLDERS" means the holders of Notes; "ORDINARY SHARES" means together, the Non-voting Ordinary Shares and the Voting Ordinary Shares; "ORDINARY SHAREHOLDER" means a holder of Ordinary Shares; "PREFERENCE SHARES" means together, the Dollar Preference Shares and the Sterling Preference Shares; "RATE OF EXCHANGE" means the middle-market sterling to US dollar exchange rate quoted by National Westminster Bank plc in London at 11.00 am on the Scheme Record Date; "RESTRICTED-VOTING EURAMAX US SHARES" means shares of Class B restricted voting Common Stock of Euramax US having a par value of $0.01 per share; "RESTRUCTURING PROPOSALS" means the proposals for the restructuring of the Group set out in this document, including the proposed acquisition by Euramax US of the entire issued share capital of the Company by means of the Scheme, as described in the Explanatory Statement; "SCHEME" means the Scheme of Arrangement under section 425 of the Act (including a reduction of share capital) the text of which is set out in Part III of this document; "SCHEME RECORD DATE" means the business day immediately preceding the Effective Date; "SCHEME RESOLUTIONS" means the resolutions to be proposed at the Court Meetings; "SENIOR CREDIT AGREEMENT" means the amended and restated credit agreement dated as of 16 July 1997 for the provision to companies in the Euramax Group of syndicated senior debt facilities of approximately US$164.7 million, made between Euramax, Amerimax Fabricated Products, Inc., Euramax Holdings Limited, Euramax Europe B.V., Euramax Netherlands B.V., Amerimax Holdings, Inc., Euramax European Holdings plc, Euramax European Holdings B.V. and Banque Paribas and other lenders; "SENIOR DEBT PROVIDERS" means the lenders under the Senior Credit Agreement; "SHAREHOLDER" means a holder of Euramax Shares; "SHAREHOLDERS' AGREEMENT" means the shareholders agreement relating to Euramax dated 25 September 1996 and made between Euramax (1) J D Smith and others (2) and CVC European Equity Partners L.P., CVC European Equity Partners (Jersey) L.P., ACP Holding Company and Bank Paribas, Grand Cayman Branch (3); "SPECIAL DIVIDEND" means the dividend in specie of the entire share capital of Amerimax Holdings, Inc. proposed to be paid by Euramax pursuant to the Restructuring Proposals; "STERLING PREFERENCE SHARES" means the 50,000 14 per cent redeemable cumulative preference shares of L1 each in the capital of Euramax; "TERMINATION AGREEMENT" means the agreement proposed to be entered into on or before the Effective Date for terminating the Shareholders' Agreement and recording the consent of the parties thereto to the Scheme; "VOTING ORDINARY SHARES" means the 911,520 ordinary shares of US$1 each in the capital of Euramax; and "VOTING US SHARES" means shares of Class A voting Common Stock of Euramax US having a par value of $0.01 per share. PART I - LETTER FROM THE CHAIRMAN OF EURAMAX EURAMAX INTERNATIONAL LIMITED (registered in England no 3162836) Directors: R M Cashin W Ty Comfort P E Drack J M Silvestri J D Smith R Van Rappard S M Wallis Registered Office: Brunel Road Earlstrees Industrial Estate, Corby Northants NN17 4JW Date: 19 October 1999 To: HOLDERS OF EURAMAX SHARES Dear Shareholder PROPOSED SCHEME OF ARRANGEMENT Introduction You will recall that I wrote to you on 5 August 1999 enclosing a notice of an extraordinary general meeting of the Company for the purpose of proposing a resolution to re-register the Company as a private limited company. I referred in that letter to a proposed group restructuring to ensure that the Group's holding company should be a US company rather than a UK company. This document sets out the terms of a scheme of arrangement which is a key element of that restructuring. If the Scheme is implemented, the Company will become a wholly owned subsidiary of Euramax US and you will become a shareholder in Euramax US instead of the Company. I am writing to you to explain the background to the Restructuring Proposals and to outline the terms of the Scheme. Full details of the Scheme are set out in the Explanatory Statement which forms Part II of this document. Background to the Restructuring Proposals In September 1996, the Company, through its wholly owned subsidiaries, acquired from Alumax Inc. a number of subsidiaries of that company incorporated in the US, the UK, the Netherlands and France. The funding for the acquisition was provided by a combination of debt and equity, with substantial capital being provided by ACP Holding Company, an affiliate of Citicorp Venture Capital Ltd, a New York based private equity sponsor, CVC European Equity Partners L.P., a London-based private equity sponsor and certain members of Euramax's management. At the time of this acquisition, it was envisaged that the institutions would, in due course, realise their investments by way of a flotation of the Company on the London Stock Exchange or a trade sale within the UK and, accordingly, the Euramax Group was structured with a UK holding company. However, in view of the fact that the greater part of the Euramax Group's operations are based in the US, your board considers that an exit would be more readily capable of being achieved by a flotation on the US Stock Exchange or a trade sale within the US at the appropriate time (although it is emphasised that there are no immediate plans for any such sale or flotation and any decision to sell Euramax or obtain a listing for its shares will only be made if and when your board considers this to be in the best interests of the Company and its shareholders). Additionally, the operation of the Euramax Group under a US holding company will result in administrative efficiencies. The Scheme will result in the existing Euramax Group being headed by Euramax US, a company incorporated in the US. Following the implementation of the Scheme, it is proposed that the Group will be further reorganised so that the US subsidiaries of Euramax will be held directly by Euramax US. It is envisaged that these steps will include, INTER ALIA, the payment by Euramax of a dividend in specie comprising the issued share capital of its subsidiary, Amerimax Holdings, Inc. In addition to providing a mechanism for the acquisition by Euramax US of the entire issued share capital of Euramax, the Scheme will be used to create additional reserves which it is intended should be available for the payment of dividends, including the Special Dividend. Diagrams illustrating the structure of the existing Euramax Group and that group as it will be following the implementation of the Restructuring Proposals are set out in Appendix I to this document. The Scheme The Scheme, which comprises the first step of the Restructuring Proposals, will involve the following steps: 1. all the Euramax Shares will be cancelled, thereby creating a reserve in the books of the Company ("Special Reserve"); 2. the Special Reserve will be applied as to part in paying up new ordinary shares in the capital of the Company in favour of Euramax US and as to the balance in creating a reserve out of which it is intended that dividends, including the Special Dividend referred to above, may be paid; and 3. Euramax US will issue to Shareholders appearing on the Register of Members of Euramax at the close of business in London on the Scheme Record Date, shares of common stock in itself on the basis of 38.58164 Euramax US Shares for each Ordinary Share and 0.33583 Euramax US Shares for each Dollar Preference Share (and so in proportion for any greater or lesser number of Ordinary or Dollar Preference Shares). In the case of Sterling Preference Shares, the terms above in relation to Dollar Preference Shares shall apply as if the nominal value of each such share were converted to US dollars at the Rate of Exchange. Holders of Non-voting Ordinary Shares may elect to receive Restricted-voting Euramax US Shares on a basis proportionate to their holdings of Non-voting Operating Shares as part of their allocation of Euramax US Shares. Fractions of Euramax US Shares will be rounded up for the purpose of determining the entitlements of Shareholders pursuant to the Scheme. The Scheme can only be implemented if: (i) it is approved at each of the Court Meetings and the Extraordinary General Meeting; (ii) it receives the consent of Institutional Investors holding at least 66 2/3 per cent of the Ordinary Shares held by all the Institutional Investors; (iii) it receives the consent of the Noteholders and the Senior Debt Providers; and (iv) it is sanctioned by the Court. Further information on the Scheme is set out in the Explanatory Statement which forms Part II of this document. EURAMAX US AND EURAMAX US SHARES Euramax US is a new company established in Delaware. The rights attaching to the Euramax US Shares will be governed by the amended and restated Certificate of Incorporation and by-laws of Euramax US and the laws of the State of Delaware. A summary of the principal differences between such rights and the existing rights attaching to Euramax Shares is set out in Appendix II to this document. EFFECT OF THE SCHEME ON DIRECTORS The management responsibilities of the Directors (as directors of Euramax US rather than Euramax) will not (to the extent possible under applicable law) be altered in any material respect as a consequence of the implementation of the Scheme, nor will the Scheme materially affect the rights (including compensation and benefits) of the Directors as directors and/or other employees of the Euramax Group. Details of the interests of the Directors in the Euramax Group are set out on page 13 of this document. TAXATION Information relating to the taxation consequences of the Scheme for Euramax Shareholders is set out in the Explanatory Statement which forms Part II of this document. COURT MEETINGS AND EXTRAORDINARY GENERAL MEETING Shareholders should note that, in order to be effective, the Scheme must be approved at each of the Court Meetings by a majority in number of the holders of shares of the relevant class present and voting (in person or by proxy) at the Court Meetings. In addition, the majority in number voting in favour at each Court Meeting must together hold not less than 75 per cent of the nominal value of the shares of the relevant class held by all those Shareholders present and voting (in person or by proxy) at the Court Meetings. Voting at each Court Meeting will be by poll. IT IS DESIRABLE THAT A HIGH PROPORTION OF VOTES ARE CAST AT THE COURT MEETINGS SO THAT THE COURT CAN BE SATISFIED IN EACH CASE THAT THE RESULT FAIRLY REPRESENTS THE OPINION OF THE SHAREHOLDERS. ACCORDINGLY, WHETHER OR NOT YOU PROPOSE TO ATTEND THE MEETINGS IN PERSON, YOU ARE STRONGLY URGED TO COMPLETE, SIGN AND RETURN THE FORMS OF PROXY IN ACCORDANCE WITH THE INSTRUCTIONS PRINTED ON THEM AS SOON AS POSSIBLE. FAILURE TO DO SO COULD RESULT IN THE SCHEME NOT BECOMING EFFECTIVE AND THE RESTRUCTURING PROPOSALS NOT BEING IMPLEMENTED. To be effective, the Scheme must also be approved by a special resolution in the terms of the Capital Reduction Resolution to be proposed at the Extraordinary General Meeting. ACTION TO BE TAKEN The action to be taken by Shareholders is set out in the Explanatory Statement, which forms Part II of this document. RECOMMENDATION The Directors consider the Scheme to be in the best interests of the Company's shareholders as a whole and unanimously recommend that Shareholders support the Scheme by voting in favour of the resolutions to be proposed at the Court Meetings and the Extraordinary General Meeting, as they intend to do in respect of their respective aggregate beneficial holdings of Voting Ordinary Shares, Non-voting Shares and Preference Shares, which respectively represent approximately 6.6 per cent of the issued Voting Ordinary Shares, 0.2 per cent of the issued Non-voting Ordinary Shares, 2.6 per cent of the issued Dollar Preference Shares and 45 per cent of the issued Sterling Preference Shares, in each case as at the date of this document. Yours sincerely Stuart M Wallis Chairman PART II - EXPLANATORY STATEMENT (In compliance with section 426 of the Companies Act 1985) 19 October 1999 TO HOLDERS OF EURAMAX SHARES 1. INTRODUCTION This statement is made in accordance with Section 426 of the Companies Act 1985, which requires there to be sent to members of the Company a statement explaining the effect of the Scheme. 2. OUTLINE OF THE SCHEME 2.1 Under the Scheme, on the Effective Date, the share capital of Euramax will be reorganised as follows: (i) all the Euramax Shares will be cancelled; (ii) Euramax will apply part of the reserve arising on the cancellation in paying up 1,000 new ordinary shares of L1 each, credited as fully paid to Euramax US; (iii) Euramax US will issue Euramax US Shares to the shareholders appearing on the Register of Members of Euramax at the close of business in London on the Scheme Record Date in the following proportions: - 38.58164 Euramax US Shares for every one Ordinary Share - 0.33583 Euramax US Shares for every Dollar Preference Share - 0.33583 Euramax US Shares for every dollar in nominal value of every Sterling Preference Share as if the nominal value of the Sterling Preference Share were converted to dollars at the Rate of Exchange and so in proportion for any greater or lesser number of Euramax Shares. Fractional entitlements to Euramax US Shares will be rounded up to the nearest whole number. (iv) It is intended that, subject to the Act, the balance of the reserve arising on the cancellation will be available for payment of dividends including the Special Dividend. (v) Holders of Non-voting Ordinary Shares may elect to receive Restricted-voting Euramax US Shares in accordance with the Scheme. 2.2 The Scheme will become effective and binding if each of the following conditions is fulfilled: (a) the Scheme is approved at each of the Court Meetings (or at any adjournment of such meetings); (b) the Scheme is approved by Institutional Investors holding at least 66 2/3 per cent of all the Ordinary Shares held by the Institutional Investors as is required by the Shareholders' Agreement (which approval will be evidenced by the execution by such Shareholders of the Termination Agreement); (c) the Scheme is approved by the Noteholders in accordance with the terms of the indenture constituting the Notes; (d) the Scheme is approved by the Senior Debt Providers in accordance with the provisions of the Senior Credit Agreement; (e) the Capital Reduction Resolution is duly passed at the Extraordinary General Meeting; (f) the Scheme is sanctioned (with or without modifications as provided by the Scheme) and the associated reduction of capital is confirmed by the Court; and (g) an office copy of the Court Order is delivered to and registered by the Registrar of Companies. If all the above conditions are fulfilled, it is expected that the Scheme will become effective on 8 December 1999. If the Scheme has not become effective by 8 December 1999 or any later date to which Euramax may agree and the Court may allow, it will lapse and not become effective. Euramax and Euramax US may jointly consent to any modification of the Scheme which is approved or required by the Court. 3. CALCULATION OF ENTITLEMENTS TO EURAMAX US SHARES The entitlements of holders of Euramax Shares to Euramax US Shares pursuant to the Scheme have been calculated by attributing to the entire issued share capital of the Company a value of US$224,971,000 being an amount equal to seven times the earnings before interest, tax, depreciation and amortisation of the Company as shown in the cumulative consolidated management accounts of the Company for the 12 month period ended 24 September 1999 after deducting a sum equal to the long term debt of the Euramax Group net of cash balances. The resulting figure ("EQUITY VALUE") has been used to allocate value between the Ordinary Shares and the Preference Shares as follows: - the Preference Shares have been valued at an amount equal to their par value and cumulative dividends accrued thereon; and - the Ordinary Shares have been valued by subtracting from the Equity Value the amount so attributed to the Preference Shares. Voting Ordinary Shares and Non-voting Ordinary Shares have been accorded the same value since their holders are entitled to convert Non-voting Ordinary Shares into Voting Ordinary Shares, subject to the provisions of the articles of association of the Company. 4. INFORMATION ON EURAMAX AND THE EURAMAX GROUP Euramax is the holding company of the Euramax Group. The Euramax Group is a leading international producer of aluminium and steel products with wholly owned subsidiaries in the United States, the United Kingdom, the Netherlands and France. Euramax's products include painted sheet and coil, siding, roofing, rain carrying systems, windows, doors and various fabricated trim parts and components. Further information on Euramax is set out in Appendix III to this document. 5. INFORMATION ON EURAMAX US AND THE ENLARGED GROUP Euramax US is a new company established in Delaware. None of its shares are currently in issue. It will, following the implementation of the Restructuring Proposals, be the holding company of the Enlarged Group. Immediately following the Scheme becoming effective, Euramax US will have no material assets other than the share capital of Euramax. Further information on Euramax US, including the names of its intended directors, is set out in Appendix III to this document. Diagrams showing the structure of the existing Euramax Group and the structure of the Enlarged Group as it will be following the implementation of the Restructuring Proposals are set out in Appendix I to this document. A summary of the differences between the Euramax Shares and the Euramax US Shares which will be issued in their place is set out in Appendix II to this document. Certain differences between the laws of England and Wales and the laws of the State of Delaware affecting companies and their shareholders are outlined in Appendix IV to this document. 6. DIRECTORS' INTERESTS At the close of business as at the date of this document, the interests of the Directors in Euramax Shares, as notified to the Company pursuant to sections 324 or 328 of the Act and as shown in the register of such interests maintained under the provisions of Section 325 of the Act (all of which are beneficial (unless otherwise stated)) were as follows:
DIRECTOR ORDINARY SHARES PREFERENCE SHARES R M Cashin 10,976 411,291 W Ty Comfort Nil Nil P E Drack 1,600 (1) 48,400 R Van Rappard Nil Nil J M Silvestri(2) 1,299 37,450 (3) J D Smith 26,400 193,600 S M Wallis 20,000 230,000 TOTAL 60,275 920,741
(1) Includes 160 Non-voting Ordinary Shares; (2) JM Silvistri is also a partner in CCT III Partners LP which holds 52,293 Voting Ordinary Shares and 1,995,386 Dollar Preference Shares; (3) Includes 22,500 Sterling Preference Shares. The effect of the Scheme on these interests does not differ from the effects of the Scheme on the interests of any other Shareholder. Neither the management responsibilities nor the terms of employment of J D Smith, the sole executive director of the Company, nor the terms of engagement of the non-executive directors will be altered as regards compensation and benefits or otherwise as a consequence of the implementation of the Scheme (to the extent possible under applicable law) although each director will assume a corresponding role on the board of Euramax US. 7. SHAREHOLDERS' AGREEMENT The Company and certain of its shareholders, including members of its management ("MANAGEMENT SHAREHOLDERS") and the Institutional Investors are the parties to a Shareholders' Agreement which contains, INTER ALIA: - a requirement that the consent of 66 2/3 of the Institutional Investors (measured by reference to the nominal value of their shares) is required to a number of actions, including a variation of the authorised or issued share capital of the Company, the alteration of its Memorandum and Articles of Association and the making of any reduction of its share capital; - a requirement that the consent of a director nominated by ACP Holding Company (if one is holding office) and a director nominated by CVC Capital Partners Europe Limited (if one is holding office) is required to a number of financial and operational decisions including the making of capital commitments and acquisitions and disposals in excess of specified limits, the granting of options to acquire shares and the appointment or removal of directors; and - certain restrictive covenants relating to the activities of the Management Shareholders for a period of 18 months after any of them ceases to be employed. The Company has agreed with the Institutional Investors and the Management Shareholders that those provisions of the Shareholders' Agreement which are of a continuing nature should continue to apply to the parties to the Shareholders' Agreement (including any persons who, although not originally parties to that agreement, have agreed to be bound by its terms ("Additional Parties")) save that rights which at present depend upon the holding of Euramax Shares will have effect by reference to holdings of Euramax US Shares following the implementation of the Scheme. Accordingly it is proposed that on or prior to the Effective Date such shareholders will execute the Euramax US Stockholders' Agreement and an agreement terminating the Shareholders' Agreement and incorporating the consent of the relevant parties (including any Additional Parties) to the Scheme. Copies of the Shareholders' Agreement and drafts of the Termination Agreement and Euramax US Stockholders' Agreement are available for inspection by Shareholders of Euramax as set out in Appendix III to this document. 8. SHARE CERTIFICATES Certificates in respect of the Euramax US Shares to be issued pursuant to the Scheme will be sent to holders of Euramax Shares on the register of members of Euramax at the close of business on the Scheme Record Date. In the case of joint holders, these will be despatched to the joint holder whose name appears first in the Register of Members. Certificates will be despatched at the risk of the person(s) entitled to them. Upon the Scheme becoming effective, existing certificates for Euramax Shares will cease to be valid and should, if Euramax so requests, be sent to Euramax for cancellation. No transfer of Euramax Shares will be registered after the Record Date. 9. TAXATION The statements set out below are intended only as a general guide to current UK law and practice (or US or Dutch law and practice as appropriate). They apply only to certain categories of person who are resident in the UK, US or the Netherlands and who hold their shares as investments and are the beneficial owners thereof. The following summary does not purport to be a complete analysis or listing of all the potential UK, US or Dutch tax consequences arising from the Scheme. If you are in any doubt as to your tax position, you are strongly recommended to consult your professional adviser. This summary is based upon UK law and UK Inland Revenue practice (or US law and US Internal Revenue Service ("IRS") practice or Dutch law and Dutch tax practice) as in effect at the date of this document, each of which may be subject to change, perhaps with retrospective effect. Any changes to these laws and practices may adversely affect the analysis and conclusions as to the tax consequences of the Scheme. No responsibility is assumed to update the conclusions due to any such changes. 9.1 STATEMENT REGARDING THE TAX POSITION OF UK SHAREHOLDERS 9.1.1 CAPITAL REDUCTION AND SCHEME OF ARRANGEMENT The opinion of leading UK tax counsel has been obtained regarding the taxation treatment of shareholders of Euramax who are resident for taxation purposes in the UK only and who do not hold their Euramax Shares as trading stock. Shareholders should not as a result of the implementation of the Scheme be treated as disposing of their existing Euramax Shares for the purposes of UK taxation of chargeable gains ("CGT") and their new holdings in Euramax US will be taken to be the same assets acquired at the same time as their original shareholdings in Euramax. 9.1.2 DISPOSAL OF EURAMAX US SHARES A disposal of Euramax US Shares by a Shareholder resident and ordinarily resident for tax purposes in the UK may, depending on the Shareholder's circumstances, and subject to any available exemption or relief, give rise to a chargeable gain or allowable loss for CGT purposes. A Shareholder who is an individual and who has on or after 17 March 1998, ceased to be resident or ordinarily resident for tax purposes in the UK for a period of less than five years, and who disposes of Euramax US Shares during that period, may also be liable to CGT (subject to any available exemption or relief). A distinction is drawn between Shareholders potentially liable to CGT on the disposal of Euramax US Shares, who are within the charge to corporation tax and those who are not. In the hands of the latter, Euramax US Shares will be eligible for taper relief as non-business assets (as though they were the same assets as the Euramax shares disposed of) and any gain or loss should only arise on the disposal of the Euramax US Shares and will be computed by reference to the CGT base cost of the Euramax Shares for which Euramax US Shares were received in exchange. In the hands of the former, Euramax US Shares will attract indexation allowance and any chargeable gain or allowable loss arising on their disposal will be computed by reference to the base cost of the Euramax Shares for which they were received in exchange. 9.1.3 DIVIDENDS ON EURAMAX US SHARES 9.1.3.1 Euramax US will be required to deduct and account to the IRS for US withholding tax at the rate of 30 per cent on dividends paid to its shareholders. Under the US/UK income tax treaty, the withholding tax on dividends paid to a UK tax resident is reduced to 15 per cent. If the UK tax resident is a corporation which controls, directly or indirectly, at least 10 per cent of the voting stock of Euramax US, the withholding tax on dividends will be reduced to 5 per cent. 9.1.3.2 For a shareholder who is a UK resident individual liable to income tax, the gross dividend, (i.e. the sum of the dividend and withholding tax) will be subject to income tax. Generally, the withholding tax will be available as a credit against the UK income tax on the dividend income. 9.1.3.3 For a UK resident corporate shareholder the gross dividend will be subject to corporation tax. Generally, the withholding tax will be available as a credit against the UK corporation tax payable in respect of the dividend income. 9.1.4 STAMP DUTY No UK stamp duty is payable on the issue of shares by Euramax US. 9.2 STATEMENT REGARDING THE TAX POSITION OF US SHAREHOLDERS 9.2.1 CAPITAL REDUCTION AND SCHEME OF ARRANGEMENT 9.2.1.1 The Scheme, which comprises a capital reduction and scheme of arrangement, should be characterised for US tax purposes as a transaction in which the US shareholders of Euramax should not recognise any gain or loss in connection with the exchange of their shares in Euramax. The US shareholders of Euramax will take a carryover tax basis and holding period in the shares of Euramax US. 9.2.1.2 Although the US shareholders of Euramax generally should not recognise any gain or loss, it is possible that certain US shareholders may have to include in gross income as ordinary income their pro rata share of certain earnings and profits of the non-US companies in the Euramax Group. Whilst the US shareholders of Euramax have legal authority to not recognise ordinary income, the IRS could take a contrary position in an audit of the shareholders' tax return. If the IRS ultimately were to prevail, an income inclusion to a US shareholder of Euramax US would be taxed as ordinary dividend income, and the Shareholder's tax basis in the Euramax US shares would be correspondingly increased. 9.2.2 DISPOSAL OF EURAMAX US SHARES 9.2.2.1 A disposal of Euramax US Shares will cause US shareholders to recognise a taxable gain or loss for US tax purposes. If the Euramax US Shares are a capital asset in the hands of the shareholder, such gain or loss will be characterised as a capital gain or loss. Non-US investors should generally not be subject to US tax on a disposal of Euramax US Shares provided that Euramax US does not constitute a "US real property holding company" during the period of five years preceding the disposal. 9.2.3 DIVIDENDS ON EURAMAX US SHARES 9.2.3.1 Dividends paid by Euramax US from its current or accumulated earnings and profits will be fully taxable to shareholders as ordinary income. To the extent dividends are paid to non-US shareholders, the dividend income will be subject to a flat 30 per cent withholding tax (or a reduced rate under an applicable income tax treaty). 9.2.3.2 Corporate US shareholders of Euramax US will receive a dividends received deduction of 70 per cent if their ownership in Euramax US is less than 20 per cent and a dividends received deduction of 80 per cent if their ownership is 20 per cent or more. 9.3 STATEMENT REGARDING THE TAX POSITION OF DUTCH SHAREHOLDERS 9.3.1 CAPITAL REDUCTION AND SCHEME OF ARRANGEMENT The implementation of the Scheme will not give rise to a chargeable gain for Shareholders who are individuals and resident for tax purposes in the Netherlands unless the individual has a substantial interest (being a shareholding exceeding 5 per cent of the issued share capital of Euramax). Dutch corporate Shareholders may be taxable on any profit arising from their shareholding in Euramax unless the participation exemption is applicable. A corporate shareholder can apply for the participation exemption if it has a direct interest of at least 5 per cent in the issued share capital of Euramax US. 9.3.2 DISPOSAL OF EURAMAX US SHARES A disposal of Euramax US Shares by a shareholder who is an individual and resident for tax purposes in the Netherlands will not give rise to a chargeable gain or an allowable loss unless he or she has a substantial interest (being a shareholding exceeding 5 per cent of the issued share capital of Euramax US). A disposal of Euramax US Shares by a Dutch resident corporate shareholder which is subject to Dutch corporation tax (35 per cent) will give rise to a chargeable gain or allowable loss unless the participation exemption is applicable. A corporate shareholder can apply for the participation exemption if it has a direct interest of at least 5 per cent in the issued share capital of Euramax US. 9.3.3 DIVIDENDS ON EURAMAX US SHARES 9.3.3.1 Euramax US will be required to deduct and account to the IRS for US withholding tax at the rate of 30 per cent on dividends paid to its shareholders. Under the US/Netherlands income tax treaty, the withholding tax on dividends paid to a Dutch tax resident is reduced to 15 per cent. If the Dutch tax resident is a corporation which controls, directly or indirectly, at least 10 per cent of the voting stock of Euramax US, the withholding tax on dividends will be reduced to 5 per cent. 9.3.3.2 Individual shareholders resident in the Netherlands will be subject to Dutch income tax in respect of cash dividends received (maximum 60 per cent income tax). If the individual has a substantial interest, the tax rate is currently 25 per cent. Generally, credit for US withholding tax on the dividends is available. 9.3.3.3 A Dutch resident corporate shareholder will normally be liable to corporation tax in respect of dividends received unless the participation exemption is applicable. Generally, credit for US withholding tax on the dividends is available. 10. MEETINGS 10.1 COURT MEETINGS The Court Meetings have been convened pursuant to an Order of the Court, for the purposes of considering and, if thought fit, approving the Scheme (with or without modification). Notices of the Court Meetings are set out on pages 52 to 59 of this document. To become effective the Scheme must be approved at each of the Court Meetings by a majority in number of the holders of each class of Shares in the capital of the Company present and voting (in person or by proxy) at the Court Meetings. In addition, the majority in number voting in favour at each Court Meeting must together hold not less than 75 per cent of the nominal value of the Euramax Shares of the relevant class held by all those Shareholders present and voting (in person or by proxy) at the Court Meetings. Voting at each Court Meeting will be by poll. Each Court Meeting has, therefore, two tests to assess whether the requisite majority has been achieved. If either of these tests are not met in respect of any of the Court Meetings, then the Scheme will not be capable of taking effect. In addition to the Court Meetings, it is also necessary for the Scheme to be sanctioned by the Court before it can become effective. A Court hearing in respect of the Scheme is scheduled for 6 December 1999 and Shareholders will be entitled to attend the hearing and to appear in person or by Counsel to support or oppose the Scheme. Upon the Scheme becoming effective, it will be binding on all holders of Euramax Shares irrespective of whether or not they attended or of the way they voted at the Court Meetings. IT IS IMPORTANT THAT AS MANY VOTES AS POSSIBLE ARE CAST AT THE COURT MEETINGS SO THAT THE COURT MAY BE SATISFIED THAT THERE IS A FAIR REPRESENTATION OF SHAREHOLDER OPINION. YOU ARE THEREFORE ASKED TO COMPLETE AND RETURN THE FORM OF PROXY ENCLOSED WITH THIS DOCUMENT IN ACCORDANCE WITH THE INSTRUCTIONS SET OUT UNDER THE HEADING "ACTION TO BE TAKEN" ON PAGE 22 OF THIS DOCUMENT. 10.2 EXTRAORDINARY GENERAL MEETING The Extraordinary General Meeting is being convened for the purposes of considering and, if thought fit, passing a special resolution to approve the Scheme and an associated reduction in capital and to amend Euramax's articles of association so as to delete the provisions contained therein that confer special rights on the holders of each class of shares and to provide instead for a single class of ordinary shares. All Shareholders other than holders of Preference Shares who hold less than 5 per cent of the issued Preference Shares and holders of Non-voting Ordinary Shares are entitled to attend the Extraordinary General Meeting. However, under the terms of the Company's existing articles of association, only the holders of the Voting Ordinary Shares are entitled to vote on the Special Resolution. At the Extraordinary General Meeting it is necessary for the Capital Reduction Resolution to be approved by a majority of not less than 75 per cent of the votes cast. Voting will be on a show of hands, unless a poll is demanded, in which case those holders of Voting Ordinary Shares present (in person or by proxy) will be entitled to one vote for each Voting Ordinary Share held by them. The full text of the Capital Reduction Resolution is set out in the notice of the Extraordinary General Meeting set out on pages 60 to 61 of this document. 11. ACTION TO BE TAKEN 11.1 FORMS OF PROXY Forms of proxy are enclosed for use at the Court Meetings and the Extraordinary General Meeting as follows:- 11.1.1 PURPLE, for use at the Court Meeting of the holders of Voting Ordinary Shares; 11.1.2 PINK, for use at the Court Meeting of the holders of Non-voting Ordinary Shares; 11.1.3 ORANGE, for use at the Court Meeting of the holders of Dollar Preference Shares; 11.1.4 YELLOW, for use at the Court Meeting of the holders of Sterling Preference Shares; and 11.1.5 WHITE, for use at the Extraordinary General Meeting*. Whether or not you propose to attend the meetings in person, you are requested to complete and sign the enclosed forms of proxy which are relevant to you and return them in accordance with the instructions thereon as soon as possible and, in any event, so as to be received no later than one hour before the time appointed for the relevant meeting. In the case of the Court Meetings only, the relevant form of proxy may, if not previously returned, be handed to the Chairman of the relevant Court Meeting at the time of that meeting. The return of a form of proxy will not preclude you from attending the relevant meeting and voting in person if you so wish. 11.2 HOLDERS OF NON-VOTING ORDINARY SHARES If you are a holder of Non-voting Ordinary Shares and you wish to receive Restricted-voting Euramax US Shares in respect of all or part of your holding of Euramax Shares you should write to the Company at Brunel Road, Earlstrees - ---------------------- * Note: The holders of the Non-voting Ordinary Shares and Preference Shares are not entitled to vote at the Extraordinary General Meeting. Industrial Estate, Corby, Northants NN17 4JW requesting an allocation of Restricted-voting Euramax US Shares and indicating the number and classes of Euramax Shares to which that allocation is to relate. Your request should be received no later than 15 November 1999 (or such later date as the directors of Euramax US shall permit). PART III - SCHEME OF ARRANGEMENT No: 3162836 IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION COMPANIES COURT IN THE MATTER OF EURAMAX INTERNATIONAL LIMITED and IN THE MATTER OF THE COMPANIES ACT 1985 SCHEME OF ARRANGEMENT (under Section 425 of the Companies Act 1985) between EURAMAX INTERNATIONAL LIMITED and THE HOLDERS OF THE SCHEME SHARES (as hereinafter defined) (a) In this Scheme, unless inconsistent with the subject or context, the following expressions have the following meanings: "BUSINESS DAY" a day (other than a Saturday or Sunday) on which banks are generally open for business in London; "DOLLAR PREFERENCE SHARES" the 33,925,000 14 per cent redeemable cumulative preference shares of US$1 each in the capital of Euramax; "EFFECTIVE DATE" the day on which this Scheme becomes effective in accordance with clause 4 of this Scheme; "EURAMAX" Euramax International Limited; "EURAMAX US" Euramax International, Inc.; "EURAMAX US STOCKHOLDERS' AGREEMENT" means the agreement proposed to be made between Euramax US and the person who will, following the implementation of the Scheme, be the holders of Euramax US Shares; "EURAMAX US SHARES" the Voting Euramax US Shares and the Restricted-voting Euramax US Shares, to be allotted and issued credited as fully paid by Euramax US pursuant to clause 2(a) of the Scheme; "HOLDER" includes a person entitled by transmission; "NON-VOTING ORDINARY SHARES" the 88,480 Non-voting Shares of US$1 each in the capital of Euramax; "ORDINARY SHARES" together, the Non-voting Ordinary Shares and the Voting Ordinary Shares; "PREFERENCE SHARES" together, the Dollar Preference Shares and the Sterling Preference Shares; "RESTRICTED-VOTING EURAMAX US SHARES" shares of Class B restricted voting Common Stock of Euramax US having a par value of $0.01 per share; "SCHEME RECORD DATE" the business day immediately preceding the Effective Date; "SCHEME SHARES" the Voting Ordinary Shares, the Non-voting Ordinary Shares, the Dollar Preference Shares and the Preference Shares (a) in issue at the close of business on the last business day prior to the date of the meeting of holders of the relevant class of shares convened pursuant to an Order of the High Court of Justice in England and Wales to approve this Scheme (or, if such meeting or meetings shall be adjourned to a later date, on the last business day prior to that later date) and (b) if any, issued thereafter and before the close of business on the date two business days before the hearing of the petition to sanction this Scheme in respect of which the original or any subsequent holder thereof is bound by this Scheme; "THIS SCHEME" this Scheme in its present form or with or subsequent to any modification, addition or condition approved or imposed by the Court; "SHAREHOLDERS' AGREEMENT" means the shareholders agreement dated 25 September 1996 and made between Euramax (1) J D Smith and others (2) and CVC European Equity Partners L.P., CVC European Equity Partners (Jersey) L.P., ACP Holding Company and Bank Paribas, Grand Cayman Branch (3); "STERLING PREFERENCE SHARES" the 50,000 14 per cent redeemable cumulative preference shares of L1 each in the capital of Euramax; "VOTING EURAMAX US SHARES" shares of class A Common Stock of Euramax US having a par value of $0.01 per share; and "VOTING ORDINARY SHARES" the 911,520 ordinary shares of US$1 each in the capital of Euramax. (b) The authorised and issued share capital of Euramax is $34,925,000 and L50,000 made up of 911,520 Voting Ordinary Shares of US$1 each, 88,480 Non-voting Ordinary Shares of US$1 each, 33,925,000 Dollar Preference Shares of US$1 each and 50,000 Sterling Preference Shares of L1 each. (c) Euramax US was incorporated on 3 September 1999 as a corporation organised under Delaware law. The total number of shares which Euramax US has current authority to issue is 60,000,000 shares of common stock, par value US $ 0.01 per share including 5,000,000 shares of class B restricted voting common stock, par value US $ 0.01 per share. None of its shares are currently in issue. (d) Euramax US has agreed to appear by Counsel on the hearing of the Petition to sanction this Scheme and to undertake to the Court to be bound by it and to execute and do or procure to be executed and done all such documents, acts and things as may be necessary or desirable to be executed or done by it for the purpose of giving effect to this Scheme. THE SCHEME 1. CANCELLATION OF SCHEME SHARES (a) The share capital of Euramax shall be reduced by cancelling and extinguishing the Scheme Shares. (b) Forthwith and contingently upon the said reduction of capital taking effect: (i) the share capital of Euramax shall be increased to L1,000 by the creation of such number of ordinary shares of L1 each as shall have an aggregate nominal value equal to L1,000; (ii) Euramax shall apply L1,000 of the reserve arising as a result of such reduction in paying up in full at par the shares created pursuant to paragraph (i) above, which shall be allotted, credited as fully paid up, to Euramax US and/or its nominees. 2. CONSIDERATION FOR THE CANCELLATION OF THE SCHEME SHARES (a) In consideration for the cancellation of the Scheme Shares and the issue of new shares provided for by clause 1 of the Scheme, Euramax US shall (subject to sub-clause (c) of this clause 2) allot and issue credited as fully paid to each person who at the close of business in London on the Scheme Record Date, is the registered holder of any Scheme Shares the following number of Euramax US Shares for the Scheme Shares so held: - 38.58164 Euramax US Shares for every one Ordinary Share - 0.33583 Euramax US Shares for every Dollar Preference Share - 0.33583 Euramax US Shares for every dollar in nominal value of every Sterling Preference Share as if the nominal value of the Sterling Preference Share were converted to dollars at the Rate of Exchange and so in proportion for any greater number of shares save that fractional entitlements to Euramax US Shares will be rounded up to the nearest whole number of Euramax US Shares. (b) A holder of Non-voting Ordinary Shares may, by written notice to the Company received by the Company no later than 15 November 1999 or such later date as the board of Euramax US may permit, elect to receive, in respect of all or part of that holder's holding of Euramax Shares, Restricted-voting Euramax US Shares as part of its allocation of Euramax US Shares. (c) The provisions of this clause 2 shall be subject to any prohibition or condition imposed by law. 3. CERTIFICATES AND PAYMENT 3.1 No later than 14 days from the Effective Date, Euramax US shall make all such allotments of and shall issue such Euramax US Shares as are required to be issued by it to give effect to this Scheme and shall deliver documents of title for the Euramax US Shares so issued to the persons respectively entitled to them. 3.2 All deliveries of notices and documents of title required to be made by this Scheme shall be effected by posting the same in pre-paid envelopes addressed to the persons respectively entitled to them at their respective addresses as appearing in the Register of Members of Euramax at the close of business in London on the Scheme Record Date (or, in the case of joint holders, to the address of that one of the joint holders whose name stands first in the said Register of Members in respect of the joint holding) or to such other addresses (if any) as such persons may respectively direct in writing. 3.3 Neither Euramax US nor Euramax shall be responsible for any loss or delay in the transmission of documents of title posted in accordance with this clause 3. 3.4 As from the Effective Date, each existing certificate representing a holding of Scheme Shares shall cease to be of value and every holder of such shares shall be bound on the request of Euramax to deliver up to Euramax the certificate(s) for such shares for cancellation. 4. OPERATION OF THIS SCHEME 4.1 This Scheme shall become effective as soon as an office copy of the Order of the Court sanctioning this Scheme under Section 425 of the Companies Act 1985 and confirming under Section 137 of the said Act the reduction of capital provided for by this Scheme shall have been duly delivered to the Registrar of Companies for registration and registered by him but such office copy shall not be delivered unless the Company and all the parties to the Shareholders' Agreement and any persons who, although not originally parties to the Shareholders Agreement, have agreed to be bound by its terms have executed the Termination Agreement and the Euramax US Stockholders' Agreement. 4.2 Unless this Scheme shall become effective on or before 8 December 1999 or such later date, if any, as the Court may allow, this Scheme shall never become effective. 4.3 Euramax and Euramax US may jointly consent on behalf of all persons concerned to any modification of or addition to this Scheme or to any condition which the Court may approve or impose. 5. COSTS Each of Euramax and Euramax US shall bear the costs and expenses incurred by it in connection with the preparation and implementation of this Scheme. Dated: 19 October 1999 APPENDIX I - STRUCTURE DIAGRAMS 1. PRESENT STRUCTURE OF THE EURAMAX GROUP [GRAPHIC OMITTED] 2. STRUCTURE OF THE EURAMAX GROUP AFTER THE IMPLEMENTATION OF THE RESTRUCTURING PROPOSALS [GRAPHIC OMITTED] APPENDIX II - COMPARISON OF EURAMAX SHARES AND EURAMAX US SHARES 1. GENERAL Under the terms of the Scheme, those persons who are on the Record Date the holders of Euramax Shares (of any class) will receive shares of common stock of US$0.01 par value in the capital of Euramax US. This Appendix contains a summary of the principal differences between the rights attaching to Euramax Shares and the rights which will attach to the Euramax US Shares after the implementation of the Scheme. For the purposes of this Appendix II the following additional definitions have been used: "ACP" means ACP Holding Company, a company incorporated in the State of Delaware, United States of America, whose registered office is at 6099 Riverside Drive, Suite 201, Dublin, Ohio, 43017, which was formerly a shareholder of the Company; "ACP DIRECTOR" means a director appointed by ACP; "ACP HOLDER" means a holder of Ordinary Shares which is any of ACP or any person to whom ACP has transferred Ordinary Shares pursuant to the Articles; "CVC DIRECTOR" means a director appointed by CVC Europe; "CVC EUROPE" means CVC Capital Partners Europe Limited, a company incorporated in Jersey whose registered office is at PO Box 87, 18 Granville Street, St Helier, Jersey Channel Islands; "CVCEEP HOLDER" means a holder of Ordinary Shares which is any of CVC European Equity Partners, LP, CVC Capital Partners Europe Limited and CVC European Equity Partners (Jersey) LP or any person to whom any such person has transferred Ordinary Shares pursuant to the Articles; "CVC NY" means Citicorp Venture Capital Ltd; "INSTITUTIONAL INVESTORS" means the CVCEEP Holders, the Paribas Holders and the ACP Holder or any of them; "LISTING" means the admission of any of the Company's shares on any internationally recognised stock exchange including (without limitation) any recognised investment exchange for the purposes of the Financial Services Act 1986 or overseas recognised exchange recognised by HM Treasury or the sale of the Company's shares in an underwritten public offering registered under the United States Securities Act of 1933, as amended; "PARIBAS" means Banque Paribas, Grand Cayman Branch; "PARIBAS HOLDER" means a holder of Ordinary Shares which is any of Paribas and/or any Permitted Transferee of Paribas; "PERMITTED TRANSFEREE" means in relation to a holder of shares in Euramax any of the persons listed in paragraph 6.1(b) of this Appendix; and "SALE" means the transfer (whether through a single transaction or a series of transactions) of 662/3 per cent or more of the Ordinary Shares in issue to a person and any other person: (i) who in relation to him is a "connected person", as defined in section 839 of the Income and Taxes Act 1988; or (ii) with whom he is acting in concert, as defined in The City Code on Takeovers and Mergers other than a person who is an original party to the Shareholders' Agreement as an Institutional Investor or any other person who in relation to such Institutional Investor is a "connected person", as defined in section 839 of the Income and Corporation Taxes Act 1988 or otherwise defined as such in the Articles. 2. COMPARISON OF CLASSES OF SHARES 2.1 SHARE CAPITAL OF EURAMAX There are four classes of shares in the capital of Euramax as follows: 2.1.1 Dollar Ordinary Shares; 2.1.2 Non-voting Ordinary Shares; 2.1.3 Dollar Preference Shares; and 2.1.4 Sterling Preference Shares and each such class has the rights and is subject to the restrictions (including restrictions on transferability) set out in the articles of association of Euramax (the "Articles"). 2.2 SHARE CAPITAL OF EURAMAX US FOLLOWING THE SCHEME The shares in the capital of Euramax US which will be issued pursuant to the Scheme will comprise shares of Class A voting common stock, par value $0.01 and, to the extent that elections are made to receive the same, shares of Class B Restricted-voting common stock, par value $0.01. 3. EFFECT OF THE SCHEME ON RIGHTS ATTACHED TO PREFERENCE SHARES 3.1 SUMMARY OF SPECIAL RIGHTS ATTACHED TO PREFERENCE SHARES The Articles confer on the holders of Sterling Preference and Dollar Preference Shares (the "PREFERENCE SHAREHOLDERS") the following special rights:- 3.1.1 DIVIDEND (a) Preference Shareholders are entitled to a fixed dividend ("PREFERENCE DIVIDEND") of 14 per cent (excluding any associated tax credit) on the nominal amount and premium paid on each Preference Share and on all accumulated and unpaid Preference Dividends. This dividend accrues cumulatively on a quarterly basis and becomes due on 31 March, 30 June, 30 September and 31 December of each year. If earlier, the Preference Dividend is payable on redemption of the Preference Shares. In every case payment of the Preference Dividend is subject to the terms of the Senior Credit Agreement and to the availability of sufficient profits available for distribution. (b) For so long as any Preference Shares remain in issue, neither the Company nor any of its direct or indirect subsidiaries may: (i) declare or pay any cash dividend or make any cash distribution; or (ii) redeem, purchase or acquire for cash (directly or indirectly) any Ordinary Shares of the Company if either (1) at the time of or immediately after such redemption, purchase, acquisition, dividend or distribution it has failed to pay all accrued Preference Dividends or (2) the Company has failed to redeem any Preference Shares which have become due for redemption under the Articles (except that the Company may buy Ordinary Shares from the managers or their permitted transferees under the Articles). (c) Subject to the Senior Credit Agreement, holders of 66 2/3 per cent of the Preference Shares in issue ("MAJORITY PREFERENCE SHAREHOLDERS") may serve notice on the Company requiring the Company to ensure that its subsidiaries distribute sufficient profits to the Company to enable it to pay any accrued and/or unpaid Preference Dividends. 3.1.2 RETURN OF CAPITAL (a) In the event of a return of capital on a liquidation, dissolution, winding-up of the Company, or otherwise, the assets of the Company available for distribution amongst the shareholders shall be applied in paying to the Preference Shareholders on a basis pro rata to their holdings of Preference Shares and in priority to any payment to the holders of any other class of shares: (i) an amount equal to the nominal amount and premium paid on their Preference Shares; and (ii) an amount equal to any accrued and/or unpaid Preference Dividend calculated to the date of return of capital (and payable whether or not the Company has sufficient profits available for distribution to pay the accrued and/or unpaid Preferred Dividend). (b) The Preference Shares do not confer any further rights of participation in the profits or assets of the Company. 3.1.3 REDEMPTION (a) The Company shall redeem all the Preference Shares remaining in issue on 31 December 2007 ("FINAL REDEMPTION DATE"). (b) Subject to the terms of the Senior Credit Agreement, the holders of 66 2/3 per cent of the Preference Shares (the "MAJORITY PREFERENCE SHAREHOLDERS") may require the Company to redeem some or all of the Preference Shares before the Final Redemption Date by written notice to the Company served within 28 days of the happening of either of the following events:- (i) any Preference Dividend is not paid in full on the due date (regardless of whether the Company has sufficient distributable profits or other requisite funds to make such payment); or (ii) the Company fails to make payment in full of any redemption monies payable in respect of any Preference Shares which have become due for redemption (regardless of whether the Company has sufficient distributable profits or other requisite funds to make such payment of redemption monies). (c) The Majority Preference Shareholders may withdraw any notice requiring early redemption of Preference Shares by serving notice to this effect on the Company before the date for redemption stated in that notice. (d) The Company may with the consent in writing of the Majority Preference Shareholders redeem all or multiples in aggregate amount of US$500,000 of the Preference Shares (or if the then outstanding aggregate amount of the Preference Shares is less than US$500,000, all the outstanding Preference Shares) at any time by serving notice on the Preference Shareholders specifying the number of Preference Shares to be redeemed and a date between 14 and 28 days later on which the redemption is to take place. (e) Subject to the terms of the Senior Credit Agreement the Preference Shares may be redeemed at any time upon or after a Sale or Listing at the election of either the Company or the Majority Preference Shareholders. (f) On any due date for the redemption of any Preference Shares the Company shall pay in respect of each Preference Share falling to be redeemed: (i) the nominal amount and the premium paid on that share; and (ii) a sum equal to any accrued and/or unpaid Preference Dividend calculated to the date of return of capital and payable whether or not the Company has sufficient profits available for distribution to pay the accrued and/or unpaid Preference Dividend and such amounts shall, subject to the terms of the Senior Credit Agreement, become a debt due and payable to the Preference Shareholders, whether or not the Company has enough profits available for distribution or other requisite funds to pay the same. (g) The Preference Dividend shall cease to accrue in respect of the Preference Shares on the due date for redemption of those shares unless on the presentation of the share certificate (or an indemnity for any lost share certificate) the Company fails to pay the monies payable in respect of such redemption. 3.1.4 TRANSFER The special provisions relating to transfers of Ordinary Shares described at paragraph 6.1 below apply equally to the Preference Shares. 3.1.5 VOTING Preference Shareholders who hold 5 per cent or more of the Preference Shares are entitled to receive notice of and attend and speak at general meetings of the Company, but may not vote at general meetings unless and for so long as: (a) the Company has not paid the redemption moneys due on the due date for redemption of any Preference Shares (regardless of whether the Company has sufficient distributable earnings and profits or other requisite funds); or (b) indebtedness of the Company or any subsidiary undertaking of the Company amounting (in aggregate) to at least US$10,000,000 has become repayable before its specified maturity or is subject to a demand for repayment. 3.2 EFFECT OF THE SCHEME The Scheme involves the cancellation of all existing Preference Shares and the issue to the holders of those shares of Euramax US Shares which do not carry any special rights to income or capital. In summary, the rights attaching to the Euramax US Shares will be as follows: 3.2.1 DIVIDEND The directors of Euramax US may by resolution of the board or unanimous written consent declare such dividends in respect of the Euramax US Shares as they shall from time to time determine. Further details of the provisions of Delaware law relating to the payment of dividends by Delaware corporations are set out in Appendix IV to this document. 3.2.2 RETURN OF CAPITAL In the event of a return of capital on a liquidation, dissolution, winding-up or otherwise of Euramax US, the Euramax US Shares will share equally in any amounts available for distribution. 3.2.3 REDEMPTION The Euramax US Shares will not be designated as redeemable shares. However, under the laws of Delaware, Euramax US is permitted to purchase those shares provided that that purchase will not cause any impairment of its capital. Further details of the provisions of Delaware law relating to the purchase by Delaware Corporations of their own shares are set out in Appendix IV to this document. 3.2.4 TRANSFER Restrictions on the transferability of Euramax US Shares which are similar to those which currently apply to the Euramax Shares are incorporated in the certificate of incorporation of Euramax US. 3.2.5 VOTING The Euramax US Shares, other than the Restricted-voting Euramax US Shares which may be issued pursuant to the Scheme, will confer upon the holders one vote for each share held. The Restricted-voting Euramax US Shares will confer upon the holders one vote for every ten shares held. Restricted-voting Euramax US Shares may be converted into Voting Euramax US Shares at the option of the holders thereof in accordance with the amended and restated certificate of incorporation and by-laws of Euramax US. 4. EFFECT OF THE SCHEME ON THE RIGHTS ATTACHED TO NON-VOTING ORDINARY SHARES 4.1 SUMMARY OF SPECIAL RIGHTS ATTACHED TO NON-VOTING ORDINARY SHARES Holders of the Non-voting Ordinary Shares are entitled to receive notices of general meetings but are not entitled to vote at those meetings. Under the Articles, certain shareholders, whose holdings include Non-voting Ordinary Shares are entitled at any time to convert any or all of those shares into Voting Ordinary Shares of an equivalent par value credited with the same premium by surrendering their share certificates. 4.2 EFFECT OF THE SCHEME The majority of the Euramax US Shares to be issued pursuant to the Scheme shall be Voting Euramax US Shares. However, in the event that any holder of Non-voting Ordinary Shares wishes to receive Restricted-voting Euramax US Shares in respect of all or any of its Euramax Shares and such Shareholder notifies the Company of its wish to receive such shares by no later than 15 November 1999 (or such later date as the board of directors of Euramax US shall permit), that Shareholder may receive Restricted-voting Euramax US Shares in respect of those Euramax Shares to which such notification relates. The Restricted-voting Euramax US Shares will be identical in every other respect with the Voting Euramax US Shares issued to other Shareholders of Euramax pursuant to the Scheme. 5. SPECIAL RIGHTS CONFERRED ON THE INSTITUTIONAL SHAREHOLDERS 5.1 SUMMARY OF EXISTING SPECIAL RIGHTS OF INSTITUTIONAL SHAREHOLDERS 5.1.1 APPOINTMENT OF DIRECTORS (a) Under the Articles, CVC Europe (or any successor thereto as the holding company of the general partners of CVC European Equity Partners LP and CVC European Equity Partners (Jersey) LP from time to time) and ACP are each entitled to appoint and remove up to two directors to the board of Euramax , as follows: (i) if the shareholding of the CVCEEP Holders and their Permitted Transferees is at least 50 per cent of CVC Europe's initial holding of Ordinary Shares, CVC Europe may appoint and remove two directors to and from the board and if the shareholding of ACP and its Permitted Transferees is at least 50 per cent of ACP's initial holding of ordinary shares ACP may appoint and remove two directors to and from the board of the Company; (ii) if the relevant shareholding is less than 50 per cent of any such initial holding of CVC Europe or ACP but is at least 10 per cent of that initial holding, the right conferred upon CVC Europe or ACP (as the case may be) shall be to appoint and remove only one director; and (iii) if the relevant shareholding is less than 10 per cent of any such initial holding of ordinary shares, CVC Europe or ACP (as the case may be) shall have no right to appoint or remove any directors. (b) The directors appointed pursuant to the provisions described in paragraph (a) above are not subject to the general appointment and removal provisions contained in the Articles and the CVC Holders and ACP Holders have weighted voting rights enabling them to block any resolution to remove any such directors appointed by them. 5.1.2 SPECIAL RIGHTS ON TRANSFER (a) Shareholders who are also employees of the Company or any of its subsidiaries or directors of the Company other than the CVC Directors or ACP directors may be compelled to offer their Euramax Shares for sale in the event of them ceasing to be so employed and ceasing to hold office as directors of the Company (if relevant). The relevant provisions state that, within two months of such a cessation, the ACP director (if there is one) together with a CVC Europe director (if there is one) can serve a notice compelling the departing employee/director to sell all their shares to the Company or, if the Company cannot lawfully acquire such shares, to sell such shares to CVC Europe, ACP and Paribas. The price for any shares sold under the foregoing provisions will depend, INTER ALIA, upon: (i) the reason for such termination of employment; and (ii) the duration of employment of the relevant individual. (b) Pre-emption provisions also apply to any Shareholder who wishes to transfer shares voluntarily other than to a Permitted Transferee provided that the consent in writing of the holders of 66 2/3 per cent or more of the Ordinary Shares is first given. Subject to that consent, the relevant Euramax Shares must first be offered to the Institutional Investors on a basis proportionate to their existing shareholdings in Euramax. 5.1.3 PARTICIPATION IN SALES If any CVCEEP Holder or ACP Holder ("SELLING SHAREHOLDER") wishes to sell its shares then the Company shall (if such shares represent less than 50 per cent of the Selling Shareholder's initial holding of Ordinary Shares) notify the other holders of Ordinary Shares or (if such shares represent 50 per cent or more of such initial shareholding) notify the other Institutional Shareholders (in either case, the "OTHER SHAREHOLDERS") whereupon the parties so notified may elect to also sell in the contemplated sale such number of their Ordinary Shares as bears the same proportion to their total holding of such shares as the number of Ordinary Shares to be sold by the Selling Shareholder bears to its total holding of such shares. 5.1.4 POWER TO CALL SHAREHOLDERS' MEETINGS Each of the ACP Directors and the CVC Europe Directors has individual power to call a shareholders' meeting. 5.1.5 APPOINTMENT OF ALTERNATE DIRECTORS Each of the ACP Directors and the CVC Europe Directors can appoint an alternate director without any reference to the board. Other directors may only appoint a fellow director or other person approved by a resolution of the board as their alternate. 5.1.6 CONVERSION OF VOTING ORDINARY SHARES INTO NON-VOTING ORDINARY SHARES If ACP or Paribas have a regulatory problem (namely, the existence of facts or circumstances where a government regulatory agency believes or ACP or Paribas reasonably believe there is a substantial risk that the ACP Holder or the Paribas Holder will not be entitled to hold or exercise any significant right with respect to the Ordinary Shares), they may convert all or any of their Voting Ordinary Shares into the same number of Non-voting Ordinary Shares of equivalent par value credited with the same premium ("Voting Shares Conversion Option"). 5.2 EFFECT OF THE SCHEME Provisions similar, to the extent acceptable under the applicable law, to those detailed above will, by virtue of the provisions of the amended and restated certificate of incorporation and by-laws of Euramax US and the Euramax US Stockholders' Agreement, attach to the Euramax US Shares to be issued to the Institutional Shareholders pursuant to the Scheme. However, in view of the fact that ACP is no longer a Shareholder, the rights which are at present conferred upon ACP or otherwise arise by virtue of the holding of Shares by ACP pursuant to the Articles will, following the implementation of the Scheme, be exercisable by a majority of the persons who now hold the Euramax Shares originally owned by ACP (such persons being defined in the by-laws of Euramax US as "CVC NY Stockholders"). 6. EFFECT OF THE SCHEME ON SPECIAL TRANSFER RIGHTS ATTACHED to ORDINARY SHARES 6.1 SUMMARY OF EXISTING TRANSFER PROVISIONS (a) The Articles provide that written consent is required of the holders of 662/3 per cent of the Ordinary Shares (the "MAJORITY ORDINARY SHAREHOLDERS"), before any Ordinary Shares can be transferred to any person other than a Permitted Transferee: (b) The following are "Permitted Transferees" for the purposes of the Articles: (i) in the case of a corporate shareholder, any other company which is a member of the same group of companies as that corporate shareholder; (ii) in the case of a shareholder who holds Ordinary Shares as nominee or trustee for a limited partnership or unit trust which is primarily a vehicle for institutional investors: - another nominee or trustee for the limited partnership or trust; - on a distribution in kind under the relevant partnership agreement or trust deed, to the partners of the limited partnership or their nominees or the holders of units in the unit trust or their nominees; or - to a nominee or trustee for the limited partnership or unit trust. (iii) in the case of an Ordinary Shareholder which is an investment trust which is listed on the London Stock Exchange, to another investment trust which is also managed by the manager of the transferor; (iv) a co-investment scheme (being a scheme under which certain officers, employees or partners of an institutional shareholder or of its advisor or manager are entitled as individuals or through a body corporate by the other vehicle to acquire shares which the institutional investor will otherwise acquire); (v) in the case of an Ordinary Shareholder which is a co-investment scheme holding shares through a body corporate or other vehicle: - another body corporate or vehicle which holds or is to hold shares for the co-investment scheme; or - the officers, employees or partners entitled to the Ordinary Shares under the co-investment scheme; and (vi) in the case of an Ordinary Shareholder who is an individual, his family members. (c) The Ordinary Shareholders also have the right to participate in sales by any CVCEEP Holder or ACP Holder in certain circumstances as described in paragraph 5.1.3 above. 6.2 EFFECT OF THE SCHEME To the extent acceptable under the applicable law, provisions, similar to those detailed above in paragraph 6.1 will attach to the Euramax US Shares to be issued pursuant to the Scheme. However, in view of the fact that ACP is no longer a Shareholder, the rights which are limited to the holder by ACP of Euramax Shares will be exerciseable by a majority of the persons who now hold the Euramax Shares originally owned by ACP. APPENDIX III - General Information 1. INFORMATION RELATING TO EURAMAX 1.1 INCORPORATION The Company was incorporated on 22 February 1996 as a private company limited by shares under the Companies Act 1985 with registered number 3162836 under the name Hawkmist Limited. On 27 June 1996, the name of the Company was changed to Euramax International Limited. It was re-registered as a public limited company on 19 September 1996 and was re-registered as a private limited company on 29 September 1999. 1.2 REGISTERED OFFICE Euramax has its registered office at Brunel Road, Earlstrees Industrial Estate, Corby, Northants NN17 4SW. 1.3 The directors of Euramax and their functions are as follows: S M Wallis Non-executive Chairman R M Cashin Non-executive Director W Ty Comfort Non-executive Director P E Drack Non-executive Director J M Silvestri Non-executive Director J D Smith Chief Executive R Van Rappard Non-executive Director
1.4 SHARE CAPITAL 1.4.1 Euramax has an authorised and issued share capital of $34,925,000 and L50,000 made up as follows: (a) 911,520 ordinary shares of $1 each; (b) 88,480 Non-voting Ordinary Shares of $1 each; (c) 33,925,000 14 per cent redeemable cumulative preferences shares of $1 each; and (d) 50,000 14 per cent redeemable cumulative preference shares of L1 each. 1.4.2 All the Euramax Shares are in registered form. 1.4.3 Further information regarding the Euramax Shares is set out in Appendix II. 1.5 DEBT SECURITIES 1.5.1 The Company, Euramax European Holdings plc and Euramax European Holdings BV (together the "ISSUER") are the joint issuers of US$135,000,000 in aggregate principal amount of 11 1/4 per cent Senior Subordinated Notes due 2006. 1.5.2 The Notes (which were issued on 10 March 1997 in place of and by way of an exchange offer for $135,000,000 in principal amount of 11 1/4 per cent senior subordinated notes due 2006, previously in issue) (the "INDENTURE") are constituted by an indenture dated as of 25 September 1996 (as amended) made by the Issuers, Amerimax Holdings, Inc., a Delaware corporation, a wholly-owned subsidiary of Euramax, as Guarantor (the "GUARANTOR"), and the Chase Manhattan Bank, as Trustee (the "TRUSTEE") ("INDENTURE") which provides INTER ALIA that: (a) the aggregate principal amount of the Notes is $135,000,000; (b) the Notes bear interest at the rate of 11 1/4 per cent per annum; (c) the obligations of the issuers are to be guaranteed by Amerimax Holdings, Inc, the sub-holding company of the US subsidiaries of the Euramax Group; (d) the Notes are subordinated to all senior debt; and (e) the Notes are repayable upon a change of control and also in the event of a distribution of the assets of any Issuer or subsidiary of an Issuer (other than as may be permitted by the terms of the Notes). 1.5.3 The Notes are not listed in the United States. However, the Company does maintain a listing for the Notes on the Luxembourg Stock Exchange, and Euramax is subject to the reporting requirements of Section 15(d) of the Securities and Exchange Act of 1934, as amended. 1.6 SENIOR CREDIT AGREEMENT Euramax is a party to the Senior Credit Agreement but has no indebtedness to the lender under that Agreement. 1.7 OTHER INDEBTEDNESS At the date of this document there are no amounts owed by the Company to any person other than amounts owed to the Noteholders under the terms of the Notes. 2. EURAMAX US 2.1 INCORPORATION Euramax US was incorporated on 3 September 1999 as a corporation organised under the laws of the State of Delaware. 2.2 DIRECTORS AND OFFICERS (a) The directors of Euramax US will be as follows: S M Wallis R M Cashin W Ty Comfort P E Drack J M Silvestri J D Smith R Van Rappard (b) The officers of Euramax US will be as follows: F T Geist Executive Vice President M B Lewis Group Vice President R S Vansant Vice President, Secretary and Chief Financial Officer
2.3 REGISTERED OFFICE Euramax US has its registered office at 1013 Centre Road, City of Wilmington, County of New Castle, Delaware 19805 and its registered agent at this address is The Corporation Service Company. 2.4 SHARE CAPITAL Euramax US will have an authorised share capital of US$600,000 divided into 55,000,000 shares of Class A voting common stock with a par value of US$0.01 per share and 5,000,000 shares of Class B restricted voting common stock with a par value of US$0.01 per share. 3. US SECURITIES LAWS The Court approval of the Scheme will be relied upon by the U.S. Securities and Exchange Commission in its decision not to recommend any enforcement action based on the exemption under Section 3(a)(10) of the U.S. Securities Act of 1933, as amended. 4. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents will be available for inspection at the offices of Dibb Lupton Alsop, 125 London Wall, London EC2Y 5AE during normal business hours on any week day (Saturdays, Sundays and public holidays excepted) from the date of this document up to and including the date of the Court Meetings and the Extraordinary General Meeting and at each of those meetings: (i) the draft amended and restated certificate of incorporation and by-laws of Euramax US; (ii) the Shareholders' Agreement; (iii) the draft Termination Agreement; (iv) the draft Euramax US Stockholders' Agreement; and (v) the new articles of association of the Company proposed to be adopted pursuant to the Capital Reduction Resolution. Dated: 19 October 1999 APPENDIX IV - COMPARISON OF LAWS 1. GENERAL THE FOLLOWING IS A SUMMARY OF CERTAIN DIFFERENCES BETWEEN THE LAWS OF ENGLAND AND WALES AND THE LAWS OF THE STATE OF DELAWARE, US, WHICH AFFECT SHAREHOLDERS OF COMPANIES INCORPORATED IN THOSE JURISDICTIONS. IT IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE EXHAUSTIVE. SHAREHOLDERS ARE RECOMMENDED TO SEEK THEIR OWN ADVICE FROM A LEGAL ADVISOR QUALIFIED TO ACT IN THE RELEVANT TERRITORY IN RELATION TO ANY ASPECTS OF THE LAWS OF ENGLAND AND WALES AND/OR THE STATE OF DELAWARE WHICH ARE OF PARTICULAR RELEVANCE TO THEM. 2. DIVIDENDS A private company incorporated in England and Wales may declare dividends out of its accumulated, realised profits, so far as not previously distributed or capitalised, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital. In contrast, a Delaware corporation is able to pay dividends out of its "surplus" which, for this purpose, is defined as the amount by which its net assets exceed its share capital. A Delaware corporation may also declare dividends based on its net profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year. 3. MAINTENANCE OF CAPITAL Companies incorporated in England and Wales are subject to stringent rules which are designed to maintain their capital. As a consequence of these rules, in general, purchases by companies of their own shares may only be made out of distributable profits or (to a limited extent) the proceeds of a fresh issue of shares. Payment for shares repurchased must be made in cash. The rules for maintenance of capital apply equally to a company's share premium account subject to limited exceptions, INTER ALIA, permitting the share premium account to be used to pay up fully paid bonus shares. Shares which have been repurchased by the company must immediately be cancelled. In contrast, a Delaware corporation may purchase its own shares for cash or other property and, provided that its capital is not impaired, out of its income or capital and there is no requirement that shares so purchased must be cancelled. Once purchased, such shares may be retained by the company and be dealt with by the company as it may determine. 4. FINANCIAL ASSISTANCE The laws of England and Wales impose a general prohibition on the provision by companies of financial assistance for the acquisition of their shares or shares in their holding companies. The prohibition applies both to financial assistance given before or at the same time as an acquisition of shares and to financial assistance given after the acquisition for the purpose of reducing or discharging a liability incurred for the purposes of the acquisition. There are a number of limited exceptions to the general prohibition on a company giving financial assistance. In general, these are available to private companies only. They include a so-called "whitewash procedure" which enables financial assistance to be given by a private company, provided, INTER ALIA, that the directors make a declaration of solvency and the assistance is sanctioned by a special resolution of the members of the company (unless it is a wholly owned subsidiary). There is no general restriction on a Delaware Corporation giving financial assistance in connection with an acquisition of its shares. 5. DUTIES OF DIRECTORS The directors of a company incorporated in England and Wales are subject to a number of common law and statutory duties including: (i) a duty to exercise reasonable care and skill in carrying out their functions; (ii) fiduciary duties owed by them to the company; and (iii) statutory duties (including a duty to disclose any interest that they may have in contracts with the company). Statute also requires shareholder approval to be obtained for certain substantial property transactions between a company and its directors. Delaware law imposes a duty on directors to exercise care in making business decisions affecting the company and a duty of loyalty which comprises a duty to protect the interest of the company, a duty to refrain from conduct which would injure the company and its shareholders and a duty of disclosure. As is the case under the laws of England and Wales, directors must avoid any conflict between their duties as directors and self interest. 6. TRANSFER OF SHARES The laws of England and Wales require the execution by a transferor of shares of a stock transfer form, which must be presented to the board duly stamped with the appropriate stamp duty and approved prior to the name of the transferor being entered into the register of members of the company, at which time legal title to the shares passes. Transfers of shares in Delaware corporations may be readily effected by endorsing over the certificate for those shares. The corporation then has a duty to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction in its books. 7. SHAREHOLDER MEETINGS The laws of England and Wales and those of Delaware require the holding of an annual general meeting in each calendar year. However, a private company incorporated in England and Wales may pass an elective resolution entitling it to dispense with the holding of annual general meetings until any member gives notice to the company requiring an annual general meeting to be held. 8. ACCOUNTING INFORMATION The laws of England and Wales and the laws of Delaware each require annual accounts to be filed by companies. However, the financial statements of Delaware companies whose securities are not publicly traded are not generally available to the public. Dated: 19 October 1999 NOTICES OF MEETINGS EURAMAX INTERNATIONAL LIMITED NOTICE OF COURT MEETING OF HOLDERS OF VOTING ORDINARY SHARES No. 3162836 IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION COMPANIES COURT Mr Registrar James IN THE MATTER OF EURAMAX INTERNATIONAL LIMITED and IN THE MATTER OF THE COMPANIES ACT 1985 NOTICE IS HEREBY GIVEN that by an Order dated 24 September 1999 made in the above matters the Court has directed a Meeting to be convened of the holders of the Voting Ordinary Shares (as defined in the Scheme of Arrangement hereinafter referred to) in Euramax International Limited (hereinafter called the "Company") for the purpose of considering and, if thought fit, approving (with or without modification) a Scheme of Arrangement proposed to be made between the Company and the holders of the Scheme Shares (as defined in the said Scheme of Arrangement) and that such meeting will be held at the offices of Dibb Lupton Alsop, Solicitors of 125 London Wall London EC2Y 5AE on 16 November 1999 at 9:30 am, or such later time or date as the Court so directs, at which place and time the said shareholders are requested to attend. A copy of the said Scheme of Arrangement and a copy of the explanatory statement required to be furnished pursuant to Section 426 of the above mentioned Act are incorporated in the document of which this Notice forms part. The holders of Voting Ordinary Shares may vote in person at the said meeting or they may appoint another person, whether a member of the Company or not, as their proxy to attend and vote in their stead. A purple form of proxy for use at the meeting is enclosed with this Notice. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority will be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding. It is requested that forms appointing proxies be left at or sent by post or by facsimile transmission to the Company at Brunel Road, Earlstrees Industrial Estate, Corby, Northants NN17 4JW marked for the attention of Paul Williams not less than one hour before the time appointed for the said meeting, but if forms are not so lodged they may be handed to the Chairman at the meeting. Holders of Voting Ordinary Shares who have returned forms of proxy are not thereby precluded from attending the Meeting and voting in person if they so wish. By the said Order the Court has appointed Mr Stuart Wallis or failing him Mr William Ty Comfort or failing him Mr John David Smith to act as Chairman of the said meeting and has directed the Chairman to report the results thereof to the Court. The said Scheme of Arrangement will be subject to the subsequent approval of the Court. Dated: 19 October 1999 Dibb Lupton Alsop 125 London Wall London EC2Y 5AE Solicitors to the Company EURAMAX INTERNATIONAL LIMITED NOTICE OF COURT MEETING OF HOLDERS OF NON-VOTING ORDINARY SHARES No. 3162836 IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION COMPANIES COURT Mr Registrar James IN THE MATTER OF EURAMAX INTERNATIONAL LIMITED and IN THE MATTER OF THE COMPANIES ACT 1985 NOTICE IS HEREBY GIVEN that by an Order dated 24 September 1999 made in the above matters the Court has directed a Meeting to be convened of the holders of the Non-voting Ordinary Shares (as defined in the Scheme of Arrangement hereinafter referred to) in Euramax International Limited (hereinafter called the "Company") for the purpose of considering and, if thought fit, approving (with or without modification) a Scheme of Arrangement proposed to be made between the Company and the holders of the Scheme Shares (as defined in the said Scheme of Arrangement) and that such meeting will be held at the offices of Dibb Lupton Alsop, Solicitors of 125 London Wall London EC2Y 5AE on 16 November 1999 at 9.45 am, or (so soon thereafter as the preceding Court Meeting of the holders of Voting Ordinary Shares convened on the same date shall have been concluded or adjourned) such later time or date as the Court so directs, at which place and time the said shareholders are requested to attend. A copy of the said Scheme of Arrangement and a copy of the explanatory statement required to be furnished pursuant to Section 426 of the above mentioned Act are incorporated in the document of which this Notice forms part. The holders of Non-voting Ordinary Shares may vote in person at the said meeting or they may appoint another person, whether a member of the Company or not, as their proxy to attend and vote in their stead. A pink form of proxy for use at the meeting is enclosed with this Notice. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority will be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding. It is requested that forms appointing proxies be left at or sent by post or by facsimile transmission to the Company at Brunel Road, Earlstrees Industrial Estate, Corby, Northants NN17 4JW marked for the attention of Paul Williams not less than one hour before the time appointed for the said meeting, but if forms are not so lodged they may be handed to the Chairman at the meeting. Holders of Non-voting Ordinary Shares who have returned forms of proxy are not thereby precluded from attending the Meeting and voting in person if they so wish. By the said Order the Court has appointed Mr Stuart Wallis or failing him Mr William Ty Comfort or failing him Mr John David Smith to act as Chairman of the said meeting and has directed the Chairman to report the results thereof to the Court. The said Scheme of Arrangement will be subject to the subsequent approval of the Court. Dated: 19 October 1999 Dibb Lupton Alsop 125 London Wall London EC2Y 5AE Solicitors to the Company EURAMAX INTERNATIONAL LIMITED NOTICE OF COURT MEETING OF HOLDERS OF DOLLAR PREFERENCE SHARES No. 3162836 IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION COMPANIES COURT Mr Registrar James IN THE MATTER OF EURAMAX INTERNATIONAL LIMITED and IN THE MATTER OF THE COMPANIES ACT 1985 NOTICE IS HEREBY GIVEN that by an Order dated 24 September 1999 made in the above matters the Court has directed a Meeting to be convened of the holders of the Dollar Preference Shares (as defined in the Scheme of Arrangement hereinafter referred to) in Euramax International Limited (hereinafter called the "Company") for the purpose of considering and, if thought fit, approving (with or without modification) a Scheme of Arrangement proposed to be made between the Company and the holders of the Scheme Shares (as defined in the said Scheme of Arrangement) and that such meeting will be held at the offices of Dibb Lupton Alsop, Solicitors of 125 London Wall, EC2Y 5AE on 16 November 1999 at 10:00 am, (or so soon thereafter as the preceding Court Meeting of the holders of Non-voting Ordinary Shares convened for the same day shall have been concluded or adjourned) or such later time or date as the Court so directs, at which place and time the said shareholders are requested to attend. A copy of the said Scheme of Arrangement and a copy of the explanatory statement required to be furnished pursuant to Section 426 of the above mentioned Act are incorporated in the document of which this Notice forms part. The holders of Dollar Preference Shares may vote in person at the said meeting or they may appoint another person, whether a member of the Company or not, as their proxy to attend and vote in their stead. An orange form of proxy for use at the meeting is enclosed with this Notice. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority will be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding. It is requested that forms appointing proxies be left at or sent by post or by facsimile transmission to the Company at Brunel Road, Earlstrees Industrial Estate, Corby, Northants NN17 4JW marked for the attention of Paul Williams not less than one hour before the time appointed for the said meeting, but if forms are not so lodged they may be handed to the Chairman at the meeting. Holders of Dollar Preference Shares who have returned forms of proxy are not thereby precluded from attending the Meeting and voting in person if they so wish. By the said Order the Court has appointed Mr Stuart Wallis or failing him Mr William Ty Comfort or failing him Mr John David Smith to act as Chairman of the said meeting and has directed the Chairman to report the results thereof to the Court. The said Scheme of Arrangement will be subject to the subsequent approval of the Court. Dated: 19 October 1999 Dibb Lupton Alsop 125 London Wall London EC2Y 5AE Solicitors to the Company EURAMAX INTERNATIONAL LIMITED NOTICE OF COURT MEETING OF HOLDERS OF STERLING PREFERENCE SHARES No. 3162836 IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION COMPANIES COURT Mr Registrar James IN THE MATTER OF EURAMAX INTERNATIONAL LIMITED and IN THE MATTER OF THE COMPANIES ACT 1985 NOTICE IS HEREBY GIVEN that by an Order dated 24 September 1999 made in the above matters the Court has directed a Meeting to be convened of the holders of the Sterling Preference Shares (as defined in the Scheme of Arrangement hereinafter referred to) in Euramax International Limited (hereinafter called the "Company") for the purpose of considering and, if thought fit, approving (with or without modification) a Scheme of Arrangement proposed to be made between the Company and the holders of the Scheme Shares (as defined in the said Scheme of Arrangement) and that such meeting will be held at the offices of Dibb Lupton Alsop, Solicitors of 125 London Wall London EC2Y 5AE on 16 November 1999 at 10:15 am, (or so soon thereafter as the preceding Court Meeting of the holders of Dollar Preference Shares convened for the same day shall have been concluded or adjourned) or such later time or date as the Court so directs, at which place and time the said shareholders are requested to attend. A copy of the said Scheme of Arrangement and a copy of the explanatory statement required to be furnished pursuant to Section 426 of the above mentioned Act are incorporated in the document of which this Notice forms part. The holders of Sterling Preference Shares may vote in person at the said meeting or they may appoint another person, whether a member of the Company or not, as their proxy to attend and vote in their stead. A yellow form of proxy for use at the meeting is enclosed with this Notice. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority will be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding. It is requested that forms appointing proxies be left at or sent by post or by facsimile transmission to the Company at Brunel Road, Earlstrees Industrial Estate, Corby, Northants NN17 4JW marked for the attention of Paul Williams not less than one hour before the time appointed for the said meeting, but if forms are not so lodged they may be handed to the Chairman at the meeting. Holders of Sterling Preference Shares who have returned forms of proxy are not thereby precluded from attending the Meeting and voting in person if they so wish. By the said Order the Court has appointed Mr Stuart Wallis or failing him Mr William Ty Comfort or failing him Mr John David Smith to act as Chairman of the said meeting and has directed the Chairman to report the results thereof to the Court. The said Scheme of Arrangement will be subject to the subsequent approval of the Court. Dated: 19 October 1999 Dibb Lupton Alsop 125 London Wall London EC2Y 5AE Solicitors to the Company EURAMAX INTERNATIONAL LIMITED NOTICE OF EXTRAORDINARY GENERAL MEETING Notice is hereby given that an Extraordinary General Meeting of Euramax International Limited (the "Company") will be held at the offices of Dibb Lupton Alsop, Solicitors of 125 London Wall London EC2Y 5AE on 16 November 1999 at 10:30 am (or as soon thereafter as the Court Meeting of the holders of Sterling Preference Shares, (as defined in the Scheme of Arrangement hereinafter referred to) convened by direction of the High Court of Justice for the same place and date shall have concluded or been adjourned) for the purpose of considering and, if thought fit, passing the following resolution which will be proposed as a special resolution. SPECIAL RESOLUTION THAT: 1. the Scheme of Arrangement dated 19 October 1999 (the "Scheme") proposed to be made between the Company and the holders of the Scheme Shares (as defined in the Scheme), a print of which has been produced to this Meeting and signed for the purpose of identification by the Chairman of the Meeting, be approved and the directors of the Company be and they are hereby authorised to take or concur in all steps necessary for carrying the same into effect; 2. for the purpose of giving effect to the Scheme: 2.1 the capital of the Company be reduced by the cancellation of the Scheme Shares (as defined in the Scheme) and forthwith and contingently upon such reduction of capital taking effect, the capital of the Company be increased to L1,000 by the creation of such number of new ordinary shares of L1 each as shall have an aggregate nominal value equal to L1,000 ("New Shares"); and 2.2 of the reserve arising upon the said reduction of capital, L1,000 be applied in paying up in full at par the New Shares, which shall thereupon be allotted and issued, credited as fully paid up to Euramax International, Inc.; 3. the Directors be and are hereby authorised for the purposes of Section 80 of the Companies Act 1985 to effect the allotment of the New Shares provided that (i) the maximum nominal amount of shares which may be allotted hereunder is L1,000, (ii) this authority shall expire on 31 December 1999 and (iii) this authority shall be without prejudice to any other authority under the said Section 80 previously granted and in force on the date on which this resolution is passed; and 4. subject to and forthwith upon the Scheme becoming effective the new articles of association of the Company in the form produced to the meeting and initialled by the Chairman for the purposes of identification be adopted as the articles of association of the Company in substitution for and to the exclusion of all existing articles of association of the Company. Dated: 19 October 1999 By order of the board R. Scott Vansant Secretary REGISTERED OFFICE: Brunel Road Earlstrees Industrial Estate Corby Northants NN17 4JW Notes: 1. A member entitled to attend and vote at the Meeting convened by this Notice above is entitled to appoint a proxy to attend and, on a poll, vote in his place. A proxy need not be a member of the Company. 2. To be valid, forms of proxy must be left at or sent by post or by facsimile transmission to the Company at Brunel Road, Earlstrees Industrial Estate, Corby, Northants NN17 4JW marked for the attention of Paul Williams not less than one hour before the time appointed for holding the Meeting. A white form of proxy is enclosed. 3. Completion of a form of proxy does not prevent a holder of Voting Ordinary Shares from attending and voting at the Meeting should he so wish. THE HOLDERS OF NON-VOTING ORDINARY SHARES AND THOSE HOLDERS OF PREFERENCE SHARES WHO HOLD AT LEAST 5 PER CENT OF THE PREFERENCE SHARES FOR THE TIME BEING IN ISSUE ("SUBSTANTIAL PREFERENCE SHAREHOLDERS") MAY ATTEND THE MEETING BUT MAY NOT VOTE THEREAT, WHETHER BY PROXY OR OTHERWISE. SUBSTANTIAL PREFERENCE SHAREHOLDERS MAY ALSO SPEAK AT THE MEETING SHOULD THEY WISH TO DO SO. EX-27 3 EXHIBIT 27
5 0001026743 EURAMAX INTERNATIONAL LIMITED 1,000 9-MOS DEC-31-1999 DEC-26-1998 SEP-25-1999 13,872 0 94,575 3,367 78,629 189,743 145,940 27,632 410,475 108,546 135,000 0 51,377 1,000 11,276 410,475 441,308 441,308 354,468 354,468 51,775 355 16,318 18,392 7,813 10,579 0 0 0 10,579 0 0
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