-----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, C710smzNKhcnWJE0eSre71+27Is5r1mQxRl060sDynxCUTFYKA58rLWkh66tPLpE TPOfOVsf8rP2NNt6mUhwAA== 0001047469-99-029402.txt : 19990809 0001047469-99-029402.hdr.sgml : 19990809 ACCESSION NUMBER: 0001047469-99-029402 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990626 FILED AS OF DATE: 19990802 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: 99676050 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 FORM 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 JUNE 26, 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 PLC (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 August 2, 1999, Registrant had outstanding 1,000,000 Ordinary Shares and 34,000,000 Preference Shares. Page 1 of 27 Exhibit Index located on page 25 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (THOUSANDS OF U.S. DOLLARS) (UNAUDITED)
QUARTERS ENDED SIX MONTHS ENDED -------------------------------- ------------------------------- JUNE 26, JUNE 27, JUNE 26, JUNE 27, 1999 1998 1999 1998 ---------------- -------------- --------------- -------------- Net sales $ 156,199 $ 160,434 $ 288,586 $ 303,523 Costs and expenses: Cost of goods sold 123,934 130,572 231,724 249,989 Selling and general 14,189 12,736 27,361 24,815 Depreciation and amortization 3,437 3,057 6,827 6,111 ---------------- -------------- --------------- -------------- Earnings from operations 14,639 14,069 22,674 22,608 Interest expense, net (5,373) (6,074) (10,631) (12,134) Other expenses, net (223) (91) (802) (132) ---------------- -------------- --------------- -------------- Earnings before income taxes 9,043 7,904 11,241 10,342 Provision for income taxes 3,812 3,366 4,772 4,385 ---------------- -------------- --------------- -------------- Net earnings 5,231 4,538 6,469 5,957 Dividends on redeemable preference shares 1,678 1,463 3,300 2,876 ---------------- -------------- --------------- -------------- Net earnings available for ordinary shareholders $ 3,553 $ 3,075 $ 3,169 $ 3,081 ---------------- -------------- --------------- -------------- ---------------- -------------- --------------- --------------
The accompanying notes are an integral part of these condensed consolidated financial statements. 2 EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (THOUSANDS OF U.S. DOLLARS) (UNAUDITED)
JUNE 26, DECEMBER 25, 1999 1998 ------------------ ------------------ ASSETS Current assets: Cash and equivalents $ 16,345 $ 19,044 Accounts receivable, net 93,613 81,845 Inventories 77,546 74,735 Other current assets 5,477 4,585 ------------------ ------------------ Total current assets 192,981 180,209 Property, plant and equipment, net 115,578 117,080 Goodwill, net 86,217 76,047 Deferred income taxes 8,540 8,588 Other assets 8,436 6,725 ------------------ ------------------ $ 411,752 $ 388,649 ------------------ ------------------ ------------------ ------------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Cash overdrafts $ 3,022 $ 1,513 Accounts payable 59,060 51,862 Accrued expenses and other current liabilities 25,533 25,616 Income taxes payable 7,567 3,478 Current maturities of long-term debt 7,832 9,182 ------------------ ------------------ Total current liabilities 103,014 91,651 Long-term debt, less current maturities 223,592 208,496 Other liabilities 9,676 13,100 Deferred income taxes 16,365 19,398 ------------------ ------------------ Total liabilities 352,647 332,645 ------------------ ------------------ Redeemable preference shares 49,639 46,339 ------------------ ------------------ Ordinary shareholders' equity: Ordinary shares 1,000 1,000 Retained earnings 14,516 11,347 Accumulated other comprehensive loss (6,050) (2,682) ------------------ ------------------ Total ordinary shareholders' equity 9,466 9,665 ------------------ ------------------ ------------------ ------------------ $ 411,752 $ 388,649 ------------------- ------------------ ------------------- ------------------
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (THOUSANDS OF U.S. DOLLARS) (UNAUDITED)
SIX MONTHS ENDED ----------------------------------------- JUNE 26, JUNE 27, 1999 1998 ------------------- ------------------- Net cash provided by operating activities $ 7,353 $ 4,010 ------------------- ------------------- Cash flows from investing activities: Purchases of businesses (22,714) - Proceeds from sales of assets 588 502 Capital expenditures (6,049) (6,241) ------------------- ------------------- Net cash used in investing activities (28,175) (5,739) ------------------- ------------------- Cash flows from financing activities: Repayments of long-term debt (19,255) (13,421) Proceeds from long-term debt 33,700 13,573 Other 1,509 - ------------------- ------------------- Net cash provided by financing activities 15,954 152 ------------------- ------------------- Effect of exchange rate changes on cash 2,169 1,819 ------------------- ------------------- Net increase (decrease) in cash and equivalents (2,699) 242 Cash and equivalents at beginning of period 19,044 12,914 ------------------- ------------------- Cash and equivalents at end of period $ 16,345 $ 13,156 ------------------- ------------------- ------------------- ------------------- Non-cash investing and financing activities: Payables for certain non-compete agreements and working capital adjustments associated with purchases of businesses $ 877 $ - Dividends accrued on redeemable preference shares $ 3,300 $ 2,876
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 EURAMAX INTERNATIONAL PLC 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" refers to Euramax International plc ("Euramax") and Subsidiaries, collectively. 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 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 June 26, 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. As of June 26, 1999, 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 $127.2 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 $548.0 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 six months ended June 26, 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. 5 EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 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 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 by the adoption. 3. INVENTORIES: Inventories were comprised of:
JUNE 26, DECEMBER 25, 1999 1998 ------------------- ------------------ Raw materials $ 56,504 $ 53,247 Work in process 9,173 10,172 Finished products 11,869 11,316 ------------------- ------------------ $ 77,546 $ 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. 6 EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 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. 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 Inc. 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. 7 EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 6. COMPREHENSIVE INCOME: For the six months ended June 26, 1999 and June 27, 1998, comprehensive income was approximately $3.1 million and $5.8 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 loss, net of tax, for the six months ended June 26, 1999 and June 27, 1998, was approximately $3.4 million and $140.0 thousand, 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 six months ended June 26, 1999 and June 27, 1998.
QUARTERS ENDED SIX MONTHS ENDED ---------------------------------------- ------------------------------------- JUNE 26, 1999 JUNE 27, 1998 JUNE 26, 1999 JUNE 27, 1998 ------------------- ------------------- ------------------- ----------------- SALES European Roll Coating $ 35,193 $ 41,690 $ 71,368 $ 86,043 U.S. Fabrication 104,788 104,177 185,788 188,787 European Fabrication 16,643 18,075 32,762 35,746 ------------------- ------------------- ------------------- ----------------- Total segment sales 156,624 163,942 289,918 310,576 Eliminations (425) (3,508) (1,332) (7,053) ------------------- ------------------- ------------------- ----------------- Consolidated net sales $ 156,199 $ 160,434 $ 288,586 $ 303,523 ------------------- ------------------- ------------------- ----------------- ------------------- ------------------- ------------------- ----------------- EBITDA European Roll Coating $ 5,730 $ 6,111 $ 10,623 $ 12,809 U.S. Fabrication 11,082 9,866 16,597 13,718 European Fabrication 2,122 2,365 3,881 4,504 ------------------- ------------------- ------------------- ----------------- Total EBITDA for reportable segments 18,934 18,342 31,101 31,031 Expenses that are not segment specific (1,081) (1,307) (2,402) (2,444) Depreciation and amortization (3,437) (3,057) (6,827) (6,111) Interest expense, net (5,373) (6,074) (10,631) (12,134) ------------------- ------------------- ------------------- ----------------- Consolidated earnings before income taxes $ 9,043 $ 7,904 $ 11,241 $ 10,342 ------------------- ------------------- ------------------- ----------------- ------------------ ------------------- ------------------- -----------------
8 EURAMAX INTERNATIONAL PLC 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 six months ended June 26, 1999 and June 27, 1998:
QUARTERS ENDED SIX MONTHS ENDED --------------------------- --------------------------- JUNE 26, JUNE 27, JUNE 26, JUNE 27, CUSTOMERS/MARKETS PRIMARY PRODUCTS 1999 1998 1999 1998 - -------------------------- ---------------------------------------- ------------- ------------ ------------ ------------- Original Equipment Painted aluminum sheet and coil; Manufacturers fabricated painted aluminum, ("OEMs") laminated and fiberglass panels; RV doors, windows and roofing; and composite building panels $ 70,114 $ 73,873 $ 137,366 $ 148,423 Rural Contractors Steel and aluminum roofing and siding 31,772 31,167 54,543 54,634 Home Centers Raincarrying systems, roofing accessories, windows, doors, and shower enclosures 23,205 22,929 38,959 40,672 Manufactured Housing Steel siding and trim components 12,591 16,135 24,241 29,442 Distributors Metal coils, raincarrying systems and roofing accessories 7,223 6,400 12,121 11,837 Industrial and Standing seam panels and siding and Architectural roofing accessories 4,289 4,401 8,658 9,409 Contractors Home Improvement Vinyl replacement windows; metal Contractors roofing and insulated roofing panels; shower, patio and entrance doors; and awnings 7,005 5,529 12,698 9,106 ------------- ------------ ------------ ------------- $ 156,199 $ 160,434 $ 288,586 $ 303,523 ------------- ------------ ------------ ------------- ------------- ------------ ------------ -------------
9 EURAMAX INTERNATIONAL PLC 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 Inc. 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 six months ended June 26, 1999 and June 27, 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 JUNE 26, 1999 ----------------------------------------------------------------------------------------------- CO-OBLIGORS AND GUARANTOR SUBSIDIARIES ----------------------------------------------------- EURAMAX AMERIMAX EURAMAX EURAMAX INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN PLC INC. HOLDINGS PLC HOLDINGS B.V. NON-GUARANTOR CONSOLIDATED (PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS ------------ ------------ ------------ -------------- -------------- ------------ ------------ Net Sales $ - $ - $ - $ - $ 156,199 $ - $ 156,199 Cost and expenses: Cost of goods sold - - - - 123,934 - 123,934 Selling and general 682 - - 1 13,506 - 14,189 Depreciation and amortization - - - - 3,437 - 3,437 ------------ ------------ ------------ -------------- -------------- ------------ ------------ Earnings (loss) from operations (682) - - (1) 15,322 - 14,639 Equity in earnings of subsidiaries 5,708 3,473 961 2,786 - (12,928) - Interest income (expense), net - (456) 257 (118) (5,056) - (5,373) Other income (expense), net (3) - (632) (1,200) 1,612 - (223) ------------ ------------ ------------ -------------- -------------- ------------ ------------ Earnings before income taxes 5,023 3,017 586 1,467 11,878 (12,928) 9,043 Provision (benefit) for income taxes (208) (178) (97) (270) 4,565 - 3,812 ------------ ------------ ------------ -------------- -------------- ------------ ------------ Net earnings 5,231 3,195 683 1,737 7,313 (12,928) 5,231 Dividends on redeemable preference shares 1,678 - - - - - 1,678 ------------ ------------ ------------ -------------- -------------- ------------ ------------ Net earnings available for ordinary shareholders $ 3,553 $ 3,195 $ 683 $ 1,737 $ 7,313 $ (12,928) $ 3,553 ------------ ------------ ------------ -------------- -------------- ------------ ------------ ------------ ------------ ------------ -------------- -------------- ------------ ------------
10 EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 8. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
QUARTER ENDED JUNE 27, 1998 ------------------------------------------------------------------------------------------------ CO-OBLIGORS AND GUARANTOR SUBSIDIARIES ------------------------------------------------------ EURAMAX AMERIMAX EURAMAX EURAMAX INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN PLC INC. HOLDINGS PLC HOLDINGS B.V. NON-GUARANTOR CONSOLIDATED (PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS ------------ ------------- ------------ ------------- --------------- ------------- ----------- Net Sales $ - $ - $ - $ - $ 160,434 $ - $ 160,434 Cost and expenses: Cost of goods sold - - - - 130,572 - 130,572 Selling and general 105 - - - 12,631 - 12,736 Depreciation and amortization - - - - 3,057 - 3,057 ------------ ------------- ------------ ------------- --------------- ------------- ----------- Earnings (loss) from operations (105) - - - 14,174 - 14,069 Equity in earnings of subsidiaries 4,682 2,062 1,370 1,734 - (9,848) - Interest expense, net - (330) (252) (223) (5,269) - (6,074) Other income (expense), net - - (347) 363 (107) - (91) ------------- ------------- ------------ ------------- --------------- ------------- ----------- Earnings before income taxes 4,577 1,732 771 1,874 8,798 (9,848) 7,904 Provision (benefit) for income taxes 39 (179) (131) 5 3,632 - 3,366 ------------- ------------- ------------ ------------- --------------- ------------- ----------- Net earnings 4,538 1,911 902 1,869 5,166 (9,848) 4,538 Dividends on redeemable preference shares 1,463 - - - - - 1,463 ------------- ------------- ------------ ------------- --------------- ------------- ----------- Net earnings available for ordinary shareholders $ 3,075 $ 1,911 $ 902 $ 1,869 $ 5,166 $ (9,848) $ 3,075 ------------- ------------- ------------ ------------- --------------- ------------- ----------- ------------- ------------- ------------ ------------- --------------- ------------- -----------
11 EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 8. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
SIX MONTHS ENDED JUNE 26, 1999 ------------------------------------------------------------------------------------------------ CO-OBLIGORS AND GUARANTOR SUBSIDIARIES ------------------------------------------------------ EURAMAX AMERIMAX EURAMAX EURAMAX INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN PLC INC. HOLDINGS PLC HOLDINGS B.V. NON-GUARANTOR CONSOLIDATED (PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS ------------ ------------- ------------ ------------- --------------- ------------- ----------- Net Sales $ - $ - $ - $ - $ 288,586 $ - $ 288,586 Cost and expenses: Cost of goods sold - - - - 231,724 - 231,724 Selling and general 1,421 - - 2 25,938 - 27,361 Depreciation and amortization - - - - 6,827 - 6,827 ------------ ------------- ------------ ------------- --------------- ------------- ----------- Earnings (loss) from operations (1,421) - - (2) 24,097 - 22,674 Equity in earnings of subsidiaries 7,452 4,139 1,663 5,810 - (19,064) - Interest income (expense), net - (913) 133 (133) (9,718) - (10,631) Other income (expense), net (3) - (1,480) (4,153) 4,834 - (802) ------------- ------------- ------------ ------------- --------------- ------------- ----------- Earnings before income taxes 6,028 3,226 316 1,522 19,213 (19,064) 11,241 Provision (benefit) for income taxes (441) (356) (416) (1,482) 7,467 - 4,772 ------------- ------------- ------------ ------------- --------------- ------------- ----------- Net earnings 6,469 3,582 732 3,004 11,746 (19,064) 6,469 Dividends on redeemable preference shares 3,300 - - - - - 3,300 ------------- ------------- ------------ ------------- --------------- ------------- ----------- Net earnings available for ordinary shareholders $ 3,169 $ 3,582 $ 732 $ 3,004 $ 11,746 $ (19,064) $ 3,169 ------------- ------------- ------------ ------------- --------------- ------------- ----------- ------------- ------------- ------------ ------------- --------------- ------------- -----------
12 EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 8. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
SIX MONTHS ENDED JUNE 27, 1998 ------------------------------------------------------------------------------------------------ CO-OBLIGORS AND GUARANTOR SUBSIDIARIES ------------------------------------------------------ EURAMAX AMERIMAX EURAMAX EURAMAX INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN PLC INC. HOLDINGS PLC HOLDINGS B.V. NON-GUARANTOR CONSOLIDATED (PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS ------------ ------------- ------------ ------------- --------------- ------------- ----------- Net Sales $ - $ - $ - $ - $ 303,523 $ - $ 303,523 Cost and expenses: Cost of goods sold - - - - 249,989 - 249,989 Selling and general 128 - - - 24,687 - 24,815 Depreciation and amortization - - - - 6,111 - 6,111 ------------ ------------- ------------ ------------- --------------- ------------- ----------- Earnings (loss) from operations (128) - - - 22,736 - 22,608 Equity in earnings of subsidiaries 6,124 457 2,503 4,803 - (13,887) - Interest expense, net - (913) (429) (229) (10,563) - (12,134) Other income (expense), net - - (273) (753) 894 - (132) ------------- ------------- ------------ ------------- --------------- ------------- ----------- Earnings (loss) before income taxes 5,996 (456) 1,801 3,821 13,067 (13,887) 10,342 Provision (benefit) for income taxes 39 (407) (162) (389) 5,304 - 4,385 ------------- ------------- ------------ ------------- --------------- ------------- ----------- Net earnings (loss) 5,957 (49) 1,963 4,210 7,763 (13,887) 5,957 Dividends on redeemable preference shares 2,876 - - - - - 2,876 ------------- ------------- ------------ ------------- --------------- ------------- ----------- Net earnings (loss) available for ordinary shareholders $ 3,081 $ (49) $ 1,963 $ 4,210 $ 7,763 $ (13,887) $ 3,081 ------------- ------------- ------------ ------------- --------------- ------------- ----------- ------------- ------------- ------------ ------------- --------------- ------------- -----------
13 EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (THOUSANDS OF U.S. DOLLARS) (UNAUDITED) 8. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
JUNE 26, 1999 ------------------------------------------------------------------------------------------------- CO-OBLIGORS AND GUARANTOR SUBSIDIARIES -------------------------------------------------------- EURAMAX AMERIMAX EURAMAX EURAMAX INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN NON- PLC INC. HOLDINGS PLC HOLDINGS B.V. GUARANTOR CONSOLIDATED (PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS ------------- ----------- ------------- ------------- ------------- ----------- ------------ ASSETS Current assets: Cash and equivalents $ - $ - $ - $ - $ 16,345 $ - $ 16,345 Accounts receivable, net 6 - - - 93,607 - 93,613 Inventories - - - - 77,546 - 77,546 Other current assets - - - - 5,477 - 5,477 ------------- ----------- ------------- ------------- ----------- ----------- ------------ Total current assets 6 - - - 192,975 - 192,981 Property, plant and equipment, net - - - - 115,578 - 115,578 Amounts due from parent/affiliates 75,043 85,975 43,506 46,807 48,901 (300,232) - Goodwill, net - - - - 86,217 - 86,217 Investment in consolidated subsidiaries 62,033 36,698 2,016 24,299 - (125,046) - Deferred income taxes - - - - 8,540 - 8,540 Other assets 1,716 - 672 731 5,317 - 8,436 ------------- ----------- ------------- ------------- ----------- ----------- ----------- $ 138,798 $ 122,673 $ 46,194 $ 71,837 $ 457,528 $(425,278) $ 411,752 ------------- ------------ ------------- ------------- ----------- ----------- ----------- ------------- ------------ ------------- ------------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Cash overdrafts $ - $ - $ - $ - $ 3,022 $ - $ 3,022 Accounts payable - - - - 59,060 - 59,060 Accrued expenses and other current liabilities 640 1,985 870 868 21,170 - 25,533 Income taxes payable (1,328) (2,444) (1,548) 5,099 7,788 7,567 Current maturities of long-term debt - - - - 7,832 - 7,832 ------------- ----------- ------------- ------------- ----------- ----------- ----------- Total current liabilities (688) (459) (678) 5,967 98,872 - 103,014 Long-term debt, less current maturities 70,605 - 27,179 37,216 88,592 - 223,592 Amounts due to parent/affiliates 9,776 94,688 10,323 6,107 179,338 (300,232) - Other liabilities - - - - 9,676 - 9,676 Deferred income taxes - - - - 16,365 - 16,365 ------------- ----------- ------------- ------------- ----------- ----------- ------------ Total liabilities 79,693 94,229 36,824 49,290 392,843 (300,232) 352,647 ------------- ----------- ------------- ------------- ----------- ----------- ------------ Redeemable preference shares 49,639 - - - - - 49,639 ------------- ----------- ------------- ------------- ----------- ----------- ------------ 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) 14,516 11,706 4,751 15,966 (24,729) (7,694) 14,516 Accumulated other comprehensive loss (6,050) (262) (2,381) (2,519) (5,014) 10,176 (6,050) ------------- ----------- ------------- ------------- ----------- ----------- ------------ Total ordinary shareholders' equity 9,466 28,444 9,370 22,547 64,685 (125,046) 9,466 ------------- ----------- ------------- ------------- ----------- ----------- ------------ $ 138,798 $ 122,673 $ 46,194 $ 71,837 $ 457,528 $(425,278) $ 411,752 ------------- ----------- ------------- ------------- ----------- ----------- ------------ ------------- ----------- ------------- ------------- ----------- ----------- ------------
14 EURAMAX INTERNATIONAL PLC 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 NON- PLC INC. HOLDINGS PLC HOLDINGS B.V. 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 1,986 913 967 21,445 - 25,616 Income taxes payable (882) (2,088) (1,207) 1,095 6,560 3,478 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 ------------- ----------- ------------- ------------- ----------- ----------- ----------- ------------- ----------- ------------- ------------- ----------- ----------- -----------
15 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 first half of 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. 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 is a producer of aluminum exterior walls and roofs sold primarily to U.K. producers of recreational vehicles (caravans). The acquisition is expected to augment 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 is expected to enhance the Company's position as a supplier of metal raincarrying and roofing products 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 JUNE 26, 1999 AS COMPARED TO QUARTER ENDED JUNE 27, 1998 The following table sets forth the Company's Statements of Earnings data expressed as a percentage of net sales:
QUARTERS ENDED -------------------------------------------- JUNE 26, JUNE 27, 1999 1998 -------------------------------------------- STATEMENTS OF EARNINGS DATA: Net sales 100.0% 100.0% Costs and expenses: Cost of goods sold 79.3 81.4 Selling and general 9.1 7.9 Depreciation and amortization 2.2 1.9 -------------------------------------------- Earnings from operations 9.4 8.8 Interest expense, net (3.4) (3.8) Other expenses, net (0.2) (0.1) -------------------------------------------- Earnings before income taxes 5.8 4.9 Provision for income taxes 2.4 2.1 -------------------------------------------- Net earnings 3.4% 2.8% -------------------------------------------- --------------------------------------------
16 The following table sets forth the Net Sales and Earnings from Operations data for the United States and Europe for the quarters ended June 26, 1999 and June 27, 1998:
Net Sales Earnings from Operations ---------------------------------------------- --------------------------------------------- June 26, June 27, Increase/ June 26, June 27, Increase/ IN THOUSANDS 1999 1998 (decrease) 1999 1998 (decrease) ------------ ------------- ------------- ------------ ------------ ------------ United States $ 104,788 $ 104,176 0.6% $ 9,051 $ 7,370 22.8% Europe 51,411 56,258 (8.6)% 5,588 6,699 (16.6)% ----------- ------------- ------------ ------------ ----------- ------------- ------------ ------------ Totals $ 156,199 $ 160,434 (2.6)% $ 14,639 $ 14,069 4.1% ----------- ------------- ------------ ------------ ----------- ------------- ------------ ------------ - ------------
NET SALES. The acquisitions of Unimet and AMP increased net sales in the United States for the quarter ended June 26, 1999 (see Note 1 to Condensed Consolidated Financial Statements). In addition, sales in the United States were higher due to an increase in sales to home improvement contractors. Further, although sales were slightly off from the prior year due to lower realized selling prices caused primarily by the decline in aluminum prices, shipments to recreational vehicle ("RV") manufacturers were higher compared to the prior year. The increase in shipments to the RV manufacturers coincides with the record year for shipments of end-use products by the RV industry in the United States. However, while the RV industry is thriving in an environment of low interest rates, low gasoline prices and favorable demographics, shipments may not continue at the current pace. These increases in net sales in the United States were offset by a decline in sales to manufactured housing customers. Lower sales to manufactured housing producers is primarily due to 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 Company's United States subsidiaries are included in the U.S. Fabrication Segment (see Note 7 to the Condensed Consolidated Financial Statements). Although not as pronounced as in the first quarter of 1999, net sales in Europe were lower in the second quarter of 1999 than in the second quarter of 1998. The decrease in Europe remains primarily attributable to lower sales in the European market for painted aluminum and steel coil (primarily industrial sheet sales) due to a general softening of demand in continental Europe and export pricing pressures in the United Kingdom, both of which have negatively impacted sales in the European Roll Coating Segment (see Note 7 to the Condensed Consolidated Financial Statements). However, the continental European markets have experienced modest improvements in the second quarter, including slight improvements in the market activity of Germany. The United Kingdom markets continue to under perform when compared to the prior year due primarily to the strength of the Pound Sterling against other European currencies and the resultant negative impact on the level of export sales. In addition, net sales in Europe for the quarter have been negatively impacted by the weakening of the Pound Sterling, Dutch Guilder and French Franc versus the U.S. Dollar. Net sales in both the United States and in Europe were also negatively impacted by lower aluminum selling prices in 1999 as compared to the same period in 1998. COST OF GOODS SOLD. Cost of goods sold, as a percentage of net sales, decreased 2.1% for the quarter ended June 26, 1999, to 79.3% in 1999 from 81.4% in 1998. This decrease is primarily attributable to productivity 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 quarter ended June 26, 1999, to 9.1% in 1999 from 7.9% in 1998. This increase is primarily attributable to investments in technology, product development and salary increases. 17 DEPRECIATION AND AMORTIZATION. Depreciation and amortization, as a percentage of net sales, increased 0.3% for the quarter ended June 26, 1999, to 2.2% in 1999 from 1.9% in 1998. EARNINGS FROM OPERATIONS. Despite decreases in net sales for the reasons stated above, the Company has increased its earnings from operations to 9.4% of net sales for the quarter ended June 26, 1999, from 8.8% of sales for the quarter ended June 27, 1998. This improvement is primarily due to profits attributable to operational and market improvements in the United States, which have exceeded the decline in European profits attributable to softer European markets. INTEREST EXPENSE, NET. Net interest expense, as a percentage of net sales, decreased 0.4% to $5.4 million for the quarter ended June 26, 1999, from $6.1 million for the quarter ended June 27, 1998. OTHER EXPENSES, NET. Other expenses were not significant for the quarters ended June 26, 1999 and June 27, 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 decreased to 42.1% from 42.6% for the quarters ended June 26, 1999 and June 27, 1998, respectively. SIX MONTHS ENDED JUNE 26, 1999 AS COMPARED TO SIX MONTHS ENDED JUNE 27, 1998 The following table sets forth the Company's Statements of Earnings data expressed as a percentage of net sales:
SIX MONTHS ENDED -------------------------------------------- JUNE 26, JUNE 27, 1999 1998 -------------------------------------------- STATEMENTS OF EARNINGS DATA: Net sales 100.0% 100.0% Costs and expenses: Cost of goods sold 80.3 82.4 Selling and general 9.5 8.2 Depreciation and amortization 2.4 2.0 -------------------------------------------- Earnings from operations 7.8 7.4 Interest expense, net (3.7) (4.0) Other expenses, net (.3) - -------------------------------------------- Earnings before income taxes 3.8 3.4 Provision for income taxes 1.6 1.4 -------------------------------------------- Net earnings 2.2% 2.0% -------------------------------------------- --------------------------------------------
The following table sets forth the Net Sales and Earnings from Operations data for the United States and Europe for the six months ended June 26, 1999 and June 27, 1998:
Net Sales Earnings from Operations --------------------------------------------- ---------------------------------------------- June 26, June 27, Increase/ June 26, June 27, Increase/ IN THOUSANDS 1999 1998 (decrease) 1999 1998 (decrease) ------------ ------------ ------------- ----------- ------------ -------------- United States $ 185,788 $ 188,786 (1.6)% $ 12,799 $ 8,659 47.8% Europe 102,798 114,737 (10.4)% 9,875 13,949 (29.2)% ------------ ------------ ------------ ------------ Totals $ 288,586 $ 303,523 (4.9)% $ 22,674 $ 22,608 0.3% ============ ============ ============ ============
18 NET SALES. Net sales in the United States, for the six months ended June 26, 1999, reflect approximately $1.9 million in sales attributable to the acquisitions of Unimet and AMP. Excluding the increase in sales from the acquisitions, net sales in the United States would have decreased approximately 2.6%. As noted in the quarter to quarter comparison of net sales, for the six months ended June 26, 1999, sales in the United States were higher due to an increase in sales to home improvement contractors. Also as noted in the quarter to quarter comparison of net sales, for the six months ended June 26, 1999, although RV sales in the United States were slightly off from the prior year, shipments to RV manufacturers were up compared to the prior year. In addition, as noted in the quarter to quarter comparison of net sales, for the six months ended June 26, 1999, the increases in net sales in the United States were offset by a decline in sales to manufactured housing customers. See "Quarter Ended June 26, 1999 as Compared to Quarter Ended June 27, 1998 - Net Sales" for further discussion of the factors affecting sales to RV and manufactured housing customers in the United States, as these factors also apply to net sales for the six months ended June 26, 1999, as compared to the six months ended June 27, 1998. Similar to the quarter to quarter comparison, for the six months ended June 26, 1999, as compared to the prior year, the decrease in Europe is primarily attributable to lower sales in the European market for painted aluminum and steel coil (primarily industrial sheet sales) due to a general softening of demand in Europe and export pricing pressures in the United Kingdom. In addition, net sales in both the United States and Europe also 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 six months ended June 26, 1999, was approximately 11.5% lower than the average for the six months ended June 27, 1998. Sales of aluminum based products were approximately 54.4% of net sales for the six months ended June 26, 1999. COST OF GOODS SOLD. Cost of goods sold, as a percentage of net sales, decreased 2.1% for the six months ended June 26, 1999, to 80.3% in 1999 from 82.4% 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 1.3% for the six months ended June 26, 1999, to 9.5% in 1999 from 8.2% in 1998. This increase is primarily attributable to investments in technology, product development and salary increases. DEPRECIATION AND AMORTIZATION. Depreciation and amortization, as a percentage of net sales, increased 0.4% for the six months ended June 26, 1999, to 2.4% in 1999 from 2.0% in 1998. EARNINGS FROM OPERATIONS. Despite decreases in net sales for the reasons stated above, the Company increased its earnings from operations. As a percentage of net sales, earnings from operations increased to 7.8% for the six months ended June 26, 1999, from 7.4% for the six months ended June 27, 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 waning demand in continental Europe and export pricing pressures in the United Kingdom. For the six months ended June 26, 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, as a percentage of net sales, decreased 0.3% to $10.6 million for the six months ended June 26, 1999, from $12.1 million for the six months ended June 27, 1998, primarily due to lower average debt balances. 19 OTHER EXPENSES, NET. Other expenses were not significant for the six months ended June 26, 1999 and June 27, 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 42.4% for both the six months ended June 26, 1999 and June 27, 1998. 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 June 26, 1999, the Company had outstanding indebtedness of $231.4 million, representing an increase of $13.7 million as compared to December 25, 1998, primarily attributable to the funding of acquisitions in the second quarter and net of a $9.3 million prepayment of the Dutch Guilder facility. Included in such indebtedness was approximately $96.4 million under the Company's Credit Agreement, consisting of $33.3 million under the Company's Term Loans and $63.1 million under the Company's Revolving Credit Facility. The undrawn amount of the Revolving Credit Facility at June 26, 1999, was $36.9 million, which was available for working capital and general corporate purposes, subject to borrowing base limitations. As of June 26, 1999, this amount was fully available. 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. 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 $3.3 million for the six months ended June 26, 1999, compared to the six months ended June 27, 1998. Increased operating cash flows in the first half of 1999 as compared to the first half of 1998 are primarily due to a significantly smaller increase in accounts receivable between June 26, 1999 and December 25, 1998 (14.4%), as compared to the change between June 27, 1998 and December 26, 1997 (22.7%). See Note 1 to the Condensed Consolidated Financial Statements for information regarding acquisitions. 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 $6.0 million and $6.2 million for the six months ended June 26, 1999 and June 27, 1998, respectively. Capital expenditures in 1999 include approximately $1.7 million for improvements to the paintlines in Corby, England and Helena, Arkansas. The balance of capital expenditures in both periods primarily relate to purchases and upgrades of fabricating equipment, transportation and material moving equipment, and information systems. 20 The Company has made and will continue to make capital expenditures to comply with Environmental Laws. The Company estimates that its environmental capital expenditures will be approximately $1.0 million in 1999. WORKING CAPITAL MANAGEMENT. Working capital was $90.0 million as of June 26, 1999, compared to $88.6 million as of December 25, 1998. The increase is primarily due to the acquisitions, which occurred in the first half of 1999, partially offset by continued reductions in working capital levels. The Company continues to aggressively manage working capital levels and believes that current levels of working capital represent a liquid source of funds available for future cash flows. 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 undertaking 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 expected to be fully complete during the second half of 1999. Historical costs incurred through June 26, 1999, are approximately $2.3 million. The Company estimates the costs to complete the conversions to be approximately $400.0 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 70% 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. Based upon the estimated level of effort necessary to complete the task, the Company is approximately 90% 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. Completion of the testing phase is expected to occur by third quarter 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 will continue to conduct such tests during 1999. All costs associated with supplier and vendor compliance will be 21 borne by the suppliers and vendors. To date, 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. SCHEDULE FOR INTRODUCTION OF THE EURO - Three of the Company's European subsidiaries are located in participating countries, but have elected the option of accounting for their transactions in their legacy currencies during at least the first year 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 that pricing transparency resulting from the use of a single currency by the participating countries will materially impact its net sales or earnings from operations. 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 22 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 complete by mid-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 $1.0 million in 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. 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 23 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 related to those financial instruments and derivative instruments held by the Company at June 26, 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 $11.0 thousand for the six months ended June 26, 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 June 26, 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 $656.6 thousand as calculated at June 26, 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). 24 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a)(1) The following consolidated financial statements of Euramax International plc and its subsidiaries are included in Part I, Item 1. Condensed Consolidated Statements of Earnings for the quarters and the six months ended June 26, 1999 and June 27, 1998 Condensed Consolidated Balance Sheets at June 26, 1999 and December 25, 1998 Condensed Consolidated Statements of Cash Flows for the six months ended June 26, 1999 and June 27, 1998 Notes to Condensed Consolidated Financial Statements (b) The Company filed no reports on Form 8-K during the three months ended June 26, 1999. 25 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). 3.1* Articles of Association of Euramax International plc 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 plc, 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 plc, 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 plc, 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 Ltd., Euramax European Holdings Ltd., 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 plc 10.27*** Phantom Stock Plan effective January 1, 1999, by Euramax International plc 10.28 Amendment and Waiver dated as of April 6, 1999, among Euramax International plc, and its subsidiaries, Paribas (as Agent and Lender), and the Lenders, to the Amended and Restated Credit Agreement dated as of July 16, 1997. 10.28 AMENDMENT AND WAIVER, dated as of April 6, 1999, among Euramax International plc, and its subsidiaries, Paribas (as Agent and Lender), and the Lenders, to the 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. 26 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934, EURAMAX INTERNATIONAL PLC HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. EURAMAX INTERNATIONAL PLC SIGNATURE TITLE DATE --------- ----- ---- /s/ J. David Smith Chief Executive Officer and President August 2, 1999 - ------------------------- J. David Smith /s/ R. Scott Vansant Chief Financial Officer and Secretary August 2, 1999 - ------------------------- R. Scott Vansant EX-10.28 2 EXHIBIT 10.28 EURAMAX INTERNATIONAL PLC Exhibit 10.28 AMENDMENT AND WAIVER, dated as of April 6, 1999 (this "Amendment"), among Euramax International plc, a company organized under the laws of England and Wales ("Euramax"), the other Loan Parties referred to below, each of the Lenders, the Swing Loan Lender and the Issuer referred to below and Paribas (formerly, Banque Paribas), as agent (in such capacity, the "Agent") for said Lenders, the Swing Loan Lender and the Issuer, to (a) the Amended and Restated Credit Agreement, dated as of July 16, 1997, as amended (said Agreement, as so amended and as the same may be further amended, supplemented or otherwise modified from time to time, being the "Credit Agreement", and the terms defined therein being used herein as therein defined unless otherwise defined herein), among Euramax, the other Loan Parties party thereto, the financial institutions party thereto, as lenders (the "Lenders"), the Swing Loan Lender and the Issuer referred to therein and the Agent, and (b) the other Loan Documents referred to below. W I T N E S S E T H : WHEREAS, (a) Euramax owns, directly, 99,907 shares of the outstanding shares of Stock of French Holdings, all of which shares are pledged to the Agent, for the ratable benefit of the Secured Parties, pursuant to the Euramax Nantissement to secure the Guarantied Obligations of Euramax, except that only 65% of such shares of Stock of French Holdings secure the Excluded U.S. Liabilities; (b) Dutch Holdings owns, directly, 287,744 shares of the outstanding shares of Stock of French Holdings, all of which shares are pledged to the Agent, for the ratable benefit of the Secured Parties, pursuant to the Dutch Holdings Nantissement to secure the Guarantied Obligations of Dutch Holdings, which Guarantied Obligations exclude the Excluded U.S. Liabilities; and (c) members of the board of directors of French Holdings own all remaining outstanding shares of Stock of French Holdings, all of which remaining shares are Qualifying Shares; WHEREAS, Euramax and Dutch Holdings have proposed that Euramax transfer to Dutch Holdings all shares of Stock of French Holdings owned by Euramax (the "Proposed French Holdings Share Transfer") in exchange for an equivalent value of shares of newly issued Stock of Dutch Holdings (the "Dutch Holdings Stock Issuance" and, together with the Proposed French Holdings Share Transfer, the "Proposed Share Transactions"), all of which shares of Stock of French Holdings proposed to be transferred to Dutch Holdings and all of which shares of Stock of Dutch Holdings proposed to be issued by Dutch Holdings to Euramax would be pledged to the Agent, for the ratable benefit of the Secured Parties, to secure, in the case of such shares of Stock of French Holdings, the Guarantied Obligations of Dutch Holdings and to secure, in the case of such shares of Stock of Dutch Holdings, the Guarantied Obligations of Euramax, except that no such shares of Stock of French Holdings will secure the Excluded U.S. Liabilities and only 65% of such shares of Stock of Dutch Holdings will secure the Excluded U.S. Liabilities; WHEREAS, U.S. Operating Co. proposes acquiring all of the outstanding capital stock of Atlanta Metal Products, Inc., a Georgia corporation ("Atlanta Metal"), from all stockholders of Atlanta Metal, all of whom are individuals (the "Atlanta Metal Sellers"), for an aggregate purchase price, payable in cash, of approximately $17,000,000 (which amount includes costs and expenses associated with such acquisition), a portion of which purchase price is contemplated to be deposited into an escrow account maintained by an escrow agent and then increased or decreased by certain working capital adjustments, decreased by any offset for indemnification payable under the purchase agreements for said acquisition and paid to the Atlanta Metal Sellers upon their and U.S. Operating Co.'s agreement on said working capital adjustment (said purchase price, including the portion thereof deposited into escrow, being the 1 "Atlanta Metal Purchase Price" and said acquisition for the Atlanta Metal Purchase Price being the "Atlanta Metal Acquisition"); WHEREAS, Coated Products U.K. proposes acquiring all of the outstanding capital stock of Color Clad PLC, an English company ("Color Clad"), from all of its shareholders, all of whom are individuals (the "Color Clad Sellers"), for an aggregate purchase price, payable in cash, of the pound sterling equivalent of approximately $5,000,000 (a portion of which is contemplated to be retained by Coated Products U.K. and, subject to a net working capital adjustment, paid to the Color Clad Sellers) (said purchase price, as adjusted by any increases or decreases to net working capital, being the "Color Clad Purchase Price" and said acquisition, on said terms, being the "Color Clad Acquisition"); WHEREAS, (a) U.S. Operating Co. intends to finance the Atlanta Metal Acquisition with General Purpose Revolving Credit Loans (said Loans borrowed by U.S. Operating Co. for said purpose being "Atlanta Metal Loans"), provided that certain provisions set forth in the Credit Agreement relating to the U.S. Borrowing Base that would restrict the amount of such Loans are waived as set forth in this Amendment, and (b) Coated Products U.K. intends to finance the Color Clad Acquisition from the proceeds of General Purpose Revolving Credit Loans to be borrowed by U.K. Operating Co.; WHEREAS, Section 2.7(d)(iii) of the Credit Agreement provides for, among other things, a mandatory prepayment by the Borrowers of the Term Loans, within 100 days of the last day of Fiscal Year 1998, in an amount equal to 75% of Excess Cash Flow for Fiscal Year 1998 (the "1998 Excess Cash Payment"), and Section 2.7(c) of the Credit Agreement provides that, among other things, until the Additional Term Loans are paid in full, no partial prepayment of any other Term Loan shall be made; WHEREAS, the Loan Parties have requested that the Lenders, the Swing Loan Lender and the Agent agree to (a) amend the Loan Documents to, among other things, (i) permit the Proposed Share Transactions, the proposed Atlanta Metal Acquisition and the proposed Color Clad Acquisition, and (ii) provide for certain provisions relating to Y2K Compliance (as hereinafter defined); (b) waive certain U.S. Borrowing Base restrictions for purposes of determining the amount of Atlanta Metal Loans available to be borrowed by U.S. Operating Co. and, for a period of six months from the date hereof, the amount of Revolving Credit Loans permitted to remain outstanding; and (c) waive the provisions of Section 2.7(d)(iii) of the Credit Agreement to the extent that said provisions require that the Borrowers make the 1998 Excess Cash Payment, provided that Dutch Company makes a prepayment of U.S. Dollar Term B Loans and Dutch Company Term Loans in the amount set forth below, to be applied as set forth below; and WHEREAS, the Lenders, the Swing Loan Lender and the Agent are willing to agree to such amendments and waivers, subject to the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows: SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT. Subject to the satisfaction of the conditions precedent set forth in Section 3, the Credit Agreement is hereby amended as follows: 1.1 AMENDMENT TO SECTION 1.1. (a) Section 1.1 thereof is amended by adding thereto, in the appropriate alphabetical order, the following new definitions: "`APRIL 1999 AMENDMENT' means the Amendment and Waiver, dated as of April 6, 1999, among the Loan Parties, the Lenders, the Swing Loan Lender and the Agent, to this Agreement and the Loan 2 Documents referred to therein. "`ATLANTA METAL' has the meaning specified in the April 1999 Amendment." "`ATLANTA METAL ACQUISITION' has the meaning specified in the April 1999 Amendment." "`ATLANTA METAL ACQUISITION CONDITIONS' means each of the following conditions: (a) Each of the statements set forth in Section 3.1(s) (other than clause (ii) thereof) shall be true and correct with respect to the Atlanta Metal Acquisition, with references therein (i) to the `Existing Loans and Loans being made on the Effective Date' to be deemed to be references to all outstanding Loans and the Atlanta Metal Loans, (ii) to the `Effective Date' to be deemed to be references to the date of consummation of the Atlanta Metal Acquisition (the `CONSUMMATION DATE' thereof), (iii) to the `Fabral Purchase Documents', the `Fabral Purchase Agreement' or to a `Related Document' to be deemed to be references to the Related Documents with respect to the Atlanta Metal Acquisition, (iv) to the `Transactions' or to the `Fabral Purchase' to be deemed to be references to the Atlanta Metal Acquisition, (v) to `Fabral Holdings' and/or `Fabral, Inc.' to be deemed to be references to Atlanta Metal, and (vi) to the aggregate purchase price of the Fabral Purchase as specified in the Fabral Purchase Agreement to be references to the Atlanta Metal Purchase Price; (b) The Agent shall have received (in sufficient copies for each Lender) (i) from Atlanta Metal (A) on the Consummation Date, a supplement to each of this Agreement and the Domestic Subsidiary Guaranty, each in form and substance satisfactory to the Agent, pursuant to which Atlanta Metal shall agree to be bound by the terms of, and for all purposes be, a Loan Party under and party to and a Guarantor under and party to this Agreement and the Domestic Subsidiary Guaranty, respectively, and shall agree to all other matters set forth therein, (B) a Domestic Security Agreement, duly executed by Atlanta Metal, together with Blocked Account Letters, duly executed by Atlanta Metal and each of its Blocked Account Banks, and other appropriate Collateral Documents (including, in the case of any Real Estate or Lease owned by Atlanta Metal, all Collateral Documents referred to in Section 3.1(j) of the Existing Credit Agreement, as in effect prior to giving effect to the amendment and restatement thereof pursuant to this Agreement, and with all such Real Estate and all such Leases to be deemed to be `Specified Real Estate' and `Initial Specified Leases', as such terms are defined in said Existing Credit Agreement), each in form and substance satisfactory to the Agent, granting to the Agent a first priority security interest in all assets of Atlanta Metal as security for its Guaranteed Obligations, and (C) all other documents required to be delivered pursuant to Section 3.1(j) of the Existing Credit Agreement (with references therein to "Specified Real Estate" and "Initial Specified Leases" to be deemed to be references to the Real Estate and Leases owned by Atlanta Metal); (ii) from U.S. Operating Co. on the Consummation Date, a Pledge Amendment under (and as defined in) the U.S. Operating Co. Pledge Agreement granting to the Agent a first priority security interest in the Stock of Atlanta Metal as security for the Obligations, together with the certificates representing such Stock and undated stock powers therefor; (iii) evidence that there are no prior Liens or charges on any above-referenced assets except as permitted by Section 7.1(a) and that there are no prior Liens or charges on any above-referenced Stock; (iv) executed copies of proper Financing Statements (Form UCC-1) under the Uniform Commercial Code of all jurisdictions, and evidence of completion of all recordings and other filings in all jurisdictions (including of instruments to be filed with respect to Intellectual Property Collateral), as may be necessary or, in the opinion of the Agent, desirable to perfect the Liens created by the Collateral Documents to be executed pursuant to this subsection (b); (v) evidence of satisfactory insurance coverage as to the assets of Atlanta Metal and compliance with all provisions of the Loan Documents with respect to such insurance; (vi) satisfactory opinions of independent counsel to the Loan Parties, each dated the Consummation Date; (vii) from Atlanta Metal, the documents referred to in Sections 3.1(b) and (c) required to be delivered by a Loan Party, and from U.S. Operating Co., the documents referred to in clause (x) of Section 3.1(b) required to be delivered 3 by a Loan Party, in each case, dated the Consummation Date and with references therein to (A) the `Fabral Purchase Document' or to the `Related Documents' to be deemed to be references to the Related Documents entered into in connection with the Atlanta Metal Acquisition, (B) the `Transactions' to be deemed to be references to the Atlanta Metal Acquisition, (C) the `Effective Date' to be deemed to be references to the Consummation Date and (D) the `Loan Documents' to be deemed to be references to the Loan Documents to be delivered, pursuant to this subsection (b), on the Consummation Date; (viii) a letter, dated the Consummation Date, from the Process Agent, in substantially the form of Exhibit O, agreeing to act as Process Agent for Atlanta Metal; and (ix) such financial and other information regarding Atlanta Metal as the Agent or any Lender shall reasonably request; and (c) Each document relating to the Atlanta Metal Acquisition shall be satisfactory in form and substance to the Agent and the Majority Lenders in their sole judgment exercised reasonably." "`ATLANTA METAL PURCHASE PRICE' has the meaning specified in the April 1999 Amendment." "`COLOR CLAD' has the meaning specified in the April 1999 Amendment." "`COLOR CLAD ACQUISITION' has the meaning specified in the April 1999 Amendment." "`COLOR CLAD ACQUISITION CONDITIONS' means each of the following conditions: (a) Each of the statements set forth in Section 3.1(s) (other than clause (ii) thereof) shall be true and correct with respect to the Color Clad Acquisition, with references therein (i) to the `Existing Loans and Loans being made on the Effective Date' to be deemed to be references to all outstanding Loans and any General Purpose Revolving Credit Loans being borrowed by U.K. Operating Co., the proceeds of which are contributed to Coated Products U.K. to finance the Color Clad Acquisition, (ii) to the `Effective Date' to be deemed to be references to the date of consummation of the Color Clad Acquisition (the `CONSUMMATION DATE' thereof), (iii) to the `Fabral Purchase Documents', the `Fabral Purchase Agreement' or to a `Related Document' to be deemed to be references to the Related Documents with respect to the Color Clad Acquisition, (iv) to the `Transactions' or to the `Fabral Purchase' to be deemed to be references to the Color Clad Acquisition, (v) to `Fabral Holdings' and/or `Fabral, Inc.' to be deemed to be references to Color Clad, and (vi) to the aggregate purchase price of the Fabral Purchase as specified in the Fabral Purchase Agreement to be deemed to be references to the Color Clad Purchase Price; (b) The Agent shall have received (in sufficient copies for each Lender), (i) a legal mortgage of shares, dated the Consummation Date and duly executed by Coated Products U.K. and the U.K. Trustee, for the ratable benefit of the Secured Parties, pursuant to which Coated Products U.K. shall pledge the Stock of Color Clad to secure the Guarantied Obligations of Coated Products U.K. (which legal mortgage of shares shall constitute a `Pledge Agreement'), together with duly executed stock transfer forms and evidence that (A) such Pledge Agreement shall have been duly prepared and organized for submission for registration on Form 395 to the Companies Register in England and Wales, which registration shall be made within 20 days after the Consummation Date, and (B) all other action necessary or, in the opinion of the Agent, desirable to perfect and protect the Lien created by such Pledge Agreement has been taken; (ii) such counsel opinions and certificates as the Agent or any Lender shall reasonably request; and (iii) such financial and other information regarding Color Clad as the Agent or any Lender shall reasonably request; and (c) Each document relating to the Color Clad Acquisition shall be satisfactory in form and substance to the Agent and the Majority Lenders in their sole judgment exercised reasonably." "`COLOR CLAD PURCHASE PRICE' has the meaning specified in the April 1999 Amendment." "`DUTCH HOLDINGS STOCK ISSUANCE' means, in exchange for the 99,907 shares of Stock of French Holdings 4 to be transferred to Dutch Holdings by Euramax in the Permitted French Holdings Share Transfer, the issuance by Dutch Holdings to Euramax of an equivalent value of shares of Stock of Dutch Holdings." "`FRENCH HOLDINGS SHARE TRANSFER CONDITIONS' means, with respect to the Proposed French Holdings Share Transfer, the following conditions precedent with respect thereto: (a) All necessary governmental and third party approvals (including, without limitation, under the Senior Subordinated Indenture, if required) in connection therewith and the Dutch Holdings Stock Issuance shall have been obtained and remain in effect, neither the Proposed French Holdings Share Transfer nor the Dutch Holdings Stock Issuance could have a Material Adverse Effect and, after giving effect thereto, there shall exist no Default or Event of Default and the representations and warranties of the Loan Parties in the Loan Documents shall be true and correct in all material respects; (b) The Agent shall have received each of the following, each dated the date of consummation of the Proposed French Holdings Share Transfer (the `PROPOSED FRENCH HOLDINGS SHARE TRANSFER DATE') and in form and substance satisfactory to the Agent and, except for any instruments referred to below, in sufficient copies for the Issuer and each Lender, together with, unless waived by the Agent, a certified copy of an English translation of each below-referenced document submitted in a language other than English: (i) A certificate of a Responsible Officer of Euramax, Dutch Holdings and French Holdings certifying (A) the resolutions of its board of directors or its general meeting of shareholders (or other governing body) approving, as applicable, the Proposed French Holdings Share Transfer and the Dutch Holdings Stock Issuance, all documentation therefor and the transactions contemplated thereby, and the Loan Documents and other documents and certificates required to be delivered by such Loan Party pursuant hereto and the transactions contemplated hereby and thereby; (B) all documents evidencing other necessary corporate action and required governmental and third party approvals, licenses and consents with respect to the Proposed French Holdings Share Transfer and the Dutch Holdings Stock Issuance and the documentation therefor and the Loan Documents and other documents and certificates required to be delivered by such Loan Party pursuant hereto and the transactions contemplated hereby and thereby; (C) in the case of Dutch Holdings and French Holdings, a copy of its organizational documents as in effect on the Proposed French Holdings Share Transfer Date after giving effect to the Proposed French Holdings Share Transfer and the Dutch Holdings Stock Issuance; (D) the names and true signatures of each of its officers who has been authorized to execute and deliver any Loan Document or other document required pursuant hereto to be executed and delivered by or on behalf of such Loan Party; and (E) a complete and correct copy of each document executed or delivered in connection with the Proposed French Holdings Share Transfer and the Dutch Holdings Stock Issuance, or evidencing the same, including, without limitation, (1) a share transfer form duly executed by Euramax, (2) the share transfer register of French Holdings updated to record the Proposed French Holdings Share Transfer, (3) the shareholders' accounts of French Holdings updated to record the Proposed French Holdings Share Transfer, (4) a notarial deed of issuance relating to the Dutch Holdings Stock Issuance, and (5) the register of Dutch Holdings updated to record the Dutch Holdings Stock Issuance; (ii) Such amendments, supplements or documents, in form and substance satisfactory to the Agent, duly executed by Dutch Holdings and the Agent, to the Dutch Holdings Nantissement as shall be necessary, in the opinion of the Agent, to give effect to, and provide for, the pledge to the Agent, for the ratable benefit of the Secured Parties, of all shares of Stock of French Holdings to be transferred by Euramax to Dutch Holdings in the Proposed French Holdings Share Transfer (the `TRANSFERRED SHARES') and containing such provisions as shall be necessary or, in the 5 opinion of the Agent, desirable to create a valid and perfected first priority Lien on such shares as security for the Guarantied Obligations of Dutch Holdings and to continue the Lien in all other Collateral covered by the Dutch Holdings Nantissement as security for the Guarantied Obligations of Dutch Holdings, together with: (A) Evidence of the completion of all recordings, filings, notices, authorizations and approvals as may be necessary or, in the opinion of the Agent, desirable to continue, perfect or protect the Lien created by each such Loan Document; (B) A letter of release of the Euramax Nantissement, in form and substance satisfactory to the Agent, executed by the Agent and Euramax, and such filings, documentation, certificates, powers and evidence of the type referred to in Sections 3.1(i)(i)(A) and 3.1(i)(i)(B) necessary or, in the opinion of the Agent, desirable to continue, perfect or protect the Lien created by or the rights of the Agent under the Dutch Holdings Nantissement after giving effect to any amendment, supplement or document entered into pursuant hereto; (C) A declaration of pledge, duly executed by Dutch Holdings, in form and substance satisfactory to the Agent; and (D) A confirmation of pledge, duly executed by French Holdings, in form and substance satisfactory to the Agent. (iii) An amendment or supplement, in form and substance satisfactory to the Agent, duly executed by Euramax and the Agent, to each of the Euramax Deed of Pledge and the Additional Euramax Deed of Pledge, each giving effect to, and providing for, the pledge to the Agent, for the ratable benefit of the Secured Parties, of all shares of Stock of Dutch Holdings issued by Dutch Holdings to Euramax in the Dutch Holdings Stock Issuance and containing such provisions as shall be necessary or, in the opinion of the Agent, desirable to create a valid and perfected first priority Lien on such shares as security for the Guarantied Obligations of Euramax (except that only 65% of all shares of Stock of Dutch Holdings owned by Euramax shall secure the Excluded U.S. Liabilities) and to continue the Lien in all other Collateral covered by the Euramax Deed of Pledge and the Additional Euramax Deed of Pledge, and/or if required by the Agent, an additional deed of pledge, in form and substance satisfactory to the Agent, duly executed by Euramax and the Agent, providing for the pledge to the Agent, for the ratable benefit of the Secured Parties, of such shares of Dutch Holdings as security for the Guarantied Obligations of Euramax (except that only 65% of all shares of Stock of Dutch Holdings owned by Euramax shall secure the Excluded U.S. Liabilities), together with all filings, documentation, certificates, powers and evidence of the type referred to in Sections 3.1(i)(i)(A) and 3.1(i)(i)(C) necessary or, in the opinion of the Agent, desirable to continue, perfect or protect the Lien created by or the rights of the Agent under (A) the Euramax Deed of Pledge and the Additional Euramax Deed of Pledge after giving effect to any amendment or supplement thereto entered into pursuant hereto and/or (B) any additional deed of pledges entered into pursuant hereto; (iv) Favorable opinions of counsel to the Loan Parties, each in form and substance satisfactory to the Agent and as to such matters as any Lender or the Issuer, through the Agent, may reasonably request; and (v) Such additional documents, information (including financial information) and materials as any Lender or the Issuer, through the Agent, may reasonably request." "`PERMITTED FRENCH HOLDINGS SHARE TRANSFER' means the Proposed French Holdings Share Transfer 6 provided that the French Holdings Share Transfer Conditions shall have been satisfied." "`PROPOSED FRENCH HOLDINGS SHARE TRANSFER' means the contribution and transfer by Euramax to Dutch Holdings of 99,907 shares of Stock of French Holdings owned by Euramax, which shares constitute all shares of Stock of French Holdings owned, beneficially or of record, by Euramax, in consideration for the Dutch Holdings Stock Issuance." "`Y2K COMPLIANCE' means the ability of acomputer program to (i) record, store, process, calculate, present and, where appropriate, insert time and accurate dates and calculations for calendar dates falling on or after (and, if applicable, spans of time including) January 1, 2000, (ii) record, store, process, calculate and present any information and/or data dependent on or relating to such dates in the same manner, and with the same functionality, data integrity and performance, as the software records, stores, processes, calculates and presents calendar dates on or before December 31, 1999 and in such fashion as to respond to two-digit date input in a way that eliminates all ambiguities as to the century of concern, and treats the year 2000 as a leap-year and correctly and accurately regards and processes data and information with respect thereto, and (iii) lose no functionality with respect to the introduction of records, including but not limited to back-up and archived information and/or data, containing dates falling on or after January 1, 2000 and `Y2K COMPLIANT' has the correlative meaning." (b) Section 1.1 thereof is further amended as follows: (i) The definition therein of "APPLICABLE GOVERNING LAW" is amended by (A) adding to clause (ii) thereof, immediately after the reference therein to "the Additional Euramax Deed of Pledge", the phrase ", any additional deed of pledge entered into by Euramax pursuant to the French Holdings Share Transfer Conditions", and (B) replacing all words in clause (iv) thereof with the words "with respect to (A) the Euramax Nantissement until the consummation of the Permitted French Holdings Share Transfer, and (B) the Dutch Holdings Nantissement, the laws of the Republic of France". (ii) The definition therein of "EURAMAX NANTISSEMENT" is amended by adding to the end thereof the phrase ", which Euramax Nantissement shall be terminated upon the consummation of the Permitted French Holdings Share Transfer". (iii) The definition therein of "FOREIGN COLLATERAL DOCUMENTS" is amended by (A) adding thereto, immediately after the reference therein to "the Additional Euramax Deed of Pledge," the phrase "any additional deed of pledge entered into by Euramax pursuant to the French Holdings Share Transfer Conditions"; and (B) adding thereto, immediately after the reference therein to "Euramax Nantissement", but prior to the comma immediately after said reference, the phrase "until the consummation of the Permitted French Holdings Share Transfer". (iv) The definition therein of "FOREIGN LOAN PARTY" is amended by adding thereto, immediately after the reference therein to "Domestic Loan Party," a reference to "Color Clad,". (v) The definition therein of "FRENCH HOLDINGS" is amended by adding to the end thereof the proviso "; PROVIDED, HOWEVER, that, upon the consummation of the Permitted French Holdings Share Transfer, `FRENCH HOLDINGS' shall mean Euramax European Holdings, S.A., a company organized under the laws of the Republic of France and a wholly owned, direct Subsidiary of Dutch Holdings". (vi) The definition therein of "PERMITTED MERGER" is amended by (A) deleting from clause (c)(iv)(B) thereof the phrase "each of the Dutch Holdings Nantissement and the Euramax Nantissement" and substituting therefor the phrase and, "until the consummation of the Permitted French Holdings Share Transfer, each of the Dutch Holdings Nantissement and the Euramax 7 Nantissement and, thereafter, the Dutch Holdings Nantissement,"; (B) adding to clause (z) of clause (c)(iv)(B) thereof, immediately prior to the reference therein to "Euramax", the phrase ", until the consummation of the Permitted French Holdings Share Transfer,"; (C) deleting from clause (c)(v)(C) thereof the words "Euramax and" and adding to the end of said clause the phrase "and, until the consummation of the Permitted French Holdings Share Transfer, Euramax"; and (D) adding to the parenthetical that immediately precedes clause (x) of clause (c)(v) thereof, immediately after the reference therein to "French Holdings", but prior to the comma immediately thereafter, the words "consummated prior to the consummation of the Permitted French Holdings Share Transfer and Dutch Holdings in the case of a Proposed Merger of French Operating Co. with and into French Holdings consummated simultaneously with or after consummation of the Permitted French Holdings Share Transfer,". (vii) The definition therein of "PLEDGE AGREEMENTS" is amended by (A) adding thereto, immediately after the reference therein to "the Euramax Nantissement", but prior to the comma immediately after such reference, the phrase "until the consummation of the Permitted French Holdings Share Transfer"; and (B) adding thereto, immediately after the reference therein to "Additional Euramax Deed of Pledge,", the phrase "any additional deed of pledge entered into by Euramax pursuant to the French Holdings Share Transfer Conditions,". (viii) The definition therein of "RELATED DOCUMENTS" is amended by adding to the end thereof the phrase ", and each purchase agreement, instrument and other document executed with respect to the Atlanta Metal Acquisition or the Color Clad Acquisition". 1.2. AMENDMENT TO SECTION 4.18. Section 4.18(a)(iii) thereof is amended by adding thereto, immediately after the reference in the parenthetical therein to "Costs", the phrase "except to finance, in the case of U.S. Operating Co., the Atlanta Metal Purchase Price and Costs associated therewith" and, in the case of U.K. Operating Co., the Color Clad Purchase Price and Costs associated therewith. 1.3. NEW SECTION 4.23. Article IV thereof is amended by adding to the end thereof a new Section 4.23 to read in full as follows: "4.23. Y2K COMPLIANCE. Except as disclosed on Schedule 4.23, each Loan Party: (a) has reviewed the areas within its operations and the operations of its Subsidiaries that utilize computers; (b) has purchased and has arranged to install computer software on all the computer systems utilized by it or any of its Subsidiaries and necessary for the business of such Loan Party and its Subsidiaries taken as a whole, in order to ensure that such computer systems are Y2K Compliant, and will install and test each such computer system on or prior to June 30, 1999; (c) has identified those of its customers, suppliers and others who are material to its business and that of its Subsidiaries taken as a whole or with whom it electronically transmits or receives data and inquired of them as to whether the computer systems utilized by such customers, suppliers and others and necessary for their operations are Y2K Compliant, and will summarize the results of such inquiries in a written report, to be furnished to the Agent on or before June 30, 1999; (d) will develop and implement a contingency plan for action to be taken by such Loan Party and its Subsidiaries in the event that any of the computer systems utilized by it in its business and the business of its Subsidiaries or by the customers, suppliers and others identified pursuant to 8 clause (c) above and necessary for their operations is not Y2K Compliant; and (e) has no reason to believe and does not believe that it will be unable to install the computer software or test the computer systems or implement any contingency plan referred to in clause (d) above except for any inability that will not have a Material Adverse Effect." 1.4. NEW SECTION 6.20. A new Section 6.20 is added to the end of Article VI thereof to read in full as follows: "6.20. ONGOING Y2K REPORTS. Each Loan Party will certify to the Agent each quarter that the representation and warranty contained in Section 4.23 remains true and correct and, if exceptions were set forth on Schedule 4.23, the progress made during the preceding quarter with respect to the elimination thereof on or prior to June 30, 1999." 1.5. AMENDMENT TO SECTION 7.4. Section 7.4 thereof is amended by adding thereto, immediately after the reference therein to , "French Holdings" in subsection (a)(iv)(J) thereof, the words "until the consummation of the Permitted French Holdings Share Transfer,". 1.6. AMENDMENT TO SECTION 7.5. Section 7.5(b) thereof is amended by (a) adding to the end of clause (i)(D) thereof the phrase "or by Euramax of 99,907 shares of Stock of French Holdings to Dutch Holdings in the Permitted French Holdings Transfer," and (b) adding to the end of clause (ii) thereof the phrase "or clause (D) above". 1.7. AMENDMENT TO SECTION 7.6. Section 7.6 thereof is amended by (a) adding to the end of subsection (a) thereof the clause "or (iv) the Permitted French Holdings Share Transfer and the Dutch Holdings Stock Issuance in connection therewith"; (b) changing subsection (j) thereof to be subsection (k); and (c) adding, immediately after subsection (i) thereof, the following new subsection (j): "(j) Investments consisting of (i) subject to the satisfaction of the Color Clad Acquisition Conditions, the Stock of Color Clad by Coated Products U.K. in the Color Clad Acquisition, and (ii) subject to the satisfaction of the Atlanta Metal Acquisition Conditions, the purchase of the Stock of Atlanta Metal by U.S. Operating Co. in the Atlanta Metal Acquisition; and". 1.8. AMENDMENT TO SECTION 7.7. Section 7.7(b) thereof is amended by (a) adding thereto, immediately after the reference therein to "the French Note Conversion," the phrase "the Permitted French Holdings Share Transfer", and (b) adding thereto, immediately after the reference therein to "a Permitted Share Transfer", the phrase ", or any other change in its capital structure specifically permitted by Section 7.6". 1.9. AMENDMENTS TO SECTION 7.10. Section 7.10 thereof is amended by adding to the end of each of clause (ii) and clause (iii) thereof the phrase "or in the Permitted French Holdings Share Transfer". 1.10. AMENDMENT TO SECTION 7.13. Clause (a) of Section 7.13 thereof is amended by adding thereto, immediately prior to the reference therein to "French Holdings", the phrase ", until the Permitted French Holdings Share Transfer,". 1.11. AMENDMENT TO SECTION 8.1(L). Clause (ix) of Section 8.1(l) thereof is amended by (a) deleting the words "Euramax and" therefrom and (b) adding thereto, immediately after the reference therein to "Dutch Holdings", the phrase "and, until the consummation of the Permitted French 9 Holdings Share Transfer, Euramax". SECTION 2. WAIVERS AND CERTAIN AGREEMENTS. (a) Subject to the satisfaction of the conditions precedent set forth in Section 3, the Lenders, the Swing Loan Lender and the Agent (i) hereby permanently waive, effective as of the date hereof, the 1998 Excess Cash Payment, provided that, on or prior to May 12, 1999, Dutch Company shall have made a prepayment of the U.S. Dollar Term B Loans and Dutch Company Term Loans in the equivalent in the relevant currency of approximately $9,300,000, which prepayment shall be applied to reduce ratably the remaining installments of said Term Loans notwithstanding the provisions of Section 2.7(c) of the Credit Agreement; and (ii) hereby agree that, if the Atlanta Loans are made, then, solely for purposes of determining (A) the aggregate principal amount of Atlanta Metal Loans available to be borrowed by U.S. Operating Co. pursuant to Section 2.1(b) of the Credit Agreement, (B) the aggregate principal amount of General Purpose Revolving Credit Loans available to be borrowed by U.S. Operating Co. pursuant to said Section 2.1(b) during the period commencing on the date hereof and ending on the sixth-month anniversary date hereof (the "Waiver Period"), and (C) whether any principal amount of Revolving Credit Loans shall be required to be prepaid pursuant to clause (d)(i) or (d)(vi) of Section 2.7 of the Credit Agreement at any time during the Waiver Period, the calculation of the "Available U.S. Credit", the "Maximum Amount of Revolver Liabilities of U.S. Operating Co.", and the "Swing Loan Lender Excess Amount" shall be made as if the term "U.S. Borrowing Base" was the term "Borrowing Base". (b) Each party hereto hereby agrees that, from and after the execution by Atlanta Metal of the supplement to the Domestic Subsidiary Guaranty and the supplement to the Credit Agreement referred to in the definition of "Atlanta Metal Acquisition" in Section 1 hereof, Atlanta Metal shall for all purposes be a Loan Party under and a party to the Credit Agreement and a Guarantor under and a party to the Domestic Subsidiary Guaranty, respectively. SECTION 3. EFFECTIVENESS. This Amendment shall become effective on the date on which the Agent shall have executed a counterpart hereof and shall have received counterparts hereof executed by the Lenders, the Swing Loan Lender and each Loan Party. SECTION 4. REPRESENTATIONS AND WARRANTIES. Each of the Loan Parties represents and warrants as to itself and each of its Subsidiaries as follows: (a) The execution, delivery and performance of this Amendment has been duly authorized by all necessary corporate action, and this Amendment and the Loan Documents as amended hereby, and the transactions contemplated hereby and thereby, do not and will not (i) require any consent or approval of the stockholders of any Loan Party or any of its Subsidiaries or any third party, other than any consents or approvals that have already been obtained and which remain in full force and effect, (ii) violate any Requirement of Law, (iii) result in a breach of or constitute a default under any Contractual Obligation to which any Loan Party or any of its Subsidiaries is a party or by which any of them or their respective properties may be bound or affected, or (iv) result in, or require, the creation or imposition of any Lien of any nature upon or with respect to any of the properties now owned or hereafter acquired by any Loan Party or any of its Subsidiaries (other than pursuant to the Loan Documents). (b) All authorizations, consents, approvals of, licenses of, or filings or registrations with, any court or Governmental Authority, required in connection with the execution, delivery and performance by any Loan Party of this Amendment and the performance by each Loan Party of the Loan Documents as amended hereby, and the consummation by each Loan Party of the transactions contemplated hereby and thereby, have been obtained, given, filed or taken and are in full force and 10 effect. (c) This Amendment has been duly executed and delivered by each Loan Party, and each of this Amendment and each Loan Document as amended hereby constitutes the legal, valid and binding obligation of each Loan Party thereto, enforceable against such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or law). (d) There exists no judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon the execution, delivery and performance of this Amendment or the Loan Documents as amended hereby or upon the consummation of the transactions contemplated hereby or thereby. (e) None of the transactions contemplated by this Amendment or the Loan Documents as amended hereby will have or could have a Material Adverse Effect, and the execution, delivery and performance of this Amendment will not and could not adversely affect the Liens of any Collateral Document. (f) No provision of any Related Document or any other Contractual Obligation of any Loan Party would prohibit, restrict or impose any conditions on this Amendment or the Loan Documents as amended hereby, and no consent under any Related Document or other Contractual Obligation is required for the execution, delivery or performance of this Amendment, or the Loan Documents as amended hereby, or for the consummation of any of the transactions contemplated hereby, including the transactions contemplated by the amendments set forth herein except as specifically contemplated hereby. (g) Each of the representations and warranties contained in each Loan Document are true and correct on and as of the date hereof, and no Default or Event of Default has occurred or is continuing or would result from the consummation of any transaction contemplated hereby. SECTION 5. COSTS AND EXPENSES. The Loan Parties jointly and severally agree to pay (a) all costs and expenses of the Agent in connection with the preparation, execution and delivery of this Amendment, including the reasonable fees and out-of-pocket expenses of counsel for the Agent with respect thereto, and (b) all costs and expenses otherwise required to be paid under Section 10.4 of the Credit Agreement. SECTION 6. MISCELLANEOUS. (a) Upon the effectiveness of this Amendment each reference in any Loan Document to "this Agreement", "hereunder", "herein", or words of like import, and each reference in any other Loan Document to such Loan Document, shall mean and be a reference to such Loan Document as amended or waived hereby. (b) Except as specifically amended or waived hereby, each Loan Document shall remain in full force and effect and is hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power, or remedy of the Lenders, the Issuer, the Swing Loan Lender or the Agent under any Loan Document, nor constitute a waiver of 11 any provision of any Loan Document. (d) This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered, shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. (e) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (f) EACH LOAN PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AMENDMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE ISSUER, ANY LENDER OR ANY LOAN PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THIS AMENDMENT. 12 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. EURAMAX INTERNATIONAL PLC By: ------------------------------------ Title: EURAMAX EUROPEAN HOLDINGS PLC By: ------------------------------------ Title: EURAMAX EUROPEAN HOLDINGS, B.V. By: ------------------------------------ Title: EURAMAX EUROPE LIMITED By: ------------------------------------ Title: EURAMAX NETHERLANDS B.V. By: ------------------------------------ Title: EURAMAX HOLDINGS LIMITED By: ------------------------------------ Title: 13 EURAMAX EUROPE B.V. By: ------------------------------------ Title: ELLBEE LIMITED By: ------------------------------------ Title: EURAMAX COATED PRODUCTS LIMITED By: ------------------------------------ Title: EURAMAX COATED PRODUCTS B.V. By: ------------------------------------ Title: AMERIMAX HOLDINGS, INC. AMERIMAX FABRICATED PRODUCTS, INC. AMERIMAX BUILDING PRODUCTS, INC. AMERIMAX COATED PRODUCTS, INC. AMERIMAX RICHMOND COMPANY AMERIMAX HOME PRODUCTS, INC. AMERIMAX LAMINATED PRODUCTS, INC. By: ------------------------------------ Title: FABRAL HOLDINGS, INC. (formerly, Gentek Holdings, Inc.) FABRAL, INC. (formerly, Gentek Building Products, Inc.) By: ------------------------------------ Title: 14 PARIBAS (formerly, Banque Paribas), as Agent, as a Lender, as the Issuer and as Swing Loan Lender By: ------------------------------------ Title: By: ------------------------------------ Title: BANKBOSTON, N.A., as a Lender By: ------------------------------------ Title: SUNTRUST BANK, ATLANTA, as a Lender By: ------------------------------------ Title: BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC., as a Lender By: ------------------------------------ Title: By: ------------------------------------ Title: 15 FLEET NATIONAL BANK, as a Lender By: ------------------------------------ Title: LASALLE NATIONAL BANK, as a Lender By: ------------------------------------ Title: WACHOVIA BANK, N.A., as a Lender By: ------------------------------------ Title: THE FIRST NATIONAL BANK OF CHICAGO, as a Lender By: ------------------------------------ Title: PPM AMERICA, INC., as attorney in fact, on behalf of Jackson National Life Insurance Company, as a Lender By: ------------------------------------ Title: DE NATIONALE INVESTERINGS BANK N.V., as a Lender By: ------------------------------------ Title: By: ------------------------------------ Title: PARIBAS CAPITAL FUNDING LLC, as a Lender By: ------------------------------------ 16 Title: MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., as a Lender By: ------------------------------------ Title: DEBT STRATEGIES FUND, INC., as a Lender By: ------------------------------------ Title: 17 EX-27 3 EXHIBIT 27
5 0001026743 EURAMAX INTERNATIONAL PLC 1,000 6-MOS DEC-31-1999 DEC-26-1998 JUN-26-1999 16,345 0 97,055 3,442 77,546 192,981 140,350 24,772 411,752 103,014 135,000 0 49,639 1,000 8,466 411,752 288,586 288,586 231,724 231,724 34,730 260 10,631 11,241 4,772 6,469 0 0 0 6,469 0 0
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