-----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, TkyLy1azoyp++UbphiLEyVSv8tBh8l+P5c3b1WEHIaEnVMzlAZR1KSlN+/GJJObb QYSimsFlRh6H7g79BgX5BA== /in/edgar/work/0000950134-00-009538/0000950134-00-009538.txt : 20001114 0000950134-00-009538.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950134-00-009538 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASSOCIATED MATERIALS INC CENTRAL INDEX KEY: 0000802967 STANDARD INDUSTRIAL CLASSIFICATION: [3089 ] IRS NUMBER: 751872487 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24956 FILM NUMBER: 761486 BUSINESS ADDRESS: STREET 1: 2200 ROSS AVE STE 4100 E CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2142204600 MAIL ADDRESS: STREET 1: 2200 ROSS AVENUE STREET 2: SUITE 4100 EAST CITY: DALLAS STATE: TX ZIP: 75201 10-Q 1 d81797e10-q.txt FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 2000 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------- FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 ----------------------------------------- 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: 0-24956 ASSOCIATED MATERIALS INCORPORATED - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware 75-1872487 - -------------------------------------------------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation of Organization) Identification No.) 2200 Ross Avenue, Suite 4100 East, Dallas, Texas 75201 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (214) 220-4600 ----------------------------- Not Applicable - -------------------------------------------------------------------------------- Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report Indicate by X whether the registrant (1) has filed all reports required to be filed by Section 13 of 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. Yes X No --- --- Shares of Common Stock, $.0025 par value outstanding at November 10, 2000: 6,432,764 Shares of Class B Common Stock, $.0025 par value outstanding at November 10, 2000: 1,550,000 2 ASSOCIATED MATERIALS INCORPORATED FORM 10-Q FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2000
Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets..................................................................... 1 September 30, 2000 (Unaudited) and December 31, 1999 Statements of Operations (Unaudited)............................................... 2 Quarter and nine months ended September 30, 2000 and 1999 Statements of Cash Flows (Unaudited)............................................... 3 Nine months ended September 30, 2000 and 1999 Notes to Financial Statements (Unaudited).......................................... 4 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.................................................. 6 Item 3. Quantitative and Qualitative Disclosures About Market Risk.................... 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.............................................. 11 SIGNATURES............................................................................... 12
3 Part I. Financial Information Item 1. Financial Statements ASSOCIATED MATERIALS INCORPORATED BALANCE SHEETS (Unaudited) (In Thousands, Except Share Data)
September 30, December 31, 2000 1999 -------------- -------------- ASSETS Current assets: Cash and cash equivalents ............................... $ 23,627 $ 3,432 Accounts receivable, net ................................ 63,769 52,583 Inventories ............................................. 77,496 69,651 Income taxes receivable ................................. -- 226 Other current assets .................................... 4,471 3,872 -------------- -------------- Total current assets ....................................... 169,363 129,764 Property, plant and equipment, net ......................... 68,169 71,682 Investment in Amercord Inc. ................................ 2,393 2,393 Other assets ............................................... 2,533 2,457 -------------- -------------- Total assets ............................................... $ 242,458 $ 206,296 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ........................................ $ 33,603 $ 16,933 Accrued liabilities ..................................... 21,123 26,953 Income taxes payable .................................... 4,172 -- -------------- -------------- Total current liabilities .................................. 58,898 43,886 Deferred income taxes ...................................... 4,829 2,236 Other liabilities .......................................... 5,633 5,848 Long-term debt ............................................. 75,000 75,000 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value: Authorized shares - 100,000 at September 30, 2000 and December 31, 1999 Issued shares - 0 at September 30, 2000 and December 31, 1999 ................................. -- -- Common stock, $.0025 par value: Authorized shares - 15,000,000 Issued shares - 7,114,834 at September 30, 2000 and 7,024,666 at December 31, 1999 ............. 17 17 Common stock, Class B, $.0025 par value: Authorized and issued shares - 1,550,000 at September 30, 2000 and December 31, 1999 ....... 4 4 Less: Treasury stock, at cost - 619,770 shares at September 30, 2000 and 555,396 at December 31, 1999............................................ (7,550) (6,626) Capital in excess of par ............................. 14,199 13,154 Retained earnings .................................... 91,428 72,777 -------------- -------------- Total stockholders' equity ........................... 98,098 79,326 -------------- -------------- Total liabilities and stockholders' equity ................. $ 242,458 $ 206,296 ============== ==============
-1- 4 ASSOCIATED MATERIALS INCORPORATED STATEMENTS OF OPERATIONS (Unaudited) (In Thousands, Except Per Share Data)
Quarter Ended Nine Months Ended September 30, September 30, -------------------------------- ------------------------------- 2000 1999 2000 1999 -------------- -------------- -------------- -------------- Net sales .................................... $ 134,085 $ 128,388 $ 369,965 $ 331,893 Cost of sales ................................ 93,808 88,920 261,362 228,437 -------------- -------------- -------------- -------------- 40,277 39,468 108,603 103,456 Selling, general and administrative expense .. 27,122 25,004 78,423 71,145 -------------- -------------- -------------- -------------- Income from operations ....................... 13,155 14,464 30,180 32,311 Interest expense ............................. 1,305 1,685 4,753 5,124 -------------- -------------- -------------- -------------- 11,850 12,779 25,427 27,187 Equity in loss of Amercord Inc. .............. -- (857) -- (1,402) Gain on sale of UltraCraft ................... (336) -- 8,012 -- -------------- -------------- -------------- -------------- Income before income taxes ................... 11,514 11,922 33,439 25,785 Income tax expense ........................... 5,547 4,590 13,987 10,057 -------------- -------------- -------------- -------------- Net income ................................... $ 5,967 $ 7,332 $ 19,452 $ 15,728 ============== ============== ============== ============== Earnings Per Common Share - Basic: Net income per common share .................. $ 0.74 $ 0.91 $ 2.42 $ 1.93 ============== ============== ============== ============== Earnings Per Common Share - Assuming Dilution: Net income per common share .................. $ 0.71 $ 0.88 $ 2.34 $ 1.88 ============== ============== ============== ==============
-2- 5 ASSOCIATED MATERIALS INCORPORATED STATEMENTS OF CASH FLOWS (Unaudited) (In Thousands)
Nine Months Ended September 30, ---------------------------- 2000 1999 ------------ ------------ OPERATING ACTIVITIES Net income ................................................ $ 19,452 $ 15,728 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ....................... 7,040 6,226 Deferred income taxes ............................... 2,593 (1,620) Loss in earnings of Amercord Inc. ................... -- 1,402 Loss on sale of assets .............................. 18 30 Gain on sale of UltraCraft .......................... (8,012) -- Changes in operating assets and liabilities: Accounts receivable, net ......................... (14,689) (12,100) Inventories ...................................... (10,023) (15,073) Income taxes receivable/payable .................. 4,398 4,482 Bank overdrafts .................................. -- 3,204 Accounts payable and accrued liabilities ......... 11,555 11,556 Other assets and liabilities ..................... (1,408) (254) ------------ ------------ Net cash provided by operating activities ................. 10,924 13,581 INVESTING ACTIVITIES Proceeds from sale of assets .............................. 64 38 Proceeds from sale of UltraCraft .......................... 18,885 -- Additions to property, plant and equipment ................ (8,998) (16,661) ------------ ------------ Net cash provided by (used by) investing activities ....... 9,951 (16,623) FINANCING ACTIVITIES Net proceeds from issuance of common stock ................ 488 431 Principal payments of long-term debt ...................... -- (3,600) Dividends paid ............................................ (801) (845) Treasury stock acquired ................................... (924) (4,853) Options exercised ......................................... 557 30 ------------ ------------ Net cash used by financing activities ..................... (680) (8,837) Net increase (decrease) in cash ........................... 20,195 (11,879) Cash at beginning of period ............................... 3,432 14,964 ------------ ------------ Cash at end of period ..................................... $ 23,627 $ 3,085 ============ ============ Supplemental information: Cash paid for interest .................................... $ 7,147 $ 7,075 ============ ============ Net cash paid for income taxes ............................ $ 7,628 $ 8,951 ============ ============
-3- 6 ASSOCIATED MATERIALS INCORPORATED NOTES TO FINANCIAL STATEMENTS FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2000 (Unaudited) NOTE 1 - BASIS OF PRESENTATION The unaudited financial statements of Associated Materials Incorporated (the "Company") for the quarter and nine months ended September 30, 2000 have been prepared in accordance with generally accepted accounting principles for interim financial reporting, the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999 filed with the Securities and Exchange Commission. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The results of operations for any interim period are not necessarily indicative of the results of operations for a full year. NOTE 2 - INVENTORIES Inventories are valued at the lower of cost (first in, first out) or market. Inventories consist of the following (in thousands):
September 30, December 31, 2000 1999 -------------- -------------- Raw materials .......................... $ 21,031 $ 20,043 Work in process ........................ 5,533 5,937 Finished goods and purchased stock ..... 50,932 43,671 -------------- -------------- $ 77,496 $ 69,651 ============== ==============
NOTE 3 - STOCKHOLDERS' EQUITY Under its stock repurchase program, the Company is authorized to purchase up to 800,000 shares of common stock in open market transactions. At September 30, 2000, 578,374 shares have been purchased under the program at a cost of $ 7.0 million. The Company purchased 64,374 shares of its common stock at a cost of $924,000 during the quarter ended September 30, 2000. No common stock purchases were made during the first or second quarter of 2000. NOTE 4 - ULTRACRAFT SALE The Company completed the sale of its UltraCraft operation, a manufacturer of semi-custom frameless cabinets, in June 2000. Pre-tax net proceeds from the sale were $18.9 million after transaction costs with a pre-tax gain on the sale of $8.0 million. The gain on UltraCraft was reduced by $336,000 during the third quarter due to a purchase price adjustment made in accordance with the agreement for the sale of UltraCraft. UltraCraft represented approximately 5.7% of the Company's net sales for 1999. Under the terms of the indenture pursuant to which the Company issued its 9 1/4% subordinated notes, the Company is obligated to make an offer to repurchase these notes using the after-tax net proceeds from the UltraCraft sale, to the extent the Company does not use these net proceeds within one year of the sale to repay senior indebtedness -4- 7 or to acquire assets used in, or other businesses similar to, the business currently conducted by the Company. As a result of the Company's acquisition of the Alpine assets (see Footnote 7) together with anticipated capital expenditures, the Company presently believes that it will not be obligated to make an offer to repurchase the notes. NOTE 5 - EARNINGS PER COMMON SHARE The following table sets forth the computation of basic and diluted earnings per share:
Quarter Ended Nine Months Ended September 30, September 30, ---------------------- --------------------- 2000 1999 2000 1999 --------- --------- --------- --------- Numerator: Numerator for basic and diluted earnings per common share .................................... $ 5,967 $ 7,332 $ 19,452 $ 15,728 Denominator: Denominator for basic earnings per common - share weighted-average shares .................. 8,065 8,056 8,035 8,163 Effect of dilutive securities: Employee stock options .......................... 286 245 263 205 --------- --------- --------- --------- Denominator for diluted earnings per common share - adjusted weighted-average shares ........ 8,351 8,301 8,298 8,368 Basic earnings per common share ....................... $ 0.74 $ 0.91 $ 2.42 $ 1.93 ========= ========= ========= ========= Diluted earnings per common share ..................... $ 0.71 $ 0.88 $ 2.34 $ 1.88 ========= ========= ========= =========
For the nine months ended September 30, 2000 and for the quarter and nine months ended September 30, 1999, options to purchase 40,000 shares of common stock were excluded from the calculation of weighted average shares outstanding because the average exercise price of these shares was higher than the average market price of the common stock during the period. NOTE 6 - INCOME TAXES During the third quarter 2000, the Company recorded $1.1 million in additional income tax expense due to an adjustment to a deferred tax asset which was recorded in 1986 pursuant to the spin-off of the Company's tire cord operation into Amercord. NOTE 7 - SUBSEQUENT EVENT On October 6, 2000, the Company acquired substantially all of the assets of Alpine Industries, Inc. for $7.5 million in cash and the assumption of certain payroll related and property tax liabilities. Included in the acquired assets is Alpine's window fabrication facility located in Bothell, Washington. This facility manufactures vinyl windows for the new construction, manufactured housing and remodeling markets. The Company accounted for the acquisition using the purchase method of accounting. -5- 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Quarter Ended September 30, 2000 Compared to Quarter Ended September 30, 1999 The table below sets forth for the periods indicated certain items of the Company's financial statements by segment:
Quarter Ended September 30, ------------------------------------------------------------------ 2000 1999 ------------------------------- ------------------------------- Percentage of Percentage of Amount Total Net Sales Amount Total Net Sales ------------ ---------------- ------------ ---------------- Total Company: Net sales - Alside ................................. $ 118,293 88.2% $ 117,466 91.5% Net sales - AmerCable .............................. 15,792 11.8 10,922 8.5 ------------ ---------------- ------------ ---------------- Total net sales ................................. 134,085 100.0 128,388 100.0 Gross profit ....................................... 40,277 30.0 39,468 30.7 Selling, general and administrative expense (1) ...................... 27,122 20.2 25,004 19.5 ------------ ---------------- ------------ ---------------- Income from operations ............................. $ 13,155 9.8% $ 14,464 11.3% ============ ================ ============ ================ Alside: Net sales .......................................... $ 118,293 100.0% $ 117,466 100.0% Gross profit ....................................... 36,925 31.2 37,404 31.8 Selling, general and administrative expense .......................... 24,405 20.6 22,745 19.3 ------------ ---------------- ------------ ---------------- Income from operations ............................. $ 12,520 10.6% $ 14,659 12.5% ============ ================ ============ ================ AmerCable: Net sales .......................................... $ 15,792 100.0% $ 10,922 100.0% Gross profit ....................................... 3,352 21.2 2,064 18.9 Selling, general and administrative expense .......................... 1,677 10.6 1,299 11.9 ------------ ---------------- ------------ ---------------- Income from operations ............................. $ 1,675 10.6% $ 765 7.0% ============ ================ ============ ================
(1) Consolidated selling, general and administrative expenses include corporate expenses of $1,040,000 and $960,000 for the quarters ended September 30, 2000 and 1999, respectively. Overview The Company's net sales increased to $134.1 million for the quarter ended September 30, 2000 as compared to $128.4 million for the same period in 1999 due to higher selling prices at the Company's Alside division and higher sales volume at its AmerCable division. The Company's net income was $6.0 million, or $0.71 per share, for the third quarter of 2000 as compared to $7.3 million, or $0.88 per share, for the same period in 1999. The Company recorded several one-time accounting adjustments during the third quarter 2000, which resulted in lower net income. The adjustments included $1.1 million of additional income tax expense due to an adjustment to a deferred tax asset which was recorded in 1986 when the Company spun-off its tire cord operation into Amercord, a $940,000 charge ($578,000 after tax) for severance cost at Alside and a $336,000 decrease ($207,000 after tax) in the gain on the sale of UltraCraft due to a purchase price adjustment. Exclusive of these items, the Company's income from operations, net income and earnings per share were $14.1 million, $7.9 million and $0.94, respectively. The 1999 period includes the results of the Company's UltraCraft operation, which was sold in June 2000. UltraCraft's net sales and income from operations for the third quarter 1999 were $6.2 million and $853,000, respectively. -6- 9 ALSIDE. Alside's net sales were $118.3 million for the quarter ended September 30, 2000 as compared to $117.5 million for the same period in 1999. As noted above, net sales for the third quarter 1999 included $6.2 million in UltraCraft sales. The increase in net sales was due to higher vinyl siding and vinyl window selling prices as higher vinyl resin costs were passed through to customers in the form of higher selling prices. For the third quarter 2000, unit sales of vinyl windows were flat while unit sales of vinyl siding decreased 3.7% as compared to the same period in 1999. Gross profit for the third quarter 2000 of $36.9 million was $479,000 lower than the 1999 period as the 1999 period included $1.3 million of UltraCraft gross profits. Selling, general and administrative expense increased to $24.4 million due to higher costs associated with the expansion of Alside's Supply Center network in 2000 and $940,000 in severance costs. Income from operations decreased $2.1 million to $12.5 million for the third quarter of 2000 as compared to $14.7 million for the same period in 1999 due to higher selling, general and administrative expense and the elimination of UltraCraft's income from operations. AMERCABLE. AmerCable's net sales increased 44.6% to $15.8 million for the third quarter of 2000 as compared with $10.9 million for the same period in 1999 due primarily to higher sales volume of industrial and mining cables. Gross profit as a percentage of sales increased to 21.2% for the 2000 period as compared to 18.9% for the 1999 period due to improved fixed cost absorption resulting from higher production volumes. Selling, general and administrative expense increased to $1.7 million for the 2000 period due to higher personnel costs, but decreased as a percentage of sales. Income from operations increased to $1.7 million for the third quarter 2000 as compared with $765,000 for the same period in 1999. OTHER. Net interest expense decreased $380,000 or 22.6% for the third quarter of 2000 compared with the same period in 1999 due primarily to an increase in the Company's investment income. The Company recorded interest income of $460,000 for the quarter ended September 30, 2000 as compared to $76,000 for the same period in 1999. During the third quarter 2000, the Company recorded $1.1 million in additional income tax expense due to an adjustment to a deferred tax asset which was recorded in 1986 pursuant to the spin-off of the Company's tire cord operation into Amercord. The Company does not anticipate any additional adjustments to its effective tax rate during 2000. In the fourth quarter of 1999, Amercord was recapitalized. In this transaction, the Company reduced its ownership in Amercord from 50.0% to 9.9%. The Company currently accounts for Amercord using the cost method of accounting. Prior to Amercord's recapitalization, the Company accounted for Amercord using the equity method of accounting. The Company recorded a loss of $857,000 on its equity in the losses of Amercord during the third quarter of 1999. -7- 10 Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30, 1999. The table below sets forth for the periods indicated certain items of the Company's financial statements by segments.
Nine Months Ended September 30, ----------------------------------------------------------- 2000 1999 ---------------------------- ----------------------------- Percentage of Percentage of Amount Total Net Sales Amount Total Net Sales ---------- --------------- ---------- --------------- Total Company: Net sales - Alside ................................. $ 323,460 87.4% $ 300,730 90.6% Net sales - AmerCable .............................. 46,505 12.6 31,163 9.4 ---------- -------------- ---------- -------------- Total net sales ................................. 369,965 100.0 331,893 100.0 Gross profit ....................................... 108,603 29.4 103,456 31.2 Selling, general and administrative expense(1) ....................... 78,423 21.2 71,145 21.4 ---------- -------------- ---------- -------------- Income from operations ............................. $ 30,180 8.2% $ 32,311 9.7% ========== ============== ========== ============== Alside: Net sales .......................................... $ 323,460 100.0% $ 300,730 100.0% Gross profit ....................................... 99,468 30.7 98,206 32.7 Selling, general and administrative expense .......................... 70,578 21.8 64,866 21.6 ---------- -------------- ---------- -------------- Income from operations ............................. $ 28,890 8.9% $ 33,340 11.1% ========== ============== ========== ============== AmerCable: Net sales .......................................... $ 46,505 100.0% $ 31,163 100.0% Gross profit ....................................... 9,135 19.6 5,250 16.8 Selling, general and administrative expense .......................... 4,760 10.2 3,491 11.2 ---------- -------------- ---------- -------------- Income from operations ............................. $ 4,375 9.4% $ 1,759 5.6% ========== ============== ========== ==============
(1) Consolidated selling, general and administrative expenses include corporate expenses of $3,085,000 and $2,788,000 for the nine-month periods ended September 30, 2000 and 1999, respectively. Overview The Company's net sales increased to $370.0 million up 11.5% for the nine months ended September 30, 2000 as compared to $331.9 million for the same period in 1999 as sales increased at both Alside and AmerCable. The Company's net income was $19.5 million ($2.34 per share) for the nine months ended September 30, 2000 as compared to $15.7 million ($1.88 per share) for the same period in 1999 due to the sale of the Company's UltraCraft division in June 2000 which resulted in a gain of $8.0 million ($4.9 million after-tax). ALSIDE. Alside's net sales for the nine months ended September 30, 2000 increased to $323.5 million as compared to $300.7 million for the same period in 1999 due to higher selling prices for vinyl siding and vinyl windows as well as higher sales volume of vinyl fence. For the nine months ended September 30, 2000, unit sales of vinyl siding and vinyl windows increased 1.7% and 2.2%, respectively as compared to the same period in 1999. Gross profit increased $1.3 million to $99.5 million for the 2000 period as improved productivity of Alside's window operations was partially offset by higher fixed costs associated with the two siding manufacturing plants. Selling, general and administrative expense increased to $70.6 million for the 2000 period due to higher personnel costs and additional costs associated with the expansion of Alside's Supply Center network. Income from operations decreased to $28.9 million for the nine months ended September 30, 2000 as compared to $33.3 million for the same period in 1999 as higher selling, general and administrative expense more than offset the higher gross profit. -8- 11 AMERCABLE. AmerCable's net sales increased to $46.5 million for the nine months ended September 30, 2000 as compared to $31.2 million in the 1999 period due primarily to higher sales volume of industrial and mining cable products. Gross profit increased 74.0% to $9.1 million for the nine months ended September 30, 2000 as compared to $5.3 million for the same period in 1999 due to higher sales volume. Selling, general and administrative expenses increased $1.3 million to $4.8 million for the nine months ended 2000 due to higher personnel costs. Income from operations increased $2.6 million to $4.4 million for the nine months ended 2000 as compared to $1.8 million for the same period in 1999. OTHER. Net interest expense decreased $371,000 or 7.2% for the nine months ended September 30, 2000 as compared to the same period in 1999. The decrease was due to an increase in the Company's investment income. The Company recorded interest income of $659,000 for the nine months ended September 30, 2000 as compared to $217,000 for the 1999 period. During the third quarter 2000, the Company recorded $1.1 million in additional income tax expense due to an adjustment to a deferred tax asset which was recorded in 1986 pursuant to the spin-off of the Company's tire cord operation into Amercord. The Company does not anticipate any additional adjustments to its effective tax rate during 2000. In the fourth quarter of 1999, Amercord was recapitalized. In this transaction, the Company reduced its ownership in Amercord from 50.0% to 9.9%. The Company currently accounts for Amercord using the cost method of accounting. Prior to Amercord's recapitalization, the Company accounted for Amercord using the equity method of accounting. The Company recorded a loss of $1.4 million on its equity in the losses of Amercord for the nine months ended September 30, 1999. LIQUIDITY AND CAPITAL RESOURCES At September 30, 2000 the Company had cash and cash equivalents of $23.6 million and available borrowing capacity of approximately $48.0 million under its existing credit facility. Outstanding letters of credit totaled $2.0 million securing various insurance letters of credit. Net cash provided by operations was $10.9 million in the nine months ended September 30, 2000 compared with $13.6 million in the same period in 1999. The decrease in cash provided by operations for the 2000 period as compared to the 1999 period was due primarily to lower operating profits. Capital expenditures totaled $9.0 million for the nine months ended September 30, 2000, compared with $16.7 million during the same period in 1999. Expenditures in the 2000 period were used primarily to increase extrusion capacity for window profiles, fencing and siding products, improve window manufacturing efficiency and upgrade window information systems at Alside. Expenditures at AmerCable were used primarily to expand capacity and improve processing efficiencies. Capital expenditures for the nine months ended September 30, 1999 included $9.4 million for the construction of a new vinyl siding manufacturing plant located in Freeport, Texas. On October 6, 2000, the Company acquired substantially all of the assets of Alpine Industries, Inc. for $7.5 million in cash and the assumption of certain payroll related and property tax liabilities. Included in the acquired assets is Alpine's window fabrication facility located in Bothell, Washington. This facility manufactures vinyl windows for the new construction, manufactured housing and remodeling markets. The Company does not expect Alpine to realize a profit for at least six months. Under the terms of the indenture pursuant to which the Company issued its 9 1/4% subordinated notes, the Company is obligated to make an offer to repurchase these notes using the after-tax net proceeds from the UltraCraft sale, to the extent the Company does not use these net proceeds within one year of the sale to repay senior indebtedness or to acquire assets used in, or other businesses similar to, the business currently conducted by the Company. -9- 12 As a result of the Company's acquisition of the Alpine assets together with anticipated capital expenditures, the Company presently believes that it will not be obligated to make an offer to repurchase the notes. The Company has guaranteed a $3.0 million note secured by Amercord's real property. Should the guarantee be exercised by Amercord's lender, the Company and Ivaco have the option to assume the loan. Ivaco has indemnified the Company for 50% of any loss under the guarantee. The Company believes the future cash flows from operations and its borrowing capacity under its existing or new credit agreement will be sufficient to satisfy its obligations to pay principal and interest on its outstanding debt, maintain current operations, provide sufficient capital for presently anticipated capital expenditures and fund its stock repurchase program. However, there can be no assurances that the cash so generated by the Company will be sufficient for these purposes. EFFECTS OF INFLATION The Company believes that the effects of inflation on its operations have not been material during the past two years. Inflation could adversely affect the Company if inflation results in significantly higher interest rates or substantial weakness in economic conditions. Alside's principal raw material, vinyl resin, has been subject to rapid price changes. Alside has historically been able to pass on price increases to its customers. No assurances can be given that Alside will be able to pass on any price increases in the future. CERTAIN FORWARD-LOOKING STATEMENTS This report contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the beliefs of, and estimates and assumptions made by and information currently available to, the Company's management. When used in this report, the words "anticipate," "believe," "estimate," "expect," "intend," and similar words, as they relate to the Company or the Company's management, identify forward-looking statements. These statements reflect the current views of the Company's management regarding the operations and results of operations of the Company as well as its customers and suppliers, including as a result of the availability of consumer credit, interest rates, employment trends, changes in levels of consumer confidence, changes in consumer preferences, national and regional trends in new housing starts, raw material costs, pricing pressures, shifts in market demand, risks associated with integrating Alpine's assets with the Company's existing window operations and general economic conditions. These statements are subject to certain risks and uncertainties. Certain factors that might cause a difference are discussed in more detail in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Should one or more of these risks or uncertainties occur, or should management's assumptions or estimates prove incorrect, actual results and events may vary materially from those discussed in the forward-looking statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is subject to commodity price risk, interest rate risk and foreign currency exchange rate risk. The Company has experienced no significant changes in market risk during the quarter or nine months ended September 30, 2000. The Company's market risk is described in more detail in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. -10- 13 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 27 - Financial Data Schedule. (b) Reports on Form During the quarter ended September 30, 2000, Associated Materials Incorporated filed no Current Reports on Form 8-K. -11- 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ASSOCIATED MATERIALS INCORPORATED --------------------------------- (Registrant) Date: November 13, 2000 By: /s/ Robert L. Winspear ----------------------------- Robert L. Winspear Vice President and Chief Financial Officer Date: November 13, 2000 By: /s/ Robert L. Winspear ----------------------------- Robert L. Winspear Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) -12- 15 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- 27 Financial Data Schedule.
EX-27 2 d81797ex27.txt FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-2000 SEP-30-2000 23,627 0 69,904 6,135 77,496 169,363 68,169 0 242,458 58,898 75,000 0 0 21 98,098 242,458 369,965 0 261,362 0 78,423 0 4,753 33,439 13,987 0 0 0 0 19,452 2.42 2.34
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