EX-99.1 3 l03940aexv99w1.htm EX-99.1 PRESS RELEASE EX-99.1 Press Release
 

Exhibit 99.1

NEWS RELEASE

ASSOCIATED MATERIALS REPORTS THIRD QUARTER RESULTS

CUYAHOGA FALLS, Ohio, November 3 — Associated Materials Incorporated (“AMI” or the “Company”) today announced third quarter 2003 net sales from continuing operations of $223.8 million, a 26.7% increase over $176.7 million for the same period in 2002. For the nine months ended September 27, 2003, net sales from continuing operations were $515.1 million or 13.8% higher than $452.6 million for the same period in 2002. The results for 2003 include the operations of the Company’s Gentek Holdings, Inc. subsidiary (“Gentek”) subsequent to its acquisition on August 29, 2003, which contributed $27.1 million of net sales. Excluding the impact of the Gentek acquisition, net sales from continuing operations increased 11.3% for the third quarter of 2003 and increased 7.8% for the nine months ended September 27, 2003. As discussed below, results of continuing operations exclude the Company’s AmerCable division, which was sold on June 24, 2002.

Net income for the third quarter of 2003 was $9.6 million. This compares to net income of $7.8 million for the same period in 2002. For the nine months ended September 27, 2003, net income was $14.9 million compared to net income of $1.8 million for the same period in 2002. Excluding the impact of the Gentek acquisition, net income was $8.5 million and $13.8 million for the third quarter of 2003 and nine months ended September 27, 2003, respectively.

EBITDA (as defined below) for the third quarter of 2003 was $29.5 million compared to $22.2 million for the third quarter of 2002. EBITDA for the third quarter of 2003 includes a cost of sales expense of $1.4 million relating to an inventory fair value adjustment recorded at the time of the acquisition of Gentek. Excluding the impact of the Gentek acquisition, EBITDA for the third quarter of 2003 was $27.1 million. A reconciliation of EBITDA to net income (loss) is included in the table below.

EBITDA for the nine months ended September 27, 2003 was $55.0 million compared to $30.9 million for the same period in 2002. EBITDA for the nine months ended September 27, 2003 includes a cost of sales expense of $1.4 million relating to an inventory fair value adjustment recorded at the time of the acquisition of Gentek. Excluding the impact of the Gentek acquisition, EBITDA for the nine months ended September 27, 2003 was $52.6 million. EBITDA for the nine months ended September 30, 2002 includes $1.9 million of EBITDA relating to the AmerCable division, merger transaction costs of $9.3 million, debt extinguishment costs of $7.6 million and a cost of sales expense of $1.9 million relating to an inventory fair value adjustment recorded at the time of the merger transaction with Harvest Partners.

Michael Caporale, President and Chief Executive Officer, commented, “Associated Materials continued its strong performance in the third quarter. We experienced significant sales and EBITDA growth compared to a very strong third quarter of 2002.”

Mr. Caporale continued, “Since the close of the acquisition of Gentek, we are even more excited about the prospects of the combined company. Gentek has excellent brands, products, and people, which will benefit Associated Materials for many years to come. As I have stated

 


 

previously, we strongly believe in the brand equity of the Revere® and Gentek® names. We will maintain distinct separation of these brands from our Alside brand by continuing to offer differentiated product, sales and marketing support. Revere® and Gentek® customers will continue to receive the same excellent service and support that they have enjoyed in the past.”

Results of Continuing Operations

Sales from continuing operations increased 26.7% during the third quarter of 2003 compared to the same period in 2002, primarily driven by increased window sales along with sales from the Company’s Gentek subsidiary. Gross profit in the third quarter of 2003 was $64.2 million, or 28.7% of net sales as compared to gross profit of $53.9 million, or 30.5% of net sales, in the third quarter of 2002. The decrease in gross profit margin percentage is due to lower margin window sales comprising a larger proportion of total sales in 2003 and the inclusion of Gentek’s operations for the month of September, which includes a cost of sales expense of $1.4 million relating to an inventory fair value adjustment recorded at the time of the Gentek acquisition. Additionally, Gentek’s gross margin percentage is typically lower than Alside’s as a larger proportion of its sales are to independent distributors versus contractors through company-owned distribution centers. Selling, general and administrative expense increased to $38.3 million, or 17.1% of net sales, for the third quarter of 2003 versus $34.6 million, or 19.6% of net sales, for the same period in 2002. The increase in selling, general and administrative expense is primarily a result of the three new supply centers added in 2003 along with the acquisition of Gentek. Income from operations was $25.9 million in the third quarter of 2003 compared to $19.3 million for the same period in 2002.

Sales from continuing operations increased 13.8% for the nine months ended September 27, 2003 compared to the same period in 2002, primarily driven by increased window sales along with sales from the Company’s Gentek subsidiary. Gross profit increased to $149.2 million, or 29.0% of net sales, for the nine months ended September 27, 2003 compared to $135.7 million, or 30.0% of net sales, for the same period in 2002. The decrease in gross profit margin percentage was primarily a result of window sales comprising a larger proportion of total sales in 2003 compared to the same period in 2002. Selling, general and administrative expense increased to $103.3 million, or 20.1% of net sales, for the nine months ended September 27, 2003 compared to $97.3 million, or 21.5% of net sales, for the same period in 2002. The increase in selling, general and administrative expense is primarily a result of the three new supply centers added in 2003 along with the seven new supply centers added in 2002, which had nine full months of expense in 2003. Income from operations was $45.9 million for the nine months ended September 27, 2003 compared to $38.4 million for the same period in 2002.

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Predecessor and Successor Results of Operations

Accounting principles generally accepted in the United States require operating results prior to the merger transaction with Harvest Partners completed on April 19, 2002 to be presented as the Predecessor’s results in the historical financial statements. Operating results subsequent to the merger transaction with Harvest Partners are presented as the Successor’s results in the historical financial statements. AmerCable’s results are included in continuing operations of the Predecessor as it was the Successor’s decision to divest this division.

Net income for the third quarter of 2003 was $9.6 million, which includes income from operations of $25.9 million, interest expense of $9.7 million, gain on foreign currency transactions of $0.2 million and an income tax provision of $6.8 million. Interest expense includes accelerated amortization of deferred financing fees of approximately $3.9 million as a result of amending and restating the Company’s credit facility in order to complete the Gentek acquisition. Net income for the third quarter of 2002 was $7.8 million, which includes income from operations of $19.3 million, interest expense of $6.0 million and an income tax provision of $5.5 million.

Net income for the nine months ended September 27, 2003 was $14.9 million, which includes income from operations of $45.9 million, interest expense of $20.6 million, gain on foreign currency transactions of $0.2 million and an income tax provision of $10.6 million. Interest expense includes accelerated amortization of deferred financing fees of approximately $3.9 million as a result of amending and restating the Company’s credit facility in order to complete the Gentek acquisition. The Predecessor had net sales and a net loss of $180.2 million and $5.8 million, respectively, for the period from January 1, 2002 to April 18, 2002. The Predecessor’s net loss includes income from operations of $6.6 million, interest expense of $2.1 million, $9.3 million of transaction costs associated with the Predecessor’s strategic review process and merger transaction with Harvest Partners and an income tax provision of $1.0 million. The Successor had net sales and net income of $290.6 million and $7.5 million, respectively, for the period from April 19, 2002 to September 30, 2002. The Successor’s net income includes income from operations of $32.3 million, interest expense of $11.0 million, $7.6 million of debt extinguishment costs, an income tax provision of $5.7 million and the loss from discontinued operations of $0.5 million, net of tax, for the Company’s AmerCable division.

Non-GAAP Financial Measures

The Company has changed the way it describes its historical financial performance in its earnings releases in connection with the adoption by the SEC of Regulation G and other rules affecting the use and disclosure of non-GAAP financial measures. Accordingly, EBITDA as used in this release has not been adjusted for items that may impact its comparability to prior periods, including items such as AmerCable’s results of operations, merger transaction costs, debt extinguishment costs and certain cost of sales

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expenses relating to inventory fair value adjustments recorded at the time of the merger transaction with Harvest Partners and the acquisition of Gentek.

*      *      *

Associated Materials management will host its third quarter earnings conference call on Monday, November 3 at 11 a.m. Eastern Time. The toll free dial-in number for the call is (877) 363-0523. A replay of the call will be available through November 10, 2003 by dialing (888) 769-9756 and entering the conference call identification number of 7802485. The conference call and replay will also be available via webcast, which along with this news release can be accessed via the Company’s web site at http://www.associatedmaterials.com .

*      *      *

Associated Materials is a leading manufacturer of exterior residential building products, which are distributed through company-owned distribution centers and independent distributors across the United States and Canada. Associated Materials produces a broad range of vinyl siding and accessories, vinyl windows, and aluminum and steel siding and accessories as well as vinyl fencing, decking and railing and vinyl garage doors. Associated Materials is a privately held, wholly owned subsidiary of Associated Materials Holdings Inc., which is controlled by affiliates of Harvest Partners, Inc. For more information, please visit the company’s website at http://www.associatedmaterials.com.

Founded in 1981, Harvest Partners has approximately $1 billion of invested and committed capital, and is focused on management buyouts and growth financings of profitable, medium-sized specialty services, manufacturing and value-added distribution businesses, with a particular emphasis on multinational transactions. Harvest has significant additional capital available through its limited partners, which include numerous U.S., European and Asian industrial corporations and financial institutions. For more information on Harvest Partners please visit its web site at http://www.harvpart.com.

This press release contains certain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) relating to Associated Materials that are based on the beliefs of Associated Materials’ management. When used in this press release, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” and similar expressions identify forward-looking statements. Such statements reflect the current views of Associated Materials’ management with respect to Associated Materials’ ability to profit from the acquisition of Gentek, including Associated Materials’ ability to grow the Gentek brands as expected. Associated Materials’ ability to profit from its initiatives will depend on a number of factors, including primarily customer acceptance of Gentek’s products and the achievement of anticipated synergies. Such statements also reflect the current views of Associated Materials’ management with respect to its operations and results of operations regarding the availability of consumer

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credit, interest rates, employment trends, levels of consumer confidence, consumer preferences, national and regional trends in new housing starts, raw material costs, pricing pressures, costs of environmental compliance, level of competition within our market, availability of alternative building products, shifts in market demand, and general economic conditions. These statements are subject to certain risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended.

For Further Information

     
At the Company:   At Abernathy MacGregor Group Inc.:
D. Keith LaVanway   Alison Brandt
Chief Financial Officer   Media
(330) 922-2004   (212) 371-5999

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ASSOCIATED MATERIALS INCORPORATED
Condensed Predecessor / Successor Statements of Operations(a)
(Unaudited)
(in thousands)

                                                     
                                One                
        Three   Three   Nine   Hundred   One Hundred   Nine
        Months   Months   Months   Eight Days   Sixty-Five   Months
        Ended   Ended   Ended   Ended   Days Ended   Ended
        September 27,   September 30,   September 27,   April 18,   September 30,   September 30,
        2003   2002   2003   2002   2002   2002
       
 
 
 
 
 
        Successor   Successor   Successor   Predecessor   Successor   Combined
       
 
 
 
 
 
Net sales
                                               
 
Building products
  $ 223,806     $ 176,673     $ 515,113     $ 161,959     $ 290,633     $ 452,592  
 
AmerCable
                      8,271             18,271  
 
   
     
     
     
     
     
 
   
Total
    223,806       176,673       515,113       180,230       290,633       470,863  
 
                                               
Gross profit
                                               
 
Building products
    64,219       53,893       149,187       47,102       88,562       135,664  
 
AmerCable
                      2,777             2,777  
 
   
     
     
     
     
     
 
   
Total
    64,219       53,893       149,187       49,879       88,562       138,441  
 
                                               
Selling, general and administrative expense
                                               
 
Building products
    38,270       34,557       103,284       41,080       56,224       97,304  
 
AmerCable
                      2,192             2,192  
 
   
     
     
     
     
     
 
   
Total
    38,270       34,557       103,284       43,272       56,224       99,496  
 
                                               
Income from operations
                                               
 
Building products
    25,949       19,336       45,903       6,022       32,338       38,360  
 
AmerCable
                      585             585  
 
   
     
     
     
     
     
 
   
Total
    25,949       19,336       45,903       6,607       32,338       38,945  
 
                                               
Interest, net(b)
    9,706       6,002       20,627       2,068       10,983       13,051  
Foreign currency gain
    (199 )           (199 )                  
 
   
     
     
     
     
     
 
Income from continuing operations before other non-operating expenses and income taxes
    16,442       13,334       25,475       4,539       21,355       25,894  
Merger transaction costs(c)
                      9,319             9,319  
Debt extinguishment costs(d)
                            7,579       7,579  
 
   
     
     
     
     
     
 
Income (loss) from continuing operations before income taxes
    16,442       13,334       25,475       (4,780 )     13,776       8,996  
 
                                               
Income taxes
    6,823       5,535       10,572       977       5,718       6,695  
 
   
     
     
     
     
     
 
Net income (loss) from continuing operations
    9,619       7,799       14,903       (5,757 )     8,058       2,301  
Loss from discontinued operations
                            (521 )     (521 )
 
   
     
     
     
     
     
 
Net income (loss)
  $ 9,619     $ 7,799     $ 14,903     $ (5,757 )   $ 7,537     $ 1,780  
 
   
     
     
     
     
     
 
 
                                               
Reconciliation of net income (loss) to EBITDA(e)(f) (g):
                                               
Net income (loss)
  $ 9,619     $ 7,799     $ 14,903     $ (5,757 )   $ 7,537     $ 1,780  
Interest – Continuing operations
    9,706       6,002       20,627       2,068       10,983       13,051  
   
– Discontinued operations(h)
                            1,213       1,213  
Taxes    – Continuing operations
    6,823       5,535       10,572       977       5,718       6,695  
   
– Discontinued operations
                            (370 )     (370 )
Depreciation and Amortization
                                               
– Continuing operations
    3,362       2,849       8,874       3,969       4,246       8,215  
   
– Discontinued operations
                            318       318  
 
   
     
     
     
     
     
 
EBITDA
  $ 29,510     $ 22,185     $ 54,976     $ 1,257     $ 29,645     $ 30,902  
 
   
     
     
     
     
     
 
 
                                               
Selected Cash Flow Data:
                                               
Net cash provided by (used in) operating activities
  $ 22,710     $ 23,339     $ 18,453     $ (18,258 )   $ 36,961     $ 18,703  
Net cash used in investing activities
    (120,323 )     (4,820 )     (126,164 )     (3,597 )     (357,544 )     (361,141 )
Net cash provided by (used in) financing activities
    103,500       (10,000 )     102,592       (245 )     334,636       334,391  
Net cash used in discontinued operations
                            (1,076 )     (1,076 )
 
                                               
 
  September 27,   December 31,                                
 
    2003       2002                                  
       
 
               
Selected Balance Sheet Data:
                                               
Cash
  $ 7,938     $ 13,022                                  
Accounts receivable, net
    145,049       67,861                                  
Inventory
    108,436       60,369                                  
Accounts payable
    69,072       31,319                                  
Accrued liabilities
    58,563       34,319                                  
Long-term debt
    345,000       242,408                                  

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(a)   Operating results prior to the merger transaction with Harvest Partners completed on April 19, 2002, are presented as the Predecessor’s results of operations and include 108 days from January 1, 2002 to April 18, 2002. Operating results subsequent to the merger transaction with Harvest Partners are presented as the Successor’s results of operations. For the 2002 periods presented this includes 165 days from April 19, 2002 to September 30, 2002. AmerCable’s results are included in continuing operations of the Predecessor prior to the merger transaction with Harvest Partners. Subsequent to the merger transaction with Harvest Partners, AmerCable’s results are treated as discontinued operations due to the Successor’s decision to divest this division. Operating results for 2003 also include the results of the Company’s Gentek Holdings subsidiary subsequent to its acquisition on August 29, 2003.
(b)   The 2003 periods include accelerated amortization of $3.9 million of debt issuance costs as a result of amending and restating the Company’s credit facility for the Gentek Holdings acquisition.
(c)   Merger transaction costs include investment banking and legal fees incurred by the Predecessor in conjunction with the strategic review process and subsequent merger transaction with Harvest Partners.
(d)   Debt extinguishment costs include $4.9 million for the extinguishment of substantially all of the Successor’s assumed 9 1/4% senior subordinated notes and $2.7 million for the expense of financing fees related to an interim credit facility utilized for the merger transaction with Harvest Partners, which was repaid shortly thereafter.
(e)   EBITDA is calculated as net income (loss) plus interest, taxes, depreciation and amortization. The Company considers EBITDA to be an important indicator of its operational strength and performance of its business. The Company has included EBITDA because it believes it is used by certain investors as one measure of a company’s ability to service its debt. EBITDA should be considered in addition to, not as a substitute for the Company’s net income or loss or to cash flows as well as other measures of financial performance in accordance with accounting principles generally accepted in the United States. EBITDA has not been prepared in accordance with accounting principles generally accepted in the United States. Therefore, EBITDA as presented by the Company, may not be comparable to similarly titled measures reported by other companies.
(f)   AmerCable’s EBITDA is calculated as its net income (loss) plus interest, taxes, depreciation and amortization. For the periods through the date of its sale AmerCable’s EBITDA is calculated as follows:

                           
      January 1, 2002   April 19, 2002   January 1, 2002
      To   To   To
      April 18, 2002   June 24, 2002   June 24, 2002
     
 
 
      Predecessor   Successor   Combined
     
 
 
Reconciliation of net income (loss) to EBITDA:
                       
Net income (loss)
  $ 359     $ (521 )   $ (162 )
Interest – Discontinued operations(h)
          1,213       1,213  
Taxes    – Continuing operations
    226             226  
 
– Discontinued operations
          (370 )     (370 )
Depreciation and Amortization
                       
– Continuing operations
    635             635  
 
– Discontinued operations
          318       318  
 
   
     
     
 
EBITDA
  $ 1,220     $ 640     $ 1,860  
 
   
     
     
 
(g)   As mentioned above, the 2003 results of operations include the results of Gentek subsequent to its acquisition on August 29, 2003. A reconciliation of EBITDA excluding the impact of the Gentek acquisition for the quarter and nine months ended September 27, 2003 is as follows:
                     
        Three   Nine
        Months   Months
        Ended   Ended
        September 27,   September 27,
        2003   2003
 
 


 


Reconciliation of EBITDA excluding the impact of the
Gentek acquisition:
               
EBITDA as presented above
  $ 29,510     $ 54,976  
 
Less EBITDA from the impact of the Gentek acquisition
calculated as:
               
   
Net income
    1,099       1,099  
   
Interest
    59       59  
   
Taxes
    779       779  
   
Depreciation and Amortization
    485       485  
 
   
     
 
   
EBITDA from the impact of the Gentek acquisition
    2,422       2,422  
 
   
     
 
EBITDA excluding impact of Gentek acquisition
  $ 27,088     $ 52,554  
 
   
     
 

    EBITDA from the impact of the Gentek acquisition includes a cost of sales adjustment of $1.4 million related to an inventory fair value adjustment recorded at the time of the acquisition.

(h)   Includes accelerated amortization of $0.8 million of debt issuance costs as a result of using the proceeds from the sale of AmerCable to permanently reduce the credit facility

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