Associated Materials Incorporated 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 1, 2006


o		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: 000-24956

Associated Materials Incorporated

(Exact Name of Registrant as Specified in Its Charter)


Delaware		75-1872487

(State or Other Jurisdiction of Incorporation of Organization)		(I.R.S. Employer Identification No.)

3773 State Rd. Cuyahoga Falls, Ohio		44223

(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code (330) 929 -1811

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Indicate by check mark 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definitions of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

As of August 15, 2006, the Registrant had 100 shares of common stock outstanding, all of which is held by an affiliate of the Registrant.

ASSOCIATED MATERIALS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)


	Six Months			Six Months
	Ended			Ended
	July 1,			July 2,
	2006			2005
Operating Activities
Net income	$	16,390		$	434
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		10,756			10,077
Amortization of deferred financing costs		1,441			1,510
Amortization of management fee		250			2,000
Stock compensation expense		27			319
Gain on sale of assets		(346	)		—
Receivable from parent		—			(418	)
Changes in operating assets and liabilities:
Accounts receivable, net		(38,409	)		(39,638	)
Inventories		(26,856	)		(32,370	)
Income taxes		5,684			5,516
Accounts payable and accrued liabilities		24,493			20,093
Other		(350	)		(3,204	)

Net cash used in operating activities		(6,920	)		(35,681	)

Investing Activities
Additions to property, plant and equipment		(6,874	)		(15,495	)
Proceeds from disposal of property, plant and equipment		2,881			—

Net cash used in investing activities		(3,993	)		(15,495	)

Financing Activities
Net increase in revolving line of credit		16,750			44,815
Dividends		(3,833	)		(33,713	)
Settlement of promissory notes		—			(11,607	)
Financing costs		(108	)		—

Net cash provided by (used in) financing activities		12,809			(505	)
Effect of exchange rate changes on cash		208			(239	)

Net increase (decrease) in cash		2,104			(51,920	)
Cash at beginning of period		12,300			58,054

Cash at end of period	$	14,404		$	6,134


Supplemental information:
Cash paid for interest	$	14,092		$	12,924

Cash paid (received) for income taxes	$	6,119		$	(5,248	)

See accompanying notes.

-3-

ASSOCIATED MATERIALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JULY 1, 2006
(Unaudited)

Note 1 — Basis of Presentation

The unaudited financial statements of Associated Materials Incorporated (the “Company”) have been prepared in accordance with U.S. 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 U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, these interim consolidated financial statements contain all of the normal recurring accruals and adjustments considered necessary for a fair presentation of the unaudited results for the three and six month periods ended July 1, 2006 and July 2, 2005. These financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in its annual report on Form 10-K for the year ended December 31, 2005.

A detailed description of the Company’s significant accounting policies and management judgments is located in the audited financial statements for the year ended December 31, 2005, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”).

The Company is a wholly owned subsidiary of Associated Materials Holdings Inc. (“Holdings”), which is a wholly owned subsidiary of AMH Holdings, Inc. (“AMH”). AMH is a wholly owned subsidiary of AMH Holdings II, Inc. (“AMH II”) which is controlled by affiliates of Investcorp S.A. (“Investcorp”) and Harvest Partners, Inc. (“Harvest Partners”). Holdings, AMH and AMH II do not have material assets or operations other than a direct or indirect ownership of the common stock of the Company.

Recent Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in tax positions. This Interpretation requires that the Company recognize in its financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective as of the beginning of the Company’s 2007 fiscal year, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of adopting FIN 48 on its financial statements.

Note 2 — Inventories

Inventories are valued at the lower of cost (first in, first out) or market. Inventories consist of the following (in thousands):


	July 1,		December 31,
	2006		2005
Raw materials	$	35,263	$	27,480
Work-in-process		14,388		10,709
Finished goods and purchased stock		111,986		95,335

	$	161,637	$	133,524

-4-

Note 3 – Goodwill and Other Intangible Assets

Goodwill represents the purchase price in excess of the fair value of the tangible and intangible net assets acquired in a business combination. Goodwill of $230.7 million as of both July 1, 2006 and December 31, 2005 consists of $194.2 million from the April 2002 merger transaction and $36.5 million from the acquisition of Gentek Holdings, Inc. (“Gentek”). None of the Company’s goodwill is deductible for income tax purposes. The Company’s other intangible assets consist of the following (in thousands):


	Average
	Amortization		July 1, 2006						December 31, 2005
	Period				Accumulated		Net Carrying				Accumulated		Net Carrying
	(in Years)		Cost		Amortization		Value		Cost		Amortization		Value
Trademarks and trade names		15	$	109,280	$	7,514	$	101,766	$	109,280	$	6,580	$	102,700
Patents		10		6,550		2,742		3,808		6,550		2,416		4,134
Customer base		7		4,908		2,181		2,727		4,824		1,791		3,033

Total other intangible assets			$	120,738	$	12,437	$	108,301	$	120,654	$	10,787	$	109,867

The Company has determined that trademarks and trade names totaling $81.1 million (included in the $109.3 million in the table above) consisting primarily of the Alside^{^®}, Revere^{^®} and Gentek^{^®} trade names have indefinite useful lives. Amortization expense related to other intangible assets was approximately $0.8 million for each of the quarters ended July 1, 2006 and July 2, 2005 and $1.6 million for each of the six month periods ended July 1, 2006 and July 2, 2005.

Note 4 – Long-Term Debt

Long-term debt consists of the following (in thousands):


	July 1,		December 31,
	2006		2005
9 3/4% notes	$	165,000	$	165,000
Term loan under credit facility		152,000		152,000
Revolving loans under credit facility		16,750		—

Total debt	$	333,750	$	317,000

On February 1, 2006, the Company entered into an amendment to its credit facility that amended certain covenants that require the Company to achieve certain financial ratios relating to leverage, coverage of fixed charges and coverage of interest expense and increased the revolving credit facility from $80 million to $90 million in anticipation of potentially higher working capital requirements due to higher commodity costs. As a result, interest margins on each of the term loan facility and the revolving credit facility increased by 0.25%. Effective with this amendment, the term facility bears interest at London Interbank Offered Rates (“LIBOR”) plus 2.50% payable quarterly at the end of each calendar quarter and the revolving credit facility bears interest at LIBOR plus a margin of 2.50% to 3.25% based on the Company’s leverage ratio, as defined in the amended and restated credit facility.

The credit facility and the indenture governing the 9 3/4% notes contain restrictive covenants that, among other things, limit the Company’s ability to incur additional indebtedness, make loans or advances to subsidiaries and other entities, invest in capital expenditures, sell its assets or declare dividends. In addition, under the credit facility the Company is required to achieve certain financial ratios relating to leverage, coverage of fixed charges and coverage of interest expense. If the Company is not in compliance with these certain financial ratio covenant requirements, and the non-compliance is not cured or waived, the Company would be in default and the credit facility lenders could cause repayment of the credit facility to be accelerated, in which case amounts outstanding under the credit facility would become immediately due and payable. In addition, the 9 3/4% notes would become due and payable upon an acceleration of the Company’s credit facility. The Company was in compliance with its covenants as of July 1, 2006.

In March 2004, AMH completed an offering of $446 million aggregate principal at maturity of 11 1/4% senior discount notes, which mature on March 1, 2014. The accreted value of the 11 1/4% notes as of July 1, 2006 was $333.2 million. In December 2004, AMH II completed an offering of 13 5/8% senior notes, which mature on December 1, 2014. The accreted value

-5-

of the 13 5/8% notes as of July 1, 2006 was $79.2 million. Because AMH and AMH II are holding companies with no operations, they must receive distributions, payments or loans from subsidiaries to satisfy obligations on the 11 1/4% notes and the 13 5/8% notes. An acceleration of the Company’s credit facility and the 9 3/4% notes as a result of a future default would have a material adverse effect on the Company’s ability to make such distributions, payments or loans to its direct and indirect parent companies. The Company does not guarantee the 11 1/4% notes or the 13 5/8% notes and has no obligation to make any payments with respect thereto. Total AMH II debt, including that of its consolidated subsidiaries, was approximately $746.2 million as of July 1, 2006.

Note 5 – Stock Plans

In June 2002, Holdings adopted the Associated Materials Holdings Inc. 2002 Stock Option Plan (the “2002 Plan”). In conjunction with the March 2004 dividend recapitalization, AMH assumed the 2002 Plan and all outstanding options under the plan. Options under the 2002 Plan were converted from the right to purchase shares of Holdings common stock into a right to purchase shares of AMH common stock with each option providing for the same in number of shares and at the same exercise price as the original options. The board of directors of AMH administers the 2002 Plan and selects eligible executives, directors, employees and consultants of AMH and its affiliates, including the Company, to receive options. The board of directors of AMH also will determine the number and type of shares of stock covered by options granted under the plan, the terms under which options may be exercised, the exercise price of the options and other terms and conditions of the options in accordance with the provisions of the 2002 Plan. In 2002, the board of directors authorized 467,519 shares of common stock and 55,758 shares of preferred stock under this plan. An option holder may pay the exercise price of an option by any legal manner that the board of directors permits. Option holders generally may not transfer their options except in the event of death. If AMH undergoes a change in control, as defined in the 2002 Plan, all outstanding time-vesting options become immediately fully exercisable, while the performance-based options may become immediately exercisable upon achievement of certain specified criteria. The board of directors of AMH may adjust outstanding options by substituting stock or other securities of any successor or another party to the change in control transaction, or cash out such outstanding options, in any such case, generally based on the consideration received by its stockholders in the transaction. Subject to particular limitations specified in the 2002 Plan, the board of directors may amend or terminate the plan. The 2002 Plan will terminate no later than 10 years following its effective date; however, any options outstanding under the option plan will remain outstanding in accordance with their terms.

Options granted under the 2002 Plan were granted at fair market value on the grant date and are exercisable under varying terms for up to ten years. The options granted in 2002 through 2004, prior to the December 2004 recapitalization transaction, which were originally granted as options to purchase Holdings stock, include the following:

	•		Options to purchase shares of AMH common stock at the fair market value on the date of grant, which will vest over time;

	•		Options to purchase shares of AMH common stock at the fair market value on the date of grant, which will vest 100% on the eighth anniversary from the date of grant provided that the option vesting may be accelerated upon the occurrence of a liquidity event, as defined in the 2002 Plan, and the achievement of a specified internal rate of return on the funds invested by Harvest Partners and minimum aggregate proceeds for the investment by Harvest Partners (“performance-based options”) and;

	•		Options to purchase shares of Holdings’ common stock and preferred stock as a unit, comprised of one share of preferred stock and a specified fraction of a share of common stock granted in exchange for a portion of the outstanding options to purchase shares of the predecessor company’s common stock, which became fully vested upon completion of the April 2002 merger transaction. These options were exercised for Holdings stock in connection with the March 2004 dividend recapitalization with shares being exchanged for AMH stock after exercise. The shares of AMH preferred stock were redeemed in connection with the March 2004 dividend recapitalization.

In connection with the December 2004 recapitalization transaction, AMH amended the 2002 Plan to provide that each option that remains outstanding under the 2002 Plan following the completion of the December 2004 recapitalization transaction will be exercisable for two shares of the Class B non-voting common stock of AMH, to adjust for the dilution effected pursuant to the December 2004 recapitalization transaction. In addition, each holder of such options entered into an agreement with AMH II whereby such option holders agreed, upon the exercise of any such options under the 2002 Plan, to automatically contribute to AMH II the AMH shares issued upon any such option exercise, in exchange for an equivalent number and class of shares of AMH II.

-6-

Also, in connection with the December 2004 recapitalization transaction, in December 2004 AMH II adopted the AMH Holdings II, Inc. 2004 Stock Option Plan (“2004 Plan”). The Compensation Committee of the board of directors of AMH II administers the AMH II Plan and selects executives, other employees, directors of and consultants of AMH II and its affiliates, including the Company, to receive options. The Committee will also determine what form the option will take, the numbers of shares, the exercise price (which shall not be less than fair market value), the periods for which the options will be outstanding, terms, conditions, performance criteria as well as certain other criteria. The total number of shares of common stock that may be delivered pursuant to options granted under the plan is 469,782 shares of AMH II common stock. Option holders generally may not transfer their options except in the event of their death. If AMH II undergoes a change in control, as defined in the 2004 Plan, the Committee in its discretion may provide that any outstanding option shall be accelerated and become immediately exercisable as to all or a portion of the shares of common stock. The board of directors of AMH II may adjust outstanding options by substituting stock or other securities of any successor or another party to the change in control transaction, or cash out such outstanding options, in any such case, generally based on the consideration received by its stockholders in the transaction. Subject to particular limitations specified in the 2004 Plan, the board of directors may amend or terminate the 2004 Plan. The 2004 Plan will terminate no later than 10 years following its effective date; however, any options outstanding under the option plan will remain outstanding in accordance with their terms.

Options granted in 2005 and 2004 under the 2004 Plan were granted at fair market value on the date of grant. Options to purchase shares of AMH II common stock will vest 100% on the eighth anniversary from the date of grant provided that the option vesting may be accelerated upon the occurrence of a liquidity event, as defined in the Plan, and the achievement of a specified internal rate of return on the funds invested by Investcorp.

On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (Revised 2004), (“SFAS 123 (Revised)”), Share-Based Payment, which requires the Company to measure all employee stock-based compensation awards using a fair value method and record the related expense in the financial statements. SFAS No. 123 (Revised) requires companies that used the minimum value method for pro forma disclosure purposes in accordance with SFAS No. 123 to adopt the new standard prospectively. As a result, the Company will continue to account for stock options granted prior to January 1, 2006 using the APB Opinion No. 25 intrinsic value method, unless such options are subsequently modified, repurchased or cancelled after January 1, 2006. For stock options granted after January 1, 2006, the Company recognizes compensation expense over the requisite service period, in accordance with SFAS No. 123 (Revised).

The adoption of SFAS 123 (Revised) reduced income before taxes for the three and six months ended July 1, 2006 by less than $0.1 million. These expenses are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. The implementation of SFAS No. 123 (Revised) did not have any impact on cash flows during the first six months of 2006.

Transactions during the six months ended July 1, 2006 under these plans are summarized below:


				Weighted		Remaining
				Average		Contractual
	Shares			Exercise Price		Term (years)
Options outstanding December 31, 2005		728,853		$	41.33
Granted under 2004 Plan		25,117			5.00
Exercised		—			—
Expired or canceled		(241,308	)		53.20

Options outstanding July 1, 2006		512,662		$	33.96		7.3

Options exercisable July 1, 2006		223,424		$	6.65		5.9

The total fair value of options vested was approximately $0.1 million for each of the six month periods ended July 1, 2006 and July 2, 2005.

The weighted average fair value at date of grant for options granted during the six month periods ended July 1, 2006 and July 2, 2005 was $1.07 and $19.43, respectively. The fair value of the options was estimated at the date of the grant using the Black-Scholes method with the following assumptions for 2006: dividend yield of 0.0%, a weighted-average risk free interest rate of 4.71%, an expected life of the option of 8 years, and expected volatility of 43.3%. The fair value of the options was estimated at the date of the grant using the minimum value method with the following assumptions for 2005: dividend yield of 0.0%, a weighted-average risk free interest rate of 4.00% and an expected life of the option of 8 years. The expected lives of the awards are based on historical exercise patterns and the terms of the options. The risk-free interest rate is based on zero coupon treasury bond rates corresponding to the expected life of the awards. Due to the fact that the Company’s shares are not publicly traded, the expected volatility assumption was derived by referring to changes in the common stock prices of several peer companies (with respect to

-7-

industry, size and leverage) over the same timeframe as the expected life of the awards. The expected dividend yield of common stock is based on the Company’s historical and expected future dividend policy.

As of July 1, 2006, there was no remaining unrecognized compensation cost related to outstanding options.

Note 6 – Comprehensive Income

Comprehensive income (loss) differs from net income due to foreign currency translation adjustments as follows (in thousands):


	Quarter		Quarter			Six Months		Six Months
	Ended		Ended			Ended		Ended
	July 1,		July 2,			July 1,		July 2,
	2006		2005			2006		2005
Net income as reported	$	16,274	$	7,695		$	16,390	$	434
Foreign currency translation adjustments		1,691		(1,199	)		1,493		(2,006	)

Comprehensive income (loss)	$	17,965	$	6,496		$	17,883	$	(1,572	)

Note 7 – Retirement Plans

The Company’s Alside division sponsors a defined benefit pension plan which covers hourly workers at its plant in West Salem, Ohio and a defined benefit retirement plan covering salaried employees, which was frozen in 1998 and subsequently replaced with a defined contribution plan. The Company’s Gentek subsidiary sponsors a defined benefit pension plan for the hourly union employees at its Woodbridge, New Jersey plant (together with the Alside sponsored defined benefit plans, the “Domestic Plans”) as well as a defined benefit pension plan covering Gentek Canadian salaried employees and hourly union employees at the Lambeth, Ontario Canada plant, a defined benefit pension plan for the hourly union employees at its Burlington, Ontario Canada plant and a defined benefit pension plan for the hourly union employees at its Pointe Claire, Quebec Canada plant (the “Foreign Plans”). Accrued pension liabilities are included in other liabilities in the accompanying balance sheets. The actuarial valuation measurement date for the defined benefit pension plans is December 31. Components of defined benefit pension plan costs are as follows (in thousands):


	Quarter						Quarter
	Ended						Ended
	July 1,						July 2,
	2006						2005
	Domestic			Foreign			Domestic			Foreign
	Plans			Plans			Plans			Plans
Net periodic pension cost
Service cost	$	127		$	512		$	124		$	328
Interest cost		688			613			670			498
Expected return on assets		(732	)		(677	)		(759	)		(528	)
Amortization of prior service costs		—			7			—			—
Amortization of unrecognized net loss		228			10			142			1

Net periodic pension cost	$	311		$	465		$	177		$	299

-8-


	Six Months						Six Months
	Ended						Ended
	July 1,						July 2,
	2006						2005
	Domestic			Foreign			Domestic			Foreign
	Plans			Plans			Plans			Plans
Net periodic pension cost
Service cost	$	255		$	1,005		$	247		$	659
Interest cost		1,375			1,204			1,340			1,002
Expected return on assets		(1,464	)		(1,330	)		(1,517	)		(1,061	)
Amortization of prior service costs		—			14			—			—
Amortization of unrecognized net loss		456			20			285			1

Net periodic pension cost	$	622		$	913		$	355		$	601

Note 8 – Business Segments

The following table sets forth for the periods presented a summary of net sales by principal product offering (in thousands):


	Quarter		Quarter		Six Months		Six Months
	Ended		Ended		Ended		Ended
	July 1,		July 2,		July 1,		July 2,
	2006		2005		2006		2005
Vinyl windows	$	112,433	$	97,507	$	193,590	$	165,734
Vinyl siding products		94,533		89,478		166,748		151,547
Metal products		62,450		54,778		109,932		95,714
Third party manufactured products		54,231		49,232		91,886		81,005
Other products and services		24,682		24,369		45,453		39,933

	$	348,329	$	315,364	$	607,609	$	533,933

Note 9 — Product Warranty Costs and Service Returns

Consistent with industry practice, the Company provides to homeowners limited warranties on certain products, primarily related to window and siding product categories. Warranties are of varying lengths of time from the date of purchase up to and including lifetime. Warranties cover product failures such as stress cracks and seal failures for windows and fading and peeling for siding products, as well as manufacturing defects. The Company has various options for remedying product warranty claims including repair, refinishing or replacement and directly incurs the cost of these remedies. Warranties also become reduced under certain conditions of time and change in ownership. Certain metal coating suppliers provide warranties on materials sold to the Company that mitigate the costs incurred by the Company. Reserves for future warranty costs are provided based on management’s estimates of such future costs using historical trends of claims experience, sales history of products to which such costs relate, and other factors. An independent actuary assists the Company in determining reserve amounts related to significant product failures.

A reconciliation of warranty reserve activity is as follows for the six months ended July 1, 2006 and July 2, 2005 (in thousands):


	Six Months Ended			Six Months Ended
	July 1, 2006			July 2, 2005
Balance at the beginning of the period	$	21,740		$	21,579
Provision for warranties issued		4,692			3,536
Claims paid		(3,876	)		(3,605	)

Balance at the end of the period	$	22,556		$	21,510

-9-

Note 10 – Subsidiary Guarantors

The Company’s payment obligations under the 9 3/4% notes are fully and unconditionally guaranteed, jointly and severally (collectively, the “Subsidiary Guarantees”) on a senior subordinated basis, by its domestic wholly owned subsidiaries: Gentek, Gentek Building Products Inc. and Alside, Inc. (“Guarantor Subsidiaries”). Alside, Inc. is a wholly owned subsidiary having no assets, liabilities or operations. Gentek Building Products Limited (“Non-Guarantor Subsidiary”) is a Canadian company and does not guarantee the Company’s 9 3/4% notes. In the opinion of management, separate financial statements of the respective Guarantor Subsidiaries would not provide additional material information which would be useful in assessing the financial composition of the Guarantor Subsidiaries. None of the Guarantor Subsidiaries has any significant legal restrictions on the ability of investors or creditors to obtain access to its assets in the event of default on the Subsidiary Guarantees other than its subordination to senior indebtedness.

ASSOCIATED MATERIALS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
July 1, 2006
(In thousands)
(Unaudited)


			Guarantor		Non-Guarantor		Reclassification/
	Parent		Subsidiaries		Subsidiary		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	5,878	$	1,069	$	7,457	$	—		$	14,404
Accounts receivable, net		120,975		30,179		35,938		—			187,092
Intercompany receivables		—		31,248		18,761		(50,009	)		—
Receivable from parent		3,908		—		—		—			3,908
Inventories		102,218		21,397		38,022		—			161,637
Income taxes receivable		—		3,308		—		(3,308	)		—
Deferred income taxes		17,560		9,069		—		—			26,629
Other current assets		8,185		1,210		1,592		—			10,987

Total current assets		258,724		97,480		101,770		(53,317	)		404,657
Property, plant and equipment, net		102,348		3,677		34,119		—			140,144
Goodwill		194,174		36,490		—		—			230,664
Other intangible assets, net		95,686		11,474		1,141		—			108,301
Investment in subsidiaries		147,089		48,799		—		(195,888	)		—
Other assets		13,968		—		481		—			14,449

Total assets	$	811,989	$	197,920	$	137,511	$	(249,205	)	$	898,215


Liabilities And Stockholder’s Equity
Current liabilities:
Accounts payable	$	57,789	$	25,531	$	37,797	$	—		$	121,117
Intercompany payables		39,734		—		10,275		(50,009	)		—
Accrued liabilities		45,411		6,257		7,829		—			59,497
Income taxes payable		13,718		—		3,089		(3,308	)		13,499

Total current liabilities		156,652		31,788		58,990		(53,317	)		194,113
Deferred income taxes		62,207		1,549		3,483		—			67,239
Other liabilities		17,550		17,494		9,489		—			44,533
Long-term debt		317,000		—		16,750		—			333,750
Stockholder’s equity		258,580		147,089		48,799		(195,888	)		258,580

Total liabilities and stockholder’s equity	$	811,989	$	197,920	$	137,511	$	(249,205	)	$	898,215

-10-

ASSOCIATED MATERIALS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended July 1, 2006
(In thousands)
(Unaudited)


				Guarantor			Non-Guarantor			Reclassification/
	Parent			Subsidiaries			Subsidiary			Eliminations			Consolidated
Net sales	$	241,674		$	68,964		$	86,820		$	(49,129	)	$	348,329
Cost of sales		178,009			64,547			67,661			(49,129	)		261,088

Gross profit		63,665			4,417			19,159			—			87,241
Selling, general and administrative expense		39,789			4,988			7,676			—			52,453
Facility closure costs, net		(92	)		—			—			—			(92	)

Income (loss) from operations		23,968			(571	)		11,483			—			34,880
Interest expense, net		7,663			—			334			—			7,997
Foreign currency (gain) loss		—			—			(1,123	)		—			(1,123	)

Income (loss) before income taxes		16,305			(571	)		12,272			—			28,006
Income taxes (benefit)		7,825			(204	)		4,111			—			11,732

Income (loss) before equity income from subsidiaries		8,480			(367	)		8,161			—			16,274
Equity income from subsidiaries		7,794			8,161			—			(15,955	)		—

Net income	$	16,274		$	7,794		$	8,161		$	(15,955	)	$	16,274

ASSOCIATED MATERIALS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended July 1, 2006
(In thousands)
(Unaudited)


				Guarantor			Non-Guarantor			Reclassification/
	Parent			Subsidiaries			Subsidiary			Eliminations			Consolidated
Net sales	$	424,023		$	126,822		$	147,133		$	(90,369	)	$	607,609
Cost of sales		315,344			119,270			117,019			(90,369	)		461,264

Gross profit		108,679			7,552			30,114			—			146,345
Selling, general and administrative expense		79,353			9,855			14,259			—			103,467
Facility closure costs, net		(92	)		—			—			—			(92	)

Income (loss) from operations		29,418			(2,303	)		15,855			—			42,970
Interest expense, net		15,157			—			566			—			15,723
Foreign currency (gain) loss		—			—			(964	)		—			(964	)

Income (loss) before income taxes		14,261			(2,303	)		16,253			—			28,211
Income taxes (benefit)		5,988			389			5,444			—			11,821

Income (loss) before equity income from subsidiaries		8,273			(2,692	)		10,809			—			16,390
Equity income from subsidiaries		8,117			10,809			—			(18,926	)		—

Net income	$	16,390		$	8,117		$	10,809		$	(18,926	)	$	16,390

-11-

ASSOCIATED MATERIALS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2005
(In thousands)


			Guarantor		Non-Guarantor		Reclassification/
	Parent		Subsidiaries		Subsidiary		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	7,010	$	1,046	$	4,244	$	—		$	12,300
Accounts receivable, net		100,679		26,506		20,479		—			147,664
Intercompany receivables		—		34,843		18,787		(53,630	)		—
Receivable from parent		3,908		—		—		—			3,908
Inventories		90,773		14,672		28,079		—			133,524
Income taxes receivable		—		2,860		—		(2,860	)		—
Deferred income taxes		17,560		9,069		—		—			26,629
Other current assets		7,987		1,062		1,171		—			10,220

Total current assets		227,917		90,058		72,760		(56,490	)		334,245
Property, plant and equipment, net		106,887		4,167		32,534		—			143,588
Goodwill		194,174		36,517		—		—			230,691
Other intangible assets, net		96,803		11,819		1,245		—			109,867
Investment in subsidiaries		137,480		36,497		—		(173,977	)		—
Other assets		15,999		—		501		—			16,500

Total assets	$	779,260	$	179,058	$	107,040	$	(230,467	)	$	834,891


Liabilities And Stockholder’s Equity
Current liabilities:
Accounts payable	$	57,820	$	13,073	$	26,040	$	—		$	96,933
Intercompany payables		29,311		—		24,319		(53,630	)		—
Accrued liabilities		41,568		9,162		6,981		—			57,711
Income taxes payable		10,263		—		368		(2,860	)		7,771

Total current liabilities		138,962		22,235		57,708		(56,490	)		162,415
Deferred income taxes		62,208		1,549		3,344		—			67,101
Other liabilities		16,589		17,794		9,491		—			43,874
Long-term debt		317,000		—		—		—			317,000
Stockholder’s equity		244,501		137,480		36,497		(173,977	)		244,501

Total liabilities and stockholder’s equity	$	779,260	$	179,058	$	107,040	$	(230,467	)	$	834,891

-13-

ASSOCIATED MATERIALS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended July 2, 2005
(In thousands)
(Unaudited)


			Guarantor			Non-Guarantor		Reclassification/
	Parent		Subsidiaries			Subsidiary		Eliminations			Consolidated
Net sales	$	222,726	$	65,523		$	73,219	$	(46,104	)	$	315,364
Cost of sales		166,134		61,782			61,350		(46,104	)		243,162

Gross profit		56,592		3,741			11,869		—			72,202
Selling, general and administrative expense		39,164		5,322			6,343		—			50,829
Facility closure costs, net		862		—			—		—			862

Income (loss) from operations		16,566		(1,581	)		5,526		—			20,511
Interest expense, net		7,721		(2	)		223		—			7,942
Foreign currency loss		—		—			292		—			292

Income (loss) before income taxes		8,845		(1,579	)		5,011		—			12,277
Income taxes (benefit)		3,619		(688	)		1,651		—			4,582

Income (loss) before equity income from subsidiaries		5,226		(891	)		3,360		—			7,695
Equity income from subsidiaries		2,469		3,360			—		(5,829	)		—

Net income	$	7,695	$	2,469		$	3,360	$	(5,829	)	$	7,695

ASSOCIATED MATERIALS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended July 2, 2005
(In thousands)
(Unaudited)


				Guarantor			Non-Guarantor		Reclassification/
	Parent			Subsidiaries			Subsidiary		Eliminations			Consolidated
Net sales	$	377,440		$	110,645		$	119,240	$	(73,392	)	$	533,933
Cost of sales		284,303			102,153			99,635		(73,392	)		412,699

Gross profit		93,137			8,492			19,605		—			121,234
Selling, general and administrative expense		77,896			11,242			12,442		—			101,580
Facility closure costs, net		3,415			—			—		—			3,415

Income (loss) from operations		11,826			(2,750	)		7,163		—			16,239
Interest expense, net		14,919			—			334		—			15,253
Foreign currency loss		—			—			289		—			289

Income (loss) before income taxes		(3,093	)		(2,750	)		6,540		—			697
Income taxes (benefit)		(759	)		(1,169	)		2,191		—			263

Income (loss) before equity income from subsidiaries		(2,334	)		(1,581	)		4,349		—			434
Equity income from subsidiaries		2,768			4,349			—		(7,117	)		—

Net income	$	434		$	2,768		$	4,349	$	(7,117	)	$	434

-14-

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company is a leading, vertically integrated manufacturer and North American distributor of exterior residential building products. The Company’s core products are vinyl windows, vinyl siding, aluminum trim coil, aluminum and steel siding and accessories, and vinyl fencing and railing. Vinyl windows and vinyl siding together comprise approximately 60% of the Company’s total net sales, while aluminum and steel products comprise approximately 18%. These products are marketed under the Alside^{^®}, Revere^{^®} and Gentek^{^®} brand names and sold on a wholesale basis to more than 50,000 professional contractors engaged in home repair and remodeling and new home construction principally through the Company’s North American network of 128 supply centers. Approximately 60% of the Company’s products are sold to contractors engaged in the home repair and remodeling market with 40% sold to the new construction market. The supply centers provide “one-stop shopping” to the Company’s contractor customers, carrying products, accessories and tools necessary to complete a vinyl window or siding project. In addition, the supply centers provide high quality product literature, product samples and installation training to these customers.

Because its exterior residential building products are consumer durable goods, the Company’s sales are impacted by the availability of consumer credit, consumer interest rates, employment trends, changes in levels of consumer confidence, national and regional trends in new housing starts and general economic conditions. The Company’s sales are also affected by changes in consumer preferences with respect to types of building products. Overall, the Company believes the fundamentals for the building products industry remain strong as the population continues to age, homes continue to get older, household formation continues to be strong and vinyl remains the optimal material for exterior cladding and window solutions, all of which bodes well for the demand for the Company’s remodeling products in the future. In the short term, despite relatively stable consumer confidence and low levels of unemployment, there are a number of factors which indicate that the strength in the housing market may be weakening. Sales of existing single-family homes continued to decline in the second quarter of 2006 from the first quarter of 2006 and prior year levels, and the inventory of homes available for sale continued to increase. In addition, the pace of new home construction has slowed, as evidenced by declines throughout 2006 in single-family housing starts and announcements from home builders of significant decreases in orders. Lastly, mortgage interest rates are increasing; however, rates remain well below long-term historical averages. These factors increase the variability of demand for building products in the short-term.

Due to the high price of oil and natural gas and strong overall consumption of raw materials, the Company, along with the entire building products industry, experienced significant inflation during 2004 and 2005 in key raw material commodity costs – particularly for vinyl resin, aluminum and steel, as well as in other raw materials such as microingredients used in the Company’s vinyl siding products. This includes significant increases in vinyl resin in the fourth quarter of 2005 as a result of the impact of Hurricanes Katrina and Rita, which caused a significant increase in energy costs. In addition, London Metal Exchange pricing for aluminum began to increase during the second half of 2005, reaching record levels in 2006. The Company believes that the increases in aluminum costs in the latter portion of 2005 and continuing into 2006 have been a result of speculation in the commodities markets, rather than a reflection of the fundamentals of supply and demand. To offset the inflation of raw materials, the Company announced price increases on certain of its product offerings in 2004 as well as in 2005. In addition, due to the overall higher cost of aluminum in 2006, the Company announced further price increases on its aluminum products in the first and second quarters of 2006. The Company’s ability to maintain gross margin levels on its products during periods of rising raw material costs depends on the Company’s ability to obtain selling price increases. Further, the results of operations for individual quarters can and have been negatively impacted by a delay between the timing of raw material cost increases and price increases on the Company’s products. There can be no assurance that the Company will be able to maintain the selling price increases already implemented or achieve the announced price increases.

The Company operates with significant operating and financial leverage. Significant portions of the Company’s manufacturing, selling, general and administrative expenses are fixed costs that neither increase nor decrease proportionately with sales. In addition, a significant portion of the Company’s interest expense is fixed. There can be no assurance that the Company will be able to reduce its fixed costs in response to a decline in its net sales. As a result, a decline in the Company’s net sales could result in a higher percentage decline in its income from operations. Also, the Company’s gross margins and gross margin percentages may not be comparable to other companies as some companies include all of the costs of their distribution network in cost of sales whereas the Company includes the operating costs of its supply centers in selling, general and administrative expenses.

Because most of the Company’s building products are intended for exterior use, sales tend to be lower during periods of inclement weather. Weather conditions in the first quarter of each calendar year usually result in that quarter producing significantly less net sales and net cash flows from operations than in any other period of the year. Consequently, the Company has historically had small profits or losses in the first quarter and reduced profits from operations in the fourth quarter of each calendar year. To meet seasonal cash flow needs, during the periods of reduced sales and net cash flows from operations the Company typically

-16-

makes borrowings under the revolving loan portion of its credit facility and repays such borrowings in periods of higher cash flow. The Company typically generates the majority of its cash flow in the third and fourth quarters.

The Company seeks to distinguish itself from other suppliers of residential building products and to sustain its profitability through a business strategy focused on increasing sales at existing supply centers, selectively expanding its supply center network, increasing sales through independent specialty distributor customers, developing innovative new products, expanding sales of third party manufactured products through its supply center network, and driving operational excellence by reducing costs and increasing customer service levels. While the Company continues to analyze new and existing markets for the selection of new supply center locations, the Company does not currently intend to open any new supply center locations in fiscal 2006.

Results of Operations

The following table sets forth for the periods indicated the results of the Company’s operations (in thousands):


	Quarter			Quarter		Six Months			Six Months
	Ended			Ended		Ended			Ended
	July 1,			July 2,		July 1,			July 2,
	2006			2005		2006			2005
Net sales	$	348,329		$	315,364	$	607,609		$	533,933
Cost of sales		261,088			243,162		461,264			412,699

Gross profit		87,241			72,202		146,345			121,234
Selling, general and administrative expense		52,453			50,829		103,467			101,580
Facility closure costs, net		(92	)		862		(92	)		3,415

Income from operations		34,880			20,511		42,970			16,239
Interest expense, net		7,997			7,942		15,723			15,253
Foreign currency (gain) loss		(1,123	)		292		(964	)		289

Income before income taxes		28,006			12,277		28,211			697
Income taxes		11,732			4,582		11,821			263

Net income	$	16,274		$	7,695	$	16,390		$	434

Other Data:
EBITDA (a)	$	41,379		$	25,340	$	54,690		$	26,027
Adjusted EBITDA (a)		40,316			27,494		55,996			32,050

-17-

The following table sets forth for the periods presented a summary of net sales by principal product offering (in thousands):


	Quarter		Quarter		Six Months		Six Months
	Ended		Ended		Ended		Ended
	July 1,		July 2,		July 1,		July 2,
	2006		2005		2006		2005
Vinyl windows	$	112,433	$	97,507	$	193,590	$	165,734
Vinyl siding products		94,533		89,478		166,748		151,547
Metal products		62,450		54,778		109,932		95,714
Third party manufactured products		54,231		49,232		91,886		81,005
Other products and services		24,682		24,369		45,453		39,933

	$	348,329	$	315,364	$	607,609	$	533,933


(a)		EBITDA is calculated as net income plus interest, taxes, depreciation and amortization. Adjusted EBITDA excludes certain items. The Company considers adjusted EBITDA to be an important indicator of its operational strength and performance of its business. The Company has included adjusted EBITDA because it is a key financial measure used by management to (i) assess the Company’s ability to service its debt and / or incur debt and meet the Company’s capital expenditure requirements; (ii) internally measure the Company’s operating performance; and (iii) determine the Company’s incentive compensation programs. In addition, the Company’s credit facility has certain covenants that use ratios utilizing this measure of adjusted EBITDA. EBITDA and adjusted EBITDA have not been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). Adjusted EBITDA as presented by the Company may not be comparable to similarly titled measures reported by other companies. EBITDA and adjusted EBITDA are not measures determined in accordance with GAAP and should not be considered as alternatives to, or more meaningful than, net income (as determined in accordance with GAAP) as a measure of the Company’s operating results or cash flows from operations (as determined in accordance with GAAP) as a measure of the Company’s liquidity. The reconciliation of the Company’s net income to EBITDA and adjusted EBITDA is as follows (in thousands):


						Six Months			Six Months
	Quarter Ended			Quarter Ended		Ended			Ended
	July 1, 2006			July 2, 2005		July 1, 2006			July 2, 2005
Net income	$	16,274		$	7,695	$	16,390		$	434
Interest expense, net		7,997			7,942		15,723			15,253
Income taxes		11,732			4,582		11,821			263
Depreciation and amortization		5,376			5,121		10,756			10,077

EBITDA		41,379			25,340		54,690			26,027
Foreign currency (gain) loss		(1,123	)		292		(964	)		289
Separation costs (b)		—			—		2,085			—
Amortization of management fee (c).		125			1,000		250			2,000
Stock compensation expense		27			—		27			319
Facility closure costs, net (d)		(92	)		862		(92	)		3,415

Adjusted EBITDA	$	40,316		$	27,494	$	55,996		$	32,050


(b)		Represents separation costs, including payroll taxes and benefits, related to the resignation of Mr. Caporale, former Chairman, President and Chief Executive Officer of the Company by mutual agreement with the Company’s Board of Directors.

(c)		Represents amortization of a prepaid management fee of $6 million paid to Investcorp International Inc. in connection with the December 2004 recapitalization transaction. The Company is expensing the prepaid management fee based on the services provided over the life of the agreement, as defined in the Management Advisory Agreement with Investcorp International Inc. In accordance with the Management Advisory Agreement, the Company recorded $4 million as expense for the year ended December 31, 2005, with the remaining unamortized amount to be expensed equally over the remaining four-year term of the agreement.

(d)		Amounts recorded during 2005 represent costs associated with the closure of the Freeport, Texas manufacturing facility during 2005 consisting primarily of equipment relocation expenses. Amounts recorded during 2006 include the gain realized upon the final sale of the facility, partially offset by other non-recurring expenses associated with the closure of the manufacturing facility.

Quarter Ended July 1, 2006 Compared to Quarter Ended July 2, 2005

Net sales increased 10.5%, or $33.0 million, during the second quarter of 2006 compared to the same period in 2005 primarily driven by the realization of selling price increases due to an improved pricing environment, continued strong unit volume growth in the Company’s vinyl window operations, as well as the benefit from the stronger Canadian dollar. During the second quarter of 2006 compared to the same period in 2005, window unit volume increased by 12%, while vinyl siding unit volume decreased by 4%.

Gross profit in the second quarter of 2006 was $87.2 million, or 25.0% of net sales, compared to gross profit of $72.2 million, or 22.9% of net sales, for the same period in 2005. The increase in gross profit as a percentage of net sales was primarily a result of the realization of price increases. Although gross profit as a percentage of net sales has increased, the Company’s results

-18-

continue to be negatively impacted due to higher manufacturing costs at its Ennis, Texas vinyl siding manufacturing facility. The Company has prepared an improvement plan for the Ennis plant and continues to focus on its implementation. For the second quarter of 2006, manufacturing costs at the Ennis plant increased compared to the same period in 2005, but at a lower rate than the previous year.

Selling, general and administrative expense increased to $52.5 million, or 15.1% of net sales, for the second quarter of 2006 versus $50.8 million, or 16.1% of net sales, for the same period in 2005. Selling, general and administrative expense includes $0.1 million and $1.0 million of amortization of prepaid management fees for the second quarters of 2006 and 2005, respectively. Excluding the amortization of prepaid management fees, selling, general and administrative expense for the second quarter of 2006 increased $2.5 million compared to the same period in 2005. The increase in selling, general and administrative expense was due primarily to increased expenses in the Company’s supply center network, including increased payroll costs and building and truck lease expenses, and increases in EBITDA-based incentive compensation programs, partially offset by lower marketing expenses. The Company realized a gain of $0.1 million upon the final sale of its Freeport, Texas manufacturing plant, partially offset by other non-recurring expenses associated with the closure of the facility, during the second quarter of 2006, while the Company incurred facility closure costs of approximately $0.9 million for the same period in 2005. Income from operations was $34.9 million for the second quarter of 2006 compared to $20.5 million for the same period in 2005.

Interest expense increased $0.1 million for the second quarter of 2006 compared to the same period in 2005. The increase in interest expense was due to higher interest rates on floating rate debt under the Company’s credit facility and additional margin on borrowings under the Company’s credit facility subsequent to an amendment to the Company’s credit facility completed during the first quarter of 2006, partially offset by lower overall borrowings on both the term and revolving loans under the Company’s credit facility.

The income tax provision for the second quarter of 2006 reflects an effective income tax rate of 41.9%, compared to an effective income tax rate of 37.3% for the same period in 2005. The increase in the effective income tax rate in 2006 was due to the Company’s intent to remit future earnings of its Canadian subsidiary to the U.S. parent and the limitations on the Company’s ability to take full advantage of foreign tax credits related to Canadian earnings.

Net income increased to $16.3 million for the quarter ended July 1, 2006 compared to $7.7 million for the same period in 2005.

EBITDA for the second quarter of 2006 was $41.4 million. This compares to EBITDA of $25.3 million for the same period in 2005. Adjusted EBITDA for the second quarter of 2006 was $40.3 million compared to adjusted EBITDA of $27.5 million for the same period in 2005. Adjusted EBITDA for the second quarter of 2006 excludes $0.1 million of amortization related to prepaid management fees, foreign currency gains of $1.1 million, non-cash stock compensation expense of less than $0.1 million, and a gain of $0.1 million associated with the sale of the Company’s Freeport, Texas manufacturing facility. Adjusted EBITDA for the same period in 2005 excludes $1.0 million of amortization related to prepaid management fees, foreign currency losses of $0.3 million, and one-time costs of $0.9 million associated with the closure of the Company’s Freeport, Texas manufacturing facility.

Six Months Ended July 1, 2006 Compared to Six Months Ended July 2, 2005

Net sales increased by 13.8%, or $73.7 million, for the six months ended July 1, 2006 compared to the same period in 2005 driven primarily by the realization of selling price increases due to an improved pricing environment during the first half of 2006, continued strong unit volume growth in the Company’s vinyl window operations, as well as the benefit from the stronger Canadian dollar. The Company experienced unit volume increases in vinyl windows and vinyl siding of 14% and 1%, respectively, during the six months ended July 1, 2006 as compared to the same period in 2005. Gross profit for the six months ended July 1, 2006 was $146.3 million, or 24.1% of net sales, compared to gross profit of $121.2 million, or 22.7% of net sales, for the same period in 2005. The increase in gross profit as a percentage of net sales was primarily a result of improved leverage of fixed costs due to higher net sales and the realization of price increases.

Selling, general and administrative expense increased to $103.5 million, or 17.0% of net sales, for the six months ended July 1, 2006 versus $101.6 million, or 19.0% of net sales, for the same period in 2005. Selling, general and administrative expense for the six months ended July 1, 2006 includes $2.1 million of separation costs related to the resignation of the Company’s former Chief Executive Officer and amortization of prepaid management fees of $0.3 million. Selling, general and administrative expense for the same period in 2005 includes $2.0 million of amortization of prepaid management fees and non-cash stock compensation expense of $0.3 million. Excluding CEO separation costs, amortization of prepaid management fees and non-cash stock compensation expense, selling, general and administrative expense for the six months ended July 1, 2006 increased $1.8 million

-19-

compared to the same period in 2005. The increase was primarily due to increased expenses in the Company’s supply center network, expenses relating to new supply centers opened during the past twelve months, as well as increases in EBITDA-based incentive compensation programs, partially offset by lower marketing expenses. During the six months ended July 1, 2006, the Company realized a gain of $0.1 million upon the final sale of its Freeport, Texas manufacturing plant, partially offset by other non-recurring expenses associated with the closure of the facility, while the Company incurred facility closure costs of approximately $3.4 million for the same period in 2005. Income from operations was $43.0 million for the six months ended July 1, 2006 compared to $16.2 million for the same period in 2005.

Interest expense increased $0.5 million for the six months ended July 1, 2006 compared to the same period in 2005. The increase in interest expense was due to higher interest rates on floating rate debt under the Company’s credit facility and the additional margin on borrowings under the Company’s credit facility subsequent to an amendment to the Company’s credit facility completed during the first quarter of 2006, partially offset by lower overall borrowings on both the term and revolving loans under the Company’s credit facility.

The income tax provision for the six months ended July 1, 2006 reflects an effective income tax rate of 41.9%, compared to an effective income tax rate of 37.7% for the same period in 2005. The increase in the effective income tax rate in 2006 was due to the Company’s intent to remit future earnings of its Canadian subsidiary to the U.S. parent and the limitations on the Company’s ability to take full advantage of foreign tax credits related to Canadian earnings.

Net income increased to $16.4 million for the six months ended July 1, 2006 compared to $0.4 million for the same period in 2005.

EBITDA was $54.7 million for the six months ended July 1, 2006 compared to EBITDA of $26.0 million for the same period in 2005. For the six months ended July 1, 2006, adjusted EBITDA was $56.0 million compared to adjusted EBITDA of $32.1 million for the same period in 2005. Adjusted EBITDA for the six months ended July 1, 2006 excludes separation costs of $2.1 million related to the resignation of the Company’s former Chief Executive Officer, $0.3 million of amortization related to prepaid management fees, foreign currency gains of $1.0 million, non-cash stock compensation expense of less than $0.1 million, and a gain of $0.1 million associated with the sale of the Company’s Freeport, Texas manufacturing facility. Adjusted EBITDA for the same period in 2005 excludes $2.0 million of amortization related to prepaid management fees, foreign currency losses of $0.3 million, $0.3 million of non-cash stock compensation expense, and one-time costs of $3.4 million associated with the closure of the Company’s Freeport, Texas manufacturing facility.

Recent Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in tax positions. This Interpretation requires that the Company recognize in its financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 are effective as of the beginning of the Company’s 2007 fiscal year, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The Company is currently evaluating the impact of adopting FIN 48 on its financial statements.

Liquidity and Capital Resources

The following sets forth a summary of the Company’s cash flows for the six months ended July 1, 2006 and July 2, 2005 (in thousands):


	Six Months			Six Months
	Ended			Ended
	July 1,			July 2,
	2006			2005
Cash used in operating activities	$	(6,920	)	$	(35,681	)
Cash used in investing activities		(3,993	)		(15,495	)
Cash provided by (used in) financing activities		12,809			(505	)

-20-

Cash Flows

At July 1, 2006, the Company had cash and cash equivalents of $14.4 million and available borrowing capacity of approximately $63.2 million under the revolving portion of its credit facility. Outstanding letters of credit as of July 1, 2006 totaled $10.0 million securing various insurance letters of credit.

Cash Flows from Operating Activities

Net cash used in operating activities was $6.9 million for the six months ended July 1, 2006 compared to net cash used in operating activities of $35.7 million for the same period in 2005. The factors typically impacting cash flows from operating activities during the first six months of the year include the Company’s operating results, the seasonal increase of inventory levels and growth in accounts payable related to inventory purchases, and use of cash related to payments for accrued liabilities including payments of profit sharing and customer sales incentives. Inventories increased $26.9 million during the six months ended July 1, 2006 compared to $32.4 million during the same period in 2005. The inventory growth for the six months ended July 1, 2006 was less than the same period in 2005 due to higher inventory levels at the end of the fourth quarter of 2005, primarily in vinyl siding, to improve service levels in 2006. Accounts payable and accrued liabilities were a source of cash of $24.5 million for the six months ended July 1, 2006 compared to $20.1 million for the same period in 2005, resulting in a net improvement in cash flows of $4.4 million, which is primarily due to reduced profit sharing payments in 2006 as well as improved payment terms with certain suppliers. Cash flows used in operating activities for the six months ended July 1, 2006 includes income tax payments of $6.1 million, while net cash used in operating activities for the same period in 2005 reflects $5.2 million of income tax refunds, net of income tax payments, received in 2005 related to deductions associated with the December 2004 recapitalization transaction.

Cash Flows from Investing Activities

Net cash used in investing activities consisted of capital expenditures that totaled $6.9 million and $15.5 million for the six months ended July 1, 2006 and July 2, 2005, respectively. Capital expenditures in 2006 were primarily to increase capacity in the Company’s windows manufacturing and Gentek vinyl siding operations. Capital expenditures in 2005 were primarily to increase capacity at the Company’s Ennis, Texas vinyl siding facility and to purchase land and equipment for the new window plant in Yuma, Arizona. The Company received proceeds of $2.7 million from the sale of property and equipment at its Freeport, Texas facility for the six months ended July 1, 2006. The Company estimates total capital expenditures for 2006 to be in the range of $16 million to $18 million.

Cash Flows from Financing Activities

Net cash provided by financing activities for the six months ended July 1, 2006 includes borrowings on the revolving loan portion of the Company’s credit facility of $16.8 million, partially offset by dividend payments of $3.8 million and a payment for financing fees of $0.1 million. The dividend of $3.8 million was paid to AMI’s direct and indirect parent companies to fund AMH II’s scheduled interest payment on its 13 5/8% notes. Net cash used in financing activities for the same period in 2005 includes borrowings on the revolving loan portion of the Company’s credit facility of $44.8 million offset by dividend payments of $33.7 million and payments on promissory notes of $11.6 million, both relating to the December 2004 recapitalization transaction. The decrease in borrowings on the revolver for the six months ended July 1, 2006 of $28.1 million as compared to the same period in the prior year was primarily due to a decrease in cash used in operating activities and reduced capital expenditures.

Description of the Company’s Outstanding Indebtedness

The Company’s term loan facility is due in August 2010 and the revolving credit facility expires in April 2009. On an annual basis, the Company is required to make principal payments on the term loan based on a percentage of excess cash flows as defined in the amended and restated credit facility. The Company will be required to make quarterly payments of the unamortized principal in the final year of the loan beginning in the fourth quarter of 2009. The Company will record as a current liability those principal payments that are estimated to be due within twelve months under the excess cash flow provision of the credit facility when the likelihood of those payments becomes probable.

On February 1, 2006, the Company entered into an amendment to the credit facility that amended certain covenants that require the Company to achieve certain financial ratios relating to leverage, coverage of fixed charges and coverage of interest expense and increased the revolving credit facility from $80 million to $90 million in anticipation of potentially higher working capital requirements due to higher commodity costs. As a result, interest margins on each of the term loan facility and the revolving credit facility increased by 0.25%. Effective with this amendment, the term facility bears interest at London Interbank Offered Rates (“LIBOR”) plus 2.50% payable quarterly at the end of each calendar quarter and the revolving credit facility bears interest at LIBOR plus a margin of 2.50% to 3.25% based on the Company’s leverage ratio, as defined in the amended and restated credit facility.

-21-

The Company’s 9 3/4% notes due in 2012 pay interest semi-annually in April and October. The 9 3/4% notes are general unsecured obligations of the Company subordinated in right of payment to senior indebtedness and senior in right of payment to any current or future subordinated indebtedness of the Company. The Company’s payment obligations under the 9 3/4% notes are fully and unconditionally guaranteed, jointly and severally on a senior subordinated basis, by its domestic wholly-owned subsidiaries: Gentek Holdings, Inc., Gentek Building Products Inc. and Alside, Inc. Alside, Inc. is a wholly owned subsidiary having no assets, liabilities or operations. Gentek Building Products Limited is a Canadian company and does not guarantee the Company’s 9 3/4% notes.

All obligations of the Company under the credit facility are jointly and severally guaranteed by AMH, Holdings and all of the Company’s direct and indirect wholly owned domestic subsidiaries. In addition, all obligations of Gentek under the credit facility also are jointly and severally guaranteed by Gentek’s wholly owned Canadian subsidiary. All obligations of the Company under the credit facility are secured by a pledge of the Company’s capital stock, the capital stock of Holdings and the capital stock of the Company’s domestic subsidiaries (and up to 66-2/3% of the voting stock of “first tier” foreign subsidiaries), and a security interest in substantially all of the Company’s owned real and personal assets (tangible and intangible) and the owned real and personal assets (tangible and intangible) of the domestic guarantors under the credit facility. In addition, all obligations of Gentek under the credit facility are secured by the capital stock and owned real and personal assets (tangible and intangible) owned by Gentek and its Canadian subsidiary.

In March 2004, the Company’s indirect parent company, AMH, issued 11 1/4% senior discount notes in connection with the March 2004 dividend recapitalization. Interest accrues at a rate of 11 1/4% on the notes in the form of an increase in the accreted value of the notes prior to March 1, 2009. Thereafter, cash interest of 11 1/4% on the notes accrues and is payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2009. The 11 1/4% notes mature on March 1, 2014. The notes are structurally subordinated to all existing and future debt and other liabilities of AMH’s existing and future subsidiaries, including the Company and Holdings. The accreted value of the 11 1/4% notes as of July 1, 2006 was $333.2 million.

In December 2004, the Company’s indirect parent company, AMH II, issued senior notes in connection with the December 2004 recapitalization transaction, which had an accreted value of $79.2 million on July 1, 2006. The notes accrue interest at 13 5/8% payable semi-annually on January 30 and July 30. Through January 30, 2010, AMH II must pay a minimum of 10% interest on each semi-annual payment date in cash, allowing the remaining 3 5/8% to accrue to the value of the note. The 13 5/8% notes mature on December 1, 2014.

Because AMH and AMH II are holding companies with no operations, they must receive distributions, payments or loans from subsidiaries to satisfy obligations under the 11 1/4% notes and the 13 5/8% notes. The Company does not guarantee the 11 1/4% notes or the 13 5/8% notes and has no obligation to make any payments with respect thereto. Furthermore, the terms of the indenture governing the Company’s 9 3/4% notes and senior credit facility significantly restrict the Company and its subsidiaries from paying dividends and otherwise transferring assets to AMH or AMH II and the indenture governing AMH’s 11 1/4% notes further restricts AMH from making restricted payments. Delaware law may also restrict the Company’s ability to make certain distributions. In the first six months of 2006, the Company and its direct and indirect parent companies declared a dividend of approximately $3.8 million to AMH II. The dividend was used to fund AMH II’s scheduled interest payment on its 13 5/8% notes. The Company and its direct and indirect parent companies declared an additional dividend in July 2006 of approximately $3.9 million to fund AMH II’s scheduled interest payment on its 13 5/8% notes. If the Company is unable to distribute sufficient funds to its parent companies to allow them to make required payments on their indebtedness, AMH or AMH II may be required to refinance all or a part of their indebtedness or borrow additional funds. AMH or AMH II may not be able to refinance their indebtedness or borrow funds on acceptable terms. If a default occurs under the 13 5/8% notes, the holders of such notes could

-22-

elect to declare such indebtedness due and payable and exercise their remedies under the indenture governing the 13 5/8% notes, which could have a material adverse effect on the Company. No cash distributions from the Company will be required to satisfy AMH’s interest payment obligations under the 11 1/4% notes until September 2009. Total AMH II debt, including that of its consolidated subsidiaries, was approximately $746.2 million as of July 1, 2006.

The Company believes its cash flows from operations, its borrowing capacity under its amended and restated credit facility or its ability to obtain alternative financing would be sufficient to satisfy its obligations to pay principal and interest on its outstanding debt, maintain current operations and provide sufficient capital for presently anticipated capital expenditures. There can be no assurances, however, that the cash generated by the Company and available under the amended and restated credit facility will be sufficient for these purposes or that the Company would be able to refinance its indebtedness on acceptable terms.

Effects of Inflation

The Company’s principal raw materials – vinyl resin, aluminum, and steel – have historically been subject to significant price changes. As a result of strong overall consumption and higher energy costs related to Hurricanes Katrina and Rita, raw material pricing on the Company’s key commodities increased significantly in fiscal year 2005. The Company believes that due to the high price of oil and natural gas, as well as expected continued strong demand, costs for vinyl resin will continue to be at elevated levels during 2006. The Company announced price increases on all vinyl siding products and a surcharge on vinyl windows that became effective during the fourth quarter of 2005. London Metal Exchange pricing for aluminum began to increase during the second half of 2005, reaching record levels in 2006. The Company believes that the increases in aluminum costs in the latter portion of 2005 and continuing into 2006 have been a result of speculation in the commodities markets, rather than a reflection of the fundamentals of supply and demand. In response to higher aluminum costs, the Company announced price increases on its aluminum products in the fourth quarter of 2005 and the first and second quarters of 2006. There can be no assurance that the Company will be able to maintain the selling price increases already implemented, or achieve any announced price increases or future price increases. In addition, there may be a delay from quarter to quarter between the timing of raw material cost increases and price increases on the Company’s products. At July 1, 2006, the Company had no raw material hedge contracts in place.

Certain Forward-Looking Statements

All statements other than statements of historical facts included in this report regarding the prospects of the industry and the Company’s prospects, plans, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “predict,” “potential” or “continue” or the negatives of these terms or variations of them or similar terminology. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it does not assure that these expectations will prove to be correct. Such statements reflect the current views of the Company’s management with respect to its operations, results of operations and future financial performance. The following factors are among those that may cause actual results to differ materially from the forward-looking statements:

	•		the Company’s operations and results of operations;

	•		changes in home building industry, economic conditions, interest rates, foreign currency exchange rates and other conditions;

	•		changes in availability of consumer credit, employment trends, levels of consumer confidence and consumer preferences;

	•		changes in raw material costs and availability;

	•		market acceptance of price increases;

	•		changes in national and regional trends in new housing starts and home remodeling;

	•		changes in weather conditions;

	•		the Company’s ability to comply with certain financial covenants in the credit facility and indenture governing its indebtedness;

-23-

	•		the Company’s ability to make distributions, payments or loans to its parent companies to allow them to make required payments on their debt;

	•		increases in competition from other manufacturers of vinyl and metal exterior residential building products as well as alternative building products;

	•		shifts in market demand;

	•		increases in the Company’s indebtedness;

	•		increases in costs of environmental compliance;

	•		increases in capital expenditure requirements;

	•		potential conflict between existing Alside and Gentek distribution channels;

	•		the other factors discussed under the heading “Risk Factors” in the Company’s annual report on Form 10-K for the year ended December 31, 2005 and elsewhere in this report.

All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements included in this report. These forward-looking statements speak only as of the date of this report. The Company does not intend to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, unless the securities laws require it to do so.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The Company has outstanding borrowings under the term loan portion of its credit facility and may borrow under the revolving credit facility from time to time for general corporate purposes, including working capital and capital expenditures. Interest under the credit facility is based on LIBOR. At July 1, 2006, the Company had borrowings of $152.0 million under the term loan and $16.8 million under the revolver. The effect of a 1/8% increase or decrease in interest rates would increase or decrease total interest expense for the quarter ended July 1, 2006 by approximately $0.1 million.

The Company has $165.0 million of senior subordinated notes due 2012 that bear a fixed interest rate of 9 3/4%. The fair value of the Company’s 9 3/4% notes is sensitive to changes in interest rates. In addition, the fair value is affected by the Company’s overall credit rating, which could be impacted by changes in the Company’s future operating results.

Foreign Currency Exchange Risk

The Company’s revenues are primarily from domestic customers and are realized in U.S. dollars. However, the Company does realize revenues from sales made through Gentek’s Canadian distribution centers in Canadian dollars. The Company’s Canadian manufacturing facilities acquire raw materials and supplies from U.S. vendors, which results in foreign currency transactional gains and losses. However, payment terms among Canadian manufacturing facilities and these vendors are short-term in nature. At July 1, 2006, the Company had no currency hedges in place.

Commodity Price Risk

See Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Effects of Inflation” for a discussion of the market risk related to the Company’s principal raw materials – vinyl resin, aluminum and steel.

-24-

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

During the fiscal period covered by this report, the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, completed an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the fiscal period covered by this report, the disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There have been no changes to the Company’s internal control over financial reporting during the quarter ended July 1, 2006 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In addition to the legal proceedings disclosed in Company’s annual report on Form 10-K for the year ended December 31, 2005, the Company is involved from time to time in routine legal proceedings arising in the ordinary course of its business, including proceedings and potential proceedings relating to environmental and product liability matters. The Company handles these claims in the ordinary course of business and maintains product liability insurance covering certain types of claims. Legal proceedings are inherently subject to a number of uncertainties and although it is difficult to estimate the Company’s potential exposure to the ongoing routine legal proceedings arising in the ordinary course of its business, the Company believes that the resolution of these matters will not have a material adverse effect on the Company’s financial position, results of operations or liquidity.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed under Item 1A. “Risk Factors” of the Company’s annual report on Form 10-K for the year ended December 31, 2005.

Item 6. Exhibits

a) Exhibits


Exhibit
Number		Description
10.1		Employment Agreement, effective as of July 1, 2006, by and between Associated Materials Incorporated and Dana R. Snyder (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 5, 2006).

10.2		Separation Agreement and General Release, dated as of April 11, 2006, by and among AMH Holdings II, Inc., AMH Holdings, Inc., Associated Materials Holdings, Inc., Associated Materials Incorporated and Michael Caporale, Jr. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 14, 2006).

10.3		Employment Agreement, dated April 3, 2006, by and between Associated Materials Incorporated and Wayne Frederick (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 5, 2006).

-25-

EXHIBIT INDEX


Exhibit
Number		Description
10.1		Employment Agreement, effective as of July 1, 2006, by and between Associated Materials Incorporated and Dana R. Snyder (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 5, 2006).

10.2		Separation Agreement and General Release, dated as of April 11, 2006, by and among AMH Holdings II, Inc., AMH Holdings, Inc., Associated Materials Holdings, Inc., Associated Materials Incorporated and Michael Caporale, Jr. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 14, 2006).

10.3		Employment Agreement, dated April 3, 2006, by and between Associated Materials Incorporated and Wayne Frederick (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 5, 2006).

10.4		Independent Consultant Agreement, dated April 3, 2006, by and between Associated Materials Incorporated and Dana R. Snyder (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 4, 2006).

31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

-28-


	ASSOCIATED MATERIALS INCORPORATED
	(Registrant)
Date: August 15, 2006	By:	/s/ Dana R. Snyder
		Dana R. Snyder
		Interim President and Chief Executive Officer (Principal Executive Officer)



	By:	/s/ D. Keith LaVanway
		D. Keith LaVanway
		Vice President – Finance, Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer)



Date: August 15, 2006	By:	/s/ Dana R. Snyder
		Dana R. Synder
		Interim President and Chief Executive Officer (Principal Executive Officer)



Date: August 15, 2006	By:	/s/ D. Keith LaVanway
		D. Keith LaVanway
		Vice President – Finance, Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer)



Date: August 15, 2006	By:	/s/ Dana R. Synder
		Dana R. Synder
		Interim President and Chief Executive Officer (Principal Executive Officer)


	Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets July 1, 2006 (Unaudited) and December 31, 2005		1

Consolidated Statements of Operations (Unaudited) Quarters ended July 1, 2006 and July 2, 2005 Six months ended July 1, 2006 and July 2, 2005		2

Consolidated Statements of Cash Flows (Unaudited) Six months ended July 1, 2006 and July 2, 2005		3

Notes to Consolidated Financial Statements (Unaudited)		4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16

Item 3. Quantitative and Qualitative Disclosures About Market Risk		24

Item 4. Controls and Procedures		25

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		25

Item 1A. Risk Factors		25

Item 6. Exhibits		25

SIGNATURES		27


	(Unaudited)
	July 1,		December 31,
	2006		2005
Assets
Current assets:
Cash and cash equivalents	$	14,404	$	12,300
Accounts receivable, net		187,092		147,664
Receivable from parent		3,908		3,908
Inventories		161,637		133,524
Deferred income taxes		26,629		26,629
Other current assets		10,987		10,220

Total current assets		404,657		334,245

Property, plant and equipment, net		140,144		143,588
Goodwill		230,664		230,691
Other intangible assets, net		108,301		109,867
Other assets		14,449		16,500

Total assets	$	898,215	$	834,891


Liabilities and Stockholder’s Equity
Current liabilities:
Accounts payable	$	121,117	$	96,933
Accrued liabilities		59,497		57,711
Income taxes payable		13,499		7,771

Total current liabilities		194,113		162,415

Deferred income taxes		67,239		67,101
Other liabilities		44,533		43,874
Long-term debt		333,750		317,000
Stockholder’s equity		258,580		244,501

Total liabilities and stockholder’s equity	$	898,215	$	834,891


	Quarter			Quarter		Six Months			Six Months
	Ended			Ended		Ended			Ended
	July 1,			July 2,		July 1,			July 2,
	2006			2005		2006			2005
Net sales	$	348,329		$	315,364	$	607,609		$	533,933
Cost of sales		261,088			243,162		461,264			412,699

Gross profit		87,241			72,202		146,345			121,234
Selling, general and administrative expense		52,453			50,829		103,467			101,580
Facility closure costs, net		(92	)		862		(92	)		3,415

Income from operations		34,880			20,511		42,970			16,239
Interest expense, net		7,997			7,942		15,723			15,253
Foreign currency (gain) loss		(1,123	)		292		(964	)		289

Income before income taxes		28,006			12,277		28,211			697
Income taxes		11,732			4,582		11,821			263

Net income	$	16,274		$	7,695	$	16,390		$	434


*		This document is being furnished in accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986.

	1.		I have reviewed this quarterly report on Form 10-Q of Associated Materials Incorporated;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	c)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	1)		the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

	2)		the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.