News Release
| Associated Materials Incorporated and AMH Holdings, Inc. Report Third Quarter Results |
CUYAHOGA FALLS, Ohio, Nov. 11 /PRNewswire/ -- Associated Materials
Incorporated ("AMI" or the "Company") today announced third quarter 2005 net
sales of $328.2 million, a 4.4% increase over net sales of $314.4 million for
the same period in 2004. For the nine months ended October 1, 2005, net sales
were $862.2 million or 5.1% higher than net sales of $820.3 million for the
same period in 2004.
Net income for the third quarter of 2005 was $11.7 million. This compares
to net income of $19.9 million for the same period in 2004. For the nine
months ended October 1, 2005, net income was $12.1 million compared to net
income of $27.5 million for the same period in 2004.
EBITDA (as defined below) for the third quarter of 2005 was $30.6 million.
This compares to EBITDA of $43.7 million for the same period in 2004.
Adjusted EBITDA (as defined below) for the third quarter of 2005 was $32.4
million compared to adjusted EBITDA of $43.7 million for the same period in
2004. Adjusted EBITDA for the quarter ended October 1, 2005 excludes one-time
costs of $0.5 million associated with the closure of the Company's Freeport,
Texas manufacturing facility, $1.0 million of amortization related to prepaid
management fees paid in connection with the December 2004 recapitalization
transaction, and $0.3 million of foreign currency losses.
EBITDA was $56.6 million for the nine months ended October 1, 2005
compared to EBITDA of $79.1 million for the same period in 2004. For the nine
months ended October 1, 2005, adjusted EBITDA was $64.5 million compared to
adjusted EBITDA of $94.2 million for the same period in 2004. Adjusted EBITDA
for the nine months ended October 1, 2005 excludes one-time costs of
$4.0 million associated with the closure of the Company's Freeport, Texas
manufacturing facility, $3.0 million of amortization related to prepaid
management fees paid in connection with the December 2004 recapitalization
transaction, $0.6 million of foreign currency losses, and $0.3 million of non-
cash stock compensation expense. Adjusted EBITDA for the nine months ended
October 2, 2004 excludes a bonus paid to certain members of Company management
and a director totaling approximately $14.5 million associated with the
completion of the March 2004 dividend recapitalization and $0.6 million of
foreign currency losses. A reconciliation of net income to EBITDA and to
adjusted EBITDA is included below.
Mike Caporale, Chairman, President, and Chief Executive Officer,
commented, "Our performance in the third quarter continued the trends we
experienced in the first half of 2005 - the impact of increased selling prices
was not enough to offset significantly higher commodity and fuel costs."
Mr. Caporale continued, "In addition, commodity costs, particularly for
vinyl resin and certain microingredients, have increased significantly in the
fourth quarter of 2005 in the aftermath of Hurricanes Katrina and Rita. In
October, we announced price increases to offset the impact of the cost
increases; however, it is too soon to determine if these price increases will
be sufficient to offset the cost increases. Although many of our suppliers,
including our vinyl resin supplier, declared force majeure in response to the
hurricanes, we have not experienced to date any interruption in the supply of
our raw materials."
Net sales increased 4.4%, or $13.8 million, during the third quarter of
2005 compared to the same period in 2004 driven primarily by price increases
implemented during the first quarter of 2005 and during 2004 as well as
increased sales volumes for windows. Gross profit in the third quarter of
2005 was $74.7 million, or 22.8% of net sales, compared to gross profit of
$87.1 million, or 27.7% of net sales, in the third quarter of 2004. The
decrease in gross profit margin percentage was primarily due to significantly
increased costs in two of the Company's key raw materials - vinyl resin and
aluminum - which were partially offset by the impact of price increases. The
Company estimates that commodity cost increases, net of price increases,
negatively impacted gross profit for the third quarter of 2005 by
approximately $2.3 million. Substantially higher freight costs, due primarily
to fuel cost increases, and manufacturing inefficiencies which were incurred
relating to the consolidation of the Freeport, Texas vinyl siding facility
into the Ennis, Texas facility also had a negative impact on gross profit of
approximately $2.6 million and $4.0 million, respectively, for the third
quarter of 2005.
Selling, general and administrative expense was $48.6 million, or 14.8% of
net sales, for the third quarter of 2005 versus $48.7 million, or 15.5% of net
sales, for the same period in 2004. Excluding $1.0 million of amortization
related to prepaid management fees paid in connection with the December 2004
recapitalization transaction, selling, general and administrative expenses
decreased from the prior year as a result of decreased marketing expenses and
lower bonus expense. These decreases were partially offset by increased
expenses in the Company's supply center network relating primarily to higher
payroll costs and building and truck lease expenses, as well as expenses
relating to new supply centers opened during the past twelve months. During
the third quarter of 2005, the Company incurred additional facility closure
costs of approximately $0.5 million relating to the closing of its Freeport,
Texas manufacturing plant. Income from operations was $25.6 million for the
third quarter of 2005 compared to $38.3 million for the same period in 2004.
Net sales increased by 5.1%, or $41.9 million, for the nine months ended
October 1, 2005 compared to the same period in 2004 driven primarily by price
increases along with increased sales volumes for vinyl windows. Gross profit
for the nine months ended October 1, 2005 was $196.0 million, or 22.7% of net
sales, compared to gross profit of $220.7 million, or 26.9% of net sales, for
the same period in 2004. The decrease in gross profit margin percentage was
primarily due to significantly increased costs of the Company's key raw
materials, partially offset by the impact of price increases, as well as
increased freight costs and manufacturing inefficiencies which were incurred
relating to the consolidation of the Freeport, Texas vinyl siding facility
into the Ennis, Texas facility. Selling, general and administrative expense
increased to $150.2 million, or 17.4% of net sales, for the nine months ended
October 1, 2005 versus $142.2 million, or 17.3% of net sales, for the same
period in 2004, due primarily to increased expenses in the Company's supply
center network. Selling, general and administrative expense for the nine
months ended October 1, 2005 includes $3.0 million of amortization related to
prepaid management fees paid in connection with the December 2004
recapitalization transaction and non-cash stock compensation expense of
$0.3 million. During the nine months ended October 1, 2005, the Company
incurred facility closure costs of approximately $4.0 million relating to the
closing of its Freeport, Texas manufacturing plant. During the nine months
ended October 2, 2004, the Company paid $14.5 million of bonuses to certain
members of senior management and a director in conjunction with the March 2004
dividend recapitalization. Income from operations was $41.9 million for the
nine months ended October 1, 2005 compared to $64.1 million for the same
period in 2004.
The attached consolidating financial information for the quarters and for
the nine months ended October 1, 2005 and October 2, 2004 includes AMI and the
Company's indirect parent company, AMH Holdings, Inc. ("AMH"), which conducts
all of its operating activities through AMI. Including AMH's interest
expense, which primarily consists of the accretion on AMH's 11-1/4% senior
discount notes, AMH's consolidated net income was $5.4 million and $15.1
million for the third quarter of 2005 and 2004, respectively. For the nine
months ended October 1, 2005, AMH incurred a consolidated net loss of $3.9
million compared to net income of $16.1 million for the same period in 2004.
In connection with the December 2004 recapitalization transaction, AMH's
parent AMH Holdings II, Inc. ("AMH II") was formed, and AMH II subsequently
issued $75 million of senior notes in December 2004. The AMH II senior notes,
which had accreted to $77.1 million by October 1, 2005, are not guaranteed by
either AMI or AMH. The senior notes accrue interest at 13-5/8%, of which 10%
will be paid in cash and 3-5/8% currently accrues to the senior notes. As AMH
II is a holding company with no operations, it must receive distributions,
payments or loans from its subsidiaries to satisfy its obligations on its
debt. Total AMH II debt, including that of its consolidated subsidiaries, was
$723.6 million as of October 1, 2005.
* * *
Management will host its third quarter earnings conference call on Friday,
November 11th at 11 a.m. Eastern Time. The toll free dial-in number for the
call is (800) 559-2403 and the conference call identification number is
12911663. A replay of the call will be available through November 18, 2005 by
dialing (877) 213-9653 and entering the above conference call identification
number. 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 Incorporated is a leading manufacturer of exterior
residential building products, which are distributed through company-owned
distribution centers and independent distributors across North America. AMI
produces a broad range of vinyl windows, vinyl siding, aluminum trim coil,
aluminum and steel siding and accessories, as well as vinyl fencing, decking
and railing. AMI is a privately held, wholly-owned subsidiary of Associated
Materials Holdings Inc., which is a wholly-owned subsidiary of AMH, which is a
wholly-owned subsidiary of AMH II, which is controlled by affiliates of
Investcorp S.A. and Harvest Partners, Inc. For more information, please visit
the Company's website at http://www.associatedmaterials.com.
Founded in 1982, Investcorp is a global investment group with offices in
New York, London and Bahrain. The firm has four lines of business: corporate
investment, real estate investment, asset management and technology
investment. It has completed transactions with a total acquisition value of
more than $25 billion. The firm now manages total investments in alternative
assets of nearly $10 billion. For more information on Investcorp please visit
its website at http://www.investcorp.com.
Harvest Partners is a private equity investment firm with a long track
record of building value in businesses and generating attractive returns on
investment. Founded in 1981, Harvest Partners has approximately $1 billion of
invested capital under management. For more information on Harvest Partners
please visit its website 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 AMI and AMH that are based on the beliefs of AMI's and AMH's
management. When used in this press release, the words "may," "will,"
"should," "expect," "intend," "estimate," "anticipate," "believe," "predict,"
"potential" or "continue" or similar expressions identify forward-looking
statements. These statements are subject to certain risks and uncertainties.
Such statements reflect the current views of AMI's and AMH's management. The
following factors, and others which are discussed in AMI's and AMH's filings
with the Securities and Exchange Commission, are among those that may cause
actual results to differ materially from the forward-looking statements:
changes in the home building industry, general economic conditions, interest
rates, foreign currency exchange rates, changes in the availability of
consumer credit, employment trends, levels of consumer confidence, consumer
preferences, changes in raw material costs and availability, market acceptance
of price increases, changes in national and regional trends in new housing
starts, changes in weather conditions, the Company's ability to comply with
certain financial covenants in loan documents governing its indebtedness,
increases in levels of competition within its market, availability of
alternative building products, increases in its level of indebtedness,
increases in costs of environmental compliance, increase in capital
expenditure requirements, potential conflict between Alside and Gentek
distribution channels, achievement of anticipated synergies and operational
efficiencies from the acquisition of Gentek and shifts in market demand.
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 expected, intended, estimated,
anticipated, believed or predicted. We undertake no obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
ASSOCIATED MATERIALS INCORPORATED
AMH HOLDINGS, INC.
Condensed Consolidating Statement of Operations
(Unaudited)
Quarter Ended October 1, 2005
(in thousands)
AMI Eliminations AMH
Quarter AMH Quarter Consolidated
Ended Quarter Ended Ended Quarter Ended
October 1, October 1, October 1, October 1,
2005 2005 2005 2005
Net sales $328,249 $- $- $328,249
Gross profit 74,735 - - 74,735
Selling, general and
administrative expense 48,580 - - 48,580
Facility closure costs 541 - - 541
Income from operations 25,614 - - 25,614
Interest expense, net 8,134 8,511 - 16,645
Foreign currency loss 267 - - 267
Income (loss) before
income taxes 17,213 (8,511) - 8,702
Income taxes (benefit) 5,512 (2,223) - 3,289
Income (loss) before
equity income from
subsidiaries 11,701 (6,288) - 5,413
Equity income from
subsidiaries - 11,701 (11,701) -
Net income $11,701 $5,413 $(11,701) $5,413
Other Data:
EBITDA (a) $30,609
Adjusted EBITDA (a) 32,417
ASSOCIATED MATERIALS INCORPORATED
AMH HOLDINGS, INC.
Condensed Consolidating Statement of Operations
(Unaudited)
Quarter Ended October 2, 2004
(in thousands)
AMI AMH
Quarter AMH Eliminations Consolidated
Ended Quarter Ended Quarter Ended Quarter Ended
October 2, October 2, October 2, October 2,
2004 2004 2004 2004
Net sales $314,408 $- $- $314,408
Gross profit 87,061 - - 87,061
Selling, general
and administrative
expense 48,716 - - 48,716
Income from
operations 38,345 - - 38,345
Interest expense, net 6,218 7,191 - 13,409
Foreign currency gain (35) - - (35)
Income (loss) before
income taxes 32,162 (7,191) - 24,971
Income taxes
(benefit) 12,297 (2,386) - 9,911
Income (loss) before
equity income from
subsidiaries 19,865 (4,805) - 15,060
Equity income
from subsidiaries - 19,865 (19,865) -
Net income $19,865 $15,060 $(19,865) $15,060
Other Data:
EBITDA (a) $43,702
Adjusted EBITDA (a) 43,667
ASSOCIATED MATERIALS INCORPORATED
AMH HOLDINGS, INC.
Condensed Consolidating Statement of Operations
(Unaudited)
Nine Months Ended October 1, 2005
(in thousands)
AMH
AMI AMH Eliminations Consolidated
Nine Months Nine Months Nine Months Nine Months
Ended Ended Ended Ended
October 1, October 1, October 1, October 1,
2005 2005 2005 2005
Net sales $862,182 $- $- $862,182
Gross profit 195,969 - - 195,969
Selling, general
and administrative
expense 150,160 - - 150,160
Facility closure
costs 3,956 - - 3,956
Income from
operations 41,853 - - 41,853
Interest expense, net 23,387 24,855 - 48,242
Foreign currency loss 556 - - 556
Income (loss) before
income taxes 17,910 (24,855) - (6,945)
Income taxes
(benefit) 5,775 (8,773) - (2,998)
Income (loss) before
equity income from
subsidiaries 12,135 (16,082) - (3,947)
Equity income from
subsidiaries - 12,135 (12,135) -
Net income (loss) $12,135 $(3,947) $(12,135) $(3,947)
Other Data:
EBITDA (a) $56,636
Adjusted EBITDA (a) 64,467
ASSOCIATED MATERIALS INCORPORATED
AMH HOLDINGS, INC.
Condensed Consolidating Statement of Operations
(Unaudited)
Nine Months Ended October 2, 2004
(in thousands)
AMH
AMI AMH Eliminations Consolidated
Nine Months Nine Months Nine Months Nine Months
Ended Ended Ended Ended
October 2, October 2, October 2, October 2,
2004 2004 2004 2004
Net sales $820,331 $- $- $820,331
Gross profit 220,741 - - 220,741
Selling, general
and administrative
expense 142,150 - - 142,150
Transaction costs -
bonuses 14,498 - - 14,498
Income from
operations 64,093 - - 64,093
Interest expense, net 18,484 17,131 - 35,615
Foreign currency loss 580 - - 580
Income (loss) before
income taxes 45,029 (17,131) - 27,898
Income taxes
(benefit) 17,544 (5,747) - 11,797
Income (loss) before
equity income from
subsidiaries 27,485 (11,384) - 16,101
Equity income from
subsidiaries - 27,485 (27,485) -
Net income $27,485 $16,101 $(27,485) $16,101
Other Data:
EBITDA (a) $79,078
Adjusted EBITDA (a) 94,156
Selected Balance Sheet
Data (in thousands) (Unaudited)
October 1, 2005
AMH
AMI AMH Consolidated
Cash $3,811 $- $3,811
Accounts receivable, net 178,827 - 178,827
Inventories 145,249 - 145,249
Accounts payable 121,817 - 121,817
Accrued liabilities 65,524 - 65,524
Total debt 339,563 306,926 646,489
January 1, 2005
AMH
AMI AMH Consolidated
Cash (b) $58,054 $- $58,054
Accounts receivable, net 128,302 - 128,302
Inventories 114,787 - 114,787
Accounts payable 75,139 - 75,139
Accrued liabilities 57,015 - 57,015
Total debt 340,000 282,856 622,856
Selected Cash Flow Data for AMI Nine Months Nine Months
(Unaudited) (in thousands) Ended Ended
October 1, October 2,
2005 2004
Net cash provided by (used in)
operating activities $15,001 $(325)
Capital expenditures 18,961 16,970
Dividend paid to fund semi-annual
interest payment on AMH II's
13-5/8% senior notes 4,562 -
Cash paid for interest 16,575 13,249
Cash paid (received) for income taxes (3,551) 13,020
(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.
The definition of EBITDA under the indentures governing the notes also
excludes certain items. Adjusted EBITDA has 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. Such supplementary adjustments to EBITDA may not be in
accordance with current SEC practices or the rules and regulations
adopted by the SEC that apply to periodic reports filed under the
Securities Exchange Act of 1934. Accordingly, the SEC may require
that adjusted EBITDA be presented differently in filings made with the
SEC than as presented in this release, or not be presented at all.
Adjusted EBITDA is not a measure determined in accordance with GAAP
and should not be considered as an alternative 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 AMI's net income to EBITDA and
adjusted EBITDA is as follows (in thousands):
Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended
October 1, October 2, October 1, October 2,
2005 2004 2005 2004
Net income $11,701 $19,865 $12,135 $27,485
Interest expense, net 8,134 6,218 23,387 18,484
Income taxes 5,512 12,297 5,775 17,544
Depreciation and
amortization 5,262 5,322 15,339 15,565
EBITDA 30,609 43,702 56,636 79,078
Foreign currency
(gain) loss 267 (35) 556 580
Transaction costs
- bonuses (c) - - - 14,498
Amortization of
management fee (d) 1,000 - 3,000 -
Stock compensation
expense - - 319 -
Facility closure
costs (e) 541 - 3,956 -
Adjusted EBITDA $32,417 $43,667 $64,467 $94,156
(b) Cash balances as of January 1, 2005 included $46.0 million of cash on
hand to be used to fund remaining payments related to the December
2004 recapitalization transaction, of which (i) $33.7 million was
distributed in January 2005 as a loan from AMI, through its direct and
indirect parent companies, to AMH II for which a dividend was then
declared by AMI and its direct and indirect parent companies in
forgiveness of the intercompany loan, (ii) $8.0 million was paid in
January and February of 2005 to satisfy promissory notes made by AMI
for management and a director bonus related to the December 2004
recapitalization transaction and (iii) $4.3 million was paid in the
first quarter of 2005 for fees related to the December 2004
recapitalization transaction.
(c) Represents management and director bonuses paid in connection with the
March 2004 dividend recapitalization.
(d) Represents amortization of a prepaid management fee paid in connection
with the December 2004 recapitalization transaction.
(e) Represents one-time costs associated with the closure of the Freeport,
Texas manufacturing facility consisting primarily of equipment
relocation expenses. Total pre-tax expenses related to the Freeport
closing were $8.5 million, including a $4.5 million pre-tax charge
recorded in the fourth quarter of 2004.
SOURCE Associated Materials IncorporatedWeb Site: http://www.associatedmaterials.com http://www.investcorp.com http://www.harvpart.com |