Associated Materials, LLC Reports Second Quarter Results
CUYAHOGA FALLS, Ohio, Aug. 11, 2011 /PRNewswire/ — Associated Materials, LLC (the “Company”) today announced results for the quarter and six months ended July 2, 2011. Financial highlights are as follows:
- Net sales for the second quarter ended July 2, 2011 were $310.5 million, a 5.4% decrease from net sales of $328.3 million for the same period in 2010.
- Adjusted EBITDA was $34.2 million for the second quarter of 2011 compared to $46.7 million for the same period in 2010.
- Net sales for the six months ended July 2, 2011 were $507.2 million, a 4.8% decrease from net sales of $532.6 million for the same period in 2010.
- Adjusted EBITDA was $30.0 million for the six months ended July 2, 2011 compared to $55.4 million for the same period in 2010.
Dana Snyder, Interim Chief Executive Officer, commented, “While we continue to experience lower than expected sales volumes, we continue to be optimistic about the long-term prospects of AMI once our end markets stabilize and return to normal levels of remodeling and new home construction. Our operating results reflect the challenging conditions that continue to exist in both the remodeling and new construction markets. While these challenging conditions are expected to continue throughout the remainder of 2011, we continue to focus on enhancing the quality, service and value that we deliver to our customer. We believe our efforts in creating and maintaining operational improvements, along with an intense focus on quality, will permanently improve our overall cost structure and will allow us to emerge stronger once the general economy and markets fully recover.”
Operating results for the periods ended July 3, 2010 have been presented to reflect the financial results of the Company and its former direct and indirect parent companies, Associated Materials Holdings, LLC, AMH and AMH II (together, the “Predecessor”). The operating results and financial position for the periods ended July 2, 2011 and January 1, 2011 have been presented to reflect the financial results of the Company subsequent to the Merger (the “Successor”). The Company’s results of operations prior to and including the Merger include the activity and results of its former direct and indirect parent companies, which principally consisted of borrowings and related interest expense, and are presented as the results of the Predecessor. The results of operations following the Merger are presented as the results of the Successor.
Earnings Conference Call
Management will host its second quarter earnings conference call on Thursday, August 11th at 11 a.m. Eastern Time. The toll free dial-in number for the call is (866) 469-0038 and the conference call identification number is 86803852. A replay of the call will be available through August 18th by dialing (855) 859-2056 or (404) 537-3406 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, LLC
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
Quarters Ended Six Months Ended
--------------
July 2, July 3, July 2, July 3,
2011 2010 2011 2010
Successor Predecessor Successor Predecessor
Net sales $310,459 $328,322 $507,195 $532,559
Cost of sales 230,119 236,464 386,776 392,262
------- ------- ------- -------
Gross profit 80,340 91,858 120,419 140,297
Selling, general and
administrative
expenses 65,624 53,589 124,540 101,070
------ ------ ------- -------
Income (loss) from
operations 14,716 38,269 (4,121) 39,227
Interest expense,
net 19,095 18,797 37,795 37,491
Foreign currency
loss (gain) 124 70 94 (52)
--- --- --- ---
(Loss) income before
income taxes (4,503) 19,402 (42,010) 1,788
Income taxes
provision (benefit) 2,690 (326) 2,301 752
----- ---- ----- ---
Net income (loss) $(7,193) $19,728 $(44,311) $1,036
======= ======= ======== ======
Other Data:
-----------
EBITDA (1) $27,392 $43,832 $21,242 $50,545
Adjusted EBITDA (1) 34,230 46,655 30,036 55,444
____________
EBITDA is calculated as net income (loss) plus interest,
taxes, depreciation and amortization. Adjusted EBITDA
is defined as EBITDA adjusted to reflect certain
adjustments that are used in calculating covenant
compliance under our revolving credit agreement and the
indenture governing the 9.125% Senior Secured Notes due
2017 (the "9.125% notes"). We consider EBITDA and
Adjusted EBITDA to be important indicators of our
operational strength and performance of our business.
We have included Adjusted EBITDA because it is a key
financial measure used by our management to (i) assess
our ability to service our debt or incur debt and meet
our capital expenditure requirements; (ii) internally
measure our operating performance; and (iii) determine
our incentive compensation programs. In addition, our
senior secured asset-based revolving credit facilities
(the "ABL facilities") and the indenture governing the
9.125% notes have certain covenants that apply ratios
utilizing this measure of Adjusted EBITDA. EBITDA and
Adjusted EBITDA have not been prepared in accordance
with U.S. generally accepted accounting principles
("GAAP"). Adjusted EBITDA as presented by us 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 an alternative to, or more
meaningful than, net income (as determined in
accordance with GAAP) as a measure of our operating
results or net cash provided by operating activities
(as determined in accordance with GAAP) as a measure of
(1) our liquidity.
Prior year Adjusted EBITDA amounts are presented to conform
to the current year's presentation of the computation of
Adjusted EBITDA, which is in conformity with the Adjusted
EBITDA as defined in our revolving credit agreement and the
indenture governing the 9.125% notes.
The reconciliation of our net income (loss) to EBITDA and Adjusted
EBITDA is as follows (in thousands):
Quarters Ended Six Months Ended
-------------- ----------------
July 2, July 3, July 2, July 3,
------- ------- ------- -------
2011 2010 2011 2010
---- ---- ---- ----
Successor Predecessor Successor Predecessor
Net income (loss) $(7,193) $19,728 $(44,311) $1,036
Interest expense, net 19,095 18,797 37,795 37,491
Income taxes provision
(benefit) 2,690 (326) 2,301 752
Depreciation and
amortization 12,800 5,633 25,457 11,266
------ ----- ------ ------
EBITDA 27,392 43,832 21,242 50,545
Merger costs (a) 96 1,263 585 1,263
Purchase accounting
related adjustments
(b) (878) - (1,854) -
Management fees (c) - 227 - 447
Executive officers
separation costs (d) 5,467 - 5,467 -
Restructuring costs (e) 228 - 228 -
Tax restructuring costs
(f) - - - 88
Write-offs of assets
other than by sale 89 13 173 27
Bank audit fees (g) - 35 - 50
Stock compensation
expense (h) 87 - 114 -
Other normalizing and
unusual items (i) 1,625 1,215 3,987 2,473
Foreign currency loss
(gain) (j) 124 70 94 (52)
Pro forma cost savings
(k) - - - 603
--- --- --- ---
Adjusted EBITDA $34,230 $46,655 $30,036 $55,444
======= ======= ======= =======
____________
Represents professional fees incurred in connection with the
(a) Merger.
Represents the elimination of the impact of adjustments related
to purchase accounting recorded as a result of the Merger, which
include the following: $0.7 million of reduced pension expense
as a result of purchase accounting adjustments and amortization
related to net liabilities recorded in purchase accounting for
the fair value of certain of our leased facilities and warranty
liabilities of $0.1 million and $0.2 million, respectively, for
both the first and second quarters of 2011. These purchase
accounting related adjustments related to the Merger are offset
by a $0.1 million negative adjustment to inventory that was
acquired as part of the supply center acquisition completed
(b) during the second quarter of 2011.
Represents annual management fees paid to Harvest Partners, L.P.
(c) (one of our sponsors prior to the Merger).
Represents separation costs, including payroll taxes and certain
benefits of $5.4 million, and professional fees of $0.1 million,
related to the terminations of Mr. Chieffe, our former President
and Chief Executive Officer, and Mr. Arthur, our former Senior
(d) Vice President of Operations, in June 2011.
During the second quarter of 2011, we recognized a charge of
approximately $0.2 million within selling, general and
administrative expenses reported in the condensed consolidated
statements of operations. The charge was a result of re-
measuring the restructuring liability related to the
discontinued use of the warehouse facility adjacent to our Ennis
manufacturing plant due to changes in the expected timing and
(e) amount of cash flows over the remaining lease term.
Represents legal and accounting fees incurred in connection with
(f) tax restructuring projects.
(g) Represents bank audit fees incurred under our prior ABL Facility.
Represents stock compensation related to restricted share units
issued to certain board members, including the Interim Chief
(h) Executive Officer.
(i) Represents the following (in thousands):
Quarters Ended Six Months Ended
-------------- ----------------
July 2, July 3, July 2, July 3,
------- ------- ------- -------
2011 2010 2011 2010
---- ---- ---- ----
Professional fees (i) $656 $1,020 $2,461 $1,900
Accretion on lease liability
(ii) 85 93 223 184
Excess severance costs (iii) 67 102 265 389
Operating lease termination
penalty (iv) 773 - 773 -
Excess legal expense (v) 44 - 265 -
--- ---
Total $1,625 $1,215 $3,987 $2,473
====== ====== ====== ======
____________
Represents management's
estimate of unusual or
non-recurring
consulting fees
primarily associated
with cost savings
(i) initiatives.
Represents accretion on
the liability recorded
at present value for
future lease costs in
connection with our
warehouse facility
adjacent to the Ennis
manufacturing, which
we discontinued using
(ii) during 2009.
Represents management's
estimates for excess
severance expense
primarily due to
unusual changes within
(iii) management.
Represents the excess
of cash paid over the
estimated fair values
of purchased equipment
(iv) previously leased.
Represents management's
estimate of excess
legal expense incurred
in connection with the
defense of certain
warranty related
(v) claims.
Represents currency transaction/translation (gains)/losses,
(j) including on currency exchange hedging agreements.
For the six months ended July 3, 2010, the amount represents
management's estimates of cost savings that could have resulted
from producing glass in-house at our Cuyahoga Falls, Ohio window
facility had such production started on January 4, 2009 of $0.5
million and cost savings that could have resulted from entering
into our leveraged procurement program with an outside consulting
firm had such program been entered into on January 4, 2009 of
(k) approximately $0.1 million.
Net Sales by Principal Product Offering
(In thousands)
Quarters Ended Six Months Ended
-------------- ----------------
July 2, July 3, July 2, July 3,
------- ------- ------- -------
2011 2010 2011 2010
---- ---- ---- ----
Successor Predecessor Successor Predecessor
Vinyl windows $97,131 $115,443 $168,840 $191,780
Vinyl siding products 62,823 68,998 99,983 108,354
Metal products 47,101 52,086 83,470 88,461
Third-party
manufactured
products 85,651 72,329 122,771 109,892
Other products and
services 17,753 19,466 32,131 34,072
------ ------ ------ ------
$310,459 $328,322 $507,195 $532,559
======== ======== ======== ========
ASSOCIATED MATERIALS, LLC
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(In thousands)
July 2,
2011
Assets
Current assets:
Cash and cash equivalents $6,785
Accounts receivable, net of allowance
for doubtful accounts of 158,291
$9,732 at July 2, 2011 and $9,203 at January 1, 2011
Inventories 193,429
Income taxes receivable -
Prepaid expenses 9,058
-----
Total current assets 367,563
Property, plant and equipment, net 137,460
Goodwill 573,912
Other intangible assets, net 725,940
Other assets 28,326
------
Total assets $1,833,201
==========
Liabilities and Member's Equity
Current liabilities:
Accounts payable $138,500
Accrued liabilities 69,937
Deferred income taxes 16,422
Income taxes payable 738
---
Total current liabilities 225,597
Deferred income taxes 144,668
Other liabilities 135,468
Long-term debt 857,800
Member's equity 469,668
-------
Total liabilities and member's equity $1,833,201
==========
January
1,
2011
Assets
Current assets:
Cash and cash equivalents $13,789
Accounts receivable, net of allowance
for doubtful accounts of 118,408
$9,732 at July 2, 2011 and $9,203 at January 1, 2011
Inventories 146,215
Income taxes receivable 3,291
Prepaid expenses 8,995
-----
Total current assets 290,698
Property, plant and equipment, net 137,862
Goodwill 566,423
Other intangible assets, net 731,014
Other assets 29,907
------
Total assets $1,755,904
==========
Liabilities and Member's Equity
Current liabilities:
Accounts payable $90,190
Accrued liabilities 79,319
Deferred income taxes 19,989
Income taxes payable 2,506
-----
Total current liabilities 192,004
Deferred income taxes 144,668
Other liabilities 132,755
Long-term debt 788,000
Member's equity 498,477
-------
Total liabilities and member's equity $1,755,904
==========
Company Description
Associated Materials, LLC is a leading, vertically integrated manufacturer and distributor of exterior residential building products in the United States and Canada. The Company produces a comprehensive offering of exterior building products, including vinyl windows, vinyl siding, aluminum trim coil, and aluminum and steel siding and accessories, which are produced at the Company’s 11 manufacturing facilities. The Company also sells complementary products that are manufactured by third parties, such as roofing materials, insulation, exterior doors, vinyl siding in a shake and scallop design and installation equipment and tools that are primarily distributed through its company-operated supply centers. The Company’s products are sold primarily through its extensive dual-distribution network, consisting of 123 company-operated supply centers, through which it sells directly to its contractor customers, and the Company’s direct sales channel, through which it sells to approximately 250 independent distributors and dealers, who then sell to their customers. For more information, please visit the Company’s website at http://www.associatedmaterials.com.
Forward-Looking Statements
This press release contains certain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) relating to the Company that are based on the beliefs of the Company’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 the Company’s management. The following factors, and others which are discussed in the Company’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 and remodeling industries, general economic conditions, interest rates, foreign currency exchange rates, changes in the availability of consumer credit, employment trends, levels of consumer confidence and spending, consumer preferences, changes in raw material costs and availability, market acceptance of price increases, changes in national and regional trends in home remodeling and new housing starts, changes in weather conditions, the Company’s ability to comply with certain financial covenants in its ABL facilities and indentures governing its 9.125% notes, 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, unanticipated warranty or product liability claims, increases in capital expenditure requirements 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. For further information, refer to the Company’s most recent Annual Report on Form 10-K (particularly the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections) and to any subsequent Quarterly Reports on Form 10-Q, all of which are on file with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
SOURCE Associated Materials, LLC