Associated Materials, LLC Reports Fourth Quarter and Year-End Results

ASSOCIATED MATERIALS, LLC

UNAUDITED CONDENSED

CONSOLIDATED STATEMENTS OF OPERATIONS

Quarter-to-Date

Year-to-Date

Quarters Ended

Years Ended

October 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

January 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

Predecessor

Successor

Combined

Predecessor

Predecessor

Successor

Combined

Predecessor

(in thousands)

Net sales

$        35,832

$    269,249

$  305,081

$      273,999

$      897,938

$    269,249

$ 1,167,187

$   1,046,107

Cost of sales

27,739

222,737

250,476

199,626

658,509

222,737

881,246

765,691

Gross profit

8,093

46,512

54,605

74,373

239,429

46,512

285,941

280,416

Selling, general

and administrative

expenses

6,644

53,543

60,187

51,492

159,448

53,543

212,991

204,610

Merger costs:

Transaction costs

36,964

7,411

44,375

-

38,416

7,411

45,827

-

Transaction

bonuses

26,231

-

26,231

-

26,231

-

26,231

-

Stock option

compensation

38,014

-

38,014

-

38,014

-

38,014

-

Manufacturing

restructuring costs

-

-

-

-

-

-

-

5,255

(Loss) income from

operations

(99,760)

(14,442)

(114,202)

22,881

(22,680)

(14,442)

(37,122)

70,551

Interest expense,

net

2,595

16,120

18,715

18,261

58,759

16,120

74,879

77,352

(Gain) loss on debt

extinguishment

(15,201)

25,129

9,928

(1,614)

(15,201)

25,129

9,928

(29,665)

Foreign currency

(gain) loss

(163)

771

608

(74)

(184)

771

587

(184)

(Loss) income

before income

taxes

(86,991)

(56,462)

(143,453)

6,308

(66,054)

(56,462)

(122,516)

23,048

Income tax

(benefit) provision

(4,118)

8,553

4,435

(6,671)

5,220

8,553

13,773

2,390

Net income (loss)

$      (82,873)

$    (65,015)

$ (147,888)

$        12,979

$      (71,274)

$    (65,015)

$  (136,289)

$        20,658

Other Data:

EBITDA (a)

$      (83,668)

$    (29,844)

$ (113,512)

$        30,159

$        10,287

$    (29,844)

$    (19,557)

$      122,569

Adjusted

EBITDA (a)

3,074

30,583

33,657

33,492

103,259

30,583

133,842

116,830

(a)

EBITDA is calculated as net income 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 the Company's revolving credit agreement and the indenture governing the 9.125% notes. The Company considers EBITDA and Adjusted EBITDA to be important indicators of its operational strength and performance of the 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 or incur debt and meet 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 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 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 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 net cash provided by operating activities (as determined in accordance with GAAP) as a measure of the Company's 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 the Company's revolving credit agreement and the indenture governing the 9.125% notes.

Quarter-to-Date

Year-to-Date

Quarters Ended

Years Ended

October 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

January 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

Predecessor

Successor

Combined

Predecessor

Predecessor

Successor

Combined

Predecessor

(in thousands)

Net income (loss)

$      (82,873)

$    (65,015)

$   (147,888)

$        12,979

$      (71,274)

$    (65,015)

$   (136,289)

$        20,658

Interest expense,

net

2,595

16,120

18,715

18,261

58,759

16,120

74,879

77,352

Income tax (benefit)

provision

(4,118)

8,553

4,435

(6,671)

5,220

8,553

13,773

2,390

Depreciation and

amortization

728

10,498

11,226

5,590

17,582

10,498

28,080

22,169

  EBITDA

(83,668)

(29,844)

(113,512)

30,159

10,287

(29,844)

(19,557)

122,569

Merger costs (b)

102,015

7,411

109,426

-

103,467

7,411

110,878

-

Net (gain) loss on

debt extinguishment

(c)

(15,201)

25,129

9,928

(1,614)

(15,201)

25,129

9,928

(29,665)

Purchase

accounting related

adjustments (d)

-

21,427

21,427

-

-

21,427

21,427

-

Management

fees (e)

-

-

-

353

681

-

681

1,400

Restructuring costs

(f)

-

-

-

201

88

-

88

5,762

Impairments and

write-offs (g)

-

1,230

1,230

519

43

1,230

1,273

1,130

Employee

Termination

costs (h)

-

1,397

1,397

(533)

-

1,397

1,397

1,182

Bank fees (i)

-

-

-

24

56

-

56

142

Other normalizing

and unusual

items (j)

91

3,062

3,153

3,097

3,419

3,062

6,481

6,505

Foreign currency

(gain) loss (k)

(163)

771

608

(74)

(184)

771

587

(184)

Proforma cost

savings (l)

-

-

-

1,360

603

-

603

7,989

 Adjusted EBITDA

$         3,074

$      30,583

$       33,657

$        33,492

$      103,259

$      30,583

$     133,842

$      116,830

(b)

Represents the following:

Quarter-to-Date

Year-to-Date

Quarters Ended

Years Ended

October 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

January 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

Predecessor

Successor

Combined

Predecessor

Predecessor

Successor

Combined

Predecessor

(in thousands)

Transaction

costs (i)

$        36,964

$         7,411

$         44,375

$                -

$        38,416

$         7,411

$       45,827

$                -

Transaction

bonuses (ii)

26,231

-

26,231

-

26,231

-

26,231

-

Stock option

compensation (iii)

38,014

-

38,014

-

38,014

-

38,014

-

Stock warrants

expense (iv)

806

-

806

-

806

-

806

-

  Total

$      102,015

$         7,411

$       109,426

$                -

$      103,467

$         7,411

$     110,878

$                -

(i)

Predecessor expenses include investment banking, legal and other expenses, including $16.2 million of expense accrued and payable to affiliates of Investcorp and Harvest Partners in connection with the amended and restated management agreement between Harvest Partners and the Company. Successor expenses primarily include fees paid related to due diligence activities.

(ii)

Represents transaction bonuses paid to senior management and certain employees in connection with the Merger.

(iii)

Represents stock option compensation expense recognized as a result of the modification of certain stock option awards in connection with the Merger and the fair value of an in-the-money stock option award granted immediately prior to the Merger.

(iv)

Represents expense for stock warrants, which were redeemed for cash in connection with the Merger. The expense associated with the stock warrants has been recognized in the statement of operations as a reduction in net sales in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 505-50, Equity-Based Payments to Non-Employees.

(c)

Expenses recorded by the Predecessor for the periods ended October 12, 2010 include the write-off of deferred financing fees associated with the prior ABL Facility and the write-off of an accrual for all future interest payments on the 20% notes, which was recorded during the year ended January 2, 2010, in accordance with FASB ASC 470-60, Troubled Debt Restructurings by Debtors. Expenses recorded by the Successor include the loss on the extinguishment of the 9.875% notes and the 11.25% notes totaling $13.6 million and fees of $11.5 million related to an interim financing facility, which was negotiated, but ultimately not utilized, in conjunction with the financing for the Merger.

The net gain on debt extinguishment recognized during the year ended January 2, 2010 represents a $29.6 million gain on troubled debt restructuring of the 13.625% notes and an $8.9 million gain on debt extinguishment in connection with the purchase of $15.0 million par value of the 11.25% notes directly from the noteholders for approximately $5.9 million, partially offset by debt extinguishment costs of $8.8 million incurred with the redemption of the 9.75% notes and the 15% notes and the issuance of the 9.875% notes.

(d)

Represents the elimination of the impact of adjustments related to purchase accounting recorded as a result of the Merger, which include the following: $23.1 million of amortization for the step-up in basis of inventory, partially offset by $0.8 million of other purchase accounting related adjustments to inventory included in cost of sales, $0.6 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 leased facilities and warranty liabilities of $0.1 million and $0.2 million, respectively.

(e)

Represents amortization of a prepaid management fee paid to Investcorp International Inc. in connection with a December 2004 recapitalization transaction and annual management fees paid to Harvest Partners.

(f)

Represents the following:

Quarter-to-Date

Year-to-Date

Quarters Ended

Years Ended

October 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

January 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

Predecessor

Successor

Combined

Predecessor

Predecessor

Successor

Combined

Predecessor

(in thousands)

Manufacturing

restructuring

costs (i)

$                -

$             -

$             -

$                -

$                -

$             -

$             -

$          5,255

Tax restructuring

charges (ii)

-

-

-

201

88

-

88

507

 Total

$                -

$             -

$             -

$             201

$               88

$             -

$            88

$          5,762

(i)

During 2008, the Company relocated a portion of its vinyl siding production from Ennis, Texas to West Salem, Ohio and Burlington, Ontario. In connection with this change, during 2009, the Company discontinued the use of the warehouse facility adjacent to the Ennis manufacturing plant. Expenses during 2009 represent lease costs associated with the discontinued use of the warehouse facility adjacent to the Ennis manufacturing plant.

(ii)

Represents legal and accounting fees in connection with tax restructuring projects.

(g)

Represents impairments and write-offs of assets other than by sale principally including (i) $1.2 million incurred during the periods ended January 1, 2011 and $0.6 million incurred during the year ended January 2, 2010 related to issues with a new product line, and the ultimate discontinuation of the product line in the fourth quarter of 2010, and (ii) $0.4 million expensed during the quarter and year ended January 2, 2010 for software write-offs due to changes in our information technology and business strategies during 2009.

(h)

Represents separation costs, including payroll taxes and certain benefits, as follows: (i) $1.4 million for the periods ended January 2, 2011 related to the termination of Mr. Franco, the Company's former President of AMI Distribution, and (ii) $1.2 million for the year ended January 2, 2010 related to a workforce reduction in connection with our overall cost reduction initiatives.

(i)

Represents bank audit fees incurred under the Company's prior ABL Facility and new ABL facilities.

(j)

Represents the following:

Quarter-to-Date

Year-to-Date

Quarters Ended

Years Ended

October 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

January 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

Predecessor

Successor

Combined

Predecessor

Predecessor

Successor

Combined

Predecessor

(in thousands)

Professional fees

(i)

$               77

$       2,973

$      3,050

$             316

$          2,734

$       2,973

$      5,707

$          1,285

Accretion of lease

liability (ii)

14

89

103

73

296

89

385

76

Excess severance

costs (iii)

-

-

-

-

389

-

389

910

Normalized bonus

expense (iv)

-

-

-

2,052

-

-

-

-

Unusual bad debt

expense (v)

-

-

-

656

-

-

-

4,234

  Total

$               91

$       3,062

$      3,153

$          3,097

$          3,419

$       3,062

$      6,481

$          6,505

(i)

Represents management's estimate of unusual or non-recurring consulting fees primarily associated with cost savings initiatives.

(ii)

Represents accretion on the liability recorded at present value for future lease costs in connection with the Company's warehouse facility adjacent to the Ennis manufacturing, which was discontinued using during 2009.

(iii)

Represents management's estimates for excess severance expense due primarily to unusual changes within senior management.

(iv)

Represents management's estimate of bonus expense in excess of normalized bonus levels accrued disproportionately in the second half of 2009 based on the timing of revenue and earnings.

(v)

Represents management's estimate of unusual bad debt expense based on historical averages from 2004 through 2008.

(k)

Represents currency transaction/translation (gains)/losses, including on currency exchange hedging agreements.

(l)

Represents the following:

Quarter-to-Date

Year-to-Date

Quarters Ended

Years Ended

October 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

January 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

Predecessor

Successor

Combined

Predecessor

Predecessor

Successor

Combined

Predecessor

(in thousands)

Savings from

Headcount

reductions (i)

$               -

$             -

$           -

$               -

$               -

$             -

$           -

$          2,975

Insourcing glass

Production

savings (ii)

-

-

-

1,028

462

-

462

3,735

Procurement

savings (iii)

-

-

-

332

141

-

141

1,279

 Total

$               -

$             -

$           -

$          1,360

$             603

$             -

$         603

$          7,989

(i)

Represents savings from headcount reductions as a result of general economic conditions.

(ii)

Represents management's estimates of cost savings that could have resulted from producing glass in-house at the Company's Cuyahoga Falls, Ohio window facility had such production started on January 4, 2009.

(iii)

Represents management's estimate of cost savings that could have resulted from entering into a leveraged procurement program with an outside consulting firm had such program been entered into on January 4, 2009.

Quarter-to-Date

Year-to-Date

Quarters Ended

Years Ended

October 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

January 3,

2010

to

October 12,

2010

October 13,

2010

to

January 1,

2011

January 1,

2011

January 2,

2010

Predecessor

Successor

Combined

Predecessor

Predecessor

Successor

Combined

Predecessor

(in thousands)

Vinyl windows

$        13,213

$   118,778

$  131,991

$      112,576

$      316,102

$   118,778

$   434,880

$      389,293

Vinyl siding

products

6,591

41,504

48,095

49,099

181,904

41,504

223,408

210,212

Metal products

5,702

35,226

40,928

40,732

147,321

35,226

182,547

167,749

Third-party

manufactured

products

8,770

55,511

64,281

52,352

196,587

55,511

252,098

210,806

Other products and

services

1,556

18,230

19,786

19,240

56,024

18,230

74,254

68,047

 Total

$        35,832

$   269,249

$  305,081

$      273,999

$      897,938

$   269,249

$1,167,187

$   1,046,107

ASSOCIATED MATERIALS, LLC

UNAUDITED CONDENSED

CONSOLIDATED BALANCE SHEETS

(In thousands)

January 1,

2011

January 2,

2010

Successor

Predecessor

ASSETS

Current assets:

Cash and cash equivalents

$    13,789

$    55,905

Accounts receivable, net

118,408

114,355

Inventories

146,215

115,394

Income taxes receivable

3,291

3,905

Deferred income taxes

—

4,921

Prepaid expenses

8,995

8,945

Total current assets

290,698

303,425

Property, plant and equipment, net

137,862

109,037

Goodwill

566,423

231,263

Other intangible assets, net

731,014

96,081

Other assets

29,907

22,323

      Total assets

$  1,755,904

$    762,129

LIABILITIES AND MEMBER'S EQUITY / STOCKHOLDERS' (DEFICIT)

Current liabilities:

Accounts payable

$  90,190

$    87,580

Accrued liabilities

79,319

73,087

Deferred income taxes

19,989

2,312

Income taxes payable

2,506

1,112

Total current liabilities

192,004

164,091

Deferred income taxes

144,668

36,557

Other liabilities

132,755

61,326

Long-term debt

788,000

675,360

Commitments and contingencies

Convertible preferred stock, $.01 par value

—

150,000

Member's equity / stockholders' (deficit)

498,477

(325,205)

      Total liabilities and member's equity / stockholders' (deficit)

$  1,755,904

$    762,129