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, 2011 | July 3, 2010 | July 2, 2011 | July 3, 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 | |||||
____________
(1) | 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 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, 2011 | July 3, 2010 | July 2, 2011 | July 3, 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 | |||||
____________
(a) | Represents professional fees incurred in connection with the Merger. | |
(b) | 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 during the second quarter of 2011. | |
(c) | Represents annual management fees paid to Harvest Partners, L.P. (one of our sponsors prior to the Merger). | |
(d) | 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 Vice President of Operations, in June 2011. | |
(e) | 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 amount of cash flows over the remaining lease term. | |
(f) | Represents legal and accounting fees incurred in connection with tax restructuring projects. | |
(g) | Represents bank audit fees incurred under our prior ABL Facility. | |
(h) | Represents stock compensation related to restricted share units issued to certain board members, including the Interim Chief Executive Officer. | |
(i) | Represents the following (in thousands): | |
Quarters Ended | Six Months Ended | ||||||||
July 2, 2011 | July 3, 2010 | July 2, 2011 | July 3, 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 | |||||
____________
(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 our warehouse facility adjacent to the Ennis manufacturing, which we discontinued using during 2009. | ||||||
(iii) | Represents management's estimates for excess severance expense primarily due to unusual changes within management. | ||||||
(iv) | Represents the excess of cash paid over the estimated fair values of purchased equipment previously leased. | ||||||
(v) | Represents management's estimate of excess legal expense incurred in connection with the defense of certain warranty related claims. | ||||||
(j) | Represents currency transaction/translation (gains)/losses, including on currency exchange hedging agreements. | |
(k) | 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 approximately $0.1 million. | |
Net Sales by Principal Product Offering (In thousands) | |||||||||
Quarters Ended | Six Months Ended | ||||||||
July 2, 2011 | July 3, 2010 | July 2, 2011 | July 3, 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 | January 1, 2011 | |||
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | $ 6,785 | $ 13,789 | ||
Accounts receivable, net of allowance for doubtful accounts of $9,732 at July 2, 2011 and $9,203 at January 1, 2011 | 158,291 | 118,408 | ||
Inventories | 193,429 | 146,215 | ||
Income taxes receivable | — | 3,291 | ||
Prepaid expenses | 9,058 | 8,995 | ||
Total current assets | 367,563 | 290,698 | ||
Property, plant and equipment, net | 137,460 | 137,862 | ||
Goodwill | 573,912 | 566,423 | ||
Other intangible assets, net | 725,940 | 731,014 | ||
Other assets | 28,326 | 29,907 | ||
Total assets | $ 1,833,201 | $1,755,904 | ||
Liabilities and Member's Equity | ||||
Current liabilities: | ||||
Accounts payable | $ 138,500 | $ 90,190 | ||
Accrued liabilities | 69,937 | 79,319 | ||
Deferred income taxes | 16,422 | 19,989 | ||
Income taxes payable | 738 | 2,506 | ||
Total current liabilities | 225,597 | 192,004 | ||
Deferred income taxes | 144,668 | 144,668 | ||
Other liabilities | 135,468 | 132,755 | ||
Long-term debt | 857,800 | 788,000 | ||
Member's equity | 469,668 | 498,477 | ||
Total liabilities and member's equity | $ 1,833,201 | $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
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