Associated Materials, LLC Reports Third Quarter Results
CUYAHOGA FALLS, Ohio, Nov. 17, 2010 /PRNewswire-FirstCall/ -- Associated Materials, LLC (the "Company") today announced results for its third quarter ended October 2, 2010. Financial highlights are as follows:
- Net sales for the third quarter ended October 2, 2010 were $329.5 million, a 1.5% increase from net sales of $324.8 million for the same period in 2009.
- Adjusted EBITDA was $44.7 million for the third quarter of 2010 compared to $54.9 million for the same period in 2009.
- Net sales for the nine months ended October 2, 2010 were $862.1 million, an 11.7% increase from net sales of $772.1 million for the same period in 2009.
- Adjusted EBITDA was $100.2 million for the nine months ended October 2, 2010 compared to $83.3 million for the same period in 2009.
Subsequent to the end of the third quarter, investment funds affiliated with Hellman & Friedman LLC completed their purchase of the Company on October 13, 2010. In connection with the consummation of the purchase, the Company and its then indirect parent entities, AMH Holdings, LLC and AMH Holdings II, Inc., satisfied and discharged their obligations under the indentures governing the 9.875% notes, the 11.25% notes and the 20% notes. In addition, the Company repaid and terminated the ABL Facility and the outstanding principal amount of the borrowings and accrued interest thereon under the intercompany loan agreement with its then indirect parent was deemed repaid.
Tom Chieffe, President and Chief Executive Officer, commented, "We are very excited to be partnering with Hellman & Friedman and believe their experience and understanding of our business will help us pursue our strategic objectives and continue to improve the performance of the Company. We are pleased, that despite a 13.5% decrease in single family housing starts during the third quarter, we have reported an increase in sales of 1.5% from a year ago and an increase of 11.7% for the nine months ended as compared to the prior year. These improvements are a result of our beneficial combination of sales to both the new home construction and repair and remodeling markets and our continued focus on pricing disciplines, quality and the introduction of new and innovative products. During the third quarter, we experienced significant growth of third-party complementary products and have continued to focus on expanding our customer base across all existing product categories. Although we have seen improvement within operations as a result of the cost reduction and efficiency improvement initiatives previously implemented, we continue to seek other manufacturing and procurement cost savings opportunities to generate additional growth within the Company's EBITDA margins. We continue to believe the long-term fundamentals of the building products industry remain strong and the Company is well-positioned to benefit as the housing market continues to recover."
Earnings Conference Call
Management will host its third quarter earnings conference call on Wednesday, November 17th 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 23922888. A replay of the call will be available through November 24th by dialing (800) 642-1687 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 |
Nine Months Ended |
|||||
October 2, |
October 3, |
October 2, |
October 3, |
|||
Net sales |
$ 329,547 |
$ 324,807 |
$ 862,106 |
$ 772,108 |
||
Cost of sales |
238,508 |
226,998 |
630,770 |
566,065 |
||
Gross profit |
91,039 |
97,809 |
231,336 |
206,043 |
||
Selling, general and administrative expenses |
53,186 |
53,323 |
154,256 |
153,118 |
||
Manufacturing restructuring costs |
— |
— |
— |
5,255 |
||
Income from operations |
37,853 |
44,486 |
77,080 |
47,670 |
||
Interest expense, net |
6,218 |
5,999 |
18,801 |
16,581 |
||
Foreign currency loss (gain) |
31 |
112 |
(21) |
(110) |
||
Income before income taxes |
31,604 |
38,375 |
58,300 |
31,199 |
||
Income tax provision |
12,194 |
15,444 |
21,330 |
12,660 |
||
Net income |
$ 19,410 |
$ 22,931 |
$ 36,970 |
$ 18,539 |
||
Other Data: |
||||||
EBITDA (a) |
$ 43,410 |
$ 50,008 |
$ 93,955 |
$ 64,359 |
||
Adjusted EBITDA (a) |
44,741 |
54,899 |
100,185 |
83,338 |
||
(a) |
EBITDA is calculated by reference to net income plus interest and amortization of other financing costs, provision for income taxes, depreciation and amortization. Consolidated EBITDA, as defined in the Revolving Credit Agreement and the Indenture is calculated by adjusting EBITDA to reflect adjustments permitted in calculating covenant compliance under these agreements. Consolidated EBITDA will be referred to as Adjusted EBITDA herein. The Company believes that the inclusion of supplementary adjustments to EBITDA are appropriate to provide additional information to investors about items that will impact the calculation of EBITDA that is used to determine covenant compliance under the Revolving Credit Agreement and the Indenture. Since not all companies use identical calculations, this presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. |
|||||
The reconciliation of the Company's net income to EBITDA and Adjusted EBITDA is as follows (in thousands): |
||||||||
Quarters Ended |
Nine Months Ended |
Twelve Months Ended |
||||||
October 2, |
October 3, |
October 2, |
October 3, |
October 2, |
October 3, |
|||
2010 |
2009 |
2010 |
2009 |
2010 |
2009 |
|||
Net income |
$ 19,410 |
$ 22,931 |
$ 36,970 |
$ 18,539 |
$ 42,504 |
$ 19,997 |
||
Interest expense, net |
6,218 |
5,999 |
18,801 |
16,581 |
24,971 |
23,512 |
||
Income taxes |
12,194 |
15,444 |
21,330 |
12,660 |
23,802 |
14,311 |
||
Depreciation and amortization |
5,588 |
5,634 |
16,854 |
16,579 |
22,444 |
22,158 |
||
EBITDA |
43,410 |
50,008 |
93,955 |
64,359 |
113,721 |
79,978 |
||
Debt extinguishments costs (b) |
— |
— |
— |
— |
8,779 |
— |
||
Management fees (c) |
234 |
353 |
681 |
1,047 |
1,034 |
1,392 |
||
Restructuring costs (d) |
98 |
308 |
370 |
5,564 |
644 |
5,564 |
||
Impairments and write-offs (e) |
16 |
348 |
43 |
611 |
562 |
704 |
||
Employee termination costs (f) |
— |
1,715 |
— |
1,715 |
(533) |
1,715 |
||
Transaction expenses (g) |
189 |
— |
1,452 |
— |
1,452 |
— |
||
Bank fees (h) |
6 |
37 |
56 |
118 |
80 |
118 |
||
Other normalizing and unusual items (i) |
757 |
603 |
3,046 |
3,404 |
6,071 |
3,404 |
||
Foreign currency (gain) loss (j) |
31 |
112 |
(21) |
(110) |
(95) |
1,371 |
||
Pro forma cost savings (k) |
— |
1,415 |
603 |
6,630 |
1,963 |
6,630 |
||
Adjusted EBITDA (a) |
$ 44,741 |
$ 54,899 |
$ 100,185 |
$ 83,338 |
$ 133,678 |
$ 100,876 |
||
(b) |
Represents debt extinguishments costs incurred with the redemption of the Company's previously outstanding 9.75% notes and 15% notes. |
|||||||
(c) |
Represents (i) amortization of a prepaid management fee paid to Investcorp International Inc. in connection with a December 2004 recapitalization transaction of $0.1 million, $0.4 million, $0.1 million and $0.5 million for the quarter ended October 3, 2009, nine months ended October 3, 2009, twelve months ended October 2, 2010 and twelve months ended October 3, 2009, respectively, (which management fee was fully amortized as of January 2, 2010) and (ii) management fees paid to Harvest Partners. |
|||||||
(d) Represents the following (in thousands): |
|||||||||||||
Quarters Ended |
Nine Months Ended |
Twelve Months Ended |
|||||||||||
October 2, |
October 3, |
October 2, |
October 3, |
October 2, |
October 3, |
||||||||
Manufacturing restructuring charges (i) |
$ |
98 |
$ |
2 |
$ |
282 |
$ |
5,258 |
$ |
355 |
$ |
5,258 |
|
Tax restructuring charges (ii) |
—- |
306 |
88 |
306 |
289 |
306 |
|||||||
Total |
$ |
98 |
$ |
308 |
$ |
370 |
$ |
5,564 |
$ |
644 |
$ |
5,564 |
|
_________________ |
||
(i) Represents lease costs associated with the Company's discontinued use of the warehouse facility adjacent to the |
||
(ii) Represents legal and accounting fees in connection with tax restructuring projects. |
||
(e) |
Represents impairments and write-offs of assets other than by sale principally including (i) $0.3 million, |
|
(f) |
Represents $1.7 million reflected in the quarter, nine months and twelve months ended October 3, 2009 for |
|
(g) |
Represents advisory fees incurred for strategic capital structure advice. |
|
(h) |
Represents bank audit fees incurred under the Company's ABL Facility. |
|
(i) Represents the following (in thousands): |
||||||||
Quarters Ended |
Nine Months Ended |
Twelve Months Ended |
||||||
October 2, |
October 3, |
October 2, |
October 3, |
October 2, |
October 3, |
|||
2010 |
2009 |
2010 |
2009 |
2010 |
2009 |
|||
Professional fees (i) |
$ 757 |
$ 396 |
$ 2,657 |
$ 969 |
$ 2,973 |
$ 969 |
||
Excess severance costs (ii) |
- |
7 |
389 |
910 |
389 |
910 |
||
Unusual bad debt expense (iii) |
- |
(184) |
- |
3,578 |
656 |
3,578 |
||
Normalized bonus expense (iv) |
- |
384 |
- |
(2,053) |
2,053 |
(2,053) |
||
Total |
$ 757 |
$ 603 |
$ 3,046 |
$ 3,404 |
$ 6,071 |
$ 3,404 |
||
_________________ |
||||||||
(i) Represents management's estimate of non-recurring consulting fees. |
||||||||
(ii) Represents management's estimates for excess severance expense due primarily to unusual changes within senior management. |
||||||||
(iii) Represents management's estimate of unusual bad debt expense based on historical averages from 2004 through 2008. |
||||||||
(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. |
||||||||
(j) Represents unrealized currency transaction/translation gains, including on currency exchange hedgingagreements. (k) Represents the following (in thousands): |
||||||||
Quarters Ended |
Nine Months Ended |
Twelve Months Ended |
||||||
October 2, |
October 3, |
October 2, |
October 3, |
October 2, |
October 3, |
|||
2010 |
2009 |
2010 |
2009 |
2010 |
2009 |
|||
Savings from headcount reductions (i) |
$ - |
$ - |
$ - |
$ 2,975 |
$ - |
$ 2,975 |
||
Insourcing glass production savings (ii) |
- |
1,075 |
462 |
2,708 |
1,490 |
2,708 |
||
Procurement savings (iii) |
- |
340 |
141 |
947 |
473 |
947 |
||
Total |
$ - |
$ 1,415 |
$ 603 |
$ 6,630 |
$ 1,963 |
$ 6,630 |
||
_________________ |
||||||||
(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 the Company's leveraged procurement program with an outside consulting firm had such program been entered into on January 4, 2009. |
||||||||
Net Sales by Principal Product Offering (in thousands) |
|||||||||
Quarters Ended |
Nine Months Ended |
||||||||
October 2, |
October 3, |
October 2, |
October 3, |
||||||
2010 |
2009 |
2010 |
2009 |
||||||
Vinyl windows |
$111,109 |
$114,686 |
$302,889 |
$276,717 |
|||||
Vinyl siding products |
66,959 |
67,857 |
175,313 |
161,113 |
|||||
Metal products |
53,158 |
53,571 |
141,619 |
127,017 |
|||||
Third-party manufactured products |
77,925 |
66,885 |
187,817 |
158,454 |
|||||
Other products and services |
20,396 |
21,808 |
54,468 |
48,807 |
|||||
$329,547 |
$324,807 |
$862,106 |
$772,108 |
||||||
Selected Balance Sheet Data (in thousands) |
||||||
October 2, |
January 2, |
|||||
2010 |
2010 |
|||||
Cash and cash equivalents |
$54,234 |
$55,855 |
||||
Accounts receivable, net |
165,600 |
114,355 |
||||
Inventories |
160,578 |
115,394 |
||||
Accounts payable |
148,793 |
87,580 |
||||
Accrued liabilities |
68,753 |
56,925 |
||||
Total debt |
208,244 |
207,552 |
||||
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 supply centers. The Company's products are sold primarily through its extensive dual-distribution network, consisting of 119 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 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 new housing starts, changes in weather conditions, the Company's ability to comply with certain financial covenants in its ABL Facility and indentures governing its 9.875% 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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