Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ending December 27, 1996
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-14338
EURAMAX INTERNATIONAL plc
(Exact name of registrant as specified in its charter)
England and Wales 98-0166997
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No,)
5335 Triangle Pkwy Suite 550, Norcross GA. 30092
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 449-7066
Securities registered pursuant to Section
12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
None *
(Title of Class)
* Certain notes issued by the Registrant are traded on the Luxembourg Stock
Exchange.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. |X|
As of April 30, 1997, Registrant has outstanding 1,000,000 Ordinary Shares
and 34,000,000 Preference Shares. All of these shares were owned by affiliates
of the Company.
433340.3
Statements contained in this Form 10-K that are not historical facts are forward
looking statements that are subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. Those statements involve risks and
uncertainties. The actual results of Euramax International plc and Subsidiaries
(the "Company", "Euramax") could differ significantly from past results, and
from those expressed or implied in forward looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in "Business," particularly "Business-Risk Factors," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" as well as those discussed elsewhere in this Form 10-K.
Part I
Item 1. Business
General
Euramax International plc is a leading international producer of aluminum and
steel products with facilities in the U.S., the U.K., The Netherlands and
France. Euramax's products include painted sheet and coil, siding, roofing,
raincarrying systems, windows, doors and various fabricated trim parts and
components. The Company is a leading supplier to several niche markets. The
Company believes that in 1996 it sold at least 45% and 60% of the aluminum
sidewalls used by RV manufacturers in the U.S. and Europe, respectively. In the
same year, the Company sold aluminum and steel gutters and downspouts to more
than 30 of the largest 50 home centers in the U.S. The Company believes that in
1996 it sold at least 80% of all metal Do-It-Yourself raincarrying products sold
to U.S. home centers. The Company also believes that it sold at least 40% of the
steel siding sold to producers of manufactured housing in the U.S. Net sales for
1996 in the U.S. and Europe were $301.1 million and $187.8 million,
respectively.
Euramax operates downstream of producers of aluminum coil, steel coil and
aluminum ingot. These producers supply the Company with aluminum coil, steel
coil and aluminum extrusions. The Company sold approximately 137.5 and 167.1
million pounds of aluminum and steel, respectively, in 1996. To a lesser extent,
the Company also distributes and fabricates products manufactured from vinyl and
fiberglass. The Company's products are sold primarily to manufacturers of RV's
and manufactured housing, rural building contractors, distributors and home
centers.
Euramax is a national supplier in several of its key U.S. product lines and the
only national supplier with in-house coil coating capabilities to supply steel
siding to manufactured housing customers and aluminum sidewalls to RV
manufacturers. This gives the Company certain advantages over regional suppliers
who do not have in-house manufacturing capabilities or national distribution
networks. In addition, extensive in-house manufacturing capabilities coupled
with product offerings made from alternate raw materials enable Euramax to react
to changing customer preferences.
Euramax is a holding company formed by (i) ACP Holding Company ("ACP"), an
affiliate of Citicorp Venture Capital, Ltd. and (ii) CVC European Equity
Partners, L.P. ("CVCEEP") and CVC European Equity Partners (Jersey), L.P.,
(collectively with CVCEEP, "CVC Europe", and collectively with ACP, the
"Investor Group") to acquire certain portions of the fabricated products
operations of Alumax Inc. ("Alumax") pursuant to the Acquisition (defined
below). See "The Transactions." The Company's operations are conducted through
subsidiaries in the U.S. and Europe.
The Transactions
Pursuant to a purchase agreement (the "Acquisition Agreement") dated June 24,
1996 between the Company and Alumax, on September 25, 1996 (the "Closing Date"),
the Company purchased, through its wholly-owned subsidiaries, all of the issued
and outstanding capital stock of certain of Alumax's subsidiaries which operate
certain portions of Alumax's fabricated products operation (the "Acquisition").
The purchase price was approximately $251.2 million, which includes estimated
acquisition expenses of $3.9 million and adjustments for certain items including
cash acquired and working capital. The purchase price is subject to further
adjustments upon determination of the final working capital. In order to finance
the purchase price, including the payment of deferred financing fees which were
approximately $9.9 million, the Company and certain of its wholly-owned
subsidiaries (i) incurred approximately $100.0 million of indebtedness under a
credit agreement providing for $40.0 million in term loans and a revolving
credit facility of up to $85.0 million (the "Credit Agreement"), (ii) issued
$135.0 million of subordinated notes and (iii) issued to the Investor Group,
certain members of management of the Company (the "Management Investors") and an
affiliate of Banque Paribas (the agent under the Credit Agreement), an aggregate
of approximately $35.0 million in preference and ordinary shares (the "Equity
Contribution").
-1-
Business Strategy
The Company's strategy is to expand its leadership position as a producer of
aluminum and steel products and to further broaden its current diversity of
products, customers and geographic regions in which it operates. To enhance the
Company's operations and profitability, the Company expects to pursue a strategy
of identifying and acquiring businesses and assets that would enable it to offer
complementary products or expand geographic coverage. The Company believes that
its strategy of expanding market share, broadening the diversity of its
businesses and continuing to provide customers with superior products through
responsive, efficient and cost effective distribution systems will be an
effective means of increasing profitability while preserving cash flow.
Market Leadership and Diversity of Business
The Company's position as a leading international downstream producer of
aluminum and steel products has enabled it to benefit from diversification
across economic and product cycles among different geographic regions and
customer groups. This diversification has historically enabled Euramax to
maintain stable margins even though demand for certain products may be affected
by changes in general and regional economic conditions such as trends in
disposable income.
Leadership in several markets: The Company's leadership in a variety of niche
markets has enabled it to maintain consistent operating results. For example,
the Company is a leading supplier of steel and aluminum sidewalls and siding to
U.S. RV and manufactured housing producers. The Company believes that its 1996
sales of raincarrying systems represent a majority of such products sold to U.S.
home centers. Similar leading positions are enjoyed by the Company's roll formed
aluminum sheet and coil products sold to RV manufacturers in the U.S. and
Europe.
Manufacturing expertise and diversity of products: The Company's technological
expertise and its ability to fabricate from alternative materials has allowed it
to develop new products and applications and to respond to the changing product
requirements of its customers. Over time, Euramax has increased its ability to
offer products manufactured from steel, vinyl and fiberglass, allowing it to
meet regional material preferences, to provide substitute products for end-users
and to retain customers in the event of demand shifts between raw materials.
Geographic diversity: The Company's sales span both the continental U.S. and
Europe, with each representing approximately 61.6% and 38.4% of 1996 net sales,
respectively. The Company has manufacturing or distribution facilities
strategically located in the U.K., The Netherlands, France and all regions of
the continental U.S. The Company's geographic diversity of sales limits reliance
on any single regional economy in the U.S. or national economy in Europe.
Customer diversity. The Company is diversified by both size and type of
customer. Of the Company's more than 3,700 customers, no single customer
accounted for more than 4.6% of net sales in 1996. The top ten customers
accounted for approximately 21.1% of 1996 net sales and represented five
distinct end-use markets. These characteristics minimize the Company's reliance
on individual customers or end-use markets.
Distribution capability. The Company's manufacturing and distribution network
consists of 29 strategically located facilities, of which 24 are located in all
major regions of the United States, and five are located in Europe. Euramax's
network of facilities allows the Company to offer a more comprehensive service
than its regional competitors and to meet the increasing demands of its
customers for short delivery lead times.
Manufacturing Processes
The Company's manufacturing processes employ a variety of equipment and several
types of facilities. Management believes that the Company's effective deployment
of equipment enables it to manufacture standard and custom products efficiently
and economically. The Company has the equipment necessary for manufacturing
substantially all of its products in-house and is able to avoid most forms of
outsourcing. This capability provides certain marketing and pricing advantages,
including the ability to better control delivery time and to develop new and
customer specific products in a more expeditious manner.
The Company's manufacturing process generally begins with painting aluminum or
steel coil through a process known as roll coating. Once coated, the aluminum or
steel is further fabricated through selected processes which include tension
leveling, embossing, slitting, rollforming, brake pressing, notching and
bending. These processes complete the appropriate steps to fabricate a finished
product.
-2-
The Company's coating and fabrication capabilities are described in more detail
as follows:
Coating (painting): Roll coating is the process of applying a variety of liquid
coatings to bare aluminum or steel coil, providing a baked-on finish that is
both protective and decorative. Over 100 million pounds of aluminum and over 30
million pounds of steel are roll coated by the Company at its eight roll coating
operations annually. The Company has three such coating lines in the U.S. and
five in Europe. The Company's roll coating facility in Roermond, The Netherlands
is one of only two facilities in the world capable of coating coil up to 100
inches in width. The Roermond line services a variety of expanding markets in
which wide coated aluminum is becoming increasingly important. Wide coils
provide customers with the opportunity to produce products more economically by
reducing labor costs and requiring fewer joints and seams in their manufacturing
processes.
The Company also employs powder coating on a line recently installed to paint
aluminum and steel sheets in the U.K. This line is one of only a few in the
world with the ability to paint customized and exotic finishes, allowing unique
design possibilities on aluminum and steel sheets. These finishes include
textures, patterns and decorative styling which have many different
applications. The Company coats aluminum extrusions on its two European powder
spray coating lines, which are located in France and in the U.K. Two of the
Company's lines in the U.S. are used to spray paint steel entry doors. A
specialized roller painting operation for appliance parts provides flexibility
in specialty decorating parts for certain appliance manufacturers.
Anodizing is an electrochemical process which alters an aluminum surface through
a controlled and accelerated oxidation process which, if desired, may also color
the material. Anodizing provides a high quality architectural finish to aluminum
extrusions which is demanded by certain customers. Anodizing is a key
manufacturing process offered by the Company at two of its European facilities.
Fabrication: After coating, much of the Company's coil is processed through
slitting operations which cut coils into more narrow widths. The cut coils may
then undergo a variety of downstream production processes which further
fabricate the aluminum and steel sheet to form the desired product. Fabrication
equipment includes rollformers, punch and brake presses and expanding machinery
for a variety of applications.
The Company also utilizes specialized equipment to inject and laminate foam to
provide insulation and rigidity to metal doors and panels. Production machinery
also includes equipment to bend, notch and cut aluminum and vinyl extrusions
required, together with glass, for the assembly of windows and doors.
-3-
Products and Customers
The Company's products are sold to a diverse group of customers operating in a
variety of industries. The Company's sales and marketing effort is organized on
a decentralized basis in order to provide the required services to the broad
customer and geographic mix with which Euramax is involved. Customers include:
o OEMs, including RV, commercial panel and appliance manufacturers
o Home Centers
o Manufactured Housing
o Distributors
o Rural Contractors
o Home Improvement Contractors
The table below lists the Company's key products, materials used, customers and
end-users, and sales regions:
- - - ------------------------------------------ --------------------- ------------------------------------- --------------------------
Products Materials Customers and End-Users Sales Regions
- - - ------------------------------------------ --------------------- ------------------------------------- --------------------------
Specialty Coated Coils (painting Aluminum, Steel OEMs, RV Manufacturers, Europe
aluminum and steel coils) Various Building Panel
Manufacturers
Roofing & Siding Aluminum, Steel, OEMs, RV Manufacturers, U.S., Europe
Vinyl, Fiberglass Manufactured Housing, Rural
Contractors, Distributors, Home
Improvement Contractors
Raincarrying Systems (gutters, Aluminum, Steel, Home Centers, Manufactured U.S., Canada
downspouts) Vinyl Housing, Rural Contractors,
Home Improvement Contractors
Soffit (roof overhangs), Fascia (trims), Aluminum, Steel Home Centers, Manufactured U.S.
Flashing (roofing valley material) Housing, Rural Contractors,
Home Improvement Contractors
Entry Doors Aluminum, Steel, OEMs, RV Manufacturers, U.S., Europe
Fiberglass Distributors, Home Improvement
Contractors
Windows Aluminum, Vinyl OEMs, RV Manufacturers, Home U.S., Europe
Improvement Contractors
Appliance Trims Aluminum, Vinyl OEMs, Appliance Manufacturers U.S.
Original Equipment Manufacturers ("OEMs") (49.6% of 1996 net sales)
The Company supplies OEMs such as RV manufacturers, commercial panel and
appliance manufacturers. The Company's principal OEM customers are described
below.
Recreational Vehicle Manufacturers. The Company is a leading supplier of various
aluminum products to RV manufacturers in the U.S. and Europe. These products
primarily consist of painted aluminum sheet and fabricated painted aluminum
panels. The Company uses its decorative graphic coating lines to produce
aluminum panels with decorative detailing in a variety of colors. The Company
also supplies RV doors, windows and finished aluminum roofing panels. In
addition, the Company began supplying laminated aluminum and fiberglass panels
to RV manufacturers in 1995.
The Company believes its decorative coating capabilities in the U.S. and in
Europe provide a technological advantage not enjoyed by its competitors. These
capabilities enable the Company to paint a stripe or other decorative pattern
directly onto the aluminum sheet according to customer specifications.
Competitors do not have these abilities; instead, they offer a decorative tape
which must be applied to the aluminum sheet. The tape cannot be applied with the
tight tolerances achieved by the Company's painting process, and
-4-
does not offer the same graphics variety. In response to demand for laminated
products in the U.S. markets, the Company recently opened a lamination line
which can laminate, among other things, fiberglass and aluminum.
Commercial Panel Manufacturers: The Company sells painted aluminum coil to
customers who produce commercial building panels. These panels become part of a
total package of commercial building wall panels and facades. The Company also
produces a composite "sandwich" building panel comprised of two aluminum skins
with a polystyrene core, which insulates and abates noise. The panels are used
in both residential (e.g., room additions and patio enclosures) and commercial
applications (e.g., service stations and school buildings), as well as in the
construction of "cold rooms" used for the storage of perishable goods.
Appliance Manufacturers: The Company enjoys a leading position in the U.S. niche
market for decorated refrigerator trims. The Company provides door trims, drawer
fascias, shelf fronts, handles and freezer trims under contracts with the five
largest U.S. home appliance manufacturers. In 1993, the Company added vinyl
extruding capabilities in response to market changes and growing preference for
vinyl extruded parts. The Company intends to utilize its expertise to produce
and market its products in other applications including other appliances and
automobiles. In Europe, the Company provides coated coil to certain appliance
manufacturers for additional fabrication.
Other Manufacturers: The Company also uses its decorative and coil coating
capabilities for products supplied to overhead door manufacturers and producers
of refrigerated transport containers. Door manufacturers produce the overhead
doors, adding the necessary hardware and accessory items to complete the
product. Transport container manufacturers represent a growing market for the
Company's products.
Home Centers (17.5% of 1996 net sales)
The Company's home center customers supply the well-established Do-It-Yourself
("DIY") market in the U.S., Canada, the United Kingdom and The Netherlands. The
Company sells building and construction products, such as residential rain
gutter systems, roof flashing products, soffits, fascias, doors, screen door
guards, shower, patio, steel roofing and siding, and residential doors. These
products, which are designed for ease of installation by DIY consumers, are
produced with aluminum, galvanized or painted steel, or occasionally with vinyl
depending on regional preferences. Home centers include small hardware stores,
large cooperative buying groups, lumberyards and major home center retailers.
The Company believes that it is the leading supplier of DIY metal raincarrying
systems in the U.S. Competitors are generally regional and thus do not have the
advantages of a nationwide service and distribution network such as the
Company's. In addition, the Company has invested in a product bar coding system
which can be used by the sophisticated inventory scanning systems prevalent in
home centers. The Company expects to exploit these strengths to introduce
additional DIY products that could be sold through this distribution channel.
Manufactured Housing (8.3% of 1996 net sales)
The Company sells rollformed steel siding and trim parts to producers of
manufactured housing in the U.S. These products are used for exterior walls and
roofs. The Company is the only supplier of steel siding to the manufactured
housing industry that has metal coating capabilities. In addition to the raw
material cost benefit, the Company views itself as an innovator in the market
for colors and decorative coating. The Company can also meet the demands of the
industry's short lead time requirements and more easily supply national accounts
with its large network of facilities. The Company has significantly increased
its market share in steel siding in the manufactured housing industry over the
last three years.
In addition to steel siding, the Company also fabricates and supplies a variety
of steel and aluminum trim components for manufactured home exteriors. To a
lesser degree, the Company also distributes vinyl siding to certain customers in
the manufactured housing industry.
Distributors (11.1% of 1996 net sales)
The Company sells to distributors (and stockists) which perform as service
centers for the next tier of customers in both the U.S. and Europe. A
distributor will typically purchase coil which is later broken down or
fabricated prior to resale. The Company markets residential steel entry door
blanks through millwork distributors, which specialize in windows, doors and
associated building products. Other residential building products sold through
distributors include a wide range of metal roof flashing materials, painted
aluminum trim coil, rain gutter, fascia/soffit systems and drip edges.
-5-
Rural Contractors (10.2% of 1996 net sales)
The Company supplies aluminum and steel roofing and siding products to rural
contractors for use in agricultural and rural buildings such as sheds and animal
confinement buildings. The Company sells its products to traditional rural
contractors, including building supply dealers, building and agricultural
cooperatives, and animal confinement integrators. Building suppliers and
agricultural cooperatives typically purchase smaller quantities of product at
multiple locations whereas contractors and integrators generally purchase large
volumes for delivery to one site.
Home Improvement Contractors (3.3% of 1996 net sales)
The Company sells a variety of products to home improvement contractors, the
most significant of which are vinyl replacement windows. Other products sold to
home improvement contractors include awnings, lattice systems, metal roofing,
shower doors, patio and entrance doors, and insulated roofing panels. In the
U.S., the Company offers a full complement of vinyl replacement windows. In the
U.K., the Company produces patio, entrance, and shower doors, marketed primarily
to home improvement contractors. The Company is also one of the largest
suppliers of lattice and painted aluminum awnings to residential contractors in
the western U.S. In addition, the Company manufactures painted aluminum and
steel panels for residential roofing, which are distributed primarily in the
Pacific Northwest. Although metal roofing costs more than traditional asphalt
shingles, it is becoming more popular due to its fire resistance, aesthetic
appeal, low cost maintenance and longer life span.
Raw Materials
The Company's products are principally manufactured from aluminum coils and
extrusions and steel coils. During 1996, approximately 137.5 million pounds of
aluminum products and approximately 167.1 million pounds of steel were sold. The
proportion sold in 1996 by value is $308.1 million of aluminum and $115.9
million of steel. Steel weighs approximately three times as much as the same
volume of aluminum. In addition, the Company sold $64.8 million of products
manufactured from materials other than aluminum and steel in 1996.
All the Company's raw material inputs are sourced from external suppliers. The
Company purchases its steel and aluminum sheet requirements from several foreign
and domestic aluminum and steel mills. Management believes there is sufficient
supply in the marketplace to competitively source all of its requirements
without reliance on any particular supplier. The Company's large volume of
aluminum and steel purchases afford it competitive market pricing.
The steel coil used by the Company, light gauge galvanized steel sheet, has a
stable price history relative to aluminum and its price fluctuations have been
generally passed on to the Company's customers. Aluminum raw material cost
increases and decreases can temporarily affect the Company's margins. Supplier
price increases, of normal frequency and amount, can be passed on to customers
usually within two to four months. Conversely, as aluminum prices decline,
corresponding price reductions are typically passed on to customers.
The Company continually scrutinizes aluminum costs and adjusts its purchasing,
inventory and sales programs accordingly. At certain times, the Company adopts a
strategy of locking in margins on long-term, higher volume contracts by buying
aluminum at a fixed price in order to guarantee a margin on a specific customer
order. At times, high aluminum prices have led customers to use alternative
products, including steel, vinyl and fiberglass. The Company believes that its
ability to supply certain products manufactured from these alternatives,
provides it with a competitive advantage over competitors who do not offer these
choices.
Competition
In the U.S., competition comes largely from privately held companies that are
generally much smaller than the Company. In Europe, competitors of the Company
include three to four integrated companies in the specialty coil-coating
business. Other smaller companies compete with the Company in the building and
construction, RV and transportation markets in Europe, both on a regional basis
and some on a pan-European basis.
Environmental, Health and Safety Matters
The Company's manufacturing facilities are subject to a range of federal, state,
local and foreign environmental and occupational health and safety laws,
including those which relate to air emissions, wastewater discharges, the
handling and disposal of solid and
-6-
hazardous waste, and the remediation of contamination associated with the
current and historic use of hazardous substances or materials (collectively,
"Environmental Laws"). If a release of hazardous substances or materials occurs
on or from the Company's properties or any offsite disposal location used by the
Company, or if contamination from prior activities is discovered at any of the
Company's properties, the Company may be held liable for the costs of
remediation (including any response costs), natural resource damages and
associated transaction costs. While the amount of such liability could be
material, the Company devotes resources to ensuring that its current operations
are conducted in a manner that intends to reduce such risks.
Based upon an environmental review conducted by outside consultants in
connection with the Acquisition and assuming compliance by Alumax with its
indemnification obligations under the Acquisition Agreement, the Company
believes that it is currently in compliance with, and not subject to liability
under, Environmental Laws except where such noncompliance or liability would not
reasonably be expected to have a material adverse effect on the consolidated
financial position or results of operations of the Company and its subsidiaries
taken as a whole. Pursuant to the terms of the Acquisition Agreement, Alumax has
agreed to correct and to bear substantially all costs with respect to certain
identified conditions of potential noncompliance and liability under
Environmental Laws, none of which costs are currently believed to be material.
Alumax's indemnification obligations under the Acquisition Agreement are not
subject to an aggregate dollar limitation with respect to specifically
identified environmental matters. However, with respect to all other
environmental matters, Alumax's obligations are limited to $125.0 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation- Environmental Matters."
Employees
As of December 27, 1996, the Company employed 2,233 people of which 828 were
employed in Europe and 1,405 were employed in the United States. Of these 2,233
employees, 28% were salaried and 72% were hourly employees. Manufacturing
employees at seven of the Company's manufacturing facilities are covered by
collective bargaining agreements. The Company and its subsidiaries are not party
to any pending labor proceedings and believe that employee relations are
satisfactory.
-7-
Risk Factors
Substantial Leverage
The Company incurred significant debt in connection with the Acquisition. As of
December 27, 1996, the Company had outstanding indebtedness of $211.7 million,
$35.2 million of Preference Shares (as defined) and $1.0 million of ordinary
shareholders' equity. For the year ended December 27, 1996, the Company's ratio
of earnings to fixed charges was 1.25 to 1. The Company's leveraged financial
position poses substantial consequences to holders of the subordinated notes,
including the risks that: (i) a substantial portion of the Company's cash flow
from operations is dedicated to the payment of interest on the subordinated
notes and the payment of principal and interest under the Credit Agreement and
other indebtedness; (ii) the Company's leveraged position may impede its ability
to obtain financing in the future for working capital, capital expenditures and
general corporate purposes, including acquisitions; and (iii) the Company's
highly leveraged financial position may make it more vulnerable to economic
downturns and may limit its ability to withstand competitive pressures. The
Company believes that, based on its current level of operations, it will have
sufficient capital to carry on its business and will be able to meet its
scheduled debt service requirements. However, there can be no assurance that the
future cash flow of the Company will be sufficient to meet the Company's
obligations and commitments. In addition, the Credit Agreement contemplates that
all borrowings thereunder will become due prior to 2003. If the Company is
unable to generate sufficient cash flow from operations in the future to service
its indebtedness and to meet its other commitments, the Company will be required
to adopt one or more alternatives, such as refinancing or restructuring its
indebtedness, selling material assets or operations or seeking to raise
additional debt or equity capital. There can be no assurance that any of these
actions could be effected on a timely basis or on satisfactory terms or that
these actions would enable the Company to continue to satisfy its capital
requirements. In addition, the terms of existing or future debt agreements,
including the Credit Agreement and related indenture, may prohibit the Company
from adopting any of these alternatives. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Customers in Cyclical Industries
Demand for most of the Company's products is cyclical in nature and subject to
changes in general economic conditions that affect market demand. Sales to the
building and construction markets are driven by trends in commercial and
residential construction, housing starts, residential repair and remodelings.
Transportation sales are also cyclical in nature and typically follow the trends
in the automotive, truck and recreational vehicle manufacturing industries.
Historically, lower demand has led to lower margins, lower production levels, or
both.
Dependence on Aluminum
The Company's primary raw material is aluminum coil. Because changes in aluminum
prices are generally passed through to the Company's customers, increases or
decreases in aluminum prices generally cause corresponding increases and
decreases in reported net sales, causing fluctuations in reported revenues that
are unrelated to the level of business activity. However, if the Company is
unable to pass through aluminum price changes to its customers in the future,
the Company could be materially adversely affected. Any major dislocation in the
supply and/or price of aluminum could have a material adverse effect on the
Company's business and financial condition. The Company is therefore subject to
the short-term commodity risk of carrying aluminum in its inventory. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Subordination of Notes; Holding Company Structure
The subordinated notes and a related guarantee (the "Guarantee") given by
Amerimax Holdings, Inc., the U.S. holding company subsidiary of Euramax, are
contractually subordinated to all Senior Debt including all obligations under
the Credit Agreement. In the event of a circumstance in which the contractual
subordination provisions apply, holders of the subordinated notes will not be
entitled to receive, and will have an obligation to pay over to holders of
Senior Debt, any payments they may receive in respect of such notes, including
any payments received in respect of any Claims (as defined in the related
indenture). At December 27, 1996, the aggregate amount of consolidated
indebtedness and other liabilities which the notes are effectively subordinated
to is approximately $151.6 million, of which approximately $76.7 million is
outstanding under the Credit Agreement. The indebtedness under the Credit
Agreement will become due prior to the time the principal obligations under the
Notes become due. The issuers of the subordinated notes, which are the Company
and two of its subsidiaries, Euramax European Holdings PLC and Euramax European
Holdings, B.V. (the "Issuer") and the Amerimax Holdings, Inc. (the "Guarantor")
are holding companies and do not have any independent operations. Accordingly,
the notes and the Guarantee are structurally subordinated to all existing and
future indebtedness of the subsidiaries of
-8-
the Issuers and the Guarantor, through which the Company's operations are
conducted, including obligations under the Credit Agreement. Subject to certain
limitations, the Indenture will permit the Issuers and their subsidiaries to
incur additional indebtedness. See "The Transactions." The holders of any
indebtedness of the Issuers' subsidiaries are entitled to payment of their
indebtedness from the assets of such subsidiaries prior to the holders of any
general unsecured obligations of the Issuers, including the Notes. In addition,
substantially all of the assets of the Company and its subsidiaries are or may
in the future be pledged to secure other indebtedness of the Company.
Restrictions Imposed by the Credit Agreement and the Indenture
The Credit Agreement requires the Company to maintain specified financial ratios
and tests, among other obligations, including a minimum interest coverage ratio,
a minimum fixed charge coverage ratio, a maximum leverage ratio, a minimum
EBITDA requirement and maximum amounts of capital expenditures. In addition, the
Credit Agreement restricts, among other things, the Issuers' ability to incur
additional indebtedness and make acquisitions. A failure to comply with the
restrictions contained in the Credit Agreement could lead to an event of default
thereunder which could result in an acceleration of such indebtedness. Such an
acceleration would constitute an event of default under the Indenture relating
to the Notes. In addition, the Indenture restricts, among other things, the
Company's ability to incur additional indebtedness, sell assets, make certain
payments and dividends or merge or consolidate. A failure to comply with the
restrictions in the Indenture could result in an event of default under the
Indenture.
Acquisition Strategy
As part of the Company's strategy to enhance and maintain its competitive
position, the Company has entered into an agreement for the acquisition of the
Fabral building panel manufacturing operations ("Fabral") from Gentek Holdings,
Inc. There can be no assurance that the Fabral acquisition will be consummated
or that the Fabral acquisition or any future acquisitions will not have a
material adverse effect upon the Company, particularly in the fiscal quarters
immediately following the consummation of such transactions due to operational
disruptions, unexpected expenses and accounting charges which may be associated
with the integration of such acquisitions.
Although no additional agreements have been reached, the Company has engaged in
and continues to engage in evaluations of and discussions with potential
acquisition candidates. Any such transaction(s) may be financed by the incurring
of additional indebtedness which could be material. See "Risk Factors
Substantial Leverage." Any such transaction(s) would be subject to negotiations
of definitive agreements, satisfactory financing arrangements (including
compliance with the limitations on issuance of indebtedness in the Indenture and
in the Credit Agreement) and applicable governmental approvals and consents. No
such agreements have been reached to date, and there can be no assurance that
any additional acquisitions will be completed or that such acquired entities or
assets will be successfully integrated into the Company's operations, or will be
able to operate profitably.
Risk of Currency Exchange Rate Fluctuations and International Manufacturing
In 1996, approximately 38% of the Company's net sales were made outside the
United States. The U.S. dollar value of the Company's sales varies with currency
exchange rate fluctuations. Changes in currency exchange rates could have an
adverse effect on the Company's results of operations and its ability to meet
interest and principal obligations on the Notes. International manufacturing and
sales are subject to risks including labor unrest, potentially high costs of
terminating labor contracts, restrictions on transfers of funds, export duties
and quotas, domestic and international customs and tariffs, unexpected changes
in regulatory environments, difficulty in obtaining distribution and support,
potentially adverse tax consequences and changes in effective tax rates. There
can be no assurance that any of the foregoing factors will not have a material
adverse effect on the Company's ability to increase or maintain its
international sales or on the Company's results of operations. See "Business."
Impact of Environmental Regulation
The Company's U.S. and European facilities are subject to the requirements of
federal, state, local and foreign environmental and occupational health and
safety laws and regulations. There can be no assurance that Euramax is at all
times in compliance with all such requirements. Euramax has made and will
continue to make capital expenditures to comply with environmental requirements.
As is the case with manufacturers in general, if a release of hazardous
substances occurs on or from Euramax's properties or any offsite disposal
location used by Euramax, or if contamination from prior activities is
discovered at any of Euramax's properties, Euramax may be held liable for
cleanup costs, natural resource damages and associated transaction costs. The
amount of such liability
-9-
could be material. Euramax has been named a party potentially responsible for
the costs of investigating and remediating nine waste disposal sites, pursuant
to the federal Comprehensive Environmental Response, Compensation, and Liability
Act of 1990. In addition, Euramax is currently engaged in environmental
remediation or has reason to believe that remediation may be required at three
properties currently operated by the Company. See "Business - Environmental,
Health and Safety Matters."
Dependence on Key Personnel
The Company is dependent on the continued services of its senior management
team. Although the Company believes it could replace key employees in an orderly
fashion should the need arise, the loss of such key personnel could have a
material adverse effect on the Company. The Company does not maintain key-person
insurance for any of its officers, employees or directors. See "Management
Directors and Key Officers."
Competition
The markets in which the Company competes are highly competitive. In the United
States, competition comes largely from privately held companies that are
generally much smaller than the Company. In Europe, competitors of the Company
include three to four integrated companies in the specialty coil coating
business. Other smaller companies compete with the Company in the building and
construction, RV and transportation markets in Europe, both on a regional basis
and some on a pan-European basis. There can be no assurance that the Company
will be able to compete effectively in each of its markets in the future. See
"Business - Competition."
Controlling Shareholders
The Investor Group owns 79.2% of the outstanding ordinary shares of the Company
and collectively controls the affairs and policies of the Company. Circumstances
may occur in which the interests of the Investor Group, as shareholders of the
Company, could be in conflict with the interests of the holders of the Notes. In
addition, the Investor Group may have an interest in pursuing acquisitions,
divestitures or other transactions that, in their judgment, could enhance their
equity investment, even though such transactions might involve risks to the
holders of the Notes. See "Security Ownership."
Limitations on Change of Control
In the event of a Change of Control, the Issuers will be required to make an
offer for cash to repurchase the Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon to the repurchase date. A
Change of Control will result in an event of default under the Credit Agreement
and may result in a default under other indebtedness of the Company that may be
incurred in the future. The Credit Agreement will prohibit the purchase of
outstanding Notes prior to repayment of the borrowings under the Credit
Agreement and any exercise by the holders of the Notes of their right to require
the Company to repurchase the Notes will cause an event of default under the
Credit Agreement. Finally, there can be no assurance that the Company will have
the financial resources necessary to repurchase the Notes upon a Change of
Control.
Risk of Fraudulent Transfer
Amerimax, as Guarantor, has guaranteed the entire aggregate principal amount of
the subordinated notes. Amerimax has issued an intercompany note (the
"Intercompany Note") to the Company in the principal amount of approximately
$80.2 million. Under applicable provisions of the U.S. Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance laws, if
Amerimax, at the time it issued the Guarantee, (i) incurred such indebtedness
with intent to hinder, delay or defraud creditors, or (ii)(a) received less than
reasonably equivalent value or fair consideration for incurring such
indebtedness and (b)(1) was insolvent at the time of incurrence, (2) was
rendered insolvent by reason of such incurrence (and the application of the
proceeds thereof), (3) was engaged or was about to engage in a business or
transaction for which the assets remaining with the Company constituted
unreasonably small capital to carry on its businesses, or (4) intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they mature, then, in each case, a court of competent jurisdiction could void,
in whole or in part, the Notes, or, in the alternative, subordinate the
Guarantee to existing and future indebtedness of Amerimax. To the extent that
the Guarantee and/or the Intercompany Note were determined to be a fraudulent
conveyance or held unenforceable for any reason, the holders of the Notes would
cease to have a claim, or would have a limited claim, in respect to Amerimax. In
such event, the claims of the holders of the Notes would be subject to the prior
payment of all liabilities of Amerimax. The measure of insolvency for purposes
of the foregoing will vary depending upon the law applied in such case.
Generally, however, Amerimax would be considered insolvent if the sum of its
debts, including contingent liabilities, was greater than all of its assets at
fair valuation or if the present fair saleable
-10-
value of its assets was less than the amount that would be required to pay the
probable liability on its existing debts, including contingent liabilities, as
they become absolute and matured.
Each of Euramax, Euramax U.K. and Euramax B.V. are severally liable for the
entire aggregate principal amount of the Notes. To the extent that insolvency,
bankruptcy or fraudulent transfer laws, or their equivalents, in the
jurisdictions of incorporation of Euramax, Euramax U.K. or Euramax B.V. have
provisions similar to those described above and an administrator or a court of
competent jurisdiction were to make a finding of insolvency or a similar
holding, all or a portion of the claims with respect to that Issuer in respect
of the Notes could be avoided or subordinated to other debts of such Issuer. In
the event an administrator, a court, or other equivalent person were to avoid or
subordinate the Notes, holders of the Notes would cease to have a claim in
respect to such Issuer and would be solely creditors of the remaining Issuers
and the Guarantor.
Management believes that, for purposes of all such insolvency, bankruptcy and
fraudulent transfer or conveyance laws, the Notes and the Guarantee were issued
without the intent to hinder, delay or defraud creditors and for proper purposes
and in good faith and that the Issuers and the Guarantor, after the issuance of
the Notes and the Guarantee and the application of the proceeds thereof, will be
solvent, will have sufficient capital for carrying on their respective business
and will be able to pay their respective debts as they mature. There can be no
assurance, however, that a court passing on such questions would agree with
management's view.
-11-
Item 2. Properties
The Company's principal business office and headquarters are located in
Uxbridge, England, with executive offices located in Norcross (Atlanta),
Georgia. The principal facilities of the Company as of December 27, 1996 are
listed below:
Facility Function Square Feet
- - - --------------------------------------- --------------------------------------- ------------------------
U.S.
Anaheim, CA Manufacturing (Leased) 15,000
Bedford Park, IL Manufacturing (Leased) 70,000
Bloomsburg, PA Manufacturing (Leased) 96,000
Bristol, IN Manufacturing (Owned) 110,115
Bristol, IN Office (Leased) 3,454
Carrollton, KY Manufacturing (Owned) 127,000
Dallas, TX Office (Leased) 12,230
Elkhart, IN Manufacturing (Leased) 60,000
Grand Prairie, TX Manufacturing (Leased) 45,281
Lancaster, PA Manufacturing (Owned) 220,000
Loveland, CO Manufacturing (Leased) 20,133
Mansfield, TX Manufacturing (Owned) 55,280
Marshfield, Wl Manufacturing (Owned) 28,200
McPherson, KS Manufacturing (Owned) 35,000
Mesa, AZ Manufacturing (Leased) 30,200
Moulton, AL Manufacturing (Owned) 39,152
Norcross, GA Executive Offices (Leased) 3,627
Ocala, FL Manufacturing (Leased) 85,190
Reidsville, NC Manufacturing (Leased) 62,575
Richmond, IN Office and Manufacturing (Leased) 82,720
Romoland, CA Manufacturing (Owned) 65,500
Sacramento, CA Manufacturing (Leased) 40,800
Stayton, OR Manufacturing (Leased) 35,733
Tifton, GA Manufacturing (Leased) 55,600
Tucker, GA Manufacturing (Leased) 35,000
West Sacramento, CA Manufacturing (Leased) 70,000
West Helena, AR Manufacturing (Owned) 230,000
EUROPE
Corby, England Manufacturing (Owned) 171,000
Pudsey, England Manufacturing (Owned & Leased) 211,200
Uxbridge, England Headquarters (Leased) 1,400
Andrezieux-Boutheon, Manufacturing(Owned) 69,968
France
Montreuil-Bellay, France Manufacturing (Owned) 178,663
Roermond, The Netherlands Manufacturing (Owned) 208,216
Management believes that the Company's facilities, taken as a whole, have
adequate productive capacity and sufficient manufacturing equipment to conduct
business at levels meeting current demand.
-12-
Item 3. Legal Proceedings
The Company and its subsidiaries are not currently parties to any pending legal
proceedings other than such proceedings incident to its business. Management
believes that such proceedings would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the consolidated
financial position or results of operations of the Company and its subsidiaries
taken as a whole. See further information provided in Item 1. "Business" and
Item 7. "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Item 4. Submission of Matters to a Vote of Security Holders
There were no items submitted for vote of Security Holders.
Item 5. Market for Registrant's Common Equity and Related Stockholders Matters
The Company consummated an exchange offer of notes pursuant to a registration
statement filed under the Securities Act of 1933. There is no established public
trading market for any class of common ("ordinary") equity of the Company. As of
December 27, 1996 there are 13 holders of record of the Company's ordinary
shares.
In connection with the Transactions, the Company issued 34,000,000 shares of
redeemable preference shares. The preference shares accrue fixed, cumulative
dividends of 14% per annum compounded quarterly. These preference shares are
more fully described in Note 6 to the Financial Statements.
During the fourth quarter of fiscal 1996, no securities were issued by the
Company which were not registered under the Securities Act of 1933, except the
initial issuance of notes in connection with the Acquisition. These notes were
sold pursuant to Rule 144A, as previously described in the Company's
Registration Statement on Form S-4.
-13-
Item 6. Selected Historical Financial Data
Set forth below are selected historical financial data of the Company as of the
dates and for the periods presented. For purposes of this presentation, all
predecessor financial data represents such data for the Company when it was a
division of Alumax. The selected historical financial data as of and for each of
the three years in the period ended December 31, 1995, and the nine months ended
September 25, 1996, and the three months ended December 27, 1996, were derived
from the audited Financial Statements of the Company. The selected historical
financial data as of and for the year ended December 31, 1992 were derived from
the unaudited Financial Statements of the Company for such period which, in the
opinion of management of the Company, reflect all adjustments necessary to
present fairly the combined financial position and results of operations of the
unaudited period. Due to required purchase accounting adjustments relating to
the Transaction the consolidated financial and other data for the period
subsequent to the acquisition (the "Successor" period) is not comparable to such
data for the periods prior to the acquisition (the "Predecessor" periods). The
information contained in this table should be read in conjunction "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and accompanying notes thereto included herein.
------------------------------------------------------------------- ----------------- -----------
Predecessor Successor Combined
------------------------------------------------------------------- ----------------- -----------
Nine Three
months months Year
ended ended ended
Year ended December 31, September 25, December 27, December 27,
-------------------------------------------------
Thousands of U.S. Dollars 1992 1993 1994 1995 1996 1996 1996
----------- ---------- ----------- ----------- ---------------- ----------------- -----------
Statement of Earnings Data:
Net sales $ 392,781 $ 385,487 $ 446,572 $ 483,462 $ 363,308 $ 125,529 $ 488,837
----------- ---------- ----------- ----------- ---------------- ----------------- ---------
Costs and expenses:
Cost of goods sold 317,691 316,841 366,717 399,989 300,185 104,055 404,240
Selling and general 34,430 35,336 42,424 41,351 33,286 10,950 44,236
Depreciation and amortization 8,088 7,645 7,672 7,980 6,995 2,591 9,586
----------- ---------- ----------- ----------- ---------------- ----------------- ---------
360,209 359,822 416,813 449,320 340,466 117,596 458,062
----------- ---------- ----------- ----------- ---------------- ----------------- ---------
Earnings from operations 32,572 25,665 29,759 34,142 22,842 7,933 30,775
Interest expense (1,689) (1,950) (1,155) (4,089) ( 930) (6,235) (7,165)
Interest income 1,311 800 900 1,100 308 48 356
Other income (expense) (139) (348) (285) (96) (298) (235) (533)
----------- ---------- ----------- ----------- ---------------- ----------------- ---------
Earnings before income taxes 32,055 24,167 29,219 31,057 21,922 1,511 23,433
Provision for income taxes 15,135 8,708 12,038 11,399 8,342 505 8,847
----------- ---------- ----------- ----------- ---------------- ----------------- ---------
Net earnings 16,920 15,459 17,181 19,658 13,580 1,006 14,586
Dividends on redeemable
preference shares - - - - - 1,191 1,191
----------- ---------- ----------- ----------- ---------------- ----------------- ---------
Net earnings (loss) available
ordinary shareholders for $ 16,920 $ 15,459 $ 17,181 $ 19,658 $ 13,580 $ (185) $ 13,395
=========== ========== =========== =========== ================ ================= =========
Other Data:
Capital expenditures $ 8,879 $ 7,700 $ 9,595 $ 17,429 $ 11,518 $ 682 $ 12,200
Ratio of earnings to fixed charges(1) 12.45x 8.76x 13.04x 6.83x 12.63x 1.26x 3.78x
Balance Sheet Data (end of period):
Working capital $ 79,611 $ 102,707 $ 126,659 $ 127,380 $ 120,940 $ 97,619 $ 97,619
Total assets 170,372 196,541 236,771 236,649 335,766 327,293 327,293
Total long-term debt, including
current maturities _ _ _ _ 235,000 211,740 211,740
Redeemable preference shares _ _ _ _ 34,000 35,191 35,191
Total ordinary shareholders' equity 105,976 110,523 133,786 151,461 1,000 2,173 2,173
- - - ----------------------
(1) Earnings used in computing the ratio of earnings to fixed charges
consist of earnings before income taxes plus fixed charges. Fixed charges
consist of interest expense, including amortization of debt issuance costs
and the estimated interest component of rent expense.
-14-
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the "Selected
Historical Financial Data" and the Financial Statements of the Company and the
accompanying notes thereto included elsewhere herein. Certain risk factors,
among others, should be considered carefully in evaluating the Company and its
business. These risk factors include the following: (i) Substantial Leverage,
(ii) Customers in Cyclical Industries, (iii) Dependence on Aluminum, (iv)
Subordination on New Notes, (v) Restrictions imposed by the Credit Agreement and
Indenture, (vi) Acquisition Strategy, (vii) Risk of Currency Exchange Rate
Fluctuations and International Manufacturing, (viii) Impact of Environmental
Regulation, (ix) Dependence on Key Personnel, (x) Competition, (xi) Controlling
Shareholders, (xii) Limitations on Change of Control, and (xiii) Risk of
Fraudulent Transfer.
General
The Company is a leading international downstream producer of aluminum and steel
products with facilities in the U.S., the U.K., The Netherlands and France.
Euramax's products are produced primarily from light gauge aluminum and steel
coil and include painted sheet and coil, siding, roofing, raincarrying systems,
windows, doors and various trim parts and components. The Company's products are
sold primarily to manufacturers of RV's and manufactured housing, rural building
contractors, distributors and home centers. See "Business." The Company was
formed in 1996 by the Investor Group to acquire certain portions of Alumax's
fabricated products operations pursuant to the Acquisition.
Approximately 60% of the Company's 1996 net sales were derived from sales of
aluminum products. Unlike other raw materials used by the Company, the cost of
aluminum is subject to a high degree of volatility caused by the relationship of
world aluminum supply to world aluminum demand. Historically, prices at which
the Company sells aluminum products tend to fluctuate with corresponding changes
in the prices paid to suppliers for aluminum raw materials. Supplier price
increases of normal amount and frequency can generally be passed to customers
within two to four months. Accordingly, the Company's reported net sales of
aluminum products may fluctuate with little or no change in the volume of
aluminum shipments.
Historically, the Company has not engaged in hedging activities intended to
manage risks relating to fluctuations in foreign currency exchange rates or
movements in market prices of steel and aluminum raw materials. See Note 5 to
the Financial Statements included elsewhere herein for a description of currency
swaps entered into by the Company upon consummation of the Acquisition.
See Note 1 to the Financial Statements included elsewhere herein for a
description of the basis of presentation of financial information and the
Company's relationship with Alumax, its former parent. Alumax operated in a
decentralized manner; therefore, many corporate functions were performed
directly by the Company. However, Alumax provided the Company with certain
administrative services, including but not limited to tax compliance, treasury
services, human resource administration, legal services, and investor relations.
The financial statements included elsewhere herein, and other financial
information set forth herein, have been presented on a combined basis for
periods prior to the Acquisition (the "Predecessor periods"), giving effect to,
among other items, corporate expenses which anticipated requirements as a
stand-alone company.
For purposes of the discussion below, the results of operations for the year
ended December 27, 1996 represent the mathematical addition of the historical
amounts for the Predecessor period (January 1, 1996 through September 25, 1996)
and the Successor period (September 26, 1996 through December 27, 1996) and are
not indicative of the results that would actually have been obtained if the
Acquisition had occurred on December 31, 1995.
Net earnings for the year ended December 27, 1996 totaled $14.6 million as
compared to net earnings of $19.7 million and $17.2 million for the years ended
December 31, 1995 and 1994, respectively. The 1996 results reflect slow growth
in sales due to unfavorable economic conditions in Europe for the first four
months of the year, coupled with increased interest expense from the debt
incurred in connection with the Transactions.
-15-
Results of Operations
The following table sets forth the Company's Statement of Earnings Data
expressed as a percentage of net sales:
December 31, December 31, December 31, December 27,
1993 1994 1995 1996
----------------- ------------------ ----------------- ------------------
Statement of Earnings Data:
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of goods sold 82.2 82.1 82.7 82.7
Selling and general 9.1 9.5 8.5 9.0
Depreciation and amortization 2.0 1.7 1.7 2.0
----------------- ------------------ ----------------- ------------------
Earnings from operations 6.7 6.7 7.1 6.3
Interest expense, net 0.3 0.1 0.7 1.4
Other expense, net 0.1 0.1 0.0 0.1
----------------- ------------------ ----------------- ------------------
Earnings before income taxes 6.3 6.5 6.4 4.8
Provision for income taxes 2.3 2.7 2.3 1.8
----------------- ------------------ ----------------- ------------------
Net earnings 4.0% 3.8% 4.1% 3.0%
================= ================== ================= ==================
Year ended December 27, 1996 compared to the year ended December 31, 1995.
Net sales. Net sales increased 1.1% to $488.8 million for the year ended
December 27, 1996 from $483.5 million for the year ended December 31, 1995. This
increase is primarily attributable to (i) an increase of approximately $13.3
million in net sales in the U.S. due to increased demand in the manufactured
housing and home center markets and (ii) an increase in sales to the vehicular
sector in Europe of approximately $4.2 million, partially offset by (iii) a
decrease in demand in the U.K. industrial market of approximately $7.8 million,
(iv) a weakening of the Company's key foreign currencies totaling approximately
$4.9 million (particularly the Dutch Guilder) compared to the U.S. Dollar and
(v) approximately $500,000 of other individually insignificant occurrences. Net
sales in the U.S. increased 4.6% to $301.1 million in 1996 from $287.8 million
in 1995. Net sales in Europe decreased 4.0% to $187.8 million in the year ended
December 27, 1996 from $195.7 million in the year ended December 31, 1995.
Cost of goods sold. Cost of goods sold, as a percentage of net sales, of 82.7%
for the year ended December 27, 1996 approximated the 1995 cost of goods sold of
82.7%. The average cost of aluminum in 1996 was 18.6% lower than in 1995. Cost
of goods sold for 1996 remained virtually unchanged from 1995. After
consideration of non-recurring charges, cost of goods sold decreased from 82.7%
to 82.1%. This decrease is attributable to non-recurring charges in 1995 which
included $1.9 million paid to the parent company for the difference between
intergroup transfer prices and prices paid locally, $900,000 to outsource
painting costs while upgrading painting facilities and approximately $400,000 in
plant closing costs.
Selling and general. Selling and general expenses, as a percentage of net sales,
increased to 9.0% in the year ended December 27, 1996 from 8.5% in 1995. This
increase is attributable to increases of approximately $750,000 in advertising
and commissions in 1996, increases in corporate charges during 1996 of $567,000,
additional information system expenses incurred in 1996 of $388,000, reversal of
provision for doubtful accounts during 1995 of $264,000, and other individually
insignificant occurrences of approximately $916,000.
Depreciation and amortization. Depreciation and amortization increased by 20.1%
in the year ended December 27, 1996 as compared to 1995. This increase of $1.6
million was due to (i) the Company's investment in a roll coating facility
placed in service in the U.S. in 1996 and (ii) the increased amortization of
goodwill and revalued assets in 1996 resulting from purchase accounting
adjustments.
-16-
Earnings from operations. For reasons stated above, earnings from operations in
the U.S. increased 3.6% to $11.6 million in 1996 from $11.2 million in 1995.
Earnings from operations in Europe decreased 16.2% to $19.2 million in the year
ended December 27, 1996 from $22.9 million in the same period in 1995.
Interest expense, net. Net interest expense in the year ended December 27, 1996
increased substantially to $6.8 million from a 1995 level of $3.0 million. This
increase was due primarily to interest as a result of the Acquisition debt
incurred. Net interest expense in 1995 consisted primarily of interest charged
by Alumax for certain specific intercompany borrowings.
Other expenses, net. Other expense was not significant in either 1996 or 1995.
Provision for income taxes. The effective rate of the provision for income taxes
for the full year 1996 increased to 37.7% from 36.7% in 1995. The increase is
due primarily to a higher portion of earnings taxed in the U.S. in 1996 compared
to 1995. For the full year 1996, 37.8% of earnings from operations were
attributable to the U.S. operations, excluding corporate costs, compared to only
32.8% in 1995. In contrast, earnings in Europe comprised 62.2% in the full year
1996, a decrease from the 67.2% which was reported for the full year 1995, again
excluding any costs at the corporate level. Earnings in the U.S. are subject to
higher income tax rates than in Europe and are also subject to state income
taxes.
Year ended December 31, 1995 compared to year ended December 31, 1994
Net sales. Net sales increased 8.3% to $483.5 million for the year ended
December 31, 1995 from $446.6 million in 1994. The increase was attributable
primarily to (i) an increase of approximately $41.3 million due to higher
selling prices for aluminum products precipitated by a 36.6% increase in
aluminum costs from 1994 to 1995, (ii) an increase in steel shipments of
approximately $15.0 million to manufactured housing producers and (iii) a
strengthening of the Company's key foreign currencies of approximately $14.9
million (particularly the Dutch Guilder) compared to the U.S. Dollar. These
increases were partially offset by an approximate $20.0 million decline in
aluminum sales volume and approximately $14.3 million of other individually
insignificant occurrences. The Company's facilities in the U.S. and Europe both
experienced sales growth as prices increased due to declining world-wide
aluminum inventories brought on by an increase in demand. For these reasons, net
sales in the U.S. increased 0.3% to $287.8 million for the year ended December
31, 1995 from $286.8 million for the year ended December 31, 1994. Net sales in
Europe increased 22.4% to $195.7 million for the year ended December 31, 1995
from $159.8 million for the year ended December 31, 1994.
Cost of goods sold. Cost of goods sold, as a percentage of net sales, increased
to 82.7% in 1995 from 82.1% in 1994. This increase was due to higher average
aluminum costs which could not be immediately passed along to customers and
increased steel usage due to higher volumes sold. The average cost of aluminum
was approximately 36.6% higher in 1995 as compared to 1994. Aluminum costs
included non-recurring charges of approximately $1.9 million paid to the parent
company for the difference between intergroup transfer prices and prices paid
locally. Other non-recurring costs in 1995 included $900,000 to outsource
painting costs while upgrading painting facilities and approximately $400,000 in
plant closing costs.
Selling and general. Selling and general expenses, as a percentage of net sales,
decreased to 8.5% in 1995 from 9.5% in 1994. This decrease was due to (i)
approximately $.7 million of nonrecurring expenses incurred in 1994 related to
the closing of two facilities, (ii) a management information system conversion
which resulted in certain duplicate operating and maintenance costs during 1994
of approximately $600,000, and (iii) an increase in sales largely driven by
aluminum price increases.
Depreciation and amortization. Depreciation and amortization was 1.7% of net
sales in both 1995 and 1994. However, the actual charge increased by
approximately $300,000 due to depreciation expense related to a new coil coating
facility in Lancaster, PA, and the expansion of a European facility to
accommodate the relocation of a sheeting department.
Earnings from operations. For reasons stated above, earnings from operations in
the U.S. decreased 32.8% to $11.2 million for the year ended December 31, 1995
from $16.7 million for the year ended December 31, 1994. Earnings from
operations in Europe increased 75.2% to $22.9 million for the year ended
December 31, 1995 from $13.1 million for the year ended December 31, 1994.
Interest expense, net. Interest expense, net of incidental interest and finance
income, increased to $3.0 million in 1995 from approximately $300,000 in 1994.
This increase was due to discretionary charges of interest on net working
capital that were not charged in previous years by Alumax and its affiliates.
-17-
Other expense, net. Other expense was not significant for the years ended
December 31, 1995 and 1994.
Provision for income taxes. The effective rate for the provision for income
taxes decreased from 41.2% in 1994 to 36.7% in 1995. This decrease was due to a
decline in the earnings of the U.S. operations in 1995 compared to 1994 levels,
partially offset by higher earnings attributable to the European operations.
Earnings in the U.S. are subjected to slightly higher income tax rates than in
the European countries, and are also subject to state income taxes.
Liquidity and Capital Resources
Liquidity. The Company's primary liquidity needs arise from debt service on
indebtedness incurred in connection with the Transactions and the funding of
capital expenditures. As of December 27, 1996, the Company had outstanding
indebtedness for borrowed money of $211.7 million, $35.2 million of Preference
Shares and ordinary shareholders' equity of $2.2 million. Included in such
indebtedness was approximately $76.8 million under the Credit Agreement,
consisting of $40.4 million under the Term Loan and $36.4 million under the
Revolving Credit Facility. The undrawn amount of the Revolving Credit Facility
at year end was approximately $48.6 million which was available for working
capital and general corporate purposes, subject to borrowing base limitations.
As of December 27, 1996, this amount was fully available. The Company's
leveraged financial position requires that a substantial portion of the
Company's cash flow from operations be used to pay interest on the Notes,
principal and interest under the Credit Agreement and other indebtedness.
Further, the Company's leveraged position may impede its ability to obtain
financing in the future for working capital, capital expenditures and general
corporate purposes. In addition, the Company's leveraged position may make it
more vulnerable to economic downturns and may limit its ability to withstand
competitive pressures. The Company believes that cash generated from operations
and, subject to borrowing base limitations, borrowings under the Credit
Agreement will be adequate to meet its needs for the foreseeable future,
although no assurance to that effect can be given.
Principal and interest payments under the Credit Agreement and interest payments
on the Notes represent significant liquidity requirements for the Company. With
respect to the $40.4 million of Term Loans, the Company must make scheduled
quarterly principal payments totaling $2.0 million in 1997, $4.1 million in
1998, $5.1 million in 1999, $3.1 million in 2000, $7.1 million in 2001, $9.5
million in 2002, $9.5 million in 2003. Interest on the Term Loans and the
Revolving Credit Facility will bear interest at floating rates based upon the
interest option selected by the Company.
The Company's primary source of liquidity is funds generated from operations
which will be supplemented by borrowings under the Credit Agreement. Net cash
provided by operating activities increased from $6.0 million in 1995 to $48.6
million in 1996, reflecting an increase in accounts payable and a decrease in
inventories partially offset by a decrease in foreign taxes payable. Net cash
provided by operating activities decreased from $8.3 million in 1994 to $6.0
million in 1995, reflecting a decrease in accounts payable which was partially
offset by a decrease in foreign taxes paid. The 1996 increase in accounts
payable/accrued liabilities represents accrued interest on external debt of $4.7
million and accrued acquisition costs totaling $3.3 million. Decreases in
inventories were realized primarily due to lower aluminium prices and lower
levels of steel inventories. The 1995 decrease in accounts payable was
attributable to changes initiated by management in the timing of payments for
inventory and other services. The 1994 one-time increase in inventories was
attributable to the Company's termination of a steel consignment and inventory
program in the U.S. whereby title on certain steel coil did not pass to the
Company until the coil was opened and fabricated. The Company believes that the
termination of the consignment program, which was initiated by the Company, has
reduced the cost of obtaining and managing steel inventory.
Prior to the Acquisition, the Company met its requirement for capital through
Alumax's centralized cash management system. Under this system, cash received
from the Company's operations was transferred to Alumax's centralized cash
accounts and cash disbursements were funded from centralized cash accounts
rather than directly from operating sources. Cash provided by (used in)
financing activities, net of certain dividends paid by European operations to
Alumax and its affiliates, was ($11.5 million) and $5.6 million in 1995 and
1994, respectively.
Capital expenditures. The Company's capital expenditures were $12.2 million,
$17.4 million, and $9.6 million in 1996, 1995, and 1994, respectively. In 1995,
the Company completed construction of the coil coating facility in Helena,
Arkansas. Capital expenditures related to this project totaled $9.2 million and
$1.6 million in 1995 and 1994, respectively. The core operating equipment of the
Helena facility was obtained by the Company from its former affiliate Alumax
Mill Products, Inc. This equipment, originally located in Riverside, California,
was transferred to the Company at an approximate book value of $2.1 million. The
Company invested
-18-
approximately $8.7 million in additional capital, net of certain State of
Arkansas inducements, to relocate transferred equipment, construct the building
and offices, acquire new equipment, and ready the facility for use. The land on
which the facility is located was granted by the State of Arkansas with a three
year option to purchase up to ten adjacent acres at a cost estimated to be below
market. This facility represents the single largest capital investment made by
the Company in the last five years and provides the Company with a dedicated
operation for painting steel and aluminum coil for distribution to U.S.
fabrication facilities. The Company believes that distinct advantages in
marketing and producing products are derived from having the capabilities of the
Helena facility.
Excluding the Helena coating line, capital expenditures totaled $12.2 million,
$8.2 million, and $8.0 million in 1996, 1995, and 1994, respectively. These
included approximately $2.5 million to acquire a door fabrication facility in
Florida and to upgrade a coating facility in The Netherlands; $2.8 million to
relocate and upgrade a U.K. fabrication facility and to acquire a parcel of land
in 1994 and approximately $600,000 for certain improvements of an embossing
line. The balance of capital expenditures in each year, primarily relate to
purchases and upgrades of fabricating equipment, transportation and material
moving equipment, and information systems. Capital expenditures in the year
ended December 27, 1996 also include $1.9 million for the construction of a
fabrication plant adjacent to the Helena coating facility. This facility is
expected to be completed in mid-1997 at a cost of approximately $400,000.
Capital commitments for 1997 are expected to be $2.1 million to upgrade two
paintlines in Europe.
Working capital management. Working capital was $97.6 million as of December 27,
1996 compared to $127.4 million and $126.7 million as of December 31, 1995 and
1994, respectively. The Company believes that current levels of working capital
represent a liquid source of funds available for future cash flows. The Company
believes that reductions in inventory and accounts receivable can be achieved
upon completion of information systems implementations recently undertaken in
the U.S. The Company believes that these systems will offer distinct advantages
in monitoring credit, open receivables, and inventory levels, while enabling
centralized ordering and inventory management. However, there can be no
assurance that working capital reductions will be achieved.
On May 2, 1997, the Company announced that it has signed a definitive agreement
with Genstar Capital Corporation, Gentek Holdings, Inc. and Gentek Building
Products, Inc. to purchase its Fabral operations headquartered in Lancaster,
Pennsylvania. Closing on this transaction is anticipated to be in the latter
part of June. Fabral employs a total of approximately 200 people at seven
locations and is an industry leader in industrial, commercial, architectural and
agricultural building panels manufactured from aluminum and steel. Management
believes that Fabral will become a valuable addition to Euramax's North American
building products operations. The Fabral acquisition represents one more
significant step in enhancing the substantial building products business
position the Company has in North America.
Inflation and Foreign Currency Translation
In recent years, inflation has not had a significant effect on the Company's
results of operations or financial condition. The assets and liabilities of the
Company's non-U.S. subsidiaries are translated into U.S. dollars at current
exchange rates and revenues and expenses are translated at average exchange
rates. Currency translations on export sales could be adversely affected in the
future by the relationship of the U.S. Dollar with foreign currencies.
Recent Accounting Pronouncements
In June 1996, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 125
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. Those standards are based
on consistent application of a financial-components approach that focuses on
control. Under this approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. Most provisions of SFAS 125 are
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996. The provisions of SFAS 125
related to collateral recognition provisions in secured borrowings and for the
provisions related to repurchase agreements, dollar rolls, securities lending,
and similar transactions, are effective for transactions occurring after
December 31, 1997. SFAS 125 is to be applied prospectively. Management is
currently reviewing the provisions of SFAS 125 and does not believe that the
Company's financial statements will be materially negatively impacted by the
adoption.
-19-
In February 1997, the FASB issued SFAS No. 129, Disclosure of Information About
Capital Structure, which the Company is required to adopt in 1997. SFAS No. 129
requires more detailed disclosures about an entity's capital structure. As such,
SFAS No. 129 is a disclosure requirement only and will not have an impact on the
Company's financial position, annual operating results or cash flows.
Environmental Matters
The Company's U.S. and European facilities, like similar manufacturing
facilities, are subject to a range of federal, state, local and foreign
environmental laws and regulations ("Environmental Laws"), including those
relating to air emissions, wastewater discharges, the handling and disposal of
solid and hazardous waste, and the remediation of contamination associated with
the current and historic use of hazardous substances or materials. If a release
of hazardous substances or materials occurs on or from the Company's properties
or any offsite disposal location used by the Company, or if contamination from
prior activities is discovered at any of the Company's properties, the Company
may be held liable for the costs of remediation including response costs,
natural resource damage and associated transaction costs. While the amount of
such liability could be material, the Company devotes resources to ensuring that
its operations are conducted in a manner intended to reduce such risks.
Based upon an environmental review conducted by outside consultants in
connection with the Acquisition and assuming compliance by Alumax with its
indemnification obligations under the Acquisition Agreement, the Company
believes that it is currently in compliance with, and not subject to liability
under, Environmental Laws except where such noncompliance or liability would not
reasonably be expected to have a material adverse effect on the consolidated
financial position or results of operations of the Company and its subsidiaries
taken as a whole. Pursuant to the terms of the Acquisition Agreement, Alumax has
agreed to correct and to bear substantially all costs with respect to certain
identified conditions of potential noncompliance and liability under
Environmental Laws, none of which costs are currently believed to be material.
Alumax's indemnification obligations under the Acquisition Agreement are not
subject to an aggregate dollar limitation with respect to specifically
identified environmental matters. However, with respect to all other
environmental matters, Alumax's obligations are limited to $125.0 million.
Liability with respect to hazardous substance or material releases in the U.S.
arises principally under the federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended "CERCLA" and similar state
laws, which impose strict, and under certain circumstances, retroactive, joint
and several liability upon statutorily defined classes of potentially
responsible parties ("PRP's"). The Company has been identified as a PRP at nine
National Priorities List ("NPL") sites under CERCLA, although two of these nine
sites may relate to disposal by divisions of Alumax that have never been and are
not now part of the Company. Pursuant to the terms of the Acquisition Agreement,
Alumax has agreed to indemnify the Company for all of the costs associated with
each of these nine NPL sites. In addition, Alumax has agreed to indemnify the
Company for all of the costs associated with eleven additional sites listed on
state hazardous site cleanup lists, with respect to which the Company has not
received any notice of potential responsibility.
The Company is currently engaged in environmental remediation or has reason to
believe that remediation may be required at three properties currently operated
by the Company. The Company's Mesa, Arizona facility is currently listed on the
federal Comprehensive Environmental Response, Compensation, and Liability
Information System ("CERCLA") list of sites under review by U.S. Environmental
Protection Agency for inclusion on the NPL. In addition, the Mesa facility is
located within a state-designated groundwater contamination area and the Company
may consequently be identified as a PRP with respect to such contamination.
Although the Company believes that it is unlikely that its Mesa facility itself
will be designated as an independent NPL site, there can be no assurance that
the costs associated with further investigation and any cleanup at the site and
the Company's share of cleanup costs for the regional groundwater contamination
cleanup will not be material. Alumax has agreed to indemnify the Company for all
costs of required remediation including any required response costs at the Mesa
facility that may be incurred by the Company in excess of $500,000 (when
aggregated with all other environmental claims).
At the Company's Montreuil-Bellay, France facility, the Company has been
discharging wastewater potentially containing solvents to the ground at the
site. In addition, a spill from the facility's anodizing line may have resulted
in contamination of soil and groundwater. Because no subsurface investigation
has been conducted at the site, there can be no assurance that the costs
associated with each of these issues will not be material. As with the Mesa,
Arizona facility, however, Alumax has agreed to indemnify the
-20-
Company for any costs of required remediation including any required response
costs with respect to each of these issues that may be incurred by the Company
in excess of $500,000 (when aggregated with all other environmental claims).
At the Company's Corby, England facility, the Company has undertaken a
remediation of chromium-contaminated groundwater onsite, which remediation may
continue for a number of years. Although some upgrades to the groundwater
treatment system may be required within the next year to complete the
remediation, the costs associated with such an upgrade and with the completion
of remediation at the site are not expected to be material. Alumax Inc. has
agreed to indemnify the Company for all of the costs of required remediation at
this site in excess of $500,000 (when aggregated with all other environmental
claims).
The Company has made and will continue to make capital expenditures to comply
with Environmental Laws. The Company spent approximately $983,100 and $1.9
million in 1996 and 1995 respectively on environmental capital projects. These
expenditures were primarily related to environmental controls associated with a
paint line upgrade in Lancaster, Pennsylvania and a new coil coating facility in
Helena, Arkansas. The Company estimates that its environmental capital
expenditures will be approximately $125,000 in 1997.
Certain risk factors, among others, should be considered carefully in evaluating
the Company and its business. For additional detail, plese refer to
"Business-Risk Factors" contained in Part I, Item 1 of this Form 10-K. Also, see
the note preceding Part I of "Business" for additional information regarding the
Private Securities Litigation Reform Act.
-21-
Item 8. Financial Statements and Supplementary Data
-22-
Report of Independent Accountants
To the Board of Directors and Shareholders
Euramax International plc and Subsidiaries
We have audited the accompanying consolidated balance sheets of Euramax
International plc and Subsidiaries (the "Company" and see Note 1) as of December
31, 1995 and December 27, 1996, and the related consolidated statements of
earnings and cash flows for the years ended December 31, 1994 and 1995, the nine
months ended September 25, 1996 and the three months ended December 27, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Euramax
International plc and Subsidiaries, as of December 31, 1995 and December 27,
1996, and the results of their operations and their cash flows for the years
ended December 31, 1994 and 1995, the nine months ended September 25, 1996 and
the three months ended December 27, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
April 4, 1997, except for Note 14, which is as of May 2, 1997
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
--------------------------------------------------------------- ---------------------
PREDECESSOR SUCCESSOR
--------------------------------------------------------------- ---------------------
FOR THE NINE FOR THE THREE
FOR THE YEARS ENDED DECEMBER 31, MONTHS ENDED MONTHS ENDED
----------------------------------------- SEPTEMBER 25, DECEMBER 27,
1994 1995 1996 1996
------------------- -------------------- --------------- ------------------
Thousands of U.S. Dollars
Net sales $ 446,571.8 $ 483,461.9 $ 363,307.6 $ 125,529.4
Cost and expenses:
Cost of goods sold 366,716.8 399,989.0 300,184.8 104,055.4
Selling and general 42,424.3 41,350.7 33,286.1 10,950.3
Depreciation and amortization 7,672.2 7,980.2 6,995.0 2,590.7
------------------- -------------------- --------------- ----------------
Earnings from operations 29,758.5 34,142.0 22,841.7 7,933.0
Interest expense, net (255.2) (2,988.4) (621.8) (6,186.4)
Other expense, net (284.2) (96.2) (297.7) (235.3)
------------------- -------------------- --------------- ----------------
Earnings before income taxes 29,219.1 31,057.4 21,922.2 1,511.3
Provision for income taxes 12,037.8 11,399.1 8,342.3 505.5
------------------- -------------------- --------------- ----------------
Net earnings 17,181.3 19,658.3 13,579.9 1,005.8
Dividends on redeemable preference shares - - - (1,191.0)
------------------- -------------------- --------------- ----------------
Net earnings (loss) available for
ordinary shareholders $ 17,181.3 $ 19,658.3 $ 13,579.9 $ (185.2)
=================== ==================== =============== ===============
The accompanying notes are an integral part of these consolidated
financial statements.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
PREDECESSOR SUCCESSOR
---------------------- ---------------------
Thousands of U.S. Dollars, except share data DECEMBER 31, 1995 DECEMBER 27, 1996
---------------------- ---------------------
ASSETS
Current assets:
Cash and cash equivalents $ 12,586.9 $ 12,515.7
Accounts receivable, less allowance for doubtful accounts
(1995 - $2,582.0; 1996 - $3,404.2) 60,006.4 60,766.7
Inventories 101,454.5 87,235.1
Deferred income taxes - 1,483.5
Other current asssets 1,340.3 1,349.9
---------------------- ---------------------
Total current assets 175,388.1 163,350.9
Property, plant and equipment, net 60,024.6 107,338.3
Goodwill, net of accumulated amortization (1995 - $0; 1996 - $328.4) - 40,925.8
Other assets 1,236.1 15,677.7
---------------------- ---------------------
$ 236,648.8 $ 327,292.7
====================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,409.1 $ 38,221.4
Accrued expenses 16,917.8 23,993.9
Income taxes payable 2,681.5 1,516.9
Current maturities of long-term debt - 2,000.0
---------------------- ---------------------
Total current liabilities 48,008.4 65,732.2
Long-term debt, less current maturities - 209,740.0
Other liabilities 2,392.2 4,721.7
Due to former parent 33,562.4 -
Deferred income taxes 1,225.0 9,735.2
---------------------- ---------------------
Total liabilities 85,188.0 289,929.1
---------------------- ---------------------
Commitments and contingencies
Redeemable preference shares:
Preference shares - 14% cumulative preferred, no par value; 33,925,000 shares
authorized, issued and outstanding, plus cumulative dividends of $1,188 - 35,113.4
Sterling preference shares - 14% cumulative preferred, no par value; 50,000 shares,
at 1 British Pound Sterling, authorized, issued and outstanding, plus cumulative
dividends of $3 - 77.6
---------------------- ---------------------
Total redeemable preference shares - 35,191.0
---------------------- ---------------------
Ordinary shareholders' equity:
Company equity 151,460.8 -
Ordinary shares - no par value; 911,520 shares authorized, issued and outstanding - 911.5
Non-voting shares - no par value; 88,420 shares authorized, issued and outstanding - 88.5
Sterling ordinary shares - no par value; 50,000 shares, at 1 British Pound Sterling,
authorized; no shares issued and outstanding - -
Accumulated deficit - (185.2)
Foreign currency translation adjustment - 1,357.8
---------------------- ---------------------
Total ordinary shareholders' equity 151,460.8 2,172.6
---------------------- ---------------------
$ 236,648.8 $ 327,292.7
====================== =====================
The accompanying notes are an integral part of these consolidated financial
statements.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Common
Stock and
Thousands of U.S. Dollars Paid-in Retained Translation
Predecessor Capital Earnings Adjustment Total
-------------------- ---------------------- ---------------- ----------------
Balance, December 31, 1993 $ 41,450.2 $ 79,723.9 $ (10,005.8) $ 111,168.3
Net earnings for 1994 - 17,181.3 - 17,181.3
Dividends declared/paid - (111.2) - (111.2)
Foreign currency adjustment - - 5,547.7 5,547.7
--------------------- ---------------------- ---------------- --------------
Balance, December 31, 1994 41,450.2 96,794.0 (4,458.1) 133,786.1
Net earnings for 1995 - 19,658.3 - 19,658.3
Dividends declared/paid - (4,037.3) - (4,037.3)
Foreign currency adjustment - - 2,053.7 2,053.7
--------------------- ---------------------- ---------------- --------------
Balance, December 31, 1995 41,450.2 112,415.0 (2,404.4) 151,460.8
Net earnings for the nine months ended
September 25, 1996 - 13,579.9 - 13,579.9
Foreign currency adjustment - - 3,142.4 3,142.4
---------------------- ---------------------- ---------------- -------------
Balance, September 25, 1996 $ 41,450.2 $ 125,994.9 $ 738.0 $ 168,183.1
==================== ====================== ================ ==============
Retained Foreign
Earnings Currency
Ordinary (Accumulated Translation
Shares Deficit) Adjustment Total
--------------- --------------- --------------- -------------
Successor
Balance, September 25, 1996 (reflects the
new basis of shares in connection
with the acquisition) $ 1,000.0 $ - $ - $ 1,000.0
Net earnings for the three months ended
December 27, 1996 - 1,005.8 - 1,005.8
Dividends accrued on redeemable
preference shares - (1,191.0) - (1,191.0)
Foreign currency adjustment - - 1,357.8 1,357.8
--------------- ----------- ----------- ---------
Balance, December 27, 1996 $ 1,000.0 $ (185.2) $ 1,357.8 $ 2,172.6
=============== =========== =========== ============
The accompanying notes are an integral part of these consolidated financial
statements.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------- -----------------
Predecessor Successor
-------------------------------------------------- -----------------
Thousands of U.S. Dollars For the year For the year For the nine For the three
ended ended months ended months ended
December 31, December 31, September 25, December 27,
1994 1995 1996 1996
--------------- -------------- --------------- -------------------
Cash flows from oeprating activities:
Net earnings $ 17,181.3 $ 19,658.3 $ 13,579.9 $ 1,005.8
Reconciliation of net earnings to net cash provided by
operating activities:
Depreciation and amortization 7,672.2 7,980.2 6,995.0 2,590.7
Provision for doubtful accounts 1,451.4 388.2 827.2 221.3
(Gain) loss on sales of assets 142.6 146.7 (168.3) (7.4)
Deferred income taxes 603.7 (526.0) (338.7) (760.5)
Changes in operating assets and liabilities:
Accounts receivable (9,574.3) (2,019.3) (9,176.0) 11,962.1
Inventories (24,855.0) (9,196.5) 4,437.5 7,001.1
Other current asssets 722.6 929.9 193.3 (129.9)
Accounts payable and other current liabilities 19,712.8 (17,727.7) 5,851.5 4,427.3
Income taxes payable (4,607.9) 6,073.7 (1,787.7) 1,378.0
Net change in other noncurrent assets and
liabilities (127.8) 258.6 (172.9) 688.2
----------------- ----------------- --------------- -------------
Net cash provided by operating activities 8,321.6 5,966.1 20,240.8 28,376.7
----------------- ----------------- --------------- -------------
Cash flows from investing activities:
Purchase of Fabricated Products - - - (251,213.0)
Proceeds from sale of assets 1,465.3 177.0 233.0 91.6
Capital expenditures (9,594.5) (17,429.4) (11,517.5) (681.8)
----------------- ----------------- --------------- -------------
Net cash used in investing activities (8,129.2) (17,252.4) (11,284.5) (251,803.2)
----------------- ----------------- --------------- -------------
Cash flows from financing activities:
Proceeds from long-term debt - - - 235,000.0
Proceeds from issuance of preference shares - - - 34,000.0
Proceeds from issuance of ordinary shares - - - 1,000.0
Deferred financing fees - - - (9,930.0)
Repayment of debt - - - (25,163.5)
Other - - - (1,555.0)
Dividends paid (111.2) (4,037.3) -
Net change in due to former parent 5,698.6 (7,486.1) (20,973.0) -
----------------- ----------------- --------------- -------------
Net cash provided by (used in) financing activities 5,587.4 (11,523.4) (20,973.0) 233,351.5
----------------- ----------------- --------------- -------------
Effect of exchange rate changes on cash (1,580.2) 277.6 (677.4) 2,697.9
----------------- ----------------- --------------- -------------
Net increase (decrease) in cash and equivalents 4,199.6 (22,532.1) (12,694.1) 12,622.9
Cash and equivalents at beginning of period 30,919.4 35,119.0 12,586.9 (107.2)
----------------- ----------------- --------------- -------------
Cash and equivalents at end of period $ 35,119.0 $ 12,586.9 $ (107.2) $ 12,515.7
================= ================= =============== =============
Noncash financing activities:
Dividends accrued on redeemable preference shares $ - $ - $ - $ 1,191.0
================= ================= ================= =============
Supplemental cash flow information:
Foreign income taxes paid, net $ 7,217.0 $ 2,273.7 $ 2,870.8 $ 3.4
================= ================= ================= =============
The accompanying notes are an integral part of these consolidated financial
statements.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(THOUSANDS OF U. S. DOLLARS EXCEPT SHARE DATA)
1. ORGANIZATION AND ACQUISITION
Euramax International plc, a corporation formed under the laws of England and
Wales ("Euramax" or the "Company"), is the parent holding company of four first
tier holding companies: Amerimax Holdings, Inc., a Delaware corporation
("Amerimax"); Euramax European Holdings plc, a corporation formed under the laws
of England and Wales ("Euramax U.K."); Euramax European Holdings, B.V., a
corporation formed under the laws of The Netherlands ("Euramax B.V."); and
Euramax European Holdings, S.A., a corporation formed under the laws of France
("Euramax S.A."). The Company is a holding company organized by an investor
group to acquire certain portions of the fabricated products operations of
Alumax Inc. ("Alumax").
Pursuant to a purchase agreement between the Company and Alumax, on September
25, 1996, the Company purchased, through its wholly-owned subsidiaries, all of
the issued and outstanding capital stock of the following Alumax subsidiaries
which operate certain portions of Alumax's fabricated products operations (the
"Acquisition"): (i) Amerimax Fabricated Products, Inc. and its wholly owned
subsidiaries, Amerimax Specialty Product, Inc., Amerimax Building Products,
Inc., Amerimax Coated Products, Inc., Johnson Door Products, Inc., and Amerimax
Home Products, Inc.; (ii) Euramax Holdings Limited and its wholly owned
subsidiaries, Ellbee Limited and Euramax Coated Products Limited; (iii) Euramax
Europe B.V. and its wholly owned subsidiary, Euramax Coated Products B.V.; and
(iv) Euramax Industries S.A. and its wholly owned subsidiary Euramax Coated
Products S.A. For purposes of identification and description, the acquired
business is referred to as "Fabricated Products" or the "Predecessor" for the
periods prior to the Acquisition, "Euramax" or the "Successor" for the period
subsequent to the Acquisition, and the "Company" for both periods. The financial
statements of the Predecessor include the combined accounts of the entities
referred to as Fabricated Products. Such Predecessor financial statements have
been prepared as if the Company's businesses had operated as an independent
stand-alone entity for all periods presented. Certain obligations were
originally recorded by Alumax on behalf of the Company such as post-retirement
and post-employment benefit obligations, income taxes, legal and other corporate
expenses. These obligations have been allocated to the Company's financial
statements using several factors including revenues or number of employees or
other reasonable methods. Corporate expenses of Alumax have been allocated to
the Company on a basis management believes is reasonable and represents the
expenses as if the Company was a stand alone operation. See Note 12 for a
description of transactions with Alumax. The financial statements of the
Successor include the consolidated accounts of the entities referred to as
Euramax. All significant intercompany accounts and transactions have been
eliminated.
The purchase price for the Acquisition was approximately $251.2 million, which
includes estimated acquisition expenses of approximately $3.9 million, is
adjusted to give effect to certain items including cash acquired and working
capital, and was allocated to the assets and liabilities of the Company based
upon their estimated fair market value at the date of Acquisition under the
purchase method of accounting. Such initial purchase price is subject to
adjustment based upon the completion of a special audit to determine the change
in the Company's working capital (as defined) from December 31, 1995 through
September 25, 1996. Management has estimated such change in connection with the
preparation of the Consolidated Balance Sheet as of December 27, 1996 and does
not expect further adjustments to the purchase price to be significant.
Additionally, the allocation of the purchase price was, in certain instances,
based on preliminary information and is, therefore, subject to revision when
additional asset and liability valuations are obtained. In the opinion of the
Company's management, the asset and liability valuations for the Acquisition
will not be materially different than initially recorded.
The financing for the Acquisition was provided by: (a) $35.0 million of
preference and ordinary share capital; (b) $135.0 million of Senior Subordinated
Notes (the "Offering"); and (c) $100.0 million under a Credit Agreement
aggregating $125.0 million.
The following unaudited pro forma data presents the results of operations for
the twelve months ended December 31, 1995, and December 27, 1996, respectively,
as though the Acquisition and the Offering had been completed January 1, 1995,
and January 1, 1996, respectively, and assume that there are no other changes in
the operations of the Company. Such pro forma information includes adjustments
to interest expense; changes in depreciation of property, plant and equipment
and amortization of goodwill relating to the allocation of the purchase price;
and the income tax effect related to these items. The pro forma results are not
necessarily indicative of the financial results that might have occurred had the
Acquisition and the Offering actually taken place on the above-mentioned dates,
or of the future results of operations:
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
YEAR ENDED
---------------------------------------
DECEMBER 31, 1995 DECEMBER 27, 1996
------------------ -----------------
Net sales $ 483,461.9 $ 488,837.0
Earnings before income taxes 8,961.4 6,434.5
Net earnings 5,737.3 3,876.7
The operations of Euramax are conducted through various indirect operating
subsidiaries of Amerimax, Euramax U.K., Euramax B.V. and Euramax S.A. Euramax is
a leading international downstream producer of aluminum and steel products with
facilities in the U.S., the U.K., The Netherlands and France. Euramax's products
include painted sheet and coil, siding, roofing, raincarrying systems, windows,
doors and various fabricated trim parts and components. The Company's products
are sold primarily to manufacturers of recreational vehicles and manufactured
housing, rural building contractors, distributors and home centers.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of the
Company and all its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
FISCAL YEAR
Beginning in 1996, the Company operates on a 52/53 week fiscal year ending on
the last Friday in December. Previously, the Company operated on a calendar
year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
may affect the reported amounts of certain assets and liabilities and disclosure
of contingencies at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
CASH AND EQUIVALENTS
The Company considers all highly liquid investments with an initial maturity of
three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost determined
under the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Depreciation and amortization
of property, plant and equipment is computed principally on the straight-line
method over the estimated useful lives of the assets ranging from 5 to 10 years
for equipment and 25 years for buildings. Gains or losses related to the
disposition of property, plant and equipment are charged to other income or
expense when incurred.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
GOODWILL
The Company used the purchase method of accounting for the acquisition of
Fabricated Products (See Note 1). Goodwill resulting from the acquisition is
being amortized on a straight-line basis over 30 years.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company enters into currency swaps with major banking institutions to reduce
the impact of interest rate and exchange rate fluctuations with respect to debt
payments made in foreign currency denominations. Currency swaps involve
exchanges of interest payments in differing currencies, but provide for the
exchange of principal amounts at maturity. Realized and unrealized gains and
losses are recognized in other income and expense. The Company is exposed to
risk if the counterparties default.
REVENUE RECOGNITION
The Company recognizes revenue when title passes to the customer.
TRANSLATION OF FOREIGN CURRENCIES
Assets and liabilities of subsidiaries are translated at the rate of exchange in
effect on the balance sheet date; income and expenses are translated at the
average rates of exchange prevailing during the year. Foreign currency gains and
losses resulting from transactions are included in results of operations. The
foreign currency transaction gains (losses) recorded in selling and general
expenses for 1994 and 1995 were $(9.9) and $275.3, respectively, $74.2 for the
nine months ended September 25, 1996, and $159.0 for the three months ended
December 27, 1996.
3. INVENTORIES:
Inventories were comprised of:
PREDECESSOR SUCCESSOR
--------------------------- -------------------------
DECEMBER 31, 1995 DECEMBER 27, 1996
-------------------------- -------------------------
Raw materials $ 66,976.3 $ 59,429.3
Work in process 24,121.3 12,769.4
Finished products 10,356.9 15,036.4
----------- -------------
$ 101,454.5 $ 87,235.1
=========== =============
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
4. PROPERTY, PLANT AND EQUIPMENT:
Components of property, plant and equipment are as follows:
PREDECESSOR SUCCESSOR
----------------- -------------------
DECEMBER 31, DECEMBER 27,
1995 1996
----------------- -------------------
Land and improvements $ 5,631.8 $ 8,170.0
Buildings 27,637.9 29,872.5
Machinery and equipment 98,799.0 69,466.3
----------------- -------------------
132,068.7 107,508.8
Less accumulated depreciation (81,179.6) (2,590.7)
----------------- -------------------
50,889.1 104,918.1
Construction in progress 9,135.5 2,420.2
----------------- -------------------
$ 60,024.6 $ 107,338.3
================= ===================
Alumax transferred equipment to Fabricated Products with a cost of $7,804.5 and
accumulated depreciation of $5,678.3 in 1995.
5. LONG-TERM OBLIGATIONS
Long-term obligations consisted of the following:
SUCCESSOR
-------------------
DECEMBER 27,
1996
-------------------
Credit Agreement:
Revolving Credit Facility $ 36,377.5
Term Loans 40,362.5
11.25% Senior Subordinated Notes due 2006 135,000.0
-------------------
211,740.0
Less: current portion (2,000.0)
-------------------
$ 209,740.0
===================
In connection with the Acquisition, the Company entered into a credit agreement
(the "Credit Agreement") which provides for $40.0 million in term loans (the
"Term Loans") and a revolving credit facility of $85.0 million (the "Revolving
Credit Facility"), a portion of which is available for letters of credit and
swing loans. The Term Loans consist of three facilities in the aggregate amount
of $40.0 million. Two of the facilities, which aggregate to $20.0 million,
consist of a Dutch Guilder facility and a Pound Sterling facility. The third
facility is a U.S. Dollar facility in the amount of $20.0 million (the "Tranche
B Facility"). Loans under the Revolving Credit Facility are made, at the
election of the Company, in U.S. Dollars, Dutch Guilders and/or Pounds Sterling.
All loans under the Term Loans and the Revolving Credit Facility are repaid in
the currency in which the loan is made.
Outstanding loans under the Revolving Credit Facility and the Term Loans, except
the Tranche B Facility, must be repaid by September 2001; provided, however,
that subject to the consent of the lender under the Revolving Credit Facility,
the Company
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
will have the option, exercisable on the fourth year anniversary date of the
Closing Date, to extend the final maturity date on the Revolving Credit Facility
to September 2003. Outstanding loans under the Tranche B Facility must be repaid
by September 2003.
At the option of the Company, the interest rate applicable to the loans under
the Credit Agreement is based upon a Base Rate or a Eurocurrency Rate (both as
defined), plus margins as follows: (a) Base Rate plus 1.75% in the case of the
Revolving Credit Facility and all Term Loans except the Tranche B Facility, or
2.25% in the case of the Tranche B Facility; or (b) Eurocurrency Rate for one,
two, three or six months, plus 2.75% in the case of the Revolving Credit
Facility and all Term Loans except the Tranche B Facility, or 3.25% in the case
of the Tranche B Facility. At December 27, 1996, the interest rate on the
Revolving Credit Facility was 8.274%, the interest rate on the Tranche B
Facility was 8.81%, and the interest rate on the other term loan facilities was
6.969%.
On September 25, 1996, the Company borrowed approximately $100.0 million under
the Credit Agreement, consisting of $40.0 million under the Term Loans and $60.0
million under the Revolving Credit Facility. The undrawn amount of $25.0 million
under the Revolving Credit Facility was available (subject to borrowing base
limitations) for working capital and general corporate purposes. As of December
27, 1996, repayments of $24.4 million under the Revolving Credit Facility had
been made leaving an undrawn amount of $48.3 million, which was fully available.
Debt increased $1.1 million due to fluctuations in the foreign exchange rates
since the September 25, 1996.
The Credit Agreement contains certain covenants and restrictions on actions by
the Company and its subsidiaries. In addition, the Credit Agreement requires the
Company to meet certain financial tests, including minimum fixed charge coverage
ratio, minimum interest coverage ratio, maximum leverage ratio, minimum EBITDA
(earnings before income taxes plus net interest expense and depreciation and
amortization) requirements and maximum amounts of capital expenditures.
On September 25, 1996, the Company issued $135.0 million in 11.25% Senior
Subordinated Notes due 2006 pursuant to a private offering. On March 10, 1997,
the Company issued new 11.25% Senior Subordinated Notes due 2006 pursuant to an
exchange offer whereby holders of the original notes received new notes which
have been registered under the Securities Act of 1933, as amended, but are
otherwise identical to the original notes. The original notes and the new notes
are herein referred to as "the Notes". The Notes mature on October 1, 2006 and
bear interest at the rate of 11.25% per annum from September 25, 1996 payable
semiannually in arrears on April 1 and October 1 of each year, commencing on
April 1, 1997. The Notes may be redeemed at the option of the Company, in whole
or in part, at any time on or after October 1, 2001, under the conditions and at
the redemption price as specified in the note indenture dated as of September
25, 1996, under which the Notes were issued. The Notes are unsecured obligations
subordinated to all existing and future unsubordinated borrowings of the
Company, including all of the obligations under the Credit Agreement, and will
be effectively subordinated to all obligations of any subsidiaries of the
Company.
Future maturities of long-term obligations as of December 27, 1996 are as
follows:
1997 $ 2,000.0
1998 4,102.3
1999 5,085.9
2000 3,051.5
2001 7,123.0
Thereafter 190,377.3
------------
$ 211,740.0
============
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
The Notes are guaranteed on a senior subordinated basis by Amerimax, and the
borrowings under the Credit Agreement are guaranteed by the Company and all of
its subsidiaries, other than Euramax S.A. and its subsidiaries.
In connection with the Notes, on December 27, 1996, the Company entered into two
currency swap agreements with a major banking institution. The agreements
provide for exchanges of interest payments in Dutch Guilders and Pound Sterling
for U.S. Dollars on April 1, and October 1 of each year commencing April 1,
1997, and provide for exchanges of principal amounts at maturity on October 1,
2003. The currency swaps effectively convert the interest rate on $75.0 million
of the Notes from 11.25% payable in U.S. Dollars to 10.36% payable in Dutch
Guilders and 12.72% payable in Pound Sterling. Under the agreements, the Company
is required to exchange 85.1 million Dutch Guilders for $50 million and 16.0
million Pound Sterling for $25.0 million at maturity. At December 27, 1996, the
fair value of the currency swap agreement was ($1.8) million.
The fair value of the Company's long-term debt is estimated based on the current
rates offered to the Company for debt of similar terms and maturities except for
the 11.25% Senior Subordinated Notes due 2006 which are measured at the quoted
market rate. The fair value of the Company's 11.25% Senior Subordinated Notes
due 2006 was $140.1 million at December 27, 1996. All other long-term debt
approximates the carrying value at December 27, 1996.
6. REDEEMABLE PREFERENCE SHARES
In connection with the Acquisition described in Note 1, the Company issued
34,000,000 shares of redeemable preference shares as follows: 33,925,000
preference shares with a stated value of $1 per share, and 50,000 sterling
preference shares with a stated value of 1 British Pound Sterling per share. The
preference shares accrue fixed, cumulative dividends of 14% per annum compounded
quarterly on March 31, June 30, September 30, and December 31 in each year,
beginning on December 31, 1996, and are paid as declared by the Company's Board
of Directors. The Company is prohibited from paying dividends on ordinary shares
unless all required preferred dividends have been paid.
In the event of liquidation, dissolution, winding-up or otherwise, the assets of
the Company available for distribution among the shareholders shall be applied
first to pay the preference shareholders before payment to the holders of any
other class of shares.
With the consent of 66.67% of the preference shareholders, the Company may, at
any time, redeem all or multiples in the aggregate amount of $500,000 of the
preference shares. Subject to certain provisions of the Credit Agreement, the
holders of 66.67% of the preference shares are entitled to require redemption of
some or all of the preference shares if any of the following events occur: i)
the preference dividend due is not paid in full on a due date, whether or not
the Company has enough profits available for distribution to pay it; or ii) when
preference shares are due for redemption, the Company does not pay all the
redemption money then payable to the preference shareholders, whether or not the
Company has enough profits available for distribution or other requisite funds
to pay the redemption money. Also subject to certain provisions of the Credit
Agreement, the holders of 66.67% of the preference shares are entitled to
require redemption of all of the preference shares in the event of the
following: i) the sale of 66.67% or more of the ordinary shares; or ii) the
listing of the Company's shares on an internationally recognized stock exchange.
On any redemption date, the Company shall pay to the preference shareholders the
nominal amounts and premiums paid on the shares and a sum equal to any accrued
and/or unpaid preference dividends. To the extent that any preference shares
remain outstanding, the Company shall redeem the preference shares on December
31, 2007. Sterling preference shares may not be redeemed as doing so would put
the Company in breach of the Companies Act 1985.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
7. NON-VOTING ORDINARY SHARES
Holders of a majority of the outstanding non-voting ordinary shares held by
certain investors, as described in the Company's Articles of Association, shall
be entitled at any time to convert any or all of their non-voting ordinary
shares into the same number of ordinary shares of an equivalent value.
Historical earnings per share have not been presented because they would not be
meaningful. For predecessor periods, the common stock of the Company, as
presented in common stock and paid-in capital, consists of the common stock of
the combined predecessor entities.
8. INCOME TAXES:
For Predecessor periods, the Company did not have a formal tax sharing agreement
with Alumax and Alumax paid the allocable share of Federal and state taxes on
behalf of the Company. Domestic current and deferred Federal and state taxes
were classified within due to former parent. The foreign entities calculated
their income taxes on a stand-alone basis and the related amounts were included
in taxes payable and deferred income taxes. For such periods, the income tax
provision (benefit) was based on amounts the Company would have paid on a
combined basis as if separate returns were filed. The provisions for income
taxes are comprised of the following:
PREDECESSOR SUCCESSOR
------------------------------------------------- -----------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 25, DECEMBER 27,
1994 1995 1996 1996
-------------------------------------------------- -----------------
Current:
Federal $ 6,097.5 $ 2,399.8 $ 2,944.4 $ 502.5
Foreign 3,978.6 8,347.4 4,833.3 669.4
State 2,151.6 800.8 1,147.1 94.1
-------------------------------------------------- -----------------
12,227.7 11,548.0 8,924.8 1,266.0
-------------------------------------------------- -----------------
Deferred:
Federal (582.1) 308.6 (254.1) (739.4)
Foreign 603.7 (523.0) (271.8) 63.3
State (211.5) 65.5 (56.6) (84.4)
-------------------------------------------------- -----------------
(189.9) (148.9) (582.5) (760.5)
-------------------------------------------------- -----------------
$ 12,037.8 $ 11,399.1 $ 8,342.3 $ 505.5
================================================== =================
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
The domestic and foreign components of earnings before income taxes are as
follows:
---------------------------------------------------------- -----------------
PREDECESSOR SUCCESSOR
---------------------------------------------------------- -----------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 25, DECEMBER 27,
1994 1995 1996 1996
---------------------------------------------------------- -----------------
Domestic $ 16,658.3 $ 8,758.3 $ 8,833.6 $ (583.3)
Foreign 12,560.8 22,299.1 13,088.6 2,094.6
---------------------------------------------------------- -----------------
$ 29,219.1 $ 31,057.4 $ 21,922.2 $ 1,511.3
========================================================== =================
Reconciliation of the differences between income taxes computed at Federal
statutory tax rates and the Company's income tax provision follows:
------------------------------------------------------------- -----------------
PREDECESSOR SUCCESSOR
------------------------------------------------------------- -----------------
THREE
NINE MONTHS MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER DECEMBER
1994 1995 25, 1996 27, 1996
------------------------------------------------------------- -----------------
Tax at Federal Statutory rate $ 10,226.7 $ 10,870.1 $ 7,672.9 $ 528.6
State income taxes, net of Federal income tax
benefit 1,600.1 569.3 669.4 (23.3)
Foreign taxes, net 186.0 16.7 - -
Goodwill amortization - - - 67.7
Other, net 25.0 (57.0) - (67.5)
------------------------------------------------------------- -----------------
$ 12,037.8 $ 11,399.1 $ 8,342.3 $ 505.5
============================================================= =================
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
At December 31, 1995, the approximate tax effects of U.S. cumulative temporary
differences were recorded as components of the amounts due to former parent
while the tax effects of foreign cumulative temporary differences were presented
in deferred income taxes. At December 27, 1996, deferred income taxes are
separately stated in the balance sheet. The combined tax-effected temporary
differences are as follows:
ASSET (LIABILITY)
-----------------------------------------------
PREDECESSOR SUCCESSOR
----------------------- ----------------------
DECEMBER 31, DECEMBER 27,
1995 1996
----------------------- ----------------------
Accrued expenses $ 2,001.9 $ 1,677.2
Allowances for doubtful accounts 929.5 674.9
Book versus tax basis of inventory - (868.6)
----------------------- ----------------------
Current, net 2,931.4 1,483.5
----------------------- ----------------------
Book versus tax basis of depreciable assets (3,529.6) (9,905.7)
Post-retirement health care accrual 2,549.7 -
Other 1,354.0 170.5
----------------------- ----------------------
Noncurrent, net 374.1 (9,735.2)
----------------------- ----------------------
Total, net $ 3,305.5 $ (8,251.7)
======================= ======================
No deferred tax liability is recognized relating to taxable temporary
differences attributable to the excess of the amount for financial reporting
over the tax basis of investments in foreign subsidiaries due to the fact that
such taxable temporary differences are not expected to reverse in the
foreseeable future. Although the Company does not expect taxable temporary
differences attributable to investments in foreign subsidiaries to reverse in
the foreseeable future, any tax amounts owed as a result of the recovery of
taxable temporary differences attributable to such investments would be
insignificant.
9. EMPLOYEE RETIREMENT PLANS:
U.S. Plans:
Defined Benefit:
Prior to the Acquisition, substantially all U.S. employees of the Company were
covered by defined benefit pension plans administered by Alumax. The costs of
these plans were allocated to the Company based on base salary expenses and were
generally non-contributory. The Company's allocated share of the projected
benefit obligation of the plans at December 31, 1995 was $18,371.6. The Company
was charged $1,254.8, $1,235.7, and $1,009.3 by Alumax in 1994, 1995, and
Predecessor 1996 respectively, for its allocated share of net periodic pension
costs of these Plans. As a result of the Acquisition, all obligations for
benefits under the plans as of the Acquisition date were retained by Alumax.
Subsequent to the Acquisition, the Company established a new non-contributory
defined benefit pension plan covering substantially all U.S. hourly employees.
The new plan contains terms and provisions similar to the predecessor plans. As
of December 27, 1996, the Company's obligations under the new plan were not
significant.
Defined Contribution:
Prior to the Acquisition, the majority of the U.S. employees of the Company were
eligible to participate in a defined contribution retirement plan sponsored by
Alumax. The plan allowed the employees to contribute a percentage of their
pre-tax and/or after-tax income in accordance with specified guidelines. Alumax
matched a certain percentage of employee contributions up to certain limits. The
Company's expense related to the plan was $414.5, $413.5, and $310.5 for 1994,
1995 and Predecessor 1996, respectively.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
Subsequent to the Acquisition, the Company established two new defined
contribution retirement and savings plans, which also allow the employees to
contribute a percentage of their pretax and/or after-tax income in accordance
with specified guidelines. As before, the Company matches a certain percentage
of employee contributions up to certain limits. Further, the plan provides for
discretionary contributions by the Company based on years of service and age.
The Company's expense related to the new plan was not significant in 1996.
International Plans:
In addition to the above, the employees of Euramax Coated Products Limited and
Ellbee Limited participate in a single employer pension plan (the "U.K. Plan").
Net periodic pension cost for the U.K. Plan includes the following components:
PREDECESSOR SUCCESSOR
--------------------------------------------------------- -----------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 25, DECEMBER 27,
1994 1995 1996 1996
--------------------------------------------------------- -----------------
Service cost-benefits earned during the period $ 355.5 $ 526.9 $ 407.0 $ 143.6
Interest cost on projected benefit obligations 442.8 642.4 511.4 204.9
Actual return on assets 319.7 (1,248.4) (462.3) (48.4)
Net amortization and deferral (876.3) 797.5 (10.3) (143.6)
--------------------------------------------------------- -----------------
Net periodic pension cost $ 241.7 $ 718.4 $ 445.8 $ 156.5
========================================================= =================
The following table sets forth the funded status of the U.K. Plan and amounts
recognized in the Company's balance sheets for its pension plans:
PREDECESSOR SUCCESSOR
------------------------- -----------------------
DECEMBER 31, 1995 DECEMBER 27, 1996
------------------------- -----------------------
Actuarial present value of benefit obligations:
Vested benefit obligation $ 7,008.8 $ 8,414.4
========================= =======================
Accumulated benefit obligation $ 7,544.4 $ 9,033.4
========================= =======================
Projected benefit obligation $ 8,206.5 $ 9,894.1
Plan net assets at fair value 7,229.5 8,977.2
------------------------- -----------------------
Plan net assets less than projected benefit obligation (977.0) (916.9)
Unrecognized net loss 572.6 215.2
Unrecognized prior service cost 211.4 -
Unrecognized transition amounts (313.3) -
------------------------- -----------------------
Accrued pension costs $ (506.3) $ (701.7)
========================= =======================
U.K. Plan assets consist of approximately 75 percent equities, 12 percent fixed
income and 13 percent cash and cash equivalents at December 27, 1996.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
Key economic assumptions used in the above calculations for the foreign plan
were as follows:
1994 1995 1996
---- ---- ----
Settlement discount rate 8.5% 8.5% 8.25%
Rate of compensation increases 6.5% 6.5% 5.75%
Expected long-term rate of return 8.5% 9.0% 8.25%
10. PREDECESSOR POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS:
Prior to the Acquisition, the Company participated in a plan for certain health
care and life insurance benefits for retired employees administered by Alumax.
Under the plan, a majority of the Company's domestic employees were eligible for
such benefits if they were to reach normal or, in certain cases, early
retirement age while working for the Company. Costs related to this unfunded
plan charged by Alumax were $146.0, and $100.0 for the years ended December 31,
1994, and 1995, respectively. Also prior to the Acquisition, the Company
provided specified postemployment benefits to certain former or inactive
employees. Substantially all domestic employees were eligible to receive these
benefits, which were either self-insured or provided through insurance carriers.
All obligations for benefits under such plans were retained by Alumax after the
Acquisition and the Company no longer provides postretirement or postemployment
benefits.
11. COMMITMENTS AND CONTINGENCIES:
Minimum commitments under long-term noncancelable operating leases, principally
for operating and office facilities, totaled $10,583.4 at December 27, 1996.
Lease commitments for future periods are as follows:
1997 $ 2,910.7
1998 2,466.5
1999 1,734.0
2000 1,253.5
2001 733.6
2002 to 2012 1,485.1
Rent expense amounted to $3,851.2, $3,760.0 in 1994 and 1995, respectively,
$2,894.0 for the nine months ended September 25, 1996 and $1,097.1 for the three
months ended December 27, 1996.
The Company has entered into several noncancelable long-term contracts for the
purchase of aluminum at market values. The aluminum contracts expire in various
years through 1999. Contracted amounts of aluminum are less than the Company's
anticipated requirements.
The Company and its subsidiaries are not currently parties to any pending legal
proceedings other than such proceedings incident to its business. Management
believes that such proceedings would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the consolidated
financial position or results of operations of the Company and its subsidiaries
taken as a whole.
The Company has been named as a defendant in lawsuits or as a potentially
responsible party in state and Federal administrative and judicial proceedings
seeking contribution for costs associated with the investigation, analysis,
correction and remediation of environmental conditions at various hazardous
waste disposal sites. The Company continues to monitor these actions and
proceedings and to vigorously defend both its own interests as well as the
interests of its affiliates. The Company's ultimate liability in connection with
present and future environmental claims will depend on many factors, including
its volumetric share of the waste at a given site, the remedial action required,
the total cost of remediation, and the financial viability and participation of
the other entities that also sent waste to the site. Once it becomes probable
that the Company will incur costs in connection with remediation of a site and
such
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
costs can be reasonably estimated, the Company establishes or adjusts its
reserve for its projected share of these costs. Based upon current law and
information known to the Company concerning the size of the sites known to it,
anticipated costs, their years of operations and the number of other potentially
responsible parties, Management believes that it has adequate reserves for the
Company's potential share of the estimated aggregate liability for the costs of
remedial actions and related costs and expenses. In addition, the Company
establishes reserves for remedial measures required from time to time at its own
facilities. Management believes that the reasonably probable outcomes of these
matters will not materially exceed established reserves and will not have a
material impact on the future financial position, net earnings or cash flows of
the Company. The Company's reserves, expenditures and expenses for all
environmental exposures were not significant for any of the dates or periods
presented.
In connection with the Acquisition referred to in Note 1, the Company was
indemnified by Alumax for substantially all of its costs, if any, related to
environmental matters for occurrences arising prior to the closing date of the
Acquisition during the period of time it was owned directly or indirectly by
Alumax. Such indemnification includes costs that may ultimately be incurred to
contribute to the remediation of certain specified existing National Priorities
List (NPL) sites for which the Company had been named a potentially responsible
party under the federal Comprehensive Environmental Response, Compensation, and
Liability Information System (CERCLA) as of the closing date of the Acquisition,
as well as certain potential costs for sites listed on state hazardous cleanup
lists. With respect to all other environmental matters, Alumax's obligations are
limited to $125.0 million. However, notwithstanding the indemnity, the Company
does not believe that it has any significant probable liability for
environmental claims. Further, the Company believes it to be unlikely that the
Company would be required to bear environmental costs in excess of its pro rata
share of such costs as a potentially responsible party under CERCLA.
12. TRANSACTIONS WITH FORMER PARENT:
For the predecessor period, the Company participated in Alumax's centralized
cash management system. Under this system, cash received from the Company's
operations was transferred to Alumax's centralized cash accounts and cash
disbursements were funded from the centralized cash accounts.
Transactions between the Company and Alumax were generally at the market value
of the products and services involved. Such transactions consisted primarily of
purchases of raw materials, which totaled $56,255.1, $27,569.7 and $1,450.1 for
the years ended December 31, 1994 and 1995 and the nine month predecessor period
ended September 25, 1996, respectively.
The following is a summary of the components of the due to former parent account
at December 31, 1995 (predecessor):
Allocation of accrued pension liability $ 1,797.7
Allocation of other post-retirement benefits 7,285.0
Net U.S. current and deferred income taxes 25,081.7
Net of other operating cash flows (602.0)
------------------
Total due to former parent $ 33,562.4
==================
The due to former parent account represented the cumulative net effect of the
Company's activity in Alumax's cash management system and other transactions
between the Company and Alumax. Alumax periodically charged the Company interest
expense related to a portion of this balance at a rate which approximated the
prime rate.
13. OPERATIONS AND GEOGRAPHIC DATA:
The Company operates 35 plants and service centers throughout the United States.
Products produced and marketed by these operations include rain carrying
systems, roofing and roofing accessories, siding, appliance trims, steel entry
doors, vinyl windows
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
and numerous recreational vehicle components. Fabricated Products serves the
recreational vehicle, manufactured housing, home center, home improvement,
residential construction, agricultural and utility building markets in the
United States.
Fabricated Products also operates a group of five companies in Western Europe
which focuses on coil coating and fabricating aluminum and steel. Other products
include steel and aluminum entry doors, recreational vehicle components,
composite panels, vehicle components such as seat rails and sunroof frames, and
windows for modular construction. These European companies, which serve the
recreational vehicle, home center, home improvement, residential construction,
and various original equipment manufacturer markets, operate two plants in the
United Kingdom, two in France and one in the Netherlands.
PREDECESSOR SUCCESSOR
--------------------------------------------------------- -------------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
Geographic data: DECEMBER 31, DECEMBER 31, SEPTEMBER 25, DECEMBER 27,
1994 1995 1996 1996
----------------- ----------------- ------------------ -------------------
Net sales:
United States $ 286,756.0 $ 287,772.2 $ 225,535.5 $ 75,538.5
Europe and other international 159,815.8 195,689.7 137,772.1 49,990.9
----------------- ----------------- ------------------ -------------------
$ 446,571.8 $ 483,461.9 $ 363,307.6 $ 125,529.4
================= ================= ================== ===================
Earnings from operations:
United States $ 16,658.3 $ 11,195.3 $ 9,573.7 $ 2,015.1
Europe and other international 13,100.2 22,946.7 13,268.0 5,917.9
----------------- ----------------- ------------------ -------------------
$ 29,758.5 $ 34,142.0 $ 22,841.7 $ $7,933.0
================= ================= ================== ===================
Identifiable assets:
United States $ 119,848.5 $ 192,934.5
Europe and other international 116,800.3 134,358.2
----------------- -------------------
$ 236,648.8 $ 327,292.7
================= ===================
A significant portion of the Company's sales are to the retail and automotive
markets. Concentrations of credit risk with respect to the trade receivables,
relating to sales into these as well as other markets, are limited due to the
large number of customers and the widely dispersed geographic areas in which the
Company's businesses operate.
14. SUBSEQUENT EVENT
On May 2, 1997, the Company announced that it has signed a definitive agreement
to purchase a business that manufacturers industrial, commercial, architectural
and agricultural building panels from aluminum and steel, and is headquartered
in Lancaster, Pennsylvania. Completion of the acquisition is subject to certain
due diligence and other conditions, and the final purchase price will be
determined pursuant to the terms of the purchase agreement. Closing on this
transaction is anticipated to be in the latter part of June.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
15. SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS:
As described in Note 1, on September 25, 1996, Euramax purchased the Company
from Alumax Inc. As further described in Note 5, the Acquisition was financed,
in part, through Senior Subordinated Notes due 2006 (the "Notes"). The Notes are
primary obligations of Euramax (the "Parent"). The United Kingdom and
Netherlands holding company subsidiaries of Euramax are co-obligors under the
Notes (the "Co-obligors"). The United States holding company subsidiary of
Euramax has provided a full and unconditional guarantee of the Notes (the
"Guarantor"). The following supplemental condensed combining financial
statements for the periods prior to the Acquisition, (the "Predecessor" periods)
reflect the combined historical financial position, results of operations and
cash flows of the entities that are the Parent, the Co-obligors and the
Guarantor (collectively, the "Anticipated Parent, Co-obligors and Guarantor"),
and such combined information of the non-guarantor entities, consisting
principally of the operating companies acquired (collectively, the
"Non-guarantor Subsidiaries"). The following supplemental condensed combining
financial statements as of December 27, 1996 and for the three month period then
ended (the "Successor" period) reflect the financial position, results of
operations, and cash flows of each of the Parent, the Co-Obligors and Guarantor
entities, and such combined information of the Non- Guarantor Subsidiaries. The
Co-obligors and the Guarantor are wholly-owned subsidiaries of Euramax and are
each jointly, severally, fully, and unconditionally liable under the Notes.
Separate complete financial statements of each Co-obligor and of the Guarantor
are not presented because management has determined that they are not material
to investors. For periods prior to the Acquisition, there were no significant
intercompany balances or transactions between the Anticipated Parent,
Co-obligors and Guarantor entities combined and the Non-guarantor Subsidiaries.
PREDECESSOR
---------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1994
---------------------------------------------------------------
Anticipated
Parent,
Co-Obligors Non-Guarantor Combined
and Guarantor Subsidiaries Totals
----------------- --------------------- --------------------
Net sales $ _ $ 446,571.8 $ 446,571.8
Cost and expenses:
Cost of goods sold _ 366,716.8 366,716.8
Selling and general _ 42,424.3 42,424.3
Depreciation and amortization _ 7,672.2 7,672.2
----------------- --------------------- --------------------
Earnings from operations _ 29,758.5 29,758.5
Interest income (expense), net _ (255.2) (255.2)
Other expense, net _ (284.2) (284.2)
----------------- --------------------- --------------------
Earnings before income taxes _ 29,219.1 29,219.1
Provision for income taxes _ 12,037.8 12,037.8
----------------- --------------------- --------------------
Net earnings $ _ $ 17,181.3 $ 17,181.3
================= ===================== ====================
Note: Separate columns for the Anticipated Parent, the Co-obligors and the
Guarantor are not presented as there were no amounts for such entities for the
periods shown.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
PREDECESSOR
-------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------------
Anticipated
Parent,
Co-Obligors Non-Guarantor
and Guarantor Subsidiaries Combined Totals
-------------------------------------------------------------
Net sales $ - $ 483,461.9 $ 483,461.9
Cost and expenses:
Cost of goods sold - 399,989.0 399,989.0
Selling and general - 41,350.7 41,350.7
Depreciation and amortization - 7,980.2 7,980.2
-------------------------------------------------------------
Earnings from operations - 34,142.0 34,142.0
Interest income (expense), net - (2,988.4) (2,988.4)
Other expense, net - (96.2) (96.2)
-------------------------------------------------------------
Earnings before income taxes - 31,057.4 31,057.4
Provision for income taxes - 11,399.1 11,399.1
-------------------------------------------------------------
Net earnings $ - $ 19,658.3 $ 19,658.3
=============================================================
PREDECESSOR
------------------------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 25, 1996
------------------------------------------------------------------
Anticipated
Parent,
Co-Obligors Non-Guarantor Combined
and Guarantor Subsidiaries Totals
------------------------------------------------------------------
Net sales $ - $ 363,307.6 $ 363,307.6
Cost and expenses:
Cost of goods sold - 300,184.8 300,184.8
Selling and general - 33,286.1 33,286.1
Depreciation and amortization - 6,995.0 6,995.0
------------------------------------------------------------------
Earnings from operations - 22,841.7 22,841.7
Interest income (expense), net - (621.8) (621.8)
Other income (expense), net - (297.7) (297.7)
------------------------------------------------------------------
Earnings before income taxes - 21,922.2 21,922.2
Provision for income taxes - 8,342.3 8,342.3
------------------------------------------------------------------
Net earnings $ - $ 13,579.9 $ 13,579.9
==================================================================
Note: Separate columns for the Anticipated Parent, the Co-obligors and the
Guarantor are not presented as there were no amounts for such entities for the
periods shown.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
-----------------------------------------------------------------------------------------------------
SUCCESSOR FOR THE THREE MONTHS ENDED DECEMBER 27, 1996
-----------------------------------------------------------------------------------------------------
Co-Obligors and Guarantor Subsidiaries
--------------------------------------------
Euramax Amerimax Euramax Euramax
International Holdings, European European Non-
plc Inc. Holdings plc Holdings, B.V Guarantor Consoliated
(Parent) (Guarantor) (Co-obligor) (Co-obligor) Subsidiaries Eliminations Total
------------- ------------- ------------- --------------- --------------- ------------- ------------
Thousands of U.S. Dollars
Net sales $ - $ - $ - $ - $ 125,529.4 $ - $ 125,529.4
Cost and Expenses: - - - - - - -
Cost of goods sold - - - - 104,055.4 - 104,055.4
Selling and general 80.0 - - - 10,870.3 - 10,950.3
Depreciation and 0.2 - - - 2,590.5 - 2,590.7
amortization ------------- ------------- ------------- --------------- --------------- --------------- ------------
Earnings from operations (80.2) - - - 8,013.2 - 7,933.0
Equity in earnings from
subsidiaries 2,640.4 1,542.8 958.3 1,448.0 8,741.1 (15,330.6) -
Interest expense, net (2,434.6) (921.1) (725.6) (938.0) (1,167.1) - (6,186.4)
Other expense, net - - - - (235.3) - (235.3)
------------- ------------- ------------- --------------- --------------- --------------- ------------
Earnings before income
taxes 125.6 621.7 232.7 510.0 15,351.9 (15,330.6) 1,511.3
Provision for income taxes 44.0 241.8 81.4 178.5 5,923.4 (5,963.6) 505.5
------------- ------------- ------------- --------------- --------------- --------------- ------------
Net earnings 81.6 379.9 151.3 331.5 9,428.5 (9,367.0) 1,005.8
Dividends on redeemable
preference shares (1,191.0) - - - - - (1,191.0)
------------- ------------- ------------- --------------- --------------- --------------- ------------
Net earnings available for
ordinary shareholders $ (1,109.4) $ 379.9 $ 151.3 $ 331.5 $ 9,428.5 $ (9,367.0) $ (185.2)
=========== =========== =========== ============= ============= ============= ============
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
PREDECESSOR
--------------------------------------------------------------------
AS OF DECEMBER 31, 1995
--------------------------------------------------------------------
Anticipated
Parent,
Co-Obligors Non-Guarantor Combined
and Guarantor Subsidiaries Totals
-------------------- --------------------- -----------------------
ASSETS
Current assets:
Cash and equivalents $ - $ 12,586.9 $ 12,586.9
Accounts receivable, net - 60,006.4 60,006.4
Inventories - 101,454.5 101,454.5
Other current assets - 1,340.3 1,340.3
------------------------------------------------------------------------
Total current assets - 175,388.1 175,388.1
------------------------------------------------------------------------
Noncurrent assets:
Property, plant and equipment, net - 60,024.6 60,024.6
Other assets - 1,236.1 1,236.1
------------------------------------------------------------------------
Total noncurrent assets - 61,260.7 61,260.7
------------------------------------------------------------------------
$ - $ 236,648.8 $ 236,648.8
========================================================================
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ - $ 28,409.1 $ 28,409.1
Accrued liabilities - 16,917.8 16,917.8
Taxes payable - 2,681.5 2,681.5
------------------------------------------------------------------------
Total current liabilities - 48,008.4 48,008.4
------------------------------------------------------------------------
Noncurrent liabilities:
Deferred income taxes - 1,225.0 1,225.0
Due to former parent - 33,562.4 33,562.4
Other noncurrent liabilities - 2,392.2 2,392.2
------------------------------------------------------------------------
Total noncurrent liabilities - 37,179.6 37,179.6
------------------------------------------------------------------------
Commitments and contingencies
Total equity - 151,460.8 151,460.8
------------------------------------------------------------------------
$ - $ 236,648.8 $ 236,648.8
========================================================================
Note: Separate columns for the Anticipated Parent, the Co-obligors and the
Guarantor are not presented as there were no amounts for such entities for the
periods shown.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
---------------------------------------------------------------------------------------------
Successor as of December 27, 1996
---------------------------------------------------------------------------------------------
Co-Obligors and Guarantor Subsidiaries
----------------------------------------------
Euramax Amerimax Euramax Euramax
International Holdings, European European Non-
plc Inc. Holdings plc Holdings, B.V. Guarantor Consolidated
(Parent) (Guarantor) (Co-obligor) (Co-obligor) Subsidiaries Eliminations Totals
------------- ----------- ----------- -------------- ------------ ------------ -----------
ASSETS
Current assets:
Cash and cash equivalents $ 123.7 $ - $ - $ - $ 12,392.0 $ - $ 12,515.7
Accounts receivable, net - - - - 60,766.7 - 60,766.7
Inventories - - - - 87,237.1 (2.0) 87,235.1
Deferred income taxes - - - - 1,483.5 - 1,483.5
Other current assets - - - - 1,349.9 - 1,349.9
------------- ------------ ---------- ------------ ------------ ------------ -------------
Total current assets 123.7 - - - 163,229.2 (2.0) 163,350.9
Property, plant and equipment, net - - - - 107,338.3 - 107,338.3
Amounts due from parent / affiliates 71,172.1 - - 3,685.9 34,074.1 (108,932.1) -
Goodwill - - - - 40,925.8 - 40,925.8
Investment in consolidated 38,998.2 142,742.8 33,205.2 37,026.3 114,667.9 (366,640.4) -
Other assets 7,561.3 3,476.3 852.7 1,102.4 2,685.0 - 15,677.7
------------- ------------ ------------ ---------- ------------ ------------ -------------
$ 117,855.3 $ 146,219.1 $34,057.9 $ 41,814.6 $ 462,920.3 $(475,574.5) $ 327,292.7
============= ========== =========== ============ ============ ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ - $ - $ - $ - $ 38,221.4 $ - $ 38,221.4
Accrued expenses 2,329.8 500.0 694.6 898.0 19,571.5 - 23,993.9
Income taxes payable (2,038.1) - - - 3,555.0 - 1,516.9
Current maturities of long-term debt - - - - 2,000.0 - 2,000.0
------------- ----------- ----------- ------------ ----------- ------------ -------------
Total current liabilities 291.7 500.0 694.6 898.0 63,347.9 - 65,732.2
Long-term debt, less current 80,200.0 25,000.0 23,900.0 30,900.0 49,740.0 - 209,740.0
Amounts due to parent/affiliates - 102,739.1 629.7 - 5,170.5 (108,539.3) -
Other liabilities - - - - 4,721.7 - 4,721.7
Deferred income taxes - - - - 9,735.2 - 9,735.2
------------- ----------- ----------- ------------ ----------- ------------ -------------
Total liabilities 80,491.7 128,239.1 25,224.3 31,798.0 132,715.3 (108,539.3) 289,929.1
------------- ----------- ----------- ------------ ----------- ------------ -------------
Redeemable preference shares 35,191.0 - - - - - 35,191.0
------------- ----------- ----------- ------------ ----------- ------------ -------------
Ordinary shareholders' equity:
Ordinary shares 1,000.0 - 78.2 23.4 74.5 (176.1) 1,000.0
Paid-in capital - 17,000.0 6,921.8 9,076.6 314,751.0 347,749.4) -
Retained earnings (deficit) (185.2) 980.0 486.7 838.3 13,614.6 (15,919.6) (185.2)
Cumulative foreign translation 1,357.8 - 1,346.9 78.3 1,764.9 (3,190.1) 1,357.8
adjustment ------------- ----------- ----------- ------------- ----------- ------------ -------------
Total ordinary shareholders' equity 2,172.6 17,980.0 8,833.6 10,016.6 330,205.0 (367,035.2) 2,172.6
------------- ----------- ----------- ------------- ----------- ------------ -------------
$ 117,855.3 $146,219.1 $34,057.9 $41,814.6 $462,920.3 $(475,574.5) $ 327,292.7
============= =========== =========== ============= ============ ============ =============
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
PREDECESSOR
------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1994
------------------------------------------------------------
Anticipated
Parent,
Co-Obligors
and Non-Guarantor
Guarantor Subsidiaries Combined Totals
--------------- ------------------ ---------------------
Cash flows from operating activities:
Net earnings (loss) $ - $ 17,181.3 $ 17,181.3
Reconciliation of net earnings to net cash provided by
operating activities:
Depreciation and amortization - 7,672.2 7,672.2
Provision for doubtful accounts - 1,451.4 1,451.4
(Gain) loss on sales of assets - 142.6 142.6
Deferred income taxes - 603.7 603.7
Changes in operating assets and liabilities - (18,729.6) (18,729.6)
------------- ------------------- ----------------
Net cash provided by operating activities - 8,321.6 8,321.6
------------- ------------------- ----------------
Cash flows from investing activities:
Proceeds from sales of assets - 1,465.3 1,465.3
Capital expenditures - (9,594.5) (9,594.5)
---------------------------------- ----------------
Net cash used in investing activities - (8,129.2) (8,129.2)
------------- ------------------- ----------------
Cash flows from financing activities:
Net change in due to former parent - 5,698.6 5,698.6
Dividends paid - (111.2) (111.2)
------------- ------------------- ----------------
Net cash provided by financing activities - 5,587.4 5,587.4
------------- ------------------- ----------------
Effect of exchange rate changes on cash - (1,580.2) (1,580.2)
------------- ------------------- ----------------
Net increase in cash and equivalents - 4,199.6 4,199.6
Cash and equivalents at beginning of year - 30,919.4 30,919.4
------------- ------------------- ----------------
Cash and equivalents at end of year $ $ 35,119.0 $ 35,119.0
============= =================== ================
Note: Separate columns for the Anticipated Parent, the Co-obligors and the
Guarantor are not presented as there were no amounts for such entities for the
periods shown.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
PREDECESSOR
---------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------------
Parent,
Co-Obligors Non-Guarantor Combined
and Guarantor Subsidiaries Totals
------------------- -------------------- -----------------
Cash flows from operating activities:
Net earnings $ - $ 19,658.3 $ 19,658.3
Reconciliation of net earnings to net cash provided by
operating activities:
Depreciation and amortization - 7,980.2 7,980.2
Provision for doubtful accounts - 388.2 388.2
Loss on sales of assets - 146.7 146.7
Deferred income taxes - (526.0) (526.0)
Changes in operating assets and liabilities - (21,681.3) (21,681.3)
--------------- ------------ ---------------
Net cash provided by operating activities - 5,966.1 5,966.1
--------------- ------------ ---------------
Cash flows from investing activities:
Proceeds from sales of assets - 177.0 177.0
Capital expenditures - (17,429.4) (17,429.4)
--------------- ------------ ---------------
Net cash used in investing activities - (17,252.4) (17,252.4)
--------------- ------------ ---------------
Cash flows from financing activities:
Net change in due to former parent - (7,486.1) (7,486.1)
Dividends paid - (4,037.3) (4,037.3)
--------------- ------------ ---------------
Net cash used in financing activities - (11,523.4) (11,523.4)
--------------- ------------ ---------------
Effect of exchange rate changes on cash - 277.6 277.6
--------------- ------------ ---------------
Net decrease in cash and equivalents - (22,532.1) (22,532.1)
Cash and equivalents at beginning of year - 35,119.0 35,119.0
--------------- ------------ ---------------
Cash and equivalents at end of year $ - $ 12,586.9 $ 12,586.9
=============== ============ ===============
Note: Separate columns for the Anticipated Parent, the Co-obligors and the
Guarantor are not presented as there were no amounts for such entities for the
periods shown.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
PREDECESSOR
-------------------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 25, 1996
-------------------------------------------------------------
ANTICIPATED
PARENT
CO-OBLIGORS
AND NON-GUARANTOR COMBINED
GUARANTOR SUBSIDIARIES TOTALS
------------------- ----------------- -------------
Cash flows from operating activities:
Net earnings $ - $ 13,579.9 $ 13,579.9
Reconciliation of net earnings to net cash provided by
operating activities:
Depreciation and amortization - 6,995.0 6,995.0
Provision for doubtful accounts - 827.2 827.2
(Gain) loss on sales of assets - (168.3) (168.3)
Deferred income taxes - (338.7) (338.7)
Changes in operating assets and liabilities - (654.3) (654.3)
-------------- -------------- --------------
Net cash provided by operating activities - 20,240.8 20,240.8
-------------- -------------- --------------
Cash flows from investing activities:
Proceeds from sale of assets - 233.0 233.0
Capital expenditures (11,517.5) (11,517.5)
-------------- -------------- --------------
Net cash used in investing activities - (11,284.5) (11,284.5)
-------------- -------------- --------------
Cash flows from financing activities:
Net change in due to former parent - (20,973.0) (20,973.0)
-------------- -------------- --------------
Net cash used in financing activities - (20,973.0) (20,973.0)
-------------- -------------- --------------
Effects of exchange rate changes on cash - (677.4) (677.4)
-------------- --------------- --------------
Net decrease in cash and equivalents - (12,694.1) (12,694.1)
Cash and equivalents at beginning of period - 12,586.9 12,586.9
------------ --------------- --------------
Cash and equivalents at end of period $ - $ (107.2) $ (107.2)
=========== =============== ==============
Note: Separate columns for the Anticipated Parent, the Co-obligors and the
Guarantor are not presented as there were no amounts for such entities for the
periods shown.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
SUCCESSOR FOR THE THREE MONTHS ENDED DECEMBER 27, 1996
-----------------------------------------------------------------------------------------------
CO-OBLIGORS AND GUARANTOR SUBSIDIARIES
-------------------------------------------------------
Euramax Euramax Euramax
International Amerimax European European Non-
plc Holdings, Inc. Holdings plc Holdings, B.V Guarantor Consolidated
(Parent) (Guarantor) (Co-obligor) (Co-obligor Subsidiaries Eliminations Totals
----------- ------------- ------------- -------------- ------------- ------------- ---------
Cash flows from operating activities
Net earnings $ 1,005.8 $ 980.0 $ 486.7 $ 838.3 $ 13,025.6 $ (15,330.6) $ 1,005.8
Reconciliation of net earnings to
cash provided by (used in)
operating activities:
Depreciation and amortization - - - - 2,590.7 - 2,590.7
Provision for doubtful accounts - - - - 221.3 - 221.3
(Gain) loss on sales of assets - - - - (7.4) - (7.4)
Deferred income taxes - - - - (760.5) - (760.5)
Equity in earnings of subsidiaries (2,640.4) (1,542.8) (958.3) (1,448.0) (8,741.1) 15,330.6 -
Changes in operating assets and
liabilities 366.1 683.0 716.5 926.3 22,634.9 - 25,326.8
----------- ------------- ------------- ------------ ---------- ------------- -----------
Net cash provided by (used in)
operating activities (1,268.5) 120.2 244.9 316.6 28,963.5 - 28,376.7
----------- ------------- ------------- ------------ ---------- ------------- -----------
Cash flows from investing activities:
Purchase of Fabricated Products (35,000.0) (141,200.0) (30,900.0) (35,500.0) (41,713.0) 33,100.0 (251,213.0)
Proceeds from sale of assets - - - - 91.6 - 91.6
Capital expenditures - - - - (681.8) - (681.8)
----------- ------------- ------------- ------------ ---------- ------------- -----------
Net cash used in investing
activities (35,000.0) (141,200.0) (30,900.0) (35,500.0) (42,303.2) 33,100.0 (251,803.2)
----------- ------------- ------------- ------------ ---------- ------------- -----------
Cash flows from financing activities:
Proceeds from long-term debt 80,200.0 44,000.0 23,900.0 30,900.0 56,000.0 - 235,000.0
Proceeds from issuance of
preference shares 34,000.0 - - - - - 34,000.0
Proceeds from issuance of ordinary 1,000.0 17,000.0 9,100.0 - (33,100.0) 1,000.0
shares
Deferred financing fees (2,934.7) (3,659.3) (1,130.7) (1,330.7) - (9,930.0)
Repayment of debt - (19,000.0) - - (6,163.5) - (25,163.5)
Other - - - - (1,555.0) - (1,555.0)
Due to/from parent or affiliate (75,873.1) 102,739.1 (3,685.9) (23,809.8) - -
----------- ------------- ------------- ----------- ------------ ------------ -----------
Net cash provided by financing
activities 36,392.2 141,079.8 30,655.1 35,183.4 23,141.0 (33,100.0) 233,351.5
----------- ------------- ------------- ----------- ------------ ------------ ----------
Effect of exchange rate changes on cash - - - - 2,697.9 - 2,697.9
----------- ------------- ------------- ----------- ------------ ------------ ----------
Net increase in cash and equivalents 123.7 - - - 12,499.2 - 12,622.9
Cash and equivalents at beginning of - - - - (107.2) - (107.2)
period
Cash and equivalents at end of ----------- ------------- ------------- ----------- ------------- ----------- ----------
period $ 123.7 $ - $ - $ - $ 12,392.0 $ - $12,515.7
=========== ============= ============= =========== ============= =========== ==========
Noncash investing and financing activities:
Dividends accrued on preference shares$ 1,191.0 $ - $ - $ - $ - $ - $1,191.0
=========== ============= ============= =========== ============== =========== =========
Supplemental cash flow information:
Foreign income taxes paid, net $ - $ - $ - $ - $ 3.4 $ - $ 3.4
=========== ============= ============= ============ ============= =========== =========
-23-
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
Part III
Item 10. Directors and Executive Officers
The following sets forth certain information with respect to the persons who are
members of the Board of Directors and key officers of the Company and its
subsidiaries.
Name Age Position
----- ----------------------------------------------
J. David Smith 47 Chief Executive Officer, President and Director
Frank T. Geist 51 Executive Vice President
R. Scott Vansant 35 Vice President, Finance and Administration
Mitchell B. Lewis 34 President, General Manager - Amerimax Building
Products, Inc.
Neil E. Bashore 47 President, General Manager - Amerimax Home
Products, Inc.
Jo Cuypers 56 Managing Director - Euramax Coated Products B.V.
Roger A. Walters 55 Managing Director - Euramax Coated Products
Limited
David C. Pugh 47 Managing Director - Ellbee Ltd.
Joseph M. Silvestri 35 Director
Richard M. Cashin 43 Director
William Ty Comfort 30 Director
Rolly van Rappard 35 Director
Paul E. Drack 69 Director
Stuart M. Wallis 51 Director, Non-executive Chairman
J. David Smith has been President of AFP, Amerimax Fabricated Products, since
1990 and was appointed a Vice President of Alumax in 1994. Mr. Smith became a
director of the Company in September 1996. Mr. Smith's career in the fabricated
products industry spans twenty-five years, starting with various operational
responsibilities with Howmet Aluminum Corp. ("Howmet Aluminum"). In 1983, Mr.
Smith joined Alumax as General Manager of the Building Specialties Division and
became President of Alumax Home and Specialty Products Group in 1988.
Frank T. Geist has been Group Vice President of AFP since 1993. Prior to 1993,
Mr. Geist served as Vice President, General Manager of Amerimax Home Products,
Inc. Mr. Geist's career in the fabricated products industry began twenty-five
years ago with various operational responsibilities with Howmet Aluminum.
R. Scott Vansant joined Alumax in 1991. From 1995 to 1996, Mr. Vansant served as
Director of Internal Audit for Alumax. Mr. Vansant also served in various
operational positions with Alumax Building Products, Inc., including serving as
Controller of the division from 1993 to 1995. Prior to 1991, Mr. Vansant worked
as a Certified Public Accountant for Ernst & Young L.L.P.
Mitchell B. Lewis has been General Manager of Amerimax Building Products, Inc.
from 1993 to 1996 and Assistant General Manager of Amerimax Building Products,
Inc. from 1991 to 1993. Prior to 1991, Mr. Lewis served as corporate counsel
with Alumax. Prior to joining Alumax, Mr. Lewis practiced law, specializing in
mergers and acquisitions.
Neil E. Bashore has been General Manager of Amerimax Home Products, Inc. from
1993 to 1996. From 1981 to 1993, Mr. Bashore served as Manufacturing Manager of
Amerimax Home Products, Inc. and has served in other management positions with
the since 1975.
Jo Cuypers has been Managing Director of Euramax Coated Products B.V. since
1979. From 1970 to 1979, Mr. Cuypers served in various management positions with
Euramax Coated Products B.V. Prior to joining Euramax Coated Products B.V., Mr.
Cuypers held several positions with other companies in related industries, thus
bringing his total experience to nearly forty years.
Roger A. Walters has been Managing Director of Euramax Coated Products Ltd.
since 1983. Prior to 1983, Mr. Walters held various technical and managerial
positions with Alcan, Inc. Mr. Walters has served on various trade associations
and is currently the Chairman of the Statistics Group for the European Coil
Coaters Association.
David C. Pugh has been Managing Director of Euramax Ellbee Ltd. since 1996. Mr.
Pugh has held several positions with Alumax over the past twenty years,
including Sales Director and Production Director of Euramax Ellbee Ltd.
Joseph M. Silvestri has been a director of the Company since its inception. Mr.
Silvestri has been employed by Citicorp Venture Capital, Ltd. since 1990 and has
been a Vice President since 1995. Mr. Silvestri is a director of International
Media Group, Polyfibron Technologies, Frozen Specialties, Glenoit Mills and
Triumph Group.
Richard M. Cashin became a director of the Company upon consummation of the
Transactions. Mr. Cashin has been employed by Citicorp Venture Capital, Ltd.
since 1980 and has been a Managing Director since 1991. Mr. Cashin is a director
of Levitz Furniture Incorporated, Lifestyle Furnishings International, and Titan
Wheel International Inc.
William Ty Comfort became a director of the Company upon consummation of the
Transactions. Mr. Comfort has been employed by CVC Capital Partners, Ltd. since
1995. Mr. Comfort is currently an Assistant Director.
Rolly van Rappard became a director of the Company upon consummation of the
Transactions. Mr. van Rappard has been employed by CVC Capital Partners B.V.
since 1988 and has been a Managing Director since 1993. Mr. van Rappard is
currently a director of, among other companies, Saybolt International B.V.,
Docdata B.V. and Hoogenbosch Retail Group B.V.
Paul E. Drack became a director of the Company in December 1996. Mr. Drack
retired from AMAX Inc. in December 1993 after serving as President and Chief
Operating Officer from 1991. From 1985 to 1991, Mr. Drack was employed in
various positions with Alumax Inc. serving as President and Chief Executive
Officer from 1986.
Stuart M. Wallis became a Director of the Company in February, 1997. Mr. Wallis
served as Chief Executive for Fisons plc from 1994 to 1995. From 1989 to 1995,
Mr. Wallis served as Chief Executive in Europe for Bowater plc.
Item 11. Executive Compensation
The following table sets forth the aggregate cash compensation paid to, or
accrued by the Company for the Company's executive officers who earned $100,000
or more during the year ended December 27, 1996.
Summary Compensation Table
Annual Compensation
---------------------------
---------------------------
All Other
Name and Principal Position Salary Bonus Compensation(1)
J. David Smith, Chief Executive Officer, President and Director... $174,855 $93,840 $6,696
Frank T. Geist, Executive Vice President.......................... $137,436 $65,563 $5,756
- - - -----------
(1) Other compensation consists entirely of the Company's matching
contributions to 401(k) plans.
The Company has not granted any options or stock appreciation rights. The
Company has no long-term incentive plans.
Retirement Plans
See Note 9 to the Financial Statements for a description of the Company's
retirement plans. Additionally, the Company has adopted an unfunded supplemental
executive retirement plan (the "SERP") for Mr. Smith and Mr. Geist which is
designed to supplement benefits payable under other plans of the Company. The
annual benefit, payable in the form of a life annuity, is $110,000 for Mr. Smith
and $45,000 for Mr. Geist upon retirement at age 65. Annual benefits payable
under the SERP are reduced for participants retiring before age 65. A
participant's benefits under the SERP are not vested until the earlier of the
date the executive attains age 55, dies, becomes totally and permanently
disabled, or the occurrence of a change-in-control. If the employment of Mr.
Smith or Mr. Geist with the Company terminates, for any reason, before his
benefits have vested, Messrs. Smith and Geist will not be entitled to any
benefits under the SERP.
Compensation of Directors
Directors who are not executive officers of the Company are entitled to an
annual fee of $15,000. Directors are reimbursed for out-of-pocket expenses
incurred in connection with attending meetings.
Employment Agreements
Mr. Smith is party to an employment agreement with the Company which expires on
September 25, 1997. The agreement provides for a minimum annual salary of
$212,000 and bonuses based on the achievement of certain operating income and
return on asset targets established by the Board of Directors of the Company in
consultation with Mr. Smith. Subject to certain exceptions, in the event Mr.
Smith is terminated by the Company (other than for cause), Mr. Smith will be
entitled to receive his annual salary for a period of twenty-four months
following the date of such termination.
Mr. Geist is party to an employment agreement with the Company which expires on
September 25, 1997. The agreement provides for a minimum annual salary of
$165,000 and bonuses based on the achievement of certain operating income and
return on asset targets established by the Board of Directors of the Company in
consultation with Mr. Geist. Subject to certain exceptions, in the event Mr.
Geist is terminated by the Company (other than for cause), Mr. Geist will be
entitled to receive his annual salary for a period of twenty-four months
following the date of such termination.
Each of the Employment Agreements also require the Company to maintain benefits
for Mr. Smith and Geist equal to: (i) basic and supplemental life insurance in
total equal to 4-1/2 times base pay, (ii) accidental death and dismemberment
insurance equal to 4-1/2 times base pay, and (iii) long-term disability
insurance equal to 2/3 base pay plus target bonus.
Management Equity Participation
In connection with the Acquisition, in order to provide financial incentives for
certain of its employees, the Company provided for certain rights with respect
to the Ordinary Shares and the Preference Shares purchased by the Management
Investors. On the Closing Date, the Management Investors purchased an aggregate
of approximately $1.0 million of Ordinary Shares and Preference Shares. The
Ordinary Shares and Preference Shares of the Management Investors are subject to
certain call provisions exercisable by the Company and/or the Investor Group in
the event of the termination of a Management Investor's employment with the
Company and its subsidiaries.
Description of Preference Shares
As part of the Transactions, the Company issued 34,000,000 Preference Shares for
a purchase price of $34.0 million (the "Liquidation Value") to the Investor
Group, the Management Investors and an affiliate of Paribas. Dividends accrue on
the Preference Shares at a rate of 14% per annum and accumulate and compound on
a quarterly basis. Upon the Closing Date, the Company had outstanding 1,000,000
Ordinary Shares and 34,000,000 Preference Shares. The Preference Shares rank
prior to the Ordinary Shares upon liquidation and in respect of dividends and
redemption. The vote of 66 2/3% of the holders of the Preference Shares, voting
as a separate class, is required to (i) cause the Company to direct its
subsidiaries to make distributions to the Company sufficient to enable the
Company to pay dividends on the Preference Shares and (ii) cause the redemption
of the Preference Shares upon the occurrence of certain events. Except as
described in the foregoing and as otherwise required by law, the Preference
Shares are not entitled to vote. The Preference Shares are subject to mandatory
redemption on December 31, 2007. Upon redemption, a holder of Preference Shares
is entitled to receive for each Preference Share redeemed its per share
Liquidation Value plus accrued and unpaid dividends.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The table below sets forth certain information regarding the beneficial
ownership of the Ordinary Shares and the Preference Shares as of May 1, 1997 by
(i) each person who is known to the Company to be the beneficial owner of more
than 5% of either class, (ii) each director, (iii) each named executive officer
of the Company, and (iv) all executive officers and directors of the Company as
a group. Except as set forth below, the stockholders listed below have sole
voting and investment power with respect to all shares shown as beneficially
owned by them.
Number of Percentage of Number of Percentage of
Name and Address of Beneficial Owner Ordinary Shares Ordinary Shares Preference Shares Preference Shares
- - - ------------------------------------------------- ------------------- --------------------- ------------------- -----------------
ACP (1) 400,800 40.1% 14,939.200 43.9%
6099 Riverside Drive, Suite 201
Dublin, Ohio 43017
CVC Europe 396,000 39.6% 14,904,000 43.8%
P.O. Box 87
18 Grenville Street
St. Helier, Jersey
JE4 8PX, Channel Islands
Banque Paribas 88,000 8.8% 3,312,000 9.7%
787 7th Avenue
New York, NY 10019
J. David Smith 18,000 1.8% 132,000 .4
5731 Mt. Repose Lane
Norcross, GA 30092
Frank T. Geist 14,400 1.4% 105,600 .3
6005 State Bridge Rd., #517
Duluth GA 30136
Joseph M. Silvestri (2) 0 * 0 *
Richard M. Cashin (2) 0 * 0 *
William Ty Comfort 0 * 0 *
Rolly van Rappard (2) 0 * 0 *
Stuart M. Wallis 0 * 0 *
Executive Officers and Directors as a Group 82,800 8.3% 607,200 1.9%
(14 persons) ------------------- --------------------- ------------------- -----------
* Less than 1%
-----------
(1)ACP is an affiliate of Citicorp Venture Capital, Ltd.
(2)Does not include 396,000 ordinary shares and 14,904,000 Preference Shares
held by CVC Europe. Messrs. Silvestri, Cashin and van Rappard are officers of
affiliates of CVC Europe.
Item 13. Certain Relationships and Related Transactions
Shareholders Agreement and Articles of Association
On the Closing Date, the Company, the Investor Group, the Management Investors
and an affiliate of Paribas entered into a shareholders agreement (the
"Shareholders Agreement") which contains certain agreements among such parties
with respect to the equity interests and corporate governance of the Company.
The Board of Directors of the Company is comprised of seven members. ACP and CVC
Europe each have the right to appoint two directors. J. David Smith is to be
re-appointed a director for as long as he is Chief Executive Officer of the
Company. Pursuant to the Shareholders Agreement and the Articles of Association
of the Company, the disposition of Ordinary Shares and Preference Shares is
restricted. The Shareholders Agreement and the Articles of Association also
contain certain participation rights, approval rights and rights of first
refusal exercisable by ACP and CVC Europe in the event of certain sales or
proposed sales of equity interests by the other.
The holders of 5% of the Company's Common Stock, as well as the named executive
officers, paid one dollar for each share listed opposite their names during
fiscal 1996. See "Item 12. Security Ownership of Certain Beneficial Owners and
Management."
Registration Rights Agreement
On the Closing Date, the Company entered into a registration rights agreement
(the "Registration Agreement") with certain of the Company's existing
shareholders. Pursuant to the terms of the Registration Agreement, such
shareholders have the right to require the Company, at the Company's sole cost
and expense and subject to certain limitations, to register under the Securities
Act or list on any internationally recognized stock exchange all or part of the
Ordinary Shares held by such shareholders (the "Registrable Securities"). All
such shareholders will be entitled to participate in all registrations by the
Company or other shareholders, subject to certain limitations. In connection
with all such registrations, the Company has agreed to indemnify all holders of
Registrable Securities against certain liabilities, including liabilities under
the Securities Act and other applicable state or foreign securities laws.
Registrations pursuant to the Registration Agreement will be made, if
applicable, on the appropriate registration form and may be underwritten
registrations.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) The following consolidated financial statements of Euramax International
plc and its subsidiaries are included in Part II, item 8:
Report of Independent Accountants
Consolidated Balance Sheets at December 27, 1996 and December 31, 1995
Consolidated Statements of Earnings for three months ended December 27,
1996 (successor period), for the years ended December 31, 1994 and 1995,
and for the nine months ended September 25, 1996 (predecessor periods).
Consolidated Statements of Changes in Equity for the three months ended
December 27, 1996 (predecessor period), for the years ended December 31,
1994 and 1995, and for the nine months ended September 25, 1996
(predecessor periods).
Consolidated Statements of Cash Flows for the three months ended December
27, 1996 (predecessor period), for the years ended December 31, 1994 and
1995, and for the nine months ended September 25, 1996 (predecessor
periods).
Notes to consolidated financial statements
(a)(2) Financial Statement Schedule
Report of Independent Accountants
Schedule II - Valuation Account
(b) The Company filed no reports on Form 8-K during the three months ended
December 27, 1996.
(c) Exhibits:
3.1* Articles of Association of Euramax International plc
3.2* Memorandum and Articles of Association of Euramax European Holdings plc
3.3* Articles of Association of Euramax International B.V.
3.4* Articles of Incorporation of Amerimax Holdings, Inc.
3.5* Bylaws of Amerimax Holdings, Inc.
4.3* Indenture, dated as of September 25, 1996, by and among Euramax
International plc, Euramax European Holdings plc, Euramax European
Holdings B.V., Amerimax Holdings, Inc. and the Chase Manhattan Bank, as
Trustee.
4.4* Deposit Agreement, dated as of September 25, 1996, by and among Euramax
International plc, Euramax European Holdings plc, Euramax European
Holdings B.V., and The Chase Manhattan Bank, as book-entry depositary
4.5* Registration Rights Agreement, dated as of September 25, 1996, by and
among Euramax International plc, Euramax European Holdings plc, Euramax
European Holdings B.V., Amerimax Holdings, Inc. and J.P. Morgan
Securities Inc. and Goldman Sachs & Co.
4.6* Purchase Agreement dated as of September 18, 1996, by and among Euramax
International Ltd., Euramax European Holdings Ltd., Euramax European
Holdings B.V., Amerimax Holdings, Inc. and J.P. Morgan Securities Inc.
and Goldman Sachs & Co.
10.1* Purchase Agreement, dated as of June 24, 1996, by and between Euramax
International Ltd. and Alumax Inc.
10.2* Executive Employment Agreement, dated as of September 25, 1996, by and
between J. David Smith and Euramax International plc
10.3* Executive Employment Agreement, dated as of September 25, 1996, by and
between Frank T. Geist and Euramax International plc
10.4* Credit Agreement, dated as of September 25, 1996, by and among Amerimax
Fabricated Products, Euramax Holdings Limited, Euramax Europe B.V.,
Euramax Netherlands B.V., as Borrowers; Euramax International plc,
Amerimax Holdings, Inc., Euramax European Holdings plc, Euramax
European Holdings B.V., Euramax Europe Limited and certain of their
operating subsidiaries, as other Loan Parties; Banque Paribas, as
Agent, as a Lender and as the Issuer; and the other lenders named
therein.
10.5* Domestic Security Agreement, dated as of September 25, 1996, by
Amerimax Holdings, Inc. in favor of Banque Paribas, as agent
10.6* Domestic Security Agreement, dated as of September 25, 1996, by
Amerimax Fabricated Products, Inc. in favor of Banque Paribas, as agent
10.7* Domestic Security Agreement, dated as of September 25, 1996, by
Amerimax Home Products, Inc. in favor of Banque Paribas, as agent
10.8* Domestic Security Agreement, dated as of September 25, 1996, by
Amerimax Building Products, Inc. in favor of Banque Paribas, as agent
10.9* Domestic Security Agreement, dated as of September 25, 1996, by
Amerimax Coated Products, Inc. in favor of Banque Paribas, as agent
10.10* Domestic Security Agreement, dated as of September 25, 1996, by Johnson
Door Products, Inc. in favor of Banque Paribas, as agent
10.11* Domestic Security Agreement, dated as of September 25, 1996, by
Amerimax Specialty Products, Inc. in favor of Banque Paribas, as agent
10.12* Domestic Subsidiary Guaranty, dated as of September 25, 1996, by each
of Amerimax Home Products, Inc., Amerimax Specialty Products, Inc.,
Amerimax Building Products, Inc., Amerimax Coated Products and Johnson
Door Products, Inc. in favor of the Guarantied Parties referred to
therein
10.13* U.S. Holdings Guaranty, dated as of September 25, 1996, by Amerimax
Holdings, Inc. in favor of the Guaranteed Parties referred to therein
10.14* U.S. Holdings Pledge Agreement, dated as of September 25, 1996, by
Amerimax Holdings, Inc., to Banque Paribas, as Agent
10.15* U.S. Operating Co. Guaranty, dated as of September 25, 1996, by
Amerimax Fabricated Products, Inc. in favor of the Guarantied Parties
referred to therein
10.16* U.S. Operating Co. Pledge Agreement dated as of September 25, 1996, by
Amerimax Fabricated Products, Inc. to Banque Paribas, as Agent
10.17* Euramax Assignment Agreement, dated as of September 25, 1996, by
Euramax International plc in favor of Banque Paribas, as Agent
10.18* Euramax Pledge Agreement, dated as of September 25, 1996, by Euramax
International plc to Banque Paribas, as Agent
10.19* Building Products Pledge Agreement, dated as of September 25, 1996, by
Amerimax Building Products, Inc. to Banque Paribas, as Agent
10.20* Dutch Holdings Guaranty, dated as of September 25, 1996, by Euramax
European Holdings B.V. in favor of the Guarantied Parties referred to
therein
10.21* Dutch Company Guaranty, dated as of September 25, 1996, by Euramax
Netherlands B.V., in favor of the Guarantied Parties referred to
therein
10.22* Dutch Operating Co. Guaranty, dated as of September 25, 1996, by
Euramax Europe B.V., in favor of the Guarantied Parties referred to
therein
10.23* Dutch Subsidiary Guaranty, dated as of September 25, 1996, by Euramax
Coated Products B.V., in favor of the Guarantied Parties referred to
therein
21.1 Subsidiaries of Euramax International plc
27 Financial Data Schedule
- - - -------------------------------------
* Incorporated by reference to the Exhibit with the same number in the
Registrant's Registration Statement on Form S-4 (333-05978) which became
effective on February 7, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, Euramax International plc has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
EURAMAX INTERNATIONAL plc
By: /S/ J. David Smith Chief Executive Officer and President
------------------
J. David Smith
Dated: May 8, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Euramax
International plc and in the capacities and on the dated indicated.
Signature Title Date
By: /S/ J. David Smith Chief Executive Officer, President and Director May 8, 1997
--------------------------------
J. David Smith
By: /S/ R. Scott Vansant V.P. Finance and Administration and Secretary May 8, 1997
--------------------------------
R. Scott Vansant (Principal Financial and Accounting Officer)
By: /S/ Richard M. Cashin Director May 8, 1997
--------------------------------
Richard M. Cashin
By: /S/ Joseph M. Silvestri Director May 8, 1997
--------------------------------
Joseph M. Silvestri
By: /S/ William Ty Comfort Director May 8, 1997
--------------------------------
William Ty Comfort
By: /S/ Rolly Van Rappard Director May 8, 1997
--------------------------------
Rolly Van Rappard
By: /S/ Paul E. Drack Director May 8, 1997
--------------------------------
Paul E. Drack
By: /S/ Stuart M. Wallis Director May 8, 1997
--------------------------------
Stuart M. Wallis
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Euramax International plc and Subsidiaries
In connection with our audit of the consolidated financial statements of Euramax
International plc and Subsidiaries as of December 31, 1995 and December 27,
1996, and the related consolidated statements of earnings and cash flows for the
years ended December 31, 1994 and 1995, the nine months ended September 25, 1996
and the three months ended December 27, 1996, which financial statements are
included in the Form 10-K, we have also audited the financial statement schedule
listed in Item 14(a)(2) herein.
In our opinion, this financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required required to be included therein.
COOPERS & LYBRAND LLP
Atlanta Georgia
April 4, 1997
Euramax International plc
Valuation and Qualifying Accounts
Dollars in Thousands
Charged to
Charged to other
Balance at costs and accounts - Deductions -
Description Classification beginning expenses describe (1) describe Balance at end
- - - -----------------------------------------------------------------------------------------------------------------------------------
For the 9 months ended September 25, 1996 A/R, net ($2,582.0) ($827.2) ($43.5) $390.7 ($3,062.0)
Allowance for doubtful accounts
For the 3 Months ended December 27, 1996 A/R, net ($3,062.0) ($221.3) ($143.3) $22.4 ($3,404.2)
Allowance for doubtful accounts
For the year ended December 31, 1995 A/R, net ($3,940.6) ($388.2) ($0.0) $1,746.8 ($2,582.0)
Allowance for doubtful accounts
Note:
(1) Changes due to foreign currency translation adjustment.
421258.1