ASSOCIATED MATERIALS INC - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002.

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO .

COMMISSION FILE NUMBER 000-24956
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ASSOCIATED MATERIALS INCORPORATED
(Exact name of Registrant as specified in its charter)
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DELAWARE 75-1872487
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

3773 STATE ROAD
CUYAHOGA FALLS, OHIO 44223
(Address of principal executive offices)

(330) 929-1811
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE

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 the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of the Common Stock held by non-affiliates of
the registrant at June 30, 2002: None

As of March 21, 2003, the Registrant had 100 shares of Common Stock
outstanding, all of which is held by an affiliate of the Registrant.
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PART I

ITEM 1. BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

Associated Materials Incorporated (the "Company") was incorporated in
Delaware in 1983 and is a leading, vertically integrated manufacturer and
nationwide distributor of exterior residential building products through its
Alside division ("Alside"). The Company's core products are vinyl siding and
vinyl windows, which together comprised approximately 72% of the Company's 2002
total building product net sales. These products are marketed on a wholesale
basis to more than 35,000 professional contractors engaged in home remodeling
and new home construction principally through the Company's nationwide network
of 90 Alside Supply Centers. The Company's vinyl product offerings also include
vinyl fencing, decking and railing, as well as vinyl garage doors. Approximately
two-thirds of the Company's products are sold to contractors engaged in the home
repair and remodeling market with one-third sold to the new construction market.
The supply centers provide "one-stop" shopping to the Company's contractor
customers, carrying products, accessories and tools necessary to complete a
vinyl siding or window project. In addition, the supply centers provide high
quality product literature, product samples and installation training to these
customers. The Company believes that the strength of its products and
distribution network has developed strong brand loyalty and long-standing
relationships with local contractors and has enabled the Company to consistently
gain market share over the last five years. Approximately 75% of the Company's
2002 total building product net sales were generated through the Company's
network of supply centers with the remainder sold to independent distributors
primarily in markets where the Company currently does not have supply centers.
The Company also sells direct to siding and window customers.

On March 16, 2002, the Company entered into a merger agreement ("Merger
Agreement") with Associated Materials Holdings Inc. ("Holdings") and its wholly
owned subsidiary, Simon Acquisition Corp. The Merger Agreement provided for the
acquisition of all shares of the Company's then outstanding common stock through
a cash tender offer of $50.00 per share. The Merger Agreement also required that
the Company commence a tender offer to purchase all of its then outstanding
9 1/4% notes. On April 19, 2002, the cash tender offer for the Company's then
outstanding common stock and the cash tender offer for approximately $74.0
million of the Company's then outstanding 9 1/4% notes was completed. Simon
Acquisition Corp. was then merged with and into the Company with the Company
continuing as a privately held, wholly owned subsidiary of Holdings. The
completion of the aforementioned transactions constitute the merger transaction
("Merger Transaction"). Holdings is controlled by affiliates of Harvest
Partners, Inc. The purchase consideration of $379.5 million, tender offer of
$74.0 million of 9 1/4% notes and debt extinguishment costs of $7.6 million were
financed through: (1) the issuance of $165 million of 9 3/4% Senior Subordinated
Notes due 2012 ("9 3/4% notes"), (2) $125 million from a new $165 million credit
facility ("credit facility"), (3) $164.8 million cash contribution from Holdings
and (4) cash of approximately $6.3 million, representing a portion of the
Company's total cash of $6.8 million on hand at the time of the acquisition.

On June 24, 2002, the Company completed the sale of its AmerCable division
to AmerCable Incorporated, a newly-formed entity controlled by members of
AmerCable's management and Wingate Partners III, L.P., for cash proceeds of
approximately $28.3 million and the assumption of certain liabilities pursuant
to an asset purchase agreement dated as of the same date. The Company used the
net proceeds to repay a portion of its credit facility. AmerCable is a leading
manufacturer of specialty electrical cable products primarily used in the
mining, marine and offshore drilling industries. In 2001, AmerCable accounted
for approximately 12% of the Company's total net sales.

FINANCIAL INFORMATION ABOUT SEGMENTS

Prior to the Merger Transaction and sale of AmerCable, the Company had two
reportable segments: building products and electrical cable products. Subsequent
to the Merger Transaction and sale of AmerCable, the Company is in the single
business of manufacturing and distributing exterior residential building

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products. See Note 16 in the Notes To Financial Statements in Item 8. "Financial
Statements and Supplementary Data."

INDUSTRY OVERVIEW

Demand for residential building products is driven by a number of factors,
including consumer confidence, availability of credit, new housing starts and
general economic cycles. Historically, the demand for repair and remodeling
products, where the Company is primarily focused, has been less cyclical than
demand for new home construction and is less sensitive to these factors. Drivers
of repair and remodeling demand include:

- Favorable Demographics. The segment of the population age 55 years and
above, which favors professionally installed, low maintenance home
improvements is estimated to grow by 25% over the next five years and 50%
over the next ten years.

- Aging of the housing stock. The average home age increased from 23 years
in 1985 to 29 years in 2000, and over 70% of the current housing stock
was built prior to 1980.

- Increase in average home size. The average home size increased over 25%
from 1,785 square feet in 1985 to 2,306 square feet in 2000.

- Favorable mortgage interest rates. Mortgage interest rates in 2002
reached historically low levels.

In addition, repair and remodeling projects tend to utilize a greater mix
of premium products with higher margins than those used in new construction
projects.

Vinyl comprises the largest share of the residential siding and window
markets. Vinyl has greater durability, requires less maintenance and provides
greater energy efficiency than many competing siding and window products.
According to industry reports, based on unit sales, vinyl accounted for
approximately 44% of the exterior siding market and approximately 58% of the
residential window market in 2001. More recently, vinyl siding has achieved
increasing acceptance in the new construction market, as builders and home
buyers have recognized vinyl's low maintenance, durability and price advantages.
Vinyl windows also have achieved increased acceptance in the new construction
market as a result of builders and home buyers recognizing vinyl's favorable
attributes, the enactment of local legal or building code requirements that
mandate more energy efficient windows and the increased development and
promotion of vinyl window products by national window manufacturers. The Company
believes that vinyl siding and vinyl windows will continue to gain market share
in the new residential construction market while remaining the preferred product
of the remodeling marketplace. Vinyl competes with wood, masonry, fiber cement
and metal in the siding market and wood and aluminum in the window market.

Products. The Company's principal product offerings are vinyl siding and
vinyl windows, which together accounted for approximately 72% of its 2002 total
building product sales. The Company also manufactures a variety of other
products including vinyl fencing, decking and railing, as well as vinyl garage
doors.

The vinyl siding market consists of three segments: economy/new
construction, standard and premium. Vinyl siding quality is determined by its
rigidity, resistance to fading, thickness and ease of installation, as well as
other factors. Since its introduction of Charter Oak in 1995, the Company has
established itself as a leader in innovation within the vinyl siding industry.
Since 1995, the Company has broadened its product lines to increase its
penetration of the premium and economy segments. The Company believes that its
innovation in product development was significant to its siding sales growth in
the past and will continue to be a key factor in its future sales growth. For
example, the introduction of Charter Oak enabled the Company to penetrate the
premium segment of the vinyl siding market. The Company believes that Charter
Oak continues to set the standard for premium vinyl siding products today.
Alside introduced its Conquest siding product in 1997, which has enabled the
Company to achieve additional market penetration in the economy/new construction
segment of the siding industry. During 1998, the Company introduced CenterLock,
a patented product positioned in the premium market segment. In addition to its
innovation, the Company has been able to broaden its historically strong
position in the standard vinyl siding segment. In 1999, the Company introduced

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Odyssey Plus, an improved and updated version of its popular Odyssey siding
product. The Company introduced its Seneca and Landscape products in order to
broaden its offerings for the standard and economy segments in 2000. In addition
to these products, the Company has increased the number of colors and profiles,
including acrylics and dark colors, offered within its existing siding products
and continues to increase and improve upon the breadth of its vinyl siding
product lines. The Company provides limited 50-year to lifetime warranties on
its siding products.

The Company divides its window products into economy, standard and premium
categories. Product quality within the vinyl window industry is determined by a
number of competitive features including method of construction and materials
used. Alside custom manufactures substantially all of its windows to fit
existing window openings. Custom fabrication provides Alside's customers with a
product that is less expensive to install and more attractive after
installation. The Company's custom windows are used primarily in the repair and
remodeling market. One of the fastest growing segments of the window market is
the new construction segment. The Company acquired substantially all the assets
of Alpine Industries, Inc. in October 2000. Alpine primarily manufactures new
construction windows, and this acquisition increased the Company's presence in
the new construction market. Substantially all of the Company's window products
are accompanied by a limited lifetime warranty.

A summary of the Company's siding and window product offerings is presented
in the table below according to the Company's product line classification:

The Company produces vinyl fencing, decking and railing under the brand
name UltraGuard(R), consisting of both agricultural and residential vinyl
fencing. Sales of UltraGuard(R) fencing accounted for less than 5% of the
Company's total building product net sales in 2002. Alside introduced a raised
panel vinyl garage door in 1997 under the brand name Premium Garage Door(TM).
Alside primarily markets its fencing, decking and railing and garage doors
through independent dealers.

To complete its line of exterior residential building products, the Company
also distributes building products manufactured by other companies. These
products include metal siding, roofing materials, insulation, cabinets and
installation equipment and tools.

Marketing and Distribution. Traditionally, most vinyl siding is sold to
the home remodeling marketplace through independent distributors. The Company
believes that it is one of only two major vinyl siding manufacturers that
markets its products primarily through nationwide company-owned distribution
centers. The Company has a nationwide distribution network of 90 Alside Supply
Centers through which the Company markets manufactured products and other
complementary building products to more than 35,000 professional home
improvement and new construction contractors. The Company believes that Alside
Supply Centers provide "one-stop shopping" to meet the specialized needs of its
contractor customers by distributing more than 2,000 building and remodeling
products, including a broad range of Company-manufactured vinyl siding and vinyl
windows as well as products manufactured by others. In 2002, approximately 75%
of the Company's total building product net sales were made through its supply
centers. In addition to sales and promotional

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support, contractors look to their local Alside Supply Center to provide a broad
range of specialty product offerings in order to maximize their ability to
attract remodeling and homebuilding customers.

The Company believes that distributing products through its supply centers
provides the Company with certain competitive advantages such as (a) building
long-standing customer relationships, (b) developing comprehensive, customized
marketing programs to assist the Company's customer contractors (c) closely
monitoring developments in local customer preferences and (d) ensuring product
availability through integrated logistics between the Company's manufacturing
and distribution facilities. Many of the Company's contractor customers have
established long-standing relationships with their local supply center based on
individualized service and credit terms, quality products, timely delivery,
breadth of product offerings, strong sales and promotional programs and
competitive prices. The Company supports its contractor customer base with
marketing and promotional programs that include product sample cases, sales
literature, product videos and other sales and promotional materials.
Professional contractors use these materials to sell remodeling construction
services to prospective customers. The customer generally relies on the
professional contractor to specify the brand of siding or window to be
purchased, subject to the customer's price, color and quality requirements. The
Company's daily contact with its contractor customers also enables it to closely
monitor activity in each of the remodeling and new construction markets in which
the Company competes. This direct presence in the marketplace permits the
Company to obtain current local market information, providing it with the
ability to recognize trends in the marketplace earlier and adapt its product
offerings on a location-by-location basis.

Many of the Company's contractor customers install both vinyl siding and
vinyl windows. Because the Company manufactures and distributes both vinyl
siding and vinyl windows, its contractor customers can acquire both products
from a single source. The Company believes that marketing both vinyl siding and
vinyl windows to its target customer base provides it a competitive market
advantage. Furthermore, the Company has the ability to achieve economies of
scale in sales and marketing by developing integrated programs on either a
national or local basis for its vinyl siding and vinyl window products. In 2000,
the Company introduced Preservation as the industry's first bundled premium
siding and window marketing program. The Company's unique position as a
manufacturer and distributor of both vinyl siding and windows has enabled it to
offer Preservation to select dealers.

Each of Alside's Supply Centers is evaluated as a separate profit center,
and compensation of supply center personnel is based in part on the supply
center's operating results. Decisions to open new supply centers, and to close
or relocate existing supply centers, are based on the Company's continuing
assessment of market conditions and individual location profitability. During
2002, the Company added seven supply centers to its distribution network. The
Company presently expects to open up to five new supply centers in 2003. The
Company has developed formal training and recruiting programs for supply center
personnel, which it expects will improve its ability to staff new locations.

Through certain of its supply centers, the Company's Alside Installed
Services Division provides full-service product installation of its vinyl siding
products, principally to new homebuilders who value the importance of
installation services. Alside also provides installation services for vinyl
replacement windows through certain of its supply centers.

The Company sells its manufactured products to large direct dealers and
distributors, generally in those areas where no Alside Supply Center currently
exists. These sales accounted for approximately 25% of the Company's 2002 net
sales. Despite their aggregate lower percentage of total sales, Alside's largest
individual customers are its large direct dealers and independent distributors.
The Company carefully monitors and evaluates its activity with these customers
to ensure the profitability of this higher volume, lower margin business. No
single customer accounted for 5% or more of the Company's 2002 net sales. The
Company continues to expand its network of independent distributors in strategic
areas to improve its penetration into certain markets.

Alside Window Company Northwest ("Alside Northwest"), which consists of the
assets purchased from Alpine in October 2000, has historically sold its window
products through a variety of channels including direct to builders and to
independent distributors and lumberyards. Alside Northwest has also sold its
products
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into foreign markets, principally the Far East. Since its acquisition, Alside
Northwest has continued many of these distribution relationships and expanded
its product distribution through certain Alside Supply Centers.

Manufacturing. The Company manufactures its vinyl siding products at its
Ennis and Freeport, Texas facilities. The Company believes that, with planned
capital projects in 2003, it will have adequate capacity to meet its sales
expectations for the foreseeable future. The Company operates a vinyl extrusion
facility in West Salem, Ohio to produce vinyl window extrusions as well as vinyl
fencing, decking and railing and garage door panels. The Company operates three
window fabrication plants, which each use vinyl extrusions manufactured by
Alside for a portion of their production requirements and utilize high speed
welding and cleaning equipment for their welded window products. By internally
producing a portion of its vinyl extrusions, the Company believes it achieves
significant cost savings and higher product quality compared to purchasing these
materials from third-party suppliers. The Company's Alside Northwest facility
produces its glass inserts, but has a long-term contract to purchase its vinyl
extrusions from a third-party supplier.

The Company's vinyl extrusion plants generally operate on a three-shift
basis to optimize equipment productivity and utilize additional equipment to
increase capacity to meet higher seasonal needs. The Company's window plants
generally operate on a single shift basis utilizing both a second shift and
increased numbers of leased production personnel to meet higher seasonal needs.

Raw Materials. The principal raw materials used by the Company are vinyl
resin, resin stabilizers and pigments, packaging materials, window hardware and
glass, all of which are available from a number of suppliers. The Company has a
contract with its resin supplier to supply substantially all of its contract
vinyl resin requirements and believes that other suppliers could also meet its
requirements. The price of vinyl resin has been, and will likely continue to be,
volatile. The Company generally has been able to pass through price increases in
raw materials to its customers. The price of vinyl resin increased significantly
during 2002. The Company implemented price increases in late 2002 to partially
offset the increases in vinyl resin prices. The Company presently expects vinyl
resin prices to increase in 2003. While the Company expects that any future
significant resin cost increases will be offset by price increases to its
customers, there can be no assurances that the Company will be able to pass on
any future price increases.

Competition. Except for Owens Corning, the Company believes that no
company within the residential siding industry competes with Alside on both the
manufacturing and distribution levels. There are, however, numerous small and
large manufacturers of vinyl siding products, some of which are larger in size
and have greater financial resources than the Company. Alside competes with
Owens Corning and numerous large and small distributors of building products in
its capacity as a distributor of these products. The Company believes that
Alside is the fifth largest manufacturer of vinyl siding with approximately 8%
of the U.S. market. The market for vinyl replacement windows is highly
fragmented, and Alside believes that no single manufacturer accounts for a
significant percentage of national sales. Alside believes that the window
fabrication industry will continue to experience consolidation due to the
increased capital requirements for manufacturing welded vinyl windows. The trend
towards welded windows, which require more expensive production equipment as
well as more sophisticated information systems, has driven these increased
capital requirements. Alside and its competitors generally compete on price,
product performance, and sales and service support to professional contractors.
Competition varies by region. Alside also faces competition from alternative
materials: wood and aluminum in the window market, and wood, masonry, fiber
cement and metal in the siding market.

ACQUISITIONS AND DIVESTITURES

In October 2000, the Company acquired substantially all of the assets of
Alpine for $7.6 million in cash and the assumption of certain payroll related
and property tax liabilities. Included in the acquired assets was Alpine's
leased window fabrication facility located in Bothell, Washington. This facility
manufactures vinyl windows primarily for the new construction market. This
acquisition significantly increased the Company's presence on the West Coast.
The acquisition was accounted for using the purchase method of accounting.

The Company completed the sale of its UltraCraft operation, a manufacturer
of semi-custom frameless cabinets, in June 2000. Pre-tax net proceeds from the
sale were $18.9 million after working capital adjustments and transaction costs.
The Company recorded a pre-tax gain of $8.0 million on the sale.
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EMPLOYEES

The Company's employment needs vary seasonally with sales and production
levels. As of December 31, 2002, the Company had approximately 2,550 full-time
employees, including approximately 1,446 hourly workers. The West Salem, Ohio
plant is the Company's only unionized manufacturing facility, employing
approximately 114 covered workers as of December 31, 2002. The collective
bargaining agreement for the West Salem facility was successfully renegotiated
in November 2001 for a three-year term. Additionally, approximately 76 hourly
workers in certain supply center locations are covered by collective bargaining
agreements. The Company considers its labor relations to be good.

Alside utilizes leased employees to supplement its own workforce at its
vinyl window fabrication plants. The Company believes that the employee leasing
program provides it with scheduling flexibility for seasonal production
requirements. The aggregate number of leased employees in the window plants
ranges from approximately 300 to 650 people based on seasonality.

TRADEMARKS AND PATENTS

The Company has registered and nonregistered trade names and trademarks
covering the principal brand names and product lines under which its products
are marketed. The allocation of purchase price from the Merger Transaction
resulted in $98.7 million in trademarks and trade names of which $24.0 million
have remaining useful lives of 15 years and $74.7 million have indefinite lives.
The indefinite lived trademark and trade name consist of one trademark and the
Alside(R) trade name. The allocation of purchase price also resulted in $6.8
million of patents with estimated useful lives of 10 years. The Company has
obtained patents on certain claims associated with its siding, fencing, decking
and railing, and garage door products, which the Company believes distinguish
Alside's products from those of its competitors.

GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

The Company is subject to numerous federal and state statutes and
regulations relating to, among other things, air and water quality, the
discharge of materials into the environment and safety and health issues. The
Company does not expect compliance with these requirements to have a material
impact on the Company's earnings or competitive position in the foreseeable
future. Additionally, no significant capital expenditures are presently
anticipated related to compliance with these requirements.

Certain environmental laws, including the federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended,
("CERCLA"), and comparable state laws, impose strict, and in certain
circumstances joint and several, liability upon specified responsible parties,
which include certain former owners and operators of waste sites designated for
clean up by environmental regulators. A facility initially owned by USX
Corporation ("USX") and subsequently owned by the Company, in Lumber City,
Georgia, which is now owned by Amercord, is subject to a Consent Order entered
into by Amercord with the Georgia Department of Natural Resources in 1994. We
are not a party to the Consent Order. We understand that soil and groundwater in
certain areas of the site (including in the area of two industrial waste
landfills) are being investigated under CERCLA by the United States
Environmental Protection Agency to determine whether remediation of those areas
may be required and whether the site should be listed on the state of federal
list of priority sites requiring remediation. Amercord, the current site owner,
does not have adequate financial resources to carry out additional remediation
that may be required, and if substantial remediation is required, claims may be
made against the Company, which could result in material expenditures. Should it
be necessary to incur costs related to the remediation of this site, the Company
and USX have agreed to share in those costs.

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FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS

Not applicable.

RISK FACTORS

The following discussion of risks relating to the Company's business should
be read carefully in connection with evaluating the Company's business,
prospects and the forward-looking statements contained in this report on Form
10-K and oral statements made by representatives of the Company from time to
time. Any of the following risks could materially adversely affect the Company's
business, operating results, financial condition and the actual outcome of
matters as to which forward-looking statements are made. For additional
information regarding forward-looking statements, see Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Certain Forward-Looking Statements."

The Company's business is subject to a number of risks and uncertainties,
including those described below.

The Company's substantial level of indebtedness could adversely affect its
financial condition and prevent it from fulfilling its obligations on the notes.

The Company has a substantial amount of indebtedness, which will require
significant interest payments. As of December 31, 2002, the Company had
approximately $242.4 million of indebtedness and interest expense from
continuing operations for the 257 days ended December 31, 2002 of approximately
$16.9 million. Approximately $76.5 million of such debt is variable rate debt
and the effect of a 1% increase or decrease in interest rates would increase or
decrease such total annual interest expense by approximately $0.8 million.

The Company's substantial level of indebtedness could have important
consequences, including the following:

- the Company's ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes may be
impaired;

- the Company must use a substantial portion of its cash flow from
operations to pay interest and principal on the notes and other
indebtedness, which will reduce the funds available to the Company for
other purposes such as potential acquisitions and capital expenditures;

- the Company is exposed to fluctuations in interest rates, because the new
credit facility has a variable rate of interest;

- the Company has a higher level of indebtedness than some of its
competitors, which may put it at a competitive disadvantage and reduce
the Company's flexibility in planning for, or responding to, changing
industry conditions, including increased competition;

- the Company is more vulnerable to general economic downturns and adverse
developments in its business; and

- the Company's failure to comply with financial and other restrictive
covenants in the indenture governing the 9 3/4% notes and other debt
obligations, some of which require the Company to maintain specified
financial ratios and limit the Company's ability to incur additional debt
and sell assets, could result in an event of default that, if not cured
or waived, could harm the Company's business or prospects and could
result in bankruptcy.

The Company expects to obtain money to pay its expenses and to pay the
principal and interest on the notes, new credit facility and other debt from
cash flow from operations. The Company's ability to meet expenses depends on
future performance, which will be affected by financial, business, economic and
other factors. The Company will not be able to control many of these factors,
such as economic conditions in the markets in which it operates and pressure
from competitors. The Company cannot be certain that cash flow will be
sufficient to allow it to pay principal and interest on its debt, including the
9 3/4% notes, and meet its other obligations. If the Company does not have
enough money, it may be required to refinance all or part of

7

its existing debt, including the 9 3/4% notes, sell assets or borrow more money.
The Company may not be able to refinance on acceptable terms, if at all. In
addition, the terms of existing or future debt agreements, including the credit
facility and the indenture governing the 9 3/4% notes, may restrict the Company
from pursuing any of these alternatives. The failure to generate sufficient cash
flow or to achieve such alternative financing could significantly and adversely
affect the value of the 9 3/4% notes.

The Company will be able to incur more indebtedness and the risks
associated with its substantial leverage, including its ability to service its
indebtedness, will increase.

The indenture relating to the 9 3/4% notes and the credit agreement
governing the new credit facility will permit the Company, subject to specified
conditions, to incur a significant amount of additional indebtedness. In
addition, the Company may incur an additional $37.4 million of indebtedness
under the revolving portion of its credit facility. If the Company incurs
additional debt, the risks associated with its substantial leverage, including
its ability to service its debt, would increase.

The right to receive payments on the 9 3/4% notes and guarantees is
subordinated to the Company's senior debt.

Payment on the notes and guarantees is subordinated in right of payment to
all of the Company's and its guarantors' senior debt. As of December 31, 2002,
the notes and the related guarantees were subordinated to approximately $76.5
million of senior debt. In addition, $37.4 million of senior debt was available
for borrowing under the revolving portion of its credit facility. As a result,
upon any distribution to creditors or the creditors of the guarantors in a
bankruptcy, liquidation, reorganization or similar proceeding relating to the
Company or its guarantors or its or their property, the holders of the senior
debt will be entitled to be paid in full in cash before any payment may be made
on the 9 3/4% notes or the guarantees thereof. In these cases, the Company and
its guarantors may not have sufficient funds to pay all of its creditors, and
holders of the 9 3/4% notes may receive less, ratably, than the holders of
senior debt. In addition, all payments on the 9 3/4% notes and the related
guarantees will be blocked in the event of a payment default on the designated
senior debt and may be blocked for up to 179 consecutive days in the event of
certain non-payment defaults on designated senior debt.

The indenture for the 9 3/4% notes and credit facility impose significant
operating and financial restrictions on the Company, which may prevent it from
capitalizing on business opportunities and taking some corporate actions.

The indenture for the 9 3/4% notes and credit facility impose, and the
terms of any future debt may impose, significant operating and financial
restrictions on the Company. These restrictions, among other things, limit the
Company's ability and that of its subsidiaries to:

- incur or guarantee additional indebtedness;

- pay dividends or make other distributions;

- repurchase stock;

- make investments;

- sell or otherwise dispose of assets including capital stock of
subsidiaries;

- create liens;

- enter into agreements restricting the Company's subsidiaries' ability to
pay dividends;

- enter into transactions with affiliates; and

- consolidate, merge or sell all of its assets.

These covenants may adversely affect the Company's ability to finance
future operations or capital needs to pursue available business opportunities.

8

In addition, the credit facility requires the Company to maintain other
specified financial ratios. These covenants may adversely affect the Company's
ability to finance its future operations or capital needs or to pursue available
business opportunities or limit the ability to plan for or react to market
conditions or meet capital needs or otherwise restrict activities or business
plans. A breach of any of these covenants or inability to maintain the required
financial ratios could result in a default in respect of the related
indebtedness. If a default occurs, the relevant lenders could elect to declare
the indebtedness, together with accrued interest and other fees, to be
immediately due and payable and proceed against any collateral securing that
indebtedness.

The exterior building products industry is cyclical and downturns in the
industry or the economy could negatively affect business, operating results and
the value of the 9 3/4% notes.

The exterior building products industry is cyclical and is significantly
affected by changes in national and local economic and other conditions such as
employment levels, migration trends, availability of financing, interest rates
and consumer confidence. These factors can negatively affect the demand for and
pricing of the Company's products. A prolonged recession affecting the
residential construction industry could also result in a significant decrease in
the Company's financial performance. The occurrence or continuation of any of
the above items, many of which are outside the Company's control, and the items
described below could have a negative impact on business and adversely affect
the value of the 9 3/4% notes.

Increases in interest rates and the reduced availability of financing for
home improvements may cause sales and profitability to decrease.

In general, demand for home improvement products is adversely affected by
increases in interest rates and the reduced availability of financing. If
interest rates increase and consequently, the ability of prospective buyers to
finance purchases of home improvement products and invest in new real estate is
adversely affected, sales, gross margins and cash flow may also be adversely
impacted and the impact may be material.

The Company has substantial fixed costs and, as a result, operating income
is sensitive to changes in net sales.

The Company operates with significant operating and financial leverage.
Significant portions of the Company's manufacturing, selling, general and
administrative expenses are fixed costs that neither increase nor decrease
proportionately with sales. As a result, a percentage change in the Company's
net sales will have a greater percentage effect on income from operations,
assuming the Company continues to offset increases in vinyl resin costs with
price increases to its customers. In addition, a significant portion of the
Company's interest expense is fixed.

The company could face potential product liability claims relating to
products it manufactures or distributes.

The Company faces a business risk of exposure to product liability claims
in the event that the use of its products is alleged to have resulted in injury
or other adverse effects. The Company currently maintains product liability
insurance coverage, but it may not be able to obtain such insurance on
acceptable terms in the future, if at all, or any such insurance may not provide
adequate coverage against potential claims. Product liability claims can be
expensive to defend and can divert management and other personnel for months or
years regardless of the ultimate outcome. An unsuccessful product liability
defense could have a material adverse effect on the Company's business,
financial condition, results of operations or business prospects or ability to
make payments on the 9 3/4% notes when due.

The Company has significant goodwill and other intangible assets.

The Company has accounted for the Merger Transaction using the purchase
method of accounting. The purchase price has been allocated to assets and
liabilities based on the fair values of the assets acquired and the liabilities
assumed. The excess of cost over fair value of the new identifiable assets
acquired has been recorded as goodwill. These purchase price allocations have
been made based upon valuations and other studies. As a result of the merger,
the Company has approximately $105.5 million of other intangible assets and
$197.5 million of goodwill. Given the significant amount of goodwill and other
intangible assets as a result of the merger, any future impairment of the
goodwill and other intangible assets recorded could have an
9

adverse effect on the Company's results of operations and financial position;
however, the extent of any such impairment, if any, cannot be predicted at this
time.

The Company is controlled by affiliates of Harvest Partners, Inc., whose
interests may be different than other investors.

By reason of Harvest Partners and its affiliates ownership of the Company
and the ability of Harvest Partners and its affiliates, pursuant to a
stockholders agreement among stockholders of Associated Materials Holdings Inc.,
to designate a majority of the members of the board of directors of Holdings,
Harvest Partners will control actions to be taken by the Company's stockholder
and/or board of directors, including amendments to the Company's certificate of
incorporation and by-laws and approval of significant corporate transactions,
including mergers and sales of substantially all of the Company's assets. The
interest of Harvest Partners and its affiliates interests may be materially
different than other investors in the Company. For example, Harvest Partners may
cause the Company to pursue a growth strategy, which could impact the Company's
ability to make payments under the indenture governing the 9 3/4% notes and the
new credit facility or cause a change of control. In addition, to the extent
permitted by the indenture and the new credit facility, Harvest Partners may
cause the Company to pay dividends rather than make capital expenditures.

ITEM 2. PROPERTIES

The Company's operations include both owned and leased facilities as
described below:

- ---------------

(1) Leased facilities.

Management believes that the Company's facilities are generally in good
operating condition and are adequate to meet anticipated requirements in the
near future.

Alside also operates 90 Alside Supply Centers in major metropolitan areas
throughout the United States. Except for one owned location in Akron, Ohio, the
Company leases its supply centers for terms generally ranging from five to seven
years with renewal options. The supply centers range in size from 6,000 square
feet to 50,000 square feet depending on sales volume and the breadth and type of
products offered at each location.

The leases for Alside's window plants extend through 2011 for the Bothell
location and 2005 for the Cedar Rapids and Kinston locations. Each lease is
renewable at the Company's option for an additional five-year period. Following
the Merger Transaction, the Company moved its corporate headquarters to the
Akron, Ohio location.

ITEM 3. LEGAL PROCEEDINGS

The Company is involved from time to time in litigation arising in the
ordinary course of its business, none of which, after giving effect to the
Company's existing insurance coverage, is expected to have a material adverse
effect on the Company.

10

From time to time, the Company is involved in a number of proceedings and
potential proceedings relating to environmental and product liability matters.
The Company handles these claims in the ordinary course of business and
maintains product liability insurance covering certain types of claims. Although
it is difficult to estimate the Company's potential exposure to these matters,
the Company believes that the resolution of these matters will not have a
material adverse effect on the Company's financial position, results of
operations or liquidity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

There is no established public trading market for the Company's common
equity securities.

HOLDERS

As of February 28, 2003, Holdings was the Company's sole record holder of
its common stock.

DIVIDENDS

Prior to the Merger Transaction, the Company paid dividends of $0.20 per
share in 2001 and $0.05 per share in the 108 days ended April 18, 2002. The
Company presently does not intend to pay cash dividends. In addition, the
Company's credit facility and indenture governing the 9 3/4% notes restrict
dividend payments.

EQUITY COMPENSATION PLANS

The Company has no outstanding equity compensation plans under which equity
securities of the Company are authorized for issuance.

11

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data set forth below for the five-year period ended
December 31, 2002 was derived from the audited financial statements of the
Company. The Company's results of operations prior to the date of the Merger
Transaction are presented as the results of the Predecessor. The results of
operations, including the Merger Transaction and results thereafter, are
presented as the results of the Successor and include 257 days from April 19,
2002 to December 31, 2002. In addition, the Company completed the sale of its
AmerCable division on June 24, 2002. AmerCable's results through April 18, 2002
are included in the results of continuing operations of the Predecessor.
Subsequent to April 18, 2002, AmerCable's results are presented as discontinued
operations of the Successor as it was the Successor's decision to divest this
division. The data should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations and the financial
statements, related notes and other financial information included elsewhere in
this report.

ONE
HUNDRED
EIGHT TWO HUNDRED
DAYS FIFTY-SEVEN
YEAR ENDED DECEMBER 31, ENDED DAYS ENDED
----------------------------------------- APRIL 18, DECEMBER 31,
1998 1999 2000 2001 2002 2002
-------- -------- -------- -------- --------- ------------
PREDECESSOR SUCCESSOR
(IN THOUSANDS)

INCOME STATEMENT DATA:
Net sales................... $410,111 $455,268 $499,393 $595,819 $180,230 $ 449,324
Cost of sales............... 285,822 317,596 353,994 425,366 130,351 317,077
-------- -------- -------- -------- -------- ---------
Gross profit................ 124,289 137,672 145,399 170,453 49,879 132,247
Selling, general and
administrative expenses... 88,727 96,028 107,255 119,945 43,272 86,097
Other income, net(1)........ 2,673 -- -- -- -- --
-------- -------- -------- -------- -------- ---------
Income from operations...... 38,235 41,644 38,144 50,508 6,607 46,150
Interest expense............ 7,565 6,779 6,046 6,795 2,068 16,850
Gain on the sale of
UltraCraft(2)............. -- -- 8,012 -- -- --
Merger transaction
costs(3).................. -- -- -- -- 9,319 --
Equity in loss of
Amercord.................. 1,881 1,337 -- -- -- --
Write-down of Amercord(4)... 4,351 -- -- 2,393 -- --
-------- -------- -------- -------- -------- ---------
Income (loss) before income
tax expense............... 24,438 33,528 40,110 41,320 (4,780) 29,300
Income tax expense.......... 11,382 13,038 16,555 15,908 977 12,161
-------- -------- -------- -------- -------- ---------
Income (loss) from
continuing operations
before extraordinary
item...................... 13,056 20,490 23,555 25,412 (5,757) 17,139
Loss from discontinued
operations................ -- -- -- -- -- (521)
Extraordinary items,
net(5).................... (4,107) -- -- -- -- (4,434)
-------- -------- -------- -------- -------- ---------
Net income (loss)........... $ 8,949 $ 20,490 $ 23,555 $ 25,412 $ (5,757) $ 12,184
======== ======== ======== ======== ======== =========

- ---------------

(1) The Company recorded a $5.9 million curtailment gain due to the freeze of
the Alside Retirement Plan at December 31, 1998. The Company also accrued an
additional $3.3 million expense for retiree medical benefits related to the
1989 closure of Alside's metal siding plant.

(2) The Company recorded an $8.0 million pre-tax gain on the sale of its
UltraCraft operation, a manufacturer of semi-custom cabinets, in June 2000.

(3) Merger transaction costs include investment banking and legal fees incurred
by the Predecessor in conjunction with the strategic review process and
subsequent Merger Transaction with Harvest Partners.

(4) In 1998, the Company recorded a pretax write-down on its investment in
Amercord in anticipation of a loss on the sale of Amercord. In 2001, the
Company recorded a $2.4 million loss upon the write-off of its remaining
investment in Amercord due to the deterioration of Amercord's operations.

(5) In 1998, the extraordinary item represents, net of tax, the loss recognized
on the write-off of debt issuance costs and the prepayment premium paid on
the purchase of the Company's 11 1/2% senior subordinated notes. In 2002,
the extraordinary items include, net of tax, $2.8 million for the
extinguishment of substantially all of the Successor's assumed 9 1/4% notes
and $1.6 million for the expense of financing fees related to an interim
credit facility utilized for the Merger Transaction, which was repaid
shortly thereafter.

(6) EBITDA is calculated as net income (loss) plus interest, taxes, depreciation
and amortization. The Company presents EBITDA because it believes that
EBITDA is used by certain investors as one measure of a company's historical
ability to service its debt. EBITDA should not be considered an alternative
to, or more meaningful than, net income (loss) as an indicator of a
company's operating performance or to cash flows as a measure of liquidity.
EBITDA has not been prepared in accordance with accounting principles
generally accepted in the United States. Therefore, EBITDA as presented by

13

the Company, may not be comparable to similarly titled measures reported by
other companies. The reconciliation of net income (loss) to EBITDA is as
follows:

(7) Adjusted EBITDA represents EBITDA plus certain non-recurring items less
AmerCable's operating results. The Company believes that Adjusted EBITDA
presents a more meaningful discussion than EBITDA since Adjusted EBITDA
corresponds to EBITDA as it is defined in the Company's credit facility and
in the indenture governing the 9 3/4% notes as it excludes non-recurring
items. The credit facility and indenture governing the 9 3/4% notes have
certain financial covenants that use ratios utilizing the Company's Adjusted
EBITDA. The definition of EBITDA under the Company's credit facility does
not exclude the results of AmerCable. The Company has, however, excluded the
results of AmerCable when calculating Adjusted EBITDA as AmerCable will not
be included in the Company's ongoing operations. The nonrecurring items and
results of AmerCable are expected to have no ongoing cash requirements and
no impact on the Company's ongoing operations. Adjusted EBITDA has not been
prepared in accordance with accounting principles generally accepted in the
United States. Adjusted EBITDA as presented by the Company may not be
comparable to similarly titled measures reported by other companies. EBITDA
reconciles to Adjusted EBITDA as follows:

14

- ---------------

(a) See (5) above for a description of the extraordinary items.

(b) AmerCable's EBITDA is calculated as its net income plus interest,
taxes, depreciation and amortization.

(c) Represents the write down of the Company's investment in Amercord
Inc. to its net realizable value.

(d) See (3) above for a description of Merger Transaction costs.

(e) The cost of sales adjustment is the expense related to an inventory
fair value adjustment recorded at the time of the merger.

(f) Represents the loss on the Company's investment in Amercord Inc.

(g) Represents the gain the Company realized on the sale of its
Ultracraft cabinet division.

(8) Certain prior period amounts have been reclassified to conform with the
current period presentation.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

Prior to the Merger Transaction and the sale of AmerCable, the Company
consisted of two operating divisions, Alside and AmerCable. Subsequent to the
Merger Transaction and the sale of AmerCable, Alside and Corporate represent the
ongoing operations of the Company. The Company is now in the single business of
manufacturing and distributing exterior residential building products.

On March 16, 2002, the Company entered into a merger agreement ("Merger
Agreement") with Associated Materials Holdings Inc. ("Holdings") and its wholly
owned subsidiary, Simon Acquisition Corp. The Merger Agreement provided for the
acquisition of all shares of the Company's then outstanding common stock through
a cash tender offer for $50.00 per share. The Merger Agreement also required
that the Company commence a tender offer to purchase all of its then outstanding
9 1/4% notes. On April 19, 2002, the cash tender offer for the Company's then
outstanding common stock and the cash tender offer for approximately $74.0
million of the Company's then outstanding 9 1/4% notes was completed. Simon
Acquisition Corp. was then merged with and into the Company with the Company
continuing as a privately held, wholly owned subsidiary of Holdings (which is
controlled by affiliates of Harvest Partners, Inc.).

On June 24, 2002, the Company completed the sale of its AmerCable division
to AmerCable Incorporated, a newly-formed entity controlled by members of
AmerCable's management and Wingate Partners III, L.P., for cash proceeds of
approximately $28.3 million and the assumption of certain liabilities pursuant
to an asset purchase agreement dated as of the same date. The Company used the
net proceeds to repay a portion of its credit facility. AmerCable is a leading
manufacturer of specialty electrical cable products primarily used in the
mining, marine and offshore drilling industries. AmerCable accounted for
approximately 12% and 13% of the Company's net sales in 2001 and 2000,
respectively.

Accounting principles generally accepted in the United States require the
Company's results of operations prior to the date of the Merger Transaction to
be presented as the results of the Predecessor. The results of operations,
including the Merger Transaction and results thereafter, are presented as the
results of the Successor and include 257 days from April 19, 2002 to December
31, 2002. AmerCable's results through April 18, 2002 are included in the results
of continuing operations of the Predecessor. Subsequent to April 18, 2002,
AmerCable's results are presented as discontinued operations of the Successor as
it was the Successor's decision to divest this division.

Alside, which currently represents all of the Company's operations,
accounted for more than 87% of the Company's net sales in 2001 and 2000. Because
its exterior residential building products are consumer durable goods, the
Company's sales are impacted by the availability of consumer credit, consumer
interest rates, employment trends, changes in levels of consumer confidence,
national and regional trends in new housing starts and general economic
conditions. The Company's sales are also affected by changes in consumer
preferences with respect to types of building products. The Company's products
are used in the repair and

15

remodeling, as well as the new construction, sectors of the building industry.
The Company believes that approximately two-thirds of its total building product
net sales were made to the repair and remodeling sector in 2002, 2001 and 2000.

The Company believes that vinyl building products continue to gain market
share from metal and wood products due to vinyl's favorable attributes, which
include its durability, lower maintenance cost and lower cost. Although no
assurances can be given, the Company further believes that these increases in
market share, together with increased marketing efforts, will increase the
Company's sales of vinyl siding, vinyl windows and other complementary building
products.

The Company operates with significant operating and financial leverage.
Significant portions of the Company's manufacturing, selling, general and
administrative expenses are fixed costs that neither increase nor decrease
proportionately with sales. As a result, a percentage change in the Company's
net sales will have a greater percentage effect on income from operations,
assuming the Company continues to offset increases in vinyl resin costs with
price increases to its customers. In addition, a significant portion of the
Company's interest expense is fixed.

16

The following table sets forth for the periods indicated the results of the
Company's operations by segment (in thousands):

- ---------------

(1) See Item 6. Selected Financial Data for description of EBITDA and Adjusted
EBITDA including the purpose and usefulness of these financial measures.

(2) Certain prior period amounts have been reclassified to conform with the
current period presentation. Includes corporate expenses of $1.3 million for
the 108 days ended April 18, 2002 and $5.0 million and $4.0 million for the
years ended December 31, 2001 and 2000, respectively. The Company's
corporate office was relocated from Texas to Ohio after the Merger
Transaction.

(3) Subsequent to April 18, 2002, AmerCable's results are presented as
discontinued operations of the Successor as it was the Successor's decision
to divest this division.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2002 (COMBINED SUCCESSOR AND PREDECESSOR RESULTS)
COMPARED TO YEAR ENDED DECEMBER 31, 2001

Alside and Corporate

Net sales increased 16.5% to $611.3 million for the year ended December 31,
2002 compared to $524.5 million for the same period in 2001 due to increased
sales of vinyl windows and vinyl siding. Unit sales of vinyl windows and vinyl
siding increased 38% and 6%, respectively, for the year ended December 31, 2002
compared to the same period in 2001. The increase in sales volume is the result
of the Company's marketing investments and continued expansion of its nationwide
distribution network of supply centers. The Company also believes that the
increased sales volume can be attributed to consumers' demand for professional
remodeling services including vinyl replacement windows and vinyl siding as a
means to enhance home values during a time of historically low interest rates.
While vinyl siding unit sales increased for the full year, unit sales of vinyl
siding decreased 3% during the fourth quarter of 2002 compared to the same
period in 2001. The decrease in unit sales of vinyl siding in the fourth quarter
is primarily a result of the continuing macroeconomic uncertainties, which are
impacting the entire vinyl siding industry. The Company believes the vinyl
siding industry decreased 5% during the fourth quarter of 2002. Gross profit
increased to $179.3 million, or 29.3% of net sales, for the year ended December
31, 2002 compared to $156.6 million, or 29.9% of net sales, for the same period
in 2001. The decrease in gross profit margin percentage was a result of window
sales, which have a lower gross margin percentage, comprising a larger
proportion of total sales in 2002 compared to 2001. More recently, gross profit
in the fourth quarter of 2002 was $43.7 million, or 27.5% of net sales. This
compares to $43.5 million, or 30.1% of net sales, in the fourth quarter of 2001.
In addition to being impacted by the mix of window sales versus siding sales,
this decrease in gross margin percentage was due to increased resin costs and
short-term manufacturing inefficiencies resulting from process and product
changes implemented at the Company's vinyl siding manufacturing facilities in
the fourth quarter. SG&A expense increased to $127.2 million, or 20.8% of net
sales, for the year ended December 31, 2002 versus $112.8 million, or 21.5% of
net sales, in the same period in 2001. SG&A expense increased as a result of
seven new supply centers

19

added during 2002, personnel added to support sales growth at existing supply
centers, additional marketing investments to drive higher sales and increased
commission expense resulting from the higher sales. Income from operations
increased to $52.2 million, or 8.5% of net sales, for the year ended December
31, 2002 compared to $43.9 million, or 8.4% of net sales, for the same period in
2001.

EBITDA and Adjusted EBITDA

EBITDA for the year ended December 31, 2002 was $47.6 million compared to
$59.0 million for the same period in 2001. EBITDA for the year ended December
31, 2002 includes $1.9 million of EBITDA relating to the Company's AmerCable
division, Merger Transaction costs of $9.3 million, pre-tax extraordinary
expenses of $7.6 million and a cost of sales expense of $1.9 million relating to
an inventory fair value adjustment recorded at the time of the Merger
Transaction. Adjusted EBITDA, excluding the amounts discussed above, was $64.6
million for the year ended December 31, 2002. EBITDA for the year ended December
31, 2001 includes EBITDA of $8.4 million relating to the Company's AmerCable
division and a charge of $2.4 million for the write-down of the Company's
investment in Amercord Inc. Adjusted EBITDA for the year ended December 31,
2001, excluding the amounts discussed above, was $53.1 million. Adjusted EBITDA
increased $11.5 million or 21.7% for the year ended December 31, 2002 compared
to the prior year. The increase in Adjusted EBITDA is primarily a result of the
Company's increased sales volume.

Successor and Predecessor Results

The Successor had net sales and net income of $449.3 million and $12.2
million, respectively, for the period from April 19, 2002 to December 31, 2002.
Interest expense during this period was $16.9 million and consisted primarily of
interest on the 9 3/4% notes, term loan and revolving loans under the credit
facility, an interim credit facility temporarily utilized for the Merger
Transaction and amortization of deferred financing costs. As a result of
relocating the Company's corporate office from Texas to Ohio, the Successor's
state and local income tax rate increased, raising the Company's total effective
tax rate to 41.5% from 38.5%. The Successor's results include extraordinary
items of $4.4 million, net of tax, for a portion of the premium paid to
extinguish $74.0 million of the Successor's assumed 9 1/4% notes and financing
fees related to an interim credit facility utilized for the Merger Transaction
which was repaid shortly thereafter and a loss from discontinued operations of
$0.5 million, net of tax, from the Company's AmerCable division.

The Predecessor had net sales and a net loss of $180.2 million and $5.8
million for the period from January 1, 2002 to April 18, 2002. Interest expense
was $2.1 million and consisted primarily of interest on the Company's then
outstanding 9 1/4% notes for the time period from January 1, 2002 to April 18,
2002. The Predecessor's results include $9.3 million of transaction costs
consisting of investment banking and legal fees in conjunction with the
strategic review process and subsequent Merger Transaction. The Predecessor's
results of operations for the year ended December 31, 2001 include the $2.4
million charge for the write-down of its investment in Amercord Inc. In addition
to recording income taxes at an effective rate of 38.5%, the Predecessor's tax
provision for 2002 includes an estimate for $7.3 million of Merger Transaction
costs that the Company considers to be non-deductible for income tax purposes.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31,
2000 -- PREDECESSOR

The Company's net sales increased $96.4 million or 19.3% to $595.8 million
for the year ended 2001 as compared to the 2000 period due primarily to strong
sales at the Company's Alside division. Income from operations increased $12.4
million or 32.4% to $50.5 million for the 2001 period compared to $38.1 million
for the 2000 period due primarily to higher operating profits at Alside. Net
income increased 7.9% to $25.4 million in 2001 compared to $23.6 million in
2000. The 2001 results include the $2.4 million write-down of the Company's
Amercord investment while the 2000 period results included the $8.0 million
pre-tax gain on the sale of the Company's UltraCraft cabinet operations and an
additional $1.1 million in income tax expense recorded due to an adjustment to a
deferred tax asset. Excluding these items, the Company's net income was $26.9
million in 2001 and $19.7 million in 2000.

20

Alside and Corporate

Alside's net sales increased 20.6% to $524.5 million in 2001 compared to
$434.8 million in the 2000 period due to higher sales volume of vinyl windows,
vinyl siding and complementary building products, such as roofing, foam
insulation, tools and other materials manufactured by third parties and sold
through Alside's Supply Centers. Unit sales of vinyl windows increased 48% for
the 2001 period compared to the 2000 period, exclusive of the operations of
Alpine, which were acquired in October 2000. Vinyl window unit sales increased
84% including the Alpine operations. Unit sales of vinyl siding increased 11%
for the 2001 period while the Company believes that the vinyl siding industry as
a whole decreased slightly. Gross profit increased to $156.6 million in 2001
compared to $131.7 million in 2000, but decreased as a percentage of sales to
29.8% in 2001 from 30.3% in 2000 due to window sales comprising a larger
proportion of total sales in 2001. This was partially offset by lower raw
material costs and improved manufacturing efficiencies. Selling, general and
administrative expense increased to $112.8 million, or 21.4% of net sales in
2001 compared to $99.4 million, or 22.9% of net sales in 2000. The increase was
a result of the new supply centers added in 2001, personnel added to support
sales growth at existing supply centers, a full year of expenses from the Alpine
acquisition, higher incentive compensation, costs associated with obtaining a
fairness opinion in connection with the repurchase of the Company's class B
common stock and additional compensation expense recorded due to a modification
of certain outstanding stock options. Income from operations increased 35.7% to
$43.9 million as higher gross profits were partially offset by higher selling,
general and administrative expenses.

AmerCable

Net sales increased 10.4% to $71.3 million for the 2001 period compared to
$64.5 million for the same period in 2000 due to higher sales of marine and
mining cable products which were partially offset by lower sales of industrial
cable products, including telecommunications cable products. Gross profit
increased to $13.8 million in 2001 compared to $13.7 million in 2000 but
decreased as a percentage of sales due to higher labor and overhead costs and
unfavorable fixed cost absorption. Selling, general and administrative expense
was $7.2 million for the period ended 2001 compared to $7.9 million for the same
period in 2000 as lower bad debt expense was partially offset by higher
personnel costs. In 2000, AmerCable recorded $1.4 million in additional bad debt
expense as the result of a customer bankruptcy. Income from operations increased
14.4% to $6.7 million in 2001 compared to $5.8 million for the same period in
2000 due to slightly higher gross profit and lower selling, general and
administrative expense due to the additional $1.4 million in bad debt expense
recorded in 2000.

Other

Net interest expense increased $0.7 million or 12.4% in 2001 compared to
2000 due primarily to a decrease in the Company's investment income. The
Company's average investment balance decreased during 2001 as compared to 2000
due to the Company's repurchase of 1.0 million shares of its Class B common
stock at an aggregate cost of $19.5 million in April 2001. The overall decrease
in interest rates during 2001 also contributed to lower investment income. The
Company recorded interest income of $0.4 million in 2001 as compared to $1.1
million in 2000.

QUARTERLY FINANCIAL DATA

Because most of the Company's building products are intended for exterior
use, sales and operating profits tend to be lower during periods of inclement
weather. Weather conditions in the first quarter of each calendar year
historically result in that quarter producing significantly less sales revenue
and operating results than in any other period of the year. As a result, the
Company has historically had small profits or losses in the first quarter and
reduced profits in the fourth quarter of each calendar year.

21

Quarterly sales and operating profit data for the Company in 2002 and 2001
are shown in the table below:

THREE EIGHTEEN THREE
MONTHS DAYS SEVENTY-THREE THREE MONTHS MONTHS
ENDED ENDED DAYS ENDED ENDED ENDED
MARCH 31 APRIL 18 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- -------- -------- --------
PREDECESSOR SUCCESSOR
(IN THOUSANDS)

2002
Net sales -- Alside................. $111,062 $50,897 $113,960 $176,673 $158,691
Net sales -- AmerCable.............. 12,136 6,135 -- -- --
-------- ------- -------- -------- --------
Total net sales................ 123,198 57,032 113,960 176,673 158,691
Gross profit........................ 32,420 17,459 34,669 53,893 43,685
Income from operations.............. 1,201 5,406 13,002 19,336 13,812
Income (loss) before extraordinary
items............................. (1,519) (4,238) 4,172 7,799 4,647
Net income (loss)................... (1,519) (4,238) (262) 7,799 4,647

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2002, the Company had cash and cash equivalents of $13.0
million and available borrowing capacity of approximately $37.4 million under
the revolving portion of its credit facility. Outstanding letters of credit as
of December 31, 2002, totaled $2.6 million securing various insurance letters of
credit.

For the 257 days ended December 31, 2002, cash provided by operations was
$42.6 million, reflecting the improved results of the ongoing operations of the
Company. This time period includes the majority of the second quarter and the
entire third quarter, the periods during which the Company historically produces
the strongest operating results due to the favorable weather conditions.
Offsetting the favorable operations are the increased interest payments the
Company has made under the new capital structure since the Merger Transaction.

For the 108 days ended April 18, 2002 net cash used in operations was $18.3
million. Cash used in this period reflects an increase in inventory due to the
new supply centers opened in 2002 and payments of certain customer incentives
and employee commissions accrued during the previous year. In addition, cash
used in this period includes merger transaction costs incurred by the
Predecessor of $9.3 million. These were partially offset by the improved
operating results of the ongoing operations of the Company. This time period
primarily includes the first quarter, the period during which the Company
historically produces lower operating results due to the unfavorable weather
conditions. Cash flows from operations of the Predecessor include the working
capital needs of AmerCable for the period from January 1, 2002 to April 18,
2002.

Cash provided by operations was $44.0 million and $23.0 million in 2001 and
2000, respectively. Cash flows from operations increased $21.0 million in 2001
compared to 2000 due to higher operating profits and higher accounts payable and
accrued liabilities, which were partially offset by higher accounts receivable.
The

22

increase in accounts payable was due to higher fourth quarter sales and the
timing of vendor payments while the increase in accrued liabilities was due to
higher commission and profit sharing accruals at the Company's Alside division.
Sales for the fourth quarter of 2001 were 26% higher than the same period in
2000 resulting in an increase in accounts receivable for 2001 compared to the
2000 period. Inventory levels have not increased proportionately with sales due
to improved inventory management and the significant increase in vinyl window
sales, which have relatively small amounts of finished goods inventory due to
the fact that the Company's window products are custom fabricated to the
customer's specifications.

For the 257 days ended December 31, 2002, capital expenditures of the
Successor totaled $8.9 million. The combined capital expenditures of the
Predecessor, excluding AmerCable, and the Successor totaled $11.0 million for
the year ended December 31, 2002. This compares to capital expenditures of $11.7
million ($15.0 million less $3.3 million of AmerCable's capital expenditures)
for the same period in 2001. For the 108 days ended April 18, 2002, capital
expenditures of the Predecessor totaled $3.8 million, which includes AmerCable's
capital expenditures of $1.8 million. Capital expenditures in the 2002 period
were primarily for production equipment to enhance capacity and reduce costs.

Capital expenditures totaled $15.0 million and $11.9 million in 2001 and
2000, respectively. Alside's 2001 expenditures were used primarily to increase
window and fencing capacity and for a new company wide information system.
Capital expenditures associated with the system implementation totaled $3.1
million in 2001. Expenditures at AmerCable were used to expand manufacturing
capacity. Capital expenditures in 2000 were used primarily to increase extrusion
capacity for window profiles, fencing and siding products, improve window
efficiency and upgrade window information systems at Alside and increase
capacity and processing efficiency at AmerCable.

The Company believes that capital expenditures ranging from $8.0 million to
$10.0 million represent a base level of spending needed to maintain its
manufacturing facilities as well as provide for modest increases in capacity and
further automation. Estimated capital expenditures for 2003 are $12.0 million.
The budget includes expenditures to replace existing vinyl siding extrusion and
handling equipment to increase capacity at our Ennis, Texas manufacturing
location, expand the existing supply center network and to further implement the
company wide information system.

Cash flows from the Successor's investing activities also include the
Merger Transaction for $379.5 million and net proceeds from the sale of
AmerCable totaling $28.3 million.

Cash flows from the Successor's financing activities include: (1) the
issuance of $165 million of 9 3/4% notes due 2012, (2) $125 million from a new
$165 million credit facility, (3) $164.8 million cash contribution from Holdings
and (4) cash of approximately $6.3 million, representing a portion of the
Company's total cash of $6.8 million on hand to finance the Merger Transaction
of $379.5 million, tender offer of the 9 1/4% notes of $74.0 million and debt
extinguishment costs of $7.6 million. The tender offer premium paid for the
9 1/4% notes was approximately $7.3 million, of which $4.9 million is included
as an extraordinary item representing the portion of the premium in excess of
the fair market value of the 9 1/4% notes. Upon completion of the Merger
Transaction, the Company was then obligated to make a change of control offer
for the approximate $1.0 million of remaining outstanding 9 1/4% notes at a
price of 101% of the principal amount thereof, plus accrued and unpaid interest.
The change of control offer was completed on June 21, 2002 with an additional
approximate $0.1 million of the 9 1/4% notes being tendered. Pursuant to the
indenture governing the 9 1/4% notes, in March 2003 the Company redeemed all the
remaining approximate $0.9 million of 9 1/4% notes. The remaining 9 1/4% notes
were redeemed at 104.625% of the principal amount of such notes plus accrued and
unpaid interest through the date of redemption. The Company permanently reduced
borrowings under the term loan by $48.5 million using net proceeds from the sale
of AmerCable of approximately $28.3 million and 2002 operating cash flows of
approximately $20.2 million.

The Company's 9 3/4% notes pay interest semi-annually. The Company's credit
facility includes $76.5 million of outstanding term loans due through 2009 that
bear interest at the London Interbank Offered Rate (LIBOR) plus 3.50%, payable
quarterly, and up to $40 million of available borrowings provided by revolving
loans, which expire in 2007. The Company has one subsidiary, which is a wholly
owned subsidiary having no assets, liabilities or operations. This subsidiary
fully and unconditionally guarantees the 9 3/4% notes.
23

The credit facility and the indenture governing the 9 3/4% notes contain
restrictive covenants that, among other things, limit the Company's ability to
incur additional indebtedness, make loans or advances to subsidiaries and other
entities, invest in capital expenditures, sell its assets or declare dividends.
In addition, under the credit facility the Company is required to achieve
certain financial ratios relating to leverage, coverage of fixed charges and
coverage of interest expense. The Company was in compliance with these covenants
as of December 31, 2002.

The Company guaranteed $3.0 million of a secured note in connection with
the sale of a portion of its ownership interest in Amercord. Ivaco, Inc.,
pursuant to the terms of the note, agreed to indemnify the Company for 50% of
any loss under the guarantee. The guarantee was exercised by Amercord's lender
and the Company has accrued approximately $1.3 million as of December 31, 2002
for its anticipated portion of the liability related to this guarantee. The
Company retains a right to any collateral proceeds that secure the note;
however, the Company believes that the value of such collateral is not
sufficient to cover any significant portion of the Company's liability.

Because most of the Company's building products are intended for exterior
use, sales tend to be lower during periods of inclement weather. Weather
conditions in the first quarter of each calendar year usually result in that
quarter producing significantly less net sales and net cash flow from operations
than in any other period of the year. Consequently, the Company has historically
had small profits or losses in the first quarter and reduced profits from
operations in the fourth quarter of each calendar year. To meet seasonal cash
flow needs during the periods of reduced sales and net cash flows from
operations, the Company anticipates borrowing under the revolving loan portion
of its credit facility. The Company believes that for the foreseeable future
cash flows from operations and its borrowing capacity under its credit facility
will be sufficient to satisfy its obligations to pay principal and interest on
its outstanding debt, maintain current operations and provide sufficient capital
for presently anticipated capital expenditures. There can be no assurances,
however, that the cash generated by the Company and available under the credit
facility will be sufficient for these purposes.

CONTRACTUAL OBLIGATIONS

The Company has commitments for maturities of long-term debt and future
minimum lease payments under noncancelable operating leases, principally for
manufacturing and distribution facilities and certain equipment. The following
summarizes certain of the Company's scheduled maturities of long-term debt and
obligations for future minimum lease payments under non-cancelable operating
leases at December 31, 2002 and the effect such items are expected to have on
the Company's liquidity and cash flow in future periods (in thousands):

RELATED PARTY TRANSACTIONS

The Company entered into a management agreement with Harvest Partners, Inc.
Under the management agreement, Harvest Partners received a one-time fee of $5.0
million in connection with structuring and implementing the acquisition of the
Company. In addition, Harvest Partners provides the Company with financial
advisory and strategic planning services. For these services, Harvest Partners
receives an annual fee of approximately $0.8 million, payable on a quarterly
basis in advance. The fee will be adjusted on a yearly basis in accordance with
the U.S. Consumer Price Index. In 2002, the Company incurred approximately $0.6
million of management fees paid to Harvest Partners for the period from the
acquisition date to December 31, 2002. The agreement also provides that Harvest
Partners will receive transaction fees in connection with financings,
acquisitions and divestitures of the Company. Such fees will be a percentage of
the applicable transaction. The Company reimburses Harvest Partners for all
out-of-pocket expenses. The

24

management agreement has a term of five years from its date of execution and
will automatically be renewed on a yearly basis, beginning in 2004, unless
otherwise specified by Harvest Partners.

On June 24, 2002, the Company completed the sale of its AmerCable division
to AmerCable Incorporated, a newly-formed entity controlled by members of
AmerCable management and Wingate Partners III, L.P., for net proceeds of
approximately $28.3 million in cash and the assumption of certain liabilities
pursuant to an asset purchase agreement dated as of the same date. Robert F.
Hogan, Jr., president and chief executive officer of the AmerCable division and
vice president of the Company prior to the sale, is the president, chief
executive officer and chairman of the board of AmerCable Incorporated.

RETIREMENT PLANS

Defined benefit pension plans are subject to additional minimum pension
liability requirements under Statement of Financial Accounting Standards
("SFAS") No. 87 -- "Employers' Accounting for Pensions". At December 31, 2002
the Company recorded an additional minimum pension liability totaling
approximately $4.3 million, net of tax, for its defined benefit pension plans.
The additional minimum pension liability was recorded as a charge to
stockholder's equity as a component of accumulated other comprehensive income.

EFFECTS OF INFLATION

The Company believes that the effects of inflation have not been material
to its operating results for each of the past three years, including interim
periods. The Company's principal raw material, vinyl resin, has been subject to
rapid price changes. Through price increases, the Company has historically been
able to pass on significant resin cost increases. The results of operations for
individual quarters can and have been negatively impacted by a delay between the
time of vinyl resin cost increases and price increases in the Company's
products. However, over longer periods of time, the impact of the cost increases
in vinyl resin has historically not been material. Resin prices significantly
increased throughout 2002. For the year ended December 31, 2002, the Company was
able to substantially offset the impact of the resin cost increase with price
increases to its customers. The Company presently expects vinyl resin prices to
increase in 2003. While the Company expects that any future significant resin
cost increases will be offset by price increases to its customers, there can be
no assurances that the Company will be able to pass on any future price
increases.

FINANCIAL ACCOUNTING STANDARDS

In April 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 145 -- "Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections." The provisions of SFAS No.
145 related to the rescission of SFAS No. 4 require that any gain or loss on
extinguishment of debt that was classified as an extraordinary item in prior
periods presented be reclassified as a component of income before income taxes.
The Successor recorded extraordinary items of $4.4 million, net of tax, related
to debt extinguishment. The Company is required to adopt the provisions of this
standard in its fiscal year beginning on January 1, 2003 and will make the
required reclassifications during 2003.

In July 2002, the FASB issued SFAS No. 146 -- "Accounting for Costs
Associated with Exit or Disposal Activities." The provisions of SFAS No. 146
require companies to recognize costs associated with exit or disposal activities
as they are incurred rather than at the date of a commitment to an exit or
disposal plan. The statement replaces guidance previously provided by Emerging
Issues Task Force Number 94-3 - "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." The Company is required to adopt the
provisions of this standard in its fiscal year beginning on January 1, 2003. The
Company believes the adoption of this standard will not impact the Company's
financial position, results of operations or cash flows.

In November 2002, the FASB issued Interpretation No. 45 -- "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." The provisions of Interpretation No. 45
requires certain guarantees to be recorded at fair value and increases the
disclosure requirements related to guarantees. The Company is required to adopt
the accounting provisions of this
25

interpretation in its fiscal year beginning on January 1, 2003. The Company
believes the adoption of this interpretation will not have a material effect on
the Company's financial position, results of operations or cash flows.

In December 2002, the FASB issued SFAS No. 148 -- "Accounting for
Stock-Based Compensation -- Transition and Disclosure." The provisions of SFAS
No. 148 amend SFAS No. 123 -- "Accounting for Stock-Based Compensation" by
providing alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. SFAS No.
148 also requires more prominent and frequent disclosures in financial
statements about the effects of stock-based compensation. The Company has
adopted the disclosure provisions of SFAS No. 148.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

General. The Company's discussion and analysis of its financial condition
and results of operations are based upon the Company's financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses. On an ongoing basis, the
Company evaluates its estimates, including those related to customer programs
and incentives, bad debts, inventories, income taxes and pensions and benefits.
The Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.

The Company believes the following critical accounting policies affect its
more significant judgments and estimates used in the preparation of its
financial statements.

Revenue Recognition. The Company primarily sells and distributes its
products through two channels: direct sales from its manufacturing facilities to
independent distributors and dealers and sales to contractors through its
Company owned supply centers. Direct sales revenue is recognized when the
Company's manufacturing facility ships the product. Sales to contractors are
recognized either when the contractor receives product directly from the supply
centers or when the supply centers deliver the product to the contractor's job
site. A substantial portion of the Company's sales is in the repair and
replacement segment of the building products industry. Therefore, vinyl windows
are manufactured to specific measurement requirements received from the
Company's customers. Revenues are recorded net of estimated returns, customer
incentive programs and other incentive offerings including special pricing
agreements, promotions and other volume-based incentives. Revisions to these
estimates are charged to income in the period in which the facts that give rise
to the revision become known.

Bad Debt. The Company maintains an allowance for doubtful accounts for
estimated losses resulting from the inability of its customers to make required
payments. The allowance for doubtful accounts is based on review of the overall
condition of accounts receivable balances and review of significant past due
accounts. If the financial condition of the Company's customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.

Inventories. The Company values its inventories at the lower of cost
(first-in, first-out) or market. The Company writes down its inventory for
estimated obsolescence or unmarketable inventory equal to the difference between
the cost of inventory and the estimated market value based upon assumptions
about future demand and market conditions. If actual market conditions are less
favorable than those projected by management, additional inventory write-downs
may be required.

Goodwill and Other Intangible Assets. The Company has accounted for the
Merger Transaction using the purchase method of accounting. The purchase price
has been allocated to assets and liabilities based on the fair values of the
assets acquired and the liabilities assumed. The excess of cost over fair value
of the new identifiable assets has been recorded as goodwill. These allocations
have been made based upon valuations and other studies.

26

Under the provisions of SFAS No. 142 -- "Goodwill and Other Intangible
Assets," goodwill and intangible assets with indefinite useful lives must be
reviewed annually for impairment using a fair-value based approach. As the
Company does not have a market for its equity, management performs the annual
impairment analysis utilizing a discounted cash flow model, which considers
forecasted operating results discounted at an estimated weighted average cost of
capital. Given the significant amount of goodwill and other intangible assets as
a result of the merger, any future impairment of the goodwill and other
intangible assets could have an adverse effect on the Company's results of
operations and financial position. Although management does not anticipate any
significant impairment of these assets, the extent of any such future impairment
cannot be predicted at this time and is dependent on future operating results.

Income Taxes. The Company accounts for income taxes in accordance with
SFAS No. 109 -- "Accounting for Income Taxes" which requires that deferred tax
assets and liabilities be recognized for the effect of temporary differences
between the book and tax bases of recorded assets and liabilities. SFAS No. 109
also requires that deferred tax assets be reduced by a valuation allowance if it
is more likely than not that some portion or all of the deferred tax asset will
not be realized. The Company reviews the recoverability of any tax assets
recorded on the balance sheet and provides any necessary allowances as required.

Pension. The Company's pension costs are developed from actuarial
valuations. Inherent in these valuations are key assumptions including discount
rates and expected return on plan assets. In selecting these assumptions,
management considers current market conditions, including changes in interest
rates and market returns on plan assets. Changes in the related pension benefit
costs may occur in the future due to changes in assumptions.

CERTAIN FORWARD-LOOKING STATEMENTS

All statements other than statements of historical facts included in this
report regarding the prospects of the industry and the Company's prospects,
plans, financial position and business strategy, may constitute forward-looking
statements. In addition, forward-looking statements generally can be identified
by the use of forward-looking terminology such as "may," "will," "should,"
"expect," "intend," "estimate," "anticipate," "believe," "predict," "potential"
or "continue" or the negatives of these terms or variations of them or similar
terminology. Although the Company believes that the expectations reflected in
these forward-looking statements are reasonable, it does not assure that these
expectations will prove to be correct. The following factors are among those
that may cause actual results to differ materially from the forward-looking
statements:

- changes in home building industry, economic, interest rates and other
conditions;

- changes in availability of consumer credit, employment trends, levels of
consumer confidence and consumer preferences;

- changes in raw material costs and availability;

- changes in national and regional trends in new housing starts;

- changes in weather conditions;

- the Company's ability to comply with certain financial covenants in the
loan documents;

- increases in competition from other manufacturers of vinyl building
products as well as alternative building products;

- increases in the Company's indebtedness;

- increases in costs of environmental compliance; and

- the other factors discussed under the heading "Risk Factors" and
elsewhere in this report.

All forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the cautionary
statements included in this report. These forward-looking

27

statements speak only as of the date of this report. The Company does not intend
to update these statements unless the securities laws require it to do so.

WEB SITE ADDRESS

As a matter of Company policy, the Company makes available its quarterly
and annual financial reports filed with the Securities and Exchange Commission
on its web site. The filings are available, free of charge, at
www.associatedmaterials.com.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

The Company has outstanding borrowings under the term loan of its credit
facility and may borrow under the revolving credit facility from time to time
for general corporate purposes, including working capital and capital
expenditures. Interest under the credit facility is based on the variable London
Interbank Offered Rate (LIBOR). At December 31, 2002, the Company had borrowings
of $76.5 million under the term loan. The effect of a 1/8% increase or decrease
in interest rates would increase or decrease total interest expense for the year
ended December 31, 2002 by approximately $0.1 million.

The Company has $165.0 million of senior subordinated notes due 2012 that
bear a fixed interest rate of 9 3/4%. The fair value of the Company's 9 3/4%
notes is sensitive to changes in interest rates. In addition, the fair value is
affected by the Company's overall credit rating, which could be impacted by
changes in the Company's future operating results.

FOREIGN CURRENCY EXCHANGE RATE RISK

The Company's revenues are primarily from domestic customers and are
realized in U.S. dollars. Accordingly, the Company believes its direct foreign
currency exchange rate risk is not material. In the past, the Company has hedged
against foreign currency exchange rate fluctuations on specific sales or
equipment purchasing contracts. At December 31, 2002 the Company had no currency
hedges in place.

COMMODITY PRICE RISK

See Item 7. "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Effects of Inflation" for a discussion of the
market risk related to the Company's principal raw material, vinyl resin.

28

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ASSOCIATED MATERIALS INCORPORATED

INDEX TO FINANCIAL STATEMENTS

29

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholder
Associated Materials Incorporated

We have audited the accompanying balance sheets of Associated Materials
Incorporated as of December 31, 2002 and 2001 and the related statements of
operations, stockholders' equity, and cash flows for the two hundred fifty-seven
day period ended December 31, 2002, the one hundred eight day period ended April
18, 2002 and each of the two years in the period ended December 31, 2001. These
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 auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Associated Materials
Incorporated at December 31, 2002 and 2001, and the results of its operations
and its cash flows for the two hundred fifty-seven day period ended December 31,
2002, the one hundred eight day period ended April 18, 2002 and each of the two
years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.

ERNST & YOUNG LLP

Dallas, Texas
February 14, 2003

30

ASSOCIATED MATERIALS INCORPORATED

BALANCE SHEETS

See accompanying notes.
31

ASSOCIATED MATERIALS INCORPORATED

STATEMENTS OF OPERATIONS

See accompanying notes.
32

ASSOCIATED MATERIALS INCORPORATED

STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME

See accompanying notes.
33

ASSOCIATED MATERIALS INCORPORATED

STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME -- (CONTINUED)

See accompanying notes.
34

ASSOCIATED MATERIALS INCORPORATED

STATEMENTS OF CASH FLOWS

See accompanying notes.
35

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

NATURE OF OPERATIONS

Associated Materials Incorporated (the "Company") was incorporated in
Delaware in 1983 and is a leading, vertically integrated manufacturer and
nationwide distributor of exterior residential building products through its
Alside division ("Alside"). The Company's core products are vinyl siding and
vinyl windows.

BASIS OF PRESENTATION

The Company's results of operations prior to the date of the Merger
Transaction (see Note 2) are presented as the results of the Predecessor. The
results of operations, including the Merger Transaction and results thereafter,
are presented as the results of the Successor and include 257 days from April
19, 2002 to December 31, 2002. The Company is a wholly owned subsidiary of
Associated Materials Holdings Inc. In addition, as discussed in Note 2, the
Company completed the sale of its AmerCable division on June 24, 2002.
AmerCable's results through April 18, 2002 are included in the results of
continuing operations of the Predecessor. Subsequent to April 18, 2002,
AmerCable's results are presented as discontinued operations of the Successor as
it was the Successor's decision to divest this division.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions regarding the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities 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.

REVENUE RECOGNITION

The Company primarily sells and distributes its products through two
channels: direct sales from its manufacturing facilities to independent
distributors and dealers and sales to contractors through its Company owned
supply centers. Direct sales revenue is recognized when the Company's
manufacturing facility ships the product. Sales to contractors are recognized
either when the contractor receives product directly from the supply centers or
when the supply centers deliver the product to the contractor's job site. A
substantial portion of the Company's sales is in the repair and replacement
segment of the building products industry. Therefore, vinyl windows are
manufactured to specific measurement requirements received from the Company's
customers. Revenues are recorded net of estimated returns, customer incentive
programs and other incentive offerings including special pricing agreements,
promotions and other volume-based incentives. Revisions to these estimates are
charged to income in the period in which the facts that give rise to the
revision become known.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out) or
market. The Company writes down its inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required.
36

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. The cost of maintenance
and repairs of property, plant and equipment is charged to operations in the
period incurred. Depreciation is provided by the straight-line method over the
estimated useful lives of the assets, which are as follows:

Building and improvements................................... 7 to 30 years
Computer equipment.......................................... 3 years
Machinery and equipment..................................... 3 to 15 years

LONG-LIVED ASSETS WITH DEPRECIABLE OR AMORTIZABLE LIVES

The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the asset to undiscounted future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Depreciation
on assets held for sale is discontinued and such assets are reported at the
lower of the carrying amount or fair value less costs to sell.

GOODWILL AND OTHER INTANGIBLE ASSETS WITH INDEFINITE LIVES

The Company reviews goodwill and other intangible assets with indefinite
lives for impairment on an annual basis or more frequently if events or
circumstances change that would impact the value of these assets. The impairment
test is conducted using a fair-value based approach. As the Company did not
record any goodwill and other indefinite lived intangible assets until the
Merger Transaction in the second quarter, an impairment test was not conducted
in 2002 in accordance with Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards ("SFAS") No. 142 -- "Goodwill and
Other Intangible Assets."

PENSIONS

The Company's pension costs are developed from actuarial valuations.
Inherent in these valuations are key assumptions including discount rates and
expected return on plan assets. In selecting these assumptions, management
considers current market conditions, including changes in interest rates and
market returns on plan assets. Changes in the related pension benefit costs may
occur in the future due to changes in assumptions.

INCOME TAXES

The Company accounts for income taxes in accordance with SFAS No.
109 -- "Accounting for Income Taxes," which requires that deferred tax assets
and liabilities be recognized for the effect of temporary differences between
the book and tax bases of recorded assets and liabilities. SFAS No. 109 also
requires that deferred tax assets be reduced by a valuation allowance if it is
more likely than not that some portion or all of the deferred tax asset will not
be realized. The Company reviews the recoverability of any tax assets recorded
on the balance sheet and provides any necessary allowances as required.

STOCK PLANS

The Company measures stock-based compensation using the intrinsic value in
accordance with Accounting Principles Board Opinion No. 25 -- "Accounting for
Stock Issued to Employees." The Company follows the disclosure provisions
required under SFAS No. 123 -- "Accounting for Stock Based Compensation." Pro

37

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

forma information regarding net income is required by SFAS No. 123, and has been
determined as if the Company had accounted for its stock options under the fair
value method of that statement using a minimum value approach for companies with
private equity. The pro forma effect on net income for the years ended December
31 would have been (in thousands):

MARKETING AND ADVERTISING

The Company expenses marketing and advertising costs as incurred. Marketing
and advertising expense was $7.2 million for the 257 days ended December 31,
2002, $3.8 million for the 108 days ended April 18, 2002, $9.9 million in 2001
and $9.2 million in 2000.

INTEREST INCOME

Interest income was approximately $0.1 million for the 257 days ended
December 31, 2002, $0.1 million for the 108 days ended April 18, 2002, $0.4
million in 2001 and $1.1 million in 2000 and is included in interest expense,
net.

RECLASSIFICATIONS

Certain prior period amounts have been reclassified to conform with the
current period presentation.

NEW ACCOUNTING PRONOUNCEMENTS

In April 2002, the FASB issued SFAS No. 145, -- "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." The provisions of SFAS No. 145 related to the rescission of SFAS
No. 4 require that any gain or loss on extinguishment of debt that was
classified as an extraordinary item in prior periods presented be reclassified
as a component of income before income taxes. The Successor recorded
extraordinary items of $4.4 million, net of tax, related to debt extinguishment.
The Company is required to adopt the provisions of this standard in its fiscal
year beginning on January 1, 2003 and will make the required reclassifications
during 2003.

In July 2002, the FASB issued SFAS No. 146 -- "Accounting for Costs
Associated with Exit or Disposal Activities." The provisions of SFAS No. 146
require companies to recognize costs associated with exit or disposal activities
as they are incurred rather than at the date of a commitment to an exit or
disposal plan. The statement replaces guidance previously provided by Emerging
Issues Task Force Number 94-3 -- "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." The Company is required to adopt the
provisions of this standard in its fiscal year beginning on January 1, 2003. The
adoption of this standard will not have a material impact on the Company's
financial position, results of operations or cash flows.

In November 2002, the FASB issued Interpretation No. 45 -- "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." The provisions of Interpretation No. 45
requires certain guarantees to be recorded at fair value and increases the
disclosure

38

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

requirements related to guarantees. The Company is required to adopt the
accounting provisions of this interpretation in its fiscal year beginning on
January 1, 2003. The adoption of this interpretation will not have a material
effect on the Company's financial position, results of operations or cash flows.

In December 2002, the FASB issued SFAS no. 148 -- "Accounting for
Stock-Based Compensation -- Transition and Disclosure." The provisions of SFAS
No. 148 amend SFAS No. 123 -- "Accounting for Stock-Based Compensation" by
providing alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. SFAS No.
148 also requires more prominent and frequent disclosures in financial
statements about the effects of stock-based compensation. The Company has
adopted the disclosure provisions of SFAS No. 148.

2. ACQUISITIONS AND DIVESTITURES

On March 16, 2002, the Company entered into a merger agreement ("Merger
Agreement") with Associated Materials Holdings, Inc. ("Holdings") and its wholly
owned subsidiary, Simon Acquisition Corp. The Merger Agreement provided for the
acquisition of all shares of the Company's then outstanding common stock through
a cash tender offer for $50.00 per share. The Merger Agreement also required
that the Company commence a tender offer to purchase all of its then outstanding
9 1/4% senior subordinated notes due March 1, 2008 ("9 1/4% notes").

On April 19, 2002, the cash tender offer for the Company's then outstanding
common stock and the cash tender offer for approximately $74.0 million of the
Company's then outstanding 9 1/4% notes was completed. Simon Acquisition Corp.
was then merged with and into the Company with the Company continuing as a
privately held, wholly owned subsidiary of Holdings (which is controlled by
affiliates of Harvest Partners, Inc.). The completion of the aforementioned
transactions constitute the merger transaction ("Merger Transaction"). Following
the completion of the Merger Transaction, the Company's then outstanding shares
of common stock were delisted from NASDAQ.

The merger has been accounted for using the purchase method of accounting.
The total purchase consideration of $379.5 million has been allocated to
tangible and intangible assets acquired and liabilities assumed based on
respective fair values at the date of acquisition based on valuation estimates
and certain assumptions. The allocation of purchase price has resulted in $197.5
million in goodwill and $105.5 million in other intangibles, including $6.8
million of patents with estimated useful lives of 10 years and $98.7 million
assigned to trademarks of which $24.0 million have remaining useful lives of 15
years and $74.7 million have indefinite lives (See Note 4). The allocation of
purchase price is reflected in the December 31, 2002 balance sheet. The purchase
consideration of $379.5 million, tender offer of the $74.0 million of 9 1/4%
notes and debt extinguishment costs of $7.6 million were financed through: (1)
the issuance of $165 million of 9 3/4% senior subordinated notes due 2012
("9 3/4% notes"), (2) $125 million from a new $165 million credit facility
("credit facility"), (3) $164.8 million cash contribution from Holdings and (4)
cash of approximately $6.3 million, representing a portion of the Company's
total cash of $6.8 million on hand at the time of the acquisition.

In connection with the merger, the Predecessor incurred merger related
costs, including legal and investment banking fees, which have been classified
as Merger Transaction costs in the Predecessor's accompanying statements of
operations.

On June 24, 2002, the Company completed the sale of its AmerCable division
to AmerCable Incorporated, a newly formed entity controlled by Wingate Partners
III, L.P. and members of AmerCable's management for net proceeds of
approximately $28.3 million and the assumption of certain liabilities pursuant
to an asset purchase agreement. The Company used the net proceeds to repay a
portion of its credit facility. No gain or loss on the sale of AmerCable was
recorded in the statements of operations, as the fair value assigned to
AmerCable's net assets acquired in the Merger Transaction approximated the net
proceeds

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ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

received from the subsequent sale of AmerCable. Operating results of
discontinued operations for the period from April 19, 2002 to June 24, 2002 were
as follows (in thousands):

Interest allocated to discontinued operations includes the interest on
$28.3 million of borrowings under the term loan for the period from April 19,
2002 to June 24, 2002 plus interest expense related to the accelerated
amortization of deferred financing fees of the Company's credit facility related
to the proceeds from the sale of AmerCable used to reduce the term loan.

On October 6, 2000, the Company acquired substantially all of the assets of
Alpine Industries, Inc. for $7.6 million in cash and the assumption of certain
payroll related and property tax liabilities. Included in the acquired assets is
Alpine's leased window fabrication facility located in Bothell, Washington. This
facility manufactures vinyl windows for the new construction and remodeling
markets. The Company accounted for the acquisition using the purchase method of
accounting and the results of operations have been included in the Company's
income statement from the date of acquisition.

The Company completed the sale of its UltraCraft operation, a manufacturer
of semi-custom frameless cabinets, in June 2000. Pre-tax net proceeds from the
sale were $18.9 million after working capital adjustments and transaction costs.
The Company recorded a pre-tax gain on the sale of $8.0 million.

3. RELATED PARTIES

The Company entered into a management agreement with Harvest Partners, Inc.
Under the management agreement, Harvest Partners received a one-time fee of $5.0
million in connection with structuring and implementing the acquisition of the
Company. In addition, Harvest Partners provides the Company with financial
advisory and strategic planning services. For these services, Harvest Partners,
Inc. receives an annual fee of approximately $0.8 million, payable on a
quarterly basis in advance, beginning on the date of execution of this
agreement. The fee will be adjusted on a yearly basis in accordance with the
U.S. Consumer Price Index. In 2002, the Company incurred approximately $0.6
million of management fees paid to Harvest Partners for the period from the
acquisition date to December 31, 2002, which are included in selling, general
and administrative expenses in the statement of operations. The agreement also
provides that Harvest Partners will receive transaction fees in connection with
financings, acquisitions and divestitures of the Company. Such fees will be a
percentage of the applicable transaction. The Company reimburses Harvest
Partners for all out-of-pocket expenses. The management agreement has a term of
five years from its date of execution and will automatically be renewed on a
yearly basis, beginning in 2004, unless otherwise specified by Harvest Partners.

As discussed in Note 2, the Company sold its AmerCable division to a
newly-formed entity that is controlled in part by former members of the
Company's management.

4. GOODWILL, TRADEMARKS, TRADE NAMES AND PATENTS

Goodwill of $197.5 million consists of the purchase price for the Merger
Transaction in excess of the fair value of the tangible and intangible net
assets acquired. The Company's trademarks and trade names total $98.7 million
and patents total approximately $6.8 million. The Company has determined that
one trademark and the Alside trade name totaling $74.7 million have an
indefinite useful life. The remaining $24.0 million of trademarks are being
amortized on a straight-line basis over their estimated remaining useful lives
of 15 years.

40

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Patents are being amortized on a straight-line basis over their estimated
remaining useful lives of 10 years. Accumulated amortization and amortization
expense related to trademarks and patents were approximately $1.2 and $0.6
million, respectively as of and for the 257 days ended December 31, 2002.
Estimated annual amortization expense for trademarks and patents combined is
approximately $2.3 million.

5. PRO FORMA INFORMATION

The following pro forma information for the years ended December 31, 2002
and 2001 was prepared as if the Merger Transaction and sale of AmerCable
occurred as of the beginning of each period presented. On a pro forma basis, the
Company would have reported (in thousands):

The pro forma information is not necessarily indicative of the results that
would have occurred had the Merger Transaction and sale of AmerCable occurred at
the beginning of the periods presented, nor is it necessarily indicative of
future results. The pro forma results of operations for all periods presented
include a $1.9 million expense related to an inventory fair value adjustment
recorded at the time of the Merger Transaction. In addition, the pro forma
results of operations for the year ended December 31, 2001 includes a $2.4
million loss on the writedown of Amercord Inc.

6. INVESTMENT IN AMERCORD

The Company owns a 9.9% interest in Amercord Inc. ("Amercord"), which
manufactured and marketed steel cord and bead wire to the tire manufacturing
industry. During 2001, Amercord ceased operations, and the Company wrote-off its
remaining $2.4 million investment.

The Company guaranteed $3.0 million of a secured note in connection with
the sale of a portion of the ownership interest in Amercord. Ivaco, Inc.,
pursuant to the terms of the note, agreed to indemnify the Company for 50% of
any loss under the guarantee. The guarantee was exercised by Amercord's lender
and the Company has accrued approximately $1.3 million as of December 31, 2002
for its anticipated portion of the liability related to this guarantee. The
Company retains a right to any collateral proceeds that secure the note;
however, the Company has determined that the value of such collateral is not
sufficient to cover any significant portion of the Company's liability.

41

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

7. ALLOWANCE FOR DOUBTFUL ACCOUNTS

Changes in the allowance for doubtful accounts on accounts receivable for
the years ended December 31 consist of (in thousands):

The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. The
allowance for doubtful accounts is based on a review of the overall condition of
accounts receivable balances and a review of significant past due accounts. If
the financial condition of the Company's customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.

8. INVENTORIES

Inventories at December 31 consist of (in thousands):

9. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31 consist of (in thousands):

2002 2001
SUCCESSOR PREDECESSOR
-------- --------

Land........................................................ $ 1,550 $ 1,878
Buildings................................................... 29,817 30,231
Construction in process..................................... 2,451 2,970
Machinery and equipment..................................... 70,672 119,151
-------- --------
104,490 154,230
Less accumulated depreciation............................... 5,377 76,497
-------- --------
$ 99,113 $ 77,733
======== ========

Depreciation expense was approximately $5.4 million for the 257 days ended
December 31, 2002, $3.9 million for the 108 days ended April 18, 2002, $10.6
million in 2001 and $9.3 million in 2000.

42

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

10. ACCRUED AND OTHER LIABILITIES

Accrued liabilities at December 31 consist of (in thousands):

2002 2001
SUCCESSOR PREDECESSOR
------- -------

Employee compensation....................................... $11,394 $15,648
Sales promotions and incentives............................. 8,597 8,929
Employee benefits........................................... 4,592 3,656
Interest.................................................... 3,435 2,322
Taxes other than income..................................... 2,559 2,610
Other....................................................... 3,742 2,100
------- -------
$34,319 $35,265
======= =======

Other liabilities of approximately $20.7 million and $5.2 million at
December 31, 2002 and 2001, respectively, consist primarily of accruals for
pension liabilities and retiree medical benefits.

11. LONG-TERM DEBT

Long-term debt at December 31 consists of (in thousands):

2002 2001
SUCCESSOR PREDECESSOR
-------- -------

9 3/4% notes................................................ $165,000
Term loan under credit facility............................. 76,500
9 1/4% notes................................................ 908 $75,000
-------- -------
$242,408 $75,000
======== =======

In connection with the Merger Transaction, on April 23, 2002 the Company
issued $165 million of 9 3/4% notes due in 2012 that pay interest semi-annually
on April 15 and October 15. The 9 3/4% notes are general unsecured obligations
of the Company subordinated in right of payment to senior indebtedness and
senior in right of payment to any current or future subordinated indebtedness of
the Company. The Company has one subsidiary, which is a wholly owned subsidiary
having no assets, liabilities or operations, that fully and unconditionally
guarantees the Company's 9 3/4% notes.

In conjunction with the merger, the Company entered into a new $165 million
credit facility, which included $125 million of term loans due through 2009 that
bear interest at the London Interbank Offered Rate (LIBOR) plus 3.50%, payable
quarterly, and up to $40 million of available borrowings provided by revolving
loans, which expire in 2007. The credit facility is secured by a pledge of the
capital stock of the Company and a perfected lien and security interest in all
of the tangible and intangible assets of the Company. The term loan has been
permanently reduced by $48.5 million, which resulted in approximately $1.4
million of accelerated amortization of deferred financing costs. At December 31,
2002, the Company had available borrowing capacity of approximately $37.4
million under the revolving portion of its credit facility. The facility
requires the Company to pay a commitment fee of 0.5% per annum on any unused
amounts under the revolving portion of the facility. Outstanding letters of
credit at December 31, 2002 totaled approximately $2.6 million securing various
insurance letters of credit.

None of the Company's long-term debt matures within five years; however, on
an annual basis the Company is required to make principal payments on the term
loan under its credit facility based on a

43

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

percentage of excess cash flows as defined in the credit facility. The payments
under the term loan in 2002 were sufficient such that no additional principal
payments were required under the excess cash flow provision.

The credit facility and the indenture governing the 9 3/4% notes contain
restrictive covenants that, among other things, limit the Company's ability to
incur additional indebtedness, make loans or advances to subsidiaries and other
entities, invest in capital expenditures, sell its assets or declare dividends.
In addition, under the credit facility the Company is required to achieve
certain financial ratios relating to leverage, coverage of fixed charges and
coverage of interest expense. The Company was in compliance with its covenants
as of December 31, 2002.

In connection with the Merger Transaction, on April 19, 2002 the Company
completed a cash tender offer for approximately $74.0 million of the Company's
9 1/4% notes. The tender offer premium paid for the 9 1/4% notes was
approximately $7.3 million, of which $4.9 million is included as an
extraordinary item representing the portion of the premium in excess of the fair
market value of the 9 1/4% notes. The Company was then obligated to make a
change of control offer for the approximate $1.0 million of remaining
outstanding 9 1/4% notes at a price of 101% of the principal amount thereof,
plus accrued and unpaid interest. The change of control offer was completed on
June 21, 2002 with approximately $0.1 million of 9 1/4% notes being tendered.
The remaining 9 1/4% notes mature in 2008.

The weighted average interest rate for borrowings under the credit facility
was 5.9% for the 257 days ended December 31, 2002 and 5.9% for the former credit
facility for the year ended December 31, 2001. For the 108 days ended April 18,
2002, there were no borrowings under the former credit facility.

The fair value of the 9 3/4% notes at December 31, 2002 was $173.3 million
based upon quoted market prices.

12. COMMITMENTS

Commitments for future minimum lease payments under noncancelable operating
leases, principally for manufacturing and distribution facilities and certain
equipment, are as follows (in thousands):

2003........................................................ $14,825
2004........................................................ 12,174
2005........................................................ 8,657
2006........................................................ 5,563
2007........................................................ 3,747
Thereafter.................................................. 4,435

Lease expense was approximately $12.4 million for the 257 days ended
December 31, 2002, $6.0 million for the 108 days ended April 18, 2002, $17.9
million in 2001 and $14.7 million in 2000. The Company's lease agreements
typically contain renewal options.

44

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

13. INCOME TAXES

Income tax expense for the years ended December 31 consists of (in
thousands):

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred income taxes as of December 31 are as follows (in
thousands):

The reconciliation of the statutory rate to the Company's effective income
tax rate for the years ended December 31 follows:

45

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

As a result of relocating the Company's corporate office from Texas to
Ohio, the Successor's state and local income tax rate increased, raising the
Company's total effective tax rate to 41.5% from 38.5%. In addition, the
Predecessor's tax provision includes an estimate for $7.3 million of Merger
Transaction costs that the Company considers to be non-deductible for income tax
purposes. Income tax expense for the 257 days ended December 31, 2002 consists
of a $12.1 million provision for continuing operations, net of a $0.3 million
benefit from discontinued operations and a $3.2 million benefit from
extraordinary items.

In 2000, the Company recorded $1.1 million in additional income tax expense
due to an adjustment to a deferred tax asset, which was recorded in 1986
pursuant to the spin-off of the Company's tire cord operation into Amercord. The
effect of this adjustment is included in the other category in the rate
reconciliation. Exclusive of this adjustment, the Company's effective tax rate
would have been 38.5%.

14. STOCKHOLDERS' EQUITY

SUCCESSOR

As discussed in Note 2, the Company is a wholly owned subsidiary of
Holdings. The Company has the authority to issue 1,000 shares of $0.01 par value
common stock, of which 100 shares are issued and outstanding at December 31,
2002. The Company's contributed capital consists of $164.9 million of cash
contributions and non-cash financing of approximately $5.0 million representing
the fair value of stock options of the Predecessor held by certain employees
that were converted into options of Holdings.

The Company reports comprehensive income in its consolidated statement of
stockholders' equity. Comprehensive income includes net income and all other
non-owner changes in equity during the period. Comprehensive income for the 257
days ended December 31, 2002 includes a minimum pension liability adjustment of
approximately $7.4 million, net of a related tax benefit of approximately $3.1
million. The Company had no non-owner changes impacting equity for the 108 days
ended April 18, 2002 or the years ended December 31, 2001 or 2000.

PREDECESSOR

In October 1998 the Company's Board of Directors approved a stock
repurchase program that authorized the Company to purchase up to 800,000 shares
of common stock in open market transactions depending on market, economic and
other factors. In November 2000, the Board authorized the repurchase of an
additional 800,000 shares of common stock under the Company's stock repurchase
program, bringing the total number of shares under the plan to 1,600,000 shares.
During 2001 and 2000, the Company repurchased 123,306 and 399,774 shares of its
common stock under the stock repurchase program at a cost of approximately $2.0
million and $5.8 million. The repurchase of the Company's Class B common stock
described below was not part of this stock repurchase program.

On April 29, 2001, the Company repurchased 1,000,000 shares of its Class B
common stock from The Prudential Insurance Company of America ("Prudential") and
its wholly owned subsidiary, PCG Finance Company II, LLC ("PCG") at $19.50 per
share, or $19.5 million in the aggregate, which has been reflected primarily as
a reduction to retained earnings. The share purchase was financed through
available cash and borrowings under the Company's then available $50 million
credit facility. Following the purchase, Prudential and PCG converted the
remaining 550,000 shares of Class B common stock held by these entities into
550,000 shares of common stock pursuant to the terms of the Company's
Certificate of Incorporation. The Company subsequently retired all 1,550,000
previously authorized shares of Class B common stock.

46

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

15. STOCK PLANS

SUCCESSOR

In June 2002, Holdings adopted the Associated Materials Holdings Inc. 2002
Stock Option Plan (the "Plan"). The board of directors of Holdings administers
the Plan and selects eligible executives, directors, employees and consultants
of Holdings and its affiliates, including the Company, to receive options. The
board of directors of Holdings also will determine the number and type of shares
of stock covered by options granted under the Plan, the terms under which
options may be exercised, the exercise price of the options and other terms and
conditions of the options in accordance with the provisions of the Plan. In
2002, the board of directors authorized 467,519 shares of Holdings' common stock
and 55,758 shares of Holdings' preferred stock under this Plan. An option holder
may pay the exercise price of an option by any legal manner that the board of
directors of Holdings permits. Option holders generally may not transfer their
options except in the event of death. If Holdings undergoes a change in control,
as defined in the Plan, all outstanding time-vesting options become immediately
fully exercisable, while the performance-based options may become immediately
exercisable upon achievement of certain specified criteria. The board of
directors of Holdings may adjust outstanding options by substituting stock or
other securities of any successor or another party to the change in control
transaction, or cash out such outstanding options, in any such case, generally
based on the consideration received by its stockholders in the transaction.
Subject to particular limitations specified in the Plan, the board of directors
may amend or terminate the Plan. The Plan will terminate no later than 10 years
following its effective date; however, any options outstanding under the option
plan will remain outstanding in accordance with their terms.

Options were granted at fair market value on the grant date and are
exercisable under varying terms for up to ten years. The options granted in 2002
include the following:

- Options to purchase shares of Holdings' common stock at the fair market
value on the date of grant, which will vest over time;

- Options to purchase shares of Holdings' common stock at the fair market
value on the date of grant, which will vest 100% on the eighth
anniversary from the date of grant provided that the option vesting may
be accelerated upon the occurrence of a liquidity event, as defined in
the Plan, and the achievement of a specified internal rate of return on
the funds invested by Harvest Partners, Inc. and minimum aggregate
proceeds for the investment by Harvest Partners (performance-based
options) and;

- Options to purchase shares of Holdings' common stock and preferred stock
as a unit, comprised of one share of preferred stock and a specified
fraction of a share of common stock granted in exchange for a portion of
the outstanding options to purchase shares of the Predecessor's common
stock, which became fully vested upon the change in control ("Roll-Over
Options").

Transactions during the 257 days ended December 31, 2002 under this plan
are summarized below:

Options to purchase 95,712 shares of Holdings' common stock and 55,758
shares of Holdings' preferred stock were exercisable at December 31, 2002. As
the Roll-Over Options are required to be exercised as a unit (as described
above), the weighted average exercise price of the Roll-Over Options has been
allocated among the options for preferred and common stock.

47

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The weighted average fair value at date of grant for options granted during
2002 using the minimum value method was $3.57 per option. The fair value of the
options was estimated at the date of the grant using the minimum value method
with the following assumptions for 2002: dividend yield of 0.0% for options for
common shares and 8.0% for options for preferred shares, a weighted-average risk
free interest rate of 5.02% and an expected life of the option of 8 years. Stock
based compensation would have reduced net income by approximately $0.2 million
for the 257 days ended December 31, 2002 if the fair values of the options
granted had been recognized as compensation expense on a straight-line basis
over the vesting period of the grants.

PREDECESSOR

The Company had a stock option plan, whereby it granted stock options to
certain directors, officers and key employees. The Company authorized 1,200,000
shares of common stock to be issued under the plan. Options were granted at fair
market value on the grant date and were exercisable for ten years. Options
vested by either of the following methods: 50% vesting upon the grant date with
the other 50% vesting after two years or 20% vesting upon the grant date with an
additional 20% vesting each year commencing on the first anniversary of the
grant date. All outstanding options granted under the stock option plan were
non-statutory stock options. As of April 18, 2002, all options were either
exercised or converted to options of Holdings.

Transactions during 2000, 2001 and the 108 days ended April 18, 2002 under
this plan are summarized below:

The weighted average fair value at date of grant for options granted during
2001 using the Black Scholes method was $8.39 per option. The fair value of the
options was estimated at the date of the grant using the Black Scholes option
pricing model with the following assumptions for 2001: dividend yield of .95%,
volatility factor of the expected market price of the stock of .330, a
weighted-average risk free interest rate of 5.10% and an expected life of the
option of 10 years. Stock based compensation would have reduced net income (or
increased net loss) by approximately $0.1 million for the 108 days ended April
18, 2002 and $0.3 million and $1.0 million for the years ended December 31, 2001
and 2000, respectively.

Effective October 1, 1998 the Company established an Employee Stock
Purchase Plan ("ESPP"). The ESPP allowed employees to purchase the Company's
common stock at 85% of the lower of the fair market value on the first day of
the purchase period or the last day of the purchase period. The Company had
registered 500,000 shares of common stock for issuance under the ESPP. Employees
purchased 60,679 and 65,873 shares under the ESPP at average prices of $14.42
and $12.87 per share during 2001 and 2000,

48

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

respectively. The Company's Board of Directors approved the suspension of the
ESPP effective December 31, 2001.

16. BUSINESS SEGMENTS

SUCCESSOR

Subsequent to the Merger Transaction and sale of AmerCable, the Company is
in the single business of manufacturing and distributing exterior residential
building products.

PREDECESSOR

Prior to the Merger Transaction and sale of AmerCable, the Company had two
reportable segments: building products and electrical cable products. The
principal business activities of the building products segment are the
manufacture of vinyl siding, vinyl windows and the wholesale distribution of
these and other complementary building products principally to professional home
remodeling and new construction contractors. The principal business activity of
the electrical cable segment was the manufacture and sale of jacketed electrical
cable.

The Company had evaluated performance and allocated resources based on
operating profit, which is comprised of net sales less operating costs and
expenses.

Comparative financial data by reportable segment for the 108 days ended
April 18, 2002 and the years ended December 31, 2001 and 2000 are as follows (in
thousands):

49

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Identifiable assets by segment are those used in the Company's operations
in each segment. Corporate assets are principally the Company's cash and cash
equivalents and short-term investments. The Company operates principally in the
United States. Neither aggregate export sales nor sales to a single customer
have accounted for 10% or more of consolidated net sales in any of the years
presented.

17. RETIREMENT PLANS

The Company sponsors a defined benefit pension plan, The Premium Building
Products Company Hourly Employees Pension Plan ("Premium Plan"), which covers
approximately 250 participants. The Company froze the Alside defined benefit
retirement plan ("Alside Plan") in 1998 and replaced it with a defined
contribution plan. Prepaid pension and accrued pension liabilities are included
in other assets and other liabilities in the accompanying balance sheets.

Information regarding the Company's defined benefit plans is as follows (in
thousands):

50

ASSOCIATED MATERIALS INCORPORATED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

In 2002, the Company recognized in the statement of comprehensive income an
additional minimum pension liability adjustment of approximately $7.4 million,
($4.3 million net of tax). The additional liability is included in other
liabilities in the balance sheet as of December 31, 2002.

The Company sponsors a defined contribution plan (the "401(k) Plan")
intended to provide assistance in accumulating personal savings for retirement.
The 401(k) Plan is qualified as a tax-exempt plan under Sections 401(a) and
401(k) of the Internal Revenue Code. The 401(k) Plan covers all full-time,
non-union employees and matches up to 4.0% of eligible compensation. The
Company's pre-tax contributions to this plan were approximately $1.8 million for
the 257 days ended December 31, 2002, $1.0 million for the 108 days ended April
18, 2002, $2.1 million in 2001 and $2.0 million in 2000.

Previously, the Company sponsored the AmerCable 401(k) Plan, which covered
all full-time employees of AmerCable and matched up to 4.0% of eligible
compensation (3.5% of eligible compensation prior to 2001). The Company's
pre-tax contributions to this plan were approximately $50 thousand for the
period from the date of the Merger Transaction to the date AmerCable was sold,
$0.1 million for the 108 days ended April 18, 2002, $0.3 million in 2001 and
$0.2 million in 2000.

18. EXTRAORDINARY ITEMS

Extraordinary items include $4.9 million ($2.8 million net of tax) for a
portion of the premium paid to extinguish substantially all of the Successor's
assumed 9 1/4% notes and $2.7 million ($1.6 million net of tax) for the
financing fees related to an interim credit facility utilized for the Merger
Transaction, which was repaid shortly thereafter.

19. CONTINGENCIES

In the ordinary course of business, the Company is involved in various
legal proceedings. The Company is of the opinion that the ultimate resolution of
these matters will not have a material adverse effect on the results of
operations or the financial position of the Company.

51

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information about the board of directors and
executive officers for the Company.

Set forth below is a brief description of the business experience of each
of our directors and executive officers as of March 21, 2003.

IRA D. KLEINMAN, AGE 46. Mr. Kleinman has been a director since the Merger
Transaction. Mr. Kleinman is chairman of the Board and a director of Associated
Materials Holdings Inc. Mr. Kleinman has been a General Partner of Harvest
Partners for more than five years and is currently a member of Harvest
Associates III, LLC and Harvest Associates IV, LLC. Mr. Kleinman is also a
director for Global Power Equipment Inc.

MICHAEL CAPORALE, JR., AGE 51. Mr. Caporale has been the President and
Chief Executive Officer of the Company and a director since the Merger
Transaction. Mr. Caporale was named Chief Executive Officer of the Alside
division and became a director in February 2001. Mr. Caporale joined the Company
in January 2000 as President of the Alside Window Company, became President and
Chief Operating Officer of the Alside division in April 2000 and was named a
Vice President of the Company in August 2000. Mr. Caporale is President and
Chief Executive Officer and a director of Associated Materials Holdings Inc.
Prior to joining the Company, Mr. Caporale was the President of Great Lakes
Window, Inc., a subsidiary of Nortek, Inc., where he had been employed since
1995.

D. KEITH LAVANWAY, AGE 38. Mr. LaVanway has been Vice President, Chief
Financial Officer, Treasurer and Secretary of the Company since the Merger
Transaction. Mr. LaVanway joined the Company in February 2001 as Vice
President -- Chief Financial Officer of Alside and was also named a Vice
President of the Company. Mr. LaVanway is Vice President -- Finance of
Associated Materials Holdings Inc. Prior to joining the Company, Mr. LaVanway
was employed by Nortek, Inc. from 1995 to 2001, most recently as Vice
President -- Chief Financial Officer of Peachtree Doors and Windows Company.

KENNETH L. BLOOM, AGE 40. Mr. Bloom joined the Company in July 2000 as
Alside's Vice President of Window Manufacturing. In March 2001, Mr. Bloom was
named President of Alside Window Company. Mr. Bloom was named President of
Alside Siding & Window Company in August 2002. Prior to joining the Company, Mr.
Bloom was Corporate Vice President of Field Container Co., L.P., where he had
been employed since 1996.

ROBERT M. FRANCO, AGE 49. Mr. Franco joined the Company in August 2002 as
President of Alside Supply Centers. Prior to joining the Company, Mr. Franco was
most recently Vice President of the Exterior Systems Business of Owens-Corning,
Inc., where he had worked in a variety of key management positions for over
twenty years.
52

THOMAS W. ARENZ, AGE 45. Mr. Arenz has been a director since shortly after
the Merger Transaction. Mr. Arenz is Treasurer, Assistant Secretary and a
director of Associated Materials Holdings Inc. Mr. Arenz joined Harvest
Partners, Inc. in November 1996 and became a Principal in October 1997. Mr.
Arenz has over 16 years of private equity investment and corporate finance
experience. From 1995 to 1996, Mr. Arenz was with the North American subsidiary
of Preussag AG, a German multinational corporation, most recently as President.
From 1991 to 1995, Mr. Arenz was a Principal at Joseph Littlejohn & Levy, a
management buyout firm. Mr. Arenz was also in the corporate finance departments
at Kidder, Peabody & Co. from 1990 to 1991 and Drexel Burnham Lambert from 1986
to 1990.

JONATHAN C. ANGRIST, AGE 31. Mr. Angrist has been a director since the
Merger Transaction. Mr. Angrist is Secretary, Assistant Treasurer and a director
of Associated Materials Holdings Inc. Mr. Angrist is also currently Vice
President of Harvest Partners. From 1993 to 1997, Mr. Angrist was a consultant
with Sibson & Company. Mr. Angrist is also a director for IRMC Holdings, Inc.

All of the Company's directors are elected on an annual basis with terms
expiring as of the annual meeting of stockholders. All of the officers serve at
the discretion of the board of directors. The Company may expand the size of the
board of directors so that it is the same as the board of Holdings.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Not applicable

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth the annual compensation paid by the Company
for services rendered in 2002, 2001 and 2000 by the chief executive officer and
each of the other executive officers of the Company.

- ---------------

(1) Perquisites and other personal benefits received by the Company's other
executive officers are not included in the Summary Compensation Table
because the aggregate amount of this compensation, if any, did not meet
disclosure thresholds established under current SEC regulations.

(2) Options granted in 2002 were granted in accordance with the Associated
Materials Holdings Inc. 2002 Stock Option Plan. The option grants include
the following:

- Options to purchase shares of Holdings common stock at the fair market
value on the date of grant, which will vest over time ("Time-Based
Options"). All Time-Based Options granted to executives during
September 2002 were immediately vested 16% on the date of grant,
representing 10% vesting upon grant plus four months of vesting from
May 2002 through August 2002, with remaining vesting of 1.5% per month
over 56 months;

- Options to purchase shares of Holdings common stock at the fair market
value on the date of grant, which will vest 100% on the eighth
anniversary from the date of grant, provided that the option vesting
may be accelerated upon the occurrence of a liquidity event and the
achievement of a specified internal rate of return ("IRR") on the
investment by Harvest Partners, Inc. in Holdings ("IRR Options"). A
liquidity event is defined as the occurrence of (a) a transaction or
series of transactions which results in the sale or transfer of (i)
more than a majority of the assets of Holdings and its subsidiaries or
(ii) a majority of the capital stock of Holdings or a widely
distributed sale of the common stock of Holdings in an underwritten
public offering which yields a minimum required amount of net proceeds
to Holdings and (b) the funds of Harvest Partners, Inc. receive a
minimum required aggregate net cash proceeds for its investment in
Holdings ("Liquidity Event");

- Options to purchase shares of Holdings common stock and preferred
stock as a unit, comprised of one share of preferred stock and a
specified fraction of a share of common stock ("Roll-Over Options").
These options were granted in exchange for the outstanding options to
purchase Associated Materials Incorporated common stock ("Predecessor
Company Options"). Roll-Over Options were granted at an exercise
price, which preserves the intrinsic value of the Predecessor Company
Options. Each Roll-Over Option grant was 100% vested as of the date of
grant.

(3) Mr. Caporale joined the Company in January 2000.

(4) Mr. LaVanway joined the Company in February 2001.

(5) Mr. Bloom joined the Company in July 2000.

(6) Mr. Franco joined the Company in August 2002.

(7) Mr. W. Winspear retired from the Company upon consummation of the Merger
Transaction.

(8) Immediately following the sale of AmerCable in June 2002, Mr. Hogan ceased
to be an officer of the Company and became the president, chief executive
officer and chairman of the board of the newly-formed entity that acquired
the Company's AmerCable division. Mr. Hogan has relinquished his rights to
severance from the Company.

(9) Mr. R. Winspear ceased to be the vice president and chief financial officer
of the Company after consummation of the Merger Transaction.

54

(10) In September 2002, Mr. Caporale was granted an option to purchase 205,892
shares of Holdings common stock and 46,415 shares of Holdings' preferred
stock as follows:

- Time-Based Options granted with the option to purchase 106,280 shares
of common stock at $10 per share;

- IRR Options granted with the option to purchase 63,768 shares of
common stock at $10 per share;

- Roll-Over Options granted with an option to purchase 23,221 shares of
preferred stock and 17,781 shares of common stock. Each option must be
exercised as a unit, with each unit comprising one share of preferred
stock and 0.7657 shares of common stock, at a unit exercise price of
$31.09;

- Roll-Over Options granted with an option to purchase 23,194 shares of
preferred stock and 18,063 shares of common stock. Each option must be
exercised as a unit, with each unit comprising one share of preferred
stock and 0.7788 shares of common stock, at a unit exercise price of
$29.91.

In January 2000, Mr. Caporale was granted Predecessor Company Options to
purchase 50,000 shares of Company common stock at $14.4375 per share,
the fair market value on the grant date. In March 2000, Mr. Caporale was
granted Predecessor Company Options to purchase an additional 50,000
shares of Company common stock at $13.875 per share, the fair market
value on the grant date. The Predecessor Company Options granted for
Company common stock vested 50% on the date of grant and 50% on the
second anniversary of the grant date. Both option grants became 100%
vested upon consummation of the Merger Transaction and were converted
into the Roll-Over Options described herein.

(11) The options shown, which are Predecessor Company Options, were issued
pursuant to a plan that is no longer in existence and have been rolled over
into new options of Holdings. These options were the basis for the
Roll-Over Options, described herein.

(12) In September 2002, Mr. LaVanway was granted an option to purchase 66,981
shares of Holdings common stock and 4,678 shares of Holdings' preferred
stock as follows:

- Time-Based Options granted with the option to purchase 39,855 shares
of common stock at $10 per share;

- IRR Options granted with the option to purchase 23,913 shares of
common stock at $10 per share;

- Roll-Over Options granted with an option to purchase 4,678 shares of
preferred stock and 3,213 shares of common stock. Each option must be
exercised as a unit, with each unit comprising one share of preferred
stock and 0.686832 shares of common stock, at a unit exercise price of
$38.21.

In February 2001, Mr. LaVanway was granted Predecessor Company Options
to purchase 10,000 shares of Associated Materials Incorporated common
stock at $17.875 per share, the fair market value on the grant date. The
Predecessor Company Options granted for Company common stock vested 20%
on the date of grant and 20% on each anniversary of the grant date
thereafter. This option grant became 100% vested upon consummation of
the Merger Transaction and was converted into the Roll-Over Options
described herein.

(13) In September 2002, Mr. Bloom was granted an option to purchase 56,483
shares of Holdings common stock and 4,665 shares of Holdings' preferred
stock as follows:

- Time-Based Options granted with the option to purchase 33,212 shares
of common stock at $10 per share;

- IRR Options granted with the option to purchase 19,927 shares of
common stock at $10 per share;

- Roll-Over Options granted with an option to purchase 4,665 shares of
preferred stock and 3,344 shares of common stock. Each option must be
exercised as a unit, with each unit comprising one share of preferred
stock and 0.716827 shares of common stock, at a unit exercise price of
$35.50.

55

In August 2000, Mr. Bloom was granted Predecessor Company Options to
purchase 10,000 shares of Associated Materials Incorporated common stock
at $16.5625 per share, the fair market value on the grant date. The
Predecessor Company Options granted for Company common stock vested 20%
on the date of grant and 20% on each anniversary of the grant date
thereafter. This option grant became 100% vested upon consummation of
the Merger Transaction and was converted into the Roll-Over Options
described herein.

(14) In September 2002, Mr. Franco was granted an option to purchase 21,256
shares of Holdings common stock as follows:

- Time-Based Options granted with the option to purchase 13,285 shares
of common stock at $10 per share;

- IRR Options granted with the option to purchase 7,971 shares of common
stock at $10 per share.

(15) On June 24, 2002, Mr. Hogan was granted Roll-Over Options, which consisted
entirely of options to purchase 15,000 shares of Holdings' preferred stock,
in exchange for his existing Predecessor Company Options. These options
were surrendered upon the sale of the AmerCable division.

(16) Includes director fees of $12,000, amounts accrued or allocated under a
defined contribution plan of $8,000 and the payment of income taxes of
$1,446 related to certain expenses included in 2001.

(17) Amounts shown for 2001 and 2000 were changed to reflect the
reclassification of payment of income taxes relating to relocation expenses
paid by the Company to All Other Compensation.

(18) Includes amounts accrued or allocated under a defined contribution plan of
$8,000 and the payment of income taxes of $1,341 related to certain
expenses included in 2001.

(19) Includes relocation expenses of $77,641 and the income taxes related to
relocation expenses of $58,048, both incurred by Mr. LaVanway and paid by
the Company under the terms of his employment agreement.

(20) Includes amounts accrued or allocated under a defined contribution plan.

(21) Includes relocation expenses of $64,317 and the income taxes related to
relocation expenses of $45,864, both incurred by Mr. Bloom and paid by the
Company under the terms of his employment agreement.

(22) Includes relocation expenses of $13,000 and the income taxes related to
relocation expenses of $12,247, both incurred by Mr. Franco and paid by the
Company under the terms of his employment agreement.

(23) Includes directors fees of $14,000 and amounts accrued or allocated under a
defined contribution plan of $2,467.

(24) Includes a severance payment of $622,000 and amounts accrued or allocated
under a defined contribution plan of $3,167.

COMPENSATION AND INCENTIVE PROGRAMS

INCENTIVE BONUS PLAN

The Company maintains an Incentive Bonus Plan providing for annual bonus
awards to certain key employees, including each of the executive officers of the
Company. Bonus amounts are based on growth in the estimated equity value of
Holdings. This plan is administered by the Company's board of directors. Mr.
Caporale, a member of the board of directors for the Company, is eligible for a
bonus award under this plan. Bonus payments under the Incentive Bonus Plan are
not guaranteed. Cash bonuses accrued in 2002, 2001 and 2000 to each of the
Company's executive officers are set forth in the Summary Compensation Table.

EMPLOYMENT AGREEMENTS

Mr. Caporale entered into an employment agreement with the Company
effective as of April 19, 2002. Under the terms of his employment agreement, Mr.
Caporale serves as the Company's President, Chief Executive Officer and a member
of the board of directors. Mr. Caporale's employment agreement provides for an
initial base salary of $500,000, an annual incentive bonus based on growth in
the estimated equity value of Holdings, certain perquisites and participation in
employee benefit programs made available to other senior

56

executives. The initial term of the employment agreement is three years. The
terms of the employment agreement provide that on the first anniversary of the
equity tender offer completion date and each successive anniversary thereof, the
term of the employment agreement will automatically extend by one year unless
the Company delivers to Mr. Caporale a notice not to extend the employment term.
The terms of the employment agreement provide that if Mr. Caporale's employment
is involuntarily terminated by the Company without cause or if Mr. Caporale
resigns for good reason, he will be entitled to severance equal to $1,000,000
per year, together with continued health and dental benefits, for two years,
plus a pro rata incentive bonus for the year of termination.

Mr. LaVanway entered into an employment agreement with the Company
effective as of April 19, 2002. Under the terms of his employment agreement, Mr.
LaVanway serves as the Company's Vice President -- Chief Financial Officer. Mr.
LaVanway's employment agreement provides for an initial base salary of $275,000
and an annual incentive bonus based on growth in the estimated equity value of
Holdings. The initial term of the employment agreement is two years. The terms
of the employment agreement provide that on the first anniversary of the equity
tender offer completion date and each successive anniversary thereof, the term
of the employment agreement will automatically extend by one year unless the
Company gives to Mr. LaVanway a notice not to extend the employment term. The
employment agreement provides that if Mr. LaVanway's employment is involuntarily
terminated by the Company without cause within two years following the equity
tender offer completion date, Mr. LaVanway is entitled to the following
severance compensation and benefits: (1) two times Mr. Lavanway's base pay at
the highest rate in effect for any period prior to his termination, (2) two
times his cash bonus (equal to the highest applicable cash bonus earned during
the three years immediately preceding the calendar year 2002, when the change in
control occurred), (3) if the termination of employment occurs after June 30 in
any year, a prorated bonus for that calendar year, (4) health, life insurance
and other employee welfare benefits substantially similar to those provided
prior to his termination, subject to reduction to the extent comparable benefits
are actually received by Mr. LaVanway from another employer during this period,
and (5) certain outplacement services. If Mr. LaVanway's employment is
involuntarily terminated by the Company without cause after the two-year period
following the equity tender offer completion date, he will be entitled to
severance equal to his annual base salary for twelve months or the remaining
employment term, whichever is longer, plus a pro rata bonus for the year of
termination.

Mr. Bloom entered into an employment agreement with the Company effective
as of April 19, 2002. Under the terms of his employment agreement, Mr. Bloom
serves as the President of Alside Siding and Window Company. Mr. Bloom's
employment agreement provides for an initial base salary of $220,000 and an
annual incentive bonus pursuant to a plan established by the Company. The
initial term of the employment agreement is two years. The terms of the
employment agreement provide that on the first anniversary of the equity tender
offer completion date and each successive anniversary thereof, the term of the
employment agreement will automatically extend by one year unless the Company
gives Mr. Bloom a notice not to extend the employment term. The employment
agreement provides that if Mr. Bloom's employment is involuntarily terminated by
the Company without cause, he will be entitled to severance equal to his annual
base salary for twelve months or the remaining employment term, whichever is
longer, plus a pro rata bonus for the year of termination.

Mr. Franco entered into an employment agreement with the Company effective
as of August 21, 2002. Under the terms of his employment agreement, Mr. Franco
serves as the President of Alside Supply Centers. Mr. Franco's employment
agreement provides for an initial base salary of $250,000 and an annual
incentive bonus based on growth in the estimated equity value of Holdings. The
initial term of the employment agreement is two years. The terms of the
employment agreement provide that on the first anniversary of the equity tender
offer completion date and each successive anniversary thereof, the term of the
employment agreement will automatically extend by one year unless the Company
gives Mr. Franco a notice not to extend the employment term. The employment
agreement provides that if Mr. Franco's employment is involuntarily terminated
by the Company without cause, he will be entitled to severance equal to his
annual base salary for twelve months or the remaining employment term, whichever
is longer, plus a pro rata bonus for the year of termination.

57

Each of the executive officers' employment agreements include
non-competition, non-solicitation, confidentiality and other restrictive
covenants.

SEVERANCE AGREEMENTS

On December 27, 2001, the Company had entered into severance agreements
with two of its executive officers, Robert F. Hogan, Jr. and Robert L. Winspear.
These severance agreements were only to become operative upon a "change in
control" of the Company. The severance agreements generally provided that if,
within a two-year period following a change in control, the Company terminated
the employment of the executive other than as a result of his death or
disability, or for cause, or if the executive terminated employment with the
Company under certain circumstances, the executive was entitled to receive
severance compensation. For Mr. Hogan and Mr. Winspear, this severance
compensation would be: (i) two times the executive's base pay at the highest
rate in effect for any period prior to his termination, (ii) two times the
executive's cash bonus (equal to the highest applicable cash bonus earned during
the three years immediately preceding the year in which the change in control
occurred) and (iii) if the termination of employment occurs after June 30 in any
year, a prorated bonus for that calendar year. In addition, health and life
insurance benefits substantially similar to those provided prior to termination
would continue for a two-year period, subject to reduction to the extent
comparable benefits were actually received by the executive from another
employer during this period. The Company's severance agreements with Mr. Hogan
and Mr. R. Winspear also provided that if any amount to be paid to the executive
under the severance agreement was determined to be non-deductible by reason of
Section 280G of the Internal Revenue Code, the severance benefits would be
reduced to the extent necessary so that Section 280G did not cause any amount to
be non-deductible to the Company. Upon the sale of the AmerCable division to
Wingate Partners III, L.P., Mr. Hogan relinquished his rights to severance from
the Company. Upon the consummation of the Merger Transaction, Mr. R. Winspear
was terminated from the employment of the Company and collected severance in
accordance with his severance agreement.

NON-COMPETITION AGREEMENT

In connection with the execution of the Merger Agreement, Mr. William W.
Winspear, who was the Company's Chairman, President and Chief Executive Officer
prior to the completion of the equity tender offer, entered into a
non-competition agreement with the Company. Mr. Winspear has agreed that he will
not directly or indirectly own, operate, manage, control, consult with, provide
services for, or in any manner engage in the building products/siding and
windows business or the electrical cable manufacturing business in competition
with the Company within the United States for a period of three years beginning
on the offer completion date ("Restricted Period"). Mr. Winspear has also agreed
that during the Restricted Period he will not directly or indirectly (1) induce
any of the Company's employees to leave its employ, (2) hire any person who is
the Company's employee, or (3) induce any customer, supplier, distributor or
other person having a significant business relationship with the Company to
cease doing business with the Company, or otherwise intentionally adversely
interfere with such a relationship. Mr. Winspear retired from the Company upon
completion of the equity tender offer.

NON-SOLICITATION AGREEMENT

In connection with the execution of the merger agreement, Mr. Robert L.
Winspear, who was the Company's Vice President and Chief Financial Officer prior
to the merger, entered into a non-solicitation agreement with the Company. Mr.
Robert Winspear has agreed that he will not, directly or indirectly, for a
period of two years following the completion of the equity tender offer: (1)
induce any of the Company's employees that was party to an employment or
severance agreement with the Company on March 16, 2002 to leave its employ, (2)
hire any such person, or (3) induce any customer, supplier, distributor or other
person having a significant business relationship with the Company to cease
doing business with the Company or otherwise intentionally adversely interfere
with such a relationship.

58

COMMITTEES OF THE BOARD OF DIRECTORS

There are currently no committees of the Company's board of directors. The
Company may elect to expand the size of its board of directors, create
committees for its board of directors and may elect the same board members and
committee members as that of Holdings.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The board of directors for for the Company did not have a compensation
committee in the year ended December 31, 2002. Mr. Caporale, who also serves as
President and Chief Executive Officer of the Company, participates in
deliberations with the board of directors of the Company concerning executive
officer compensation from time to time. In addition, Mr. Caporale is a director
of Holdings. The board of directors for Holdings did not have a compensation
committee during the year ended December 31, 2002. During 2002, no other
executive officer of the Company served as a member of the compensation
committee of another entity. For a more detailed discussion of relationships
between Holdings and the Company see "Certain Relationships and Related
Transactions."

DIRECTOR COMPENSATION

Prior to the Merger Transaction, directors, including directors who were
employees of the Company, received an annual retainer of $16,000 plus $3,500 for
each board of directors meeting and $1,000 for each committee meeting attended
in person or $1,000 for each such meeting in which participation was by
telephone. Directors were also reimbursed for reasonable travel expenses
incurred in attending board meetings and committee meetings. Subsequent to the
Merger Transaction, the Company currently reimburses its non-employee directors
for all out-of-pocket expenses incurred in the performance of their duties as
directors.

ASSOCIATED MATERIALS HOLDINGS INC. 2002 STOCK OPTION PLAN

In June 2002, Holdings adopted the Associated Materials Holdings Inc. 2002
Stock Option Plan (the "Plan"). The board of directors of Holdings administers
the Plan and selects eligible executives, directors, employees and consultants
of Holdings and its affiliates, including the Company, to receive options. The
board of directors of Holdings also will determine the number and type of shares
of stock covered by options granted under the Plan, the terms under which
options may be exercised, the exercise price of the options and other terms and
conditions of the options in accordance with the provisions of the Plan. An
option holder may pay the exercise price of an option by any legal manner that
the board of directors of Holdings permits. Option holders generally may not
transfer their options except in the event of death. If Holdings undergoes a
change in control, as defined in the Plan, all outstanding Time-Based Options
become immediately fully exercisable, while the IRR Options may become
immediately exercisable upon achievement of certain specified criteria. The
board of directors of Holdings may adjust outstanding options by substituting
stock or other securities of any successor or another party to the change in
control transaction, or cash out such outstanding options, in any such case,
generally based on the consideration received by its stockholders in the
transaction. Subject to particular limitations specified in the Plan, the board
of directors may amend or terminate the Plan. The Plan will terminate no later
than 10 years following its effective date; however, any options outstanding
under the option plan will remain outstanding in accordance with their terms.

Certain employees of the Company who held options immediately prior to the
Merger Transaction to purchase shares of the Predecessor's common stock have
converted such options into options to purchase shares of Holdings' common
stock, preferred stock or both. Certain employees of the Company may also
receive new options to purchase shares of common stock of Holdings. Mr. Caporale
may require Holdings to repurchase shares of stock of Holdings that have been
purchased through the exercise of certain options granted to him upon the
occurrence of specified events.

59

OPTION/SAR GRANTS IN 2002

The following table provides information regarding the grant of Holdings'
stock options to each of the Company's executive officers in 2002.

- ---------------

(1) Options granted in 2002 were granted in accordance with the Associated
Materials Holdings Inc. 2002 Stock Option Plan. The option grants include
the following:

- Options to purchase shares of Holdings common stock at the fair market
value on the date of grant, which will vest over time ("Time-Based
Options"). All Time-Based Options granted to executives during September
2002 were immediately vested 16% on the date of grant, representing 10%
vesting upon grant plus four months of vesting from May 2002 through
August 2002, with remaining vesting of 1.5% per month over 56 months;

- Options to purchase shares of Holdings common stock at the fair market
value on the date of grant, which will vest 100% on the eighth
anniversary from the date of grant, provided that the option vesting may
be accelerated upon the occurrence of a liquidity event and the
achievement of a specified internal rate of return ("IRR") on the
investment by Harvest Partners, Inc. in Holdings ("IRR Options"). A
liquidity event is defined as the occurrence of (a) a transaction or
series of transactions which results in the sale or transfer of (i) more
than a majority of the assets of Holdings and its subsidiaries or (ii) a
majority of the capital stock of Holdings or a widely distributed sale of
the common stock of Holdings in an underwritten public offering which
yields a minimum required amount of net proceeds to Holdings and (b) the
funds of Harvest Partners, Inc. receive a minimum required aggregate net
cash proceeds for its investment in Holdings ("Liquidity Event");

- Options to purchase shares of Holdings common stock and preferred stock
as a unit, comprised of one share of preferred stock and a specified
fraction of a share of common stock ("Roll-Over Options"). These options
were granted in exchange for the outstanding options to purchase
Associated Materials common stock ("Predecessor Company Options").
Roll-Over Options were granted at an exercise price, which preserves the
intrinsic value of the Predecessor Company Options. Each Roll-Over Option
grant was 100% vested as of the date of grant.

60

(2) The potential realizable value set forth for common stock in the table above
illustrates the value that would be realized upon exercise of the option
immediately prior to the expiration of its term, assuming the specified
compounded rates of appreciation on the common stock over the term of the
option. The use of the assumed 5% and 10% annual rates of stock price
appreciation are established by the Securities and Exchange Commission and
is not intended by the Company to forecast possible appreciation of the
price of its common stock. The potential realizable value for preferred
shares is $100 per share plus accumulated dividends of 8% per year for the
remaining life of the option. Preferred stock is not convertible into common
stock.

(3) In September 2002, Mr. Caporale was granted an option to purchase 205,892
shares of Holdings common stock and 46,415 shares of Holdings' preferred
stock as follows:

- Time-Based Options granted with the option to purchase 106,280 shares of
common stock at $10 per share;

- IRR Options granted with the option to purchase 63,768 shares of common
stock at $10 per share;

- Roll-Over Options granted with an option to purchase 23,221 shares of
preferred stock and 17,781 shares of common stock. Each option must be
exercised as a unit, with each unit comprising one share of preferred
stock and 0.7657 shares of common stock, at a unit exercise price of
$31.09.

- Roll-Over Options granted with an option to purchase 23,194 shares of
preferred stock and 18,063 shares of common stock. Each option must be
exercised as a unit, with each unit comprising one share of preferred
stock and 0.7788 shares of common stock, at a unit exercise price of
$29.91.

(4) In September 2002, Mr. LaVanway was granted an option to purchase 66,981
shares of Holdings common stock and 4,678 shares of Holdings' preferred
stock as follows:

- Time-Based Options granted with the option to purchase 39,855 shares of
common stock at $10 per share;

- IRR Options granted with the option to purchase 23,913 shares of common
stock at $10 per share;

- Roll-Over Options granted with an option to purchase 4,678 shares of
preferred stock and 3,213 shares of common stock. Each option must be
exercised as a unit, with each unit comprising one share of preferred
stock and 0.686832 shares of common stock, at a unit exercise price of
$38.21.

(5) In September 2002, Mr. Bloom was granted an option to purchase 56,483 shares
of Holdings common stock and 4,665 shares of Holdings' preferred stock as
follows:

- Time-Based Options granted with the option to purchase 33,212 shares of
common stock at $10 per share;

- IRR Options granted with the option to purchase 19,927 shares of common
stock at $10 per share;

- Roll-Over Options granted with an option to purchase 4,665 shares of
preferred stock and 3,344 shares of common stock. Each option must be
exercised as a unit, with each unit comprising one share of preferred
stock and 0.716827 shares of common stock, at a unit exercise price of
$35.50.

(6) In September 2002, Mr. Franco was granted an option to purchase 21,256
shares of Holdings common stock as follows:

- Time-Based Options granted with the option to purchase 13,285 shares of
common stock at $10 per share;

- IRR Options granted with the option to purchase 7,971 shares of common
stock at $10 per share.

61

AGGREGATED OPTION/SAR EXERCISES IN 2002
AND DECEMBER 31, 2002 OPTION/SAR VALUES

The following table provides information regarding the exercise of
Holdings' or the predecessor Company's options during 2002 and unexercised
options held as of December 31, 2002 for each of the Company's executive
officers.

- ---------------

(1) The Company has not granted stock appreciation rights.

(2) The per share common equity value on December 31, 2002 was $18.29 per share,
which was based on a calculation of common equity value which includes
Adjusted EBITDA, an estimated EBITDA multiple and December 31, 2002 cash and
debt of the Company. The value of unexercised common options was calculated
by multiplying the per share common stock value by the number of shares of
common stock issuable upon exercise of these options, less exercise price.
Preferred share value was based on a $100 per share value, plus accumulated
preferred stock dividends of 8% since the closing of the Merger Transaction,
less the exercise price of these options.

(3) Options granted in 2002 were granted in accordance with the Associated
Materials Holdings, Inc. 2002 Stock Option Plan. The option grants include
the following:

- Options to purchase shares of Holdings common stock at the fair market
value on the date of grant, which will vest over time ("Time-Based
Options"). All Time-Based Options granted to executives during
September 2002 were immediately vested 16% on the date of grant,
representing 10% vesting upon grant plus four months of vesting from
May 2002 through August 2002, with remaining vesting of 1.5% per month
over 56 months;

- Options to purchase shares of Holdings common stock at the fair market
value on the date of grant, which will vest 100% on the eighth
anniversary from the date of grant, provided that the option vesting
may be accelerated upon the occurrence of a liquidity event and the
achievement of a specified internal rate of return ("IRR") on the
investment by Harvest Partners, Inc. in

62

Holdings ("IRR Options"). A liquidity event is defined as the
occurrence of (a) a transaction or series of transactions which
results in the sale or transfer of (i) more than a majority of the
assets of Holdings and its subsidiaries or (ii) a majority of the
capital stock of Holdings or a widely distributed sale of the common
stock of Holdings in an underwritten public offering which yields a
minimum required amount of net proceeds to Holdings and (b) the funds
of Harvest Partners, Inc. receive a minimum required aggregate net
cash proceeds for its investment in Holdings ("Liquidity Event");

- Options to purchase shares of Holdings common stock and preferred
stock as a unit, comprised of one share of preferred stock and a
specified fraction of a share of common stock ("Roll-Over Options").
These options were granted in exchange for the outstanding options to
purchase Associated Materials Incorporated common stock ("Predecessor
Company Options"). Roll-Over Options were granted at an exercise
price, which preserves the intrinsic value of the Predecessor Company
Options. Each Roll-Over Option grant was 100% vested as of the date of
grant.

(4) In September 2002, Mr. Caporale was granted an option to purchase 205,892
shares of Holdings common stock and 55,758 shares of Holdings' preferred
stock as follows:

- Time-Based Options granted with the option to purchase 106,280 shares
of common stock at $10 per share;

- IRR Options granted with the option to purchase 63,768 shares of
common stock at $10 per share;

- Roll-Over Options granted with an option to purchase 23,221 shares of
preferred stock and 17,781 shares of common stock. Each option must be
exercised as a unit, with each unit comprising one share of preferred
stock and 0.7657 shares of common stock, at a unit exercise price of
$31.09.

- Roll-Over Options granted with an option to purchase 23,194 shares of
preferred stock and 18,063 shares of common stock. Each option must be
exercised as a unit, with each unit comprising one share of preferred
stock and 0.7788 shares of common stock, at a unit exercise price of
$29.91.

(5) In September 2002, Mr. LaVanway was granted an option to purchase 66,981
shares of Holdings common stock and 4,678 shares of Holdings' preferred
stock as follows:

- Time-Based Options granted with the option to purchase 39,855 shares
of common stock at $10 per share;

- IRR Options granted with the option to purchase 23,913 shares of
common stock at $10 per share;

- Roll-Over Options granted with an option to purchase 4,678 shares of
preferred stock and 3,213 shares of common stock. Each option must be
exercised as a unit, with each unit comprising one share of preferred
stock and 0.686832 shares of common stock, at a unit exercise price of
$38.21.

(6) In September 2002, Mr. Bloom was granted an option to purchase 56,483 shares
of Holdings common stock and 4,665 shares of Holdings' preferred stock as
follows:

- Time-Based Options granted with the option to purchase 33,212 shares
of common stock at $10 per share;

- IRR Options granted with the option to purchase 19,927 shares of
common stock at $10 per share;

- Roll-Over Options granted with an option to purchase 4,665 shares of
preferred stock and 3,344 shares of common stock. Each option must be
exercised as a unit, with each unit comprising one share of preferred
stock and 0.716827 shares of common stock, at a unit exercise price of
$35.50.

63

(7) In September 2002, Mr. Franco was granted an option to purchase 21,256
shares of Holdings common stock as follows:

- Time-Based Options granted with the option to purchase 13,285 shares
of common stock at $10 per share;

- IRR Options granted with the option to purchase 7,971 shares of common
stock at $10 per share.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Company is a wholly owned subsidiary of Holdings. The capital stock of
Holdings consists of preferred stock, par value $0.01 per share (the "preferred
stock"), class A common stock, par value $0.01 per share (the "class A common
stock") and class B non-voting common stock, par value $0.01 per share ("class B
common stock" and collectively with the class A common stock, the "common
stock"). The preferred stock is senior in right of payment to the common stock.
Holders of preferred stock have no voting rights except as required by law.
Harvest Funds (as defined by footnote 3 below) owns approximately 30.7% of the
voting stock of Holdings and is party to an amended and restated stockholders
agreement dated as of April 19, 2002, regarding the ownership and voting of the
common stock of Holdings. By virtue of such stock ownership and stockholders
agreement, Harvest Funds will have the ability to designate a majority of the
board of directors of Holdings and to control actions to be taken by the
Company's stockholder and/or board of directors, including amendments to the
Company's certificate of incorporation and by-laws and approval of significant
corporate transactions, including mergers and sales of substantially all of the
Company's assets.

The following table sets forth certain information as of February 28, 2003
regarding the beneficial ownership of:

- Harvest Funds in Holdings;

- the directors of Holdings

- the directors and named executive officers of the Company; and

- all directors and executive officers of the Company and directors of
Holdings as a group.

The Company determined beneficial ownership in accordance with the rules of
the Commission, which generally require inclusion of shares over which a person
has voting or investment power. Share ownership in each case includes shares
that may be acquired within sixty days through the exercise of any options.
Except as otherwise indicated, the address for each of the named individuals is
c/o Associated Materials Incorporated, 280 Park Avenue, New York, New York
10017.

64

- ---------------

* Less than 1%.

(1) Holdings is controlled by Harvest Funds, by reason of their collective
right to designate a majority of the members of the board of directors of
Holdings. Harvest Funds are Harvest Partners III, L.P., Harvest Partners
III Beteilingungsgesellschaft Burgerlichen Rechts (mit
Haftungsbeschrankung) ("Harvest Partners III, GbR"), Harvest Partners IV,
L.P. and Harvest Partners IV GmbH & Co. KG ("Harvest Partners IV KG").
Harvest Associates III, L.L.C., which has six members, is the general
partner of Harvest Partners III, L.P. and Harvest Partners III, GbR.
Harvest Associates IV, L.L.C., which has six members, is the general
partner of Harvest Partners IV, L.P. and Harvest Partners IV KG. Harvest
Partners, Inc. provides management services for Harvest Associates III,
L.L.C. in connection with Harvest Partners III, L.P. and Harvest Partners
III, GbR and for Harvest Associates IV, L.L.C. in connection with Harvest
Partners IV, L.P. and Harvest Partners IV KG.

(2) Includes 131,978 shares of common stock and 118,780 shares of preferred
stock owned by Harvest Partners III, L.P. and 18,022 shares of common stock
and 16,220 shares of preferred stock owned by Harvest Partners III, GbR for
each of which Harvest Associates III, L.L.C. is the general partner.
Harvest Funds may hold two classes of preferred stock or notes convertible
into preferred stock. Harvest Associates III, L.L.C. has six members, each
of whom has equal voting rights and who may be deemed to share beneficial
ownership of the shares of common stock of Holdings. The six members are
Ira Kleinman, Harvey Mallement, Stephen Eisenstein, Harvey Wertheim,
William Kane and Thomas Arenz. Mr. Kleinman and Mr. Arenz are on the
Company's board of directors. Each of Messrs. Kleinman, Mallement,
Eisenstein, Wertheim, Kane and Arenz disclaims beneficial ownership of the
shares of common stock owned by Harvest Partners III, L.P. and Harvest
Partners III GbR.

(3) Includes 273,000 shares of common stock and 245,700 shares of common stock
owned by Harvest Partners IV, L.P. and 77,000 shares of common stock and
69,300 shares of preferred stock owned by Harvest Partners IV GmbH & Co. KG
or Harvest Partners IV KG, for each of which Harvest Associates IV, L.L.C.
is the general partner. Harvest Associates IV, L.L.C. has six members, each
of whom has equal voting rights and who may be deemed to share beneficial
ownership of the shares of common stock of Holdings beneficially owned by
it. The six members are Ira Kleinman, Harvey Mallement, Stephen Eisenstein,
Harvey Wertheim, William Kane and Thomas Arenz. Mr. Kleinman and Mr. Arenz
are on the Company's board of directors. Each of Messrs. Kleinman,
Mallement, Eisenstein, Wertheim, Kane and Arenz disclaims beneficial
ownership of the shares of common stock owned by Harvest Partners IV, L.P.,
Harvest Partners IV KG. Harvest Partners III, L.P., Harvest Partners III
GbR, Harvest Partners IV, L.P. and Harvest Partners IV KG are collectively
referred to as the "Harvest Funds." The address of the named entities is
280 Park Avenue, 33rd Floor, New York, New York 10017.

(4) Includes shares of class A common stock and preferred stock owned by
Harvest Partners III, L.P. and shares of class A common stock and preferred
stock owned by Harvest Partners III GbR, for each of which Harvest
Associates III, L.L.C. is the general partner. Also includes shares of
class A common stock and preferred stock owned by Harvest Partners IV, L.P.
and Harvest Partners IV KG, for each of which Harvest Partners IV, L.L.C.
is the general partner. Mr. Kleinman is a member of Harvest Associates,
III, L.L.C. and Harvest Partners IV, L.L.C. and may be deemed to share
beneficial ownership of the shares of common stock of Holdings beneficially
owned by them. Mr. Kleinman disclaims beneficial ownership of common shares
owned by Harvest Partners III, L.P., Harvest Partners III GbR, Harvest
Partners IV, L.P. and Harvest Partners IV KG.

(5) Includes options to purchase 65,602 shares of class A common stock and
46,415 shares of preferred stock. This reflects the conversion of options
held by Mr. Caporale to purchase shares of common stock of the Predecessor
prior to the merger into options to purchase shares of common and preferred
stock of Holdings.

(6) Includes options to purchase 14,372 shares of class A common stock and
4,678 shares of preferred stock. This reflects the conversion of options
held by Mr. LaVanway to purchase shares of common stock of the Predecessor
prior to the merger into options to purchase shares of common and preferred
stock of Holdings.

65

(7) Includes shares of class A common stock and preferred stock owned by
Harvest Partners III, L.P. and shares of class A common stock and preferred
stock owned by Harvest Partners III GbR, for each of which Harvest
Associates III, L.L.C. is the general partner. Also includes shares of
class A common stock and preferred stock owned by Harvest Partners IV, L.P.
and Harvest Partners IV KG, for each of which Harvest Partners IV, L.L.C.
is the general partner. Mr. Arenz is a member of Harvest Associates, III,
L.L.C. and Harvest Partners IV, L.L.C. and may be deemed to share
beneficial ownership of the shares of common stock of Holdings beneficially
owned by them. Mr. Arenz disclaims beneficial ownership of common shares
owned by Harvest Partners III, L.P., Harvest Partners III GbR, Harvest
Partners IV, L.P. and Harvest Partners IV KG.

(8) Mr. Angrist is a director of Holdings and the Company.

(9) Includes options to purchase 12,643 shares of class A common stock and
4,665 shares of preferred stock. This reflects the conversion of options
held by Mr. Bloom to purchase shares of common stock of the Predecessor
prior to the merger into options to purchase shares of common and preferred
stock of Holdings.

(10) Includes options to purchase 3,720 shares of class A common stock.

(11) Includes 1,000 shares of common stock and 900 shares of preferred stock
owned through a personal holding company in the name of 3755428 Canada Inc,
a Canadian corporation. Mr. Vollmershausen is the sole shareholder of this
corporation. Mr. Vollmershausen was also granted options to purchase 893
shares of class A common stock.

(12) Mr. Hayes is a director for Holdings, representing four of Holdings
stockholders, Weston Presidio Capital IV, L.P. ("Fund IV"), Weston Presidio
Capital III, L.P. ("Fund III"), WPC Entrepreneur Fund, L.P. ("WP EF") and
WPC Entrepreneur Fund II, L.P. ("WP EF II"). Fund IV, Fund III, WP EF and
WPEF II are collectively referred to as the "Weston Funds." Mr. Hayes'
election as a director is prescribed by the Holdings stockholders'
agreement. The shares included in the table above includes shares held by
the Weston Funds as follows: Fund III holds 65,992 shares of Class A common
stock and 59,393 shares of preferred stock; Fund IV holds 156,986 shares of
Class A Common Stock and 141,288 shares of preferred stock; WP EF holds
3,256 shares of class A common stock and 2,930 shares of preferred stock;
and WP EF II holds 2,485 shares of class A common stock and 2,236 shares of
preferred stock.

Mr. Hayes is a member or partner, as the case may be, of the general
partner of the Weston Funds. Mr. Hayes disclaims beneficial ownership of
the shares held by the Weston Funds, except to the extent of his pecuniary
interest therein.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

THE MERGER

THE MERGER AGREEMENT

On March 16, 2002, the Company, Simon Acquisition Corp. and Holdings
(formerly known as Harvest/ AMI Holdings Inc.) entered into an agreement and
plan of merger pursuant to which Simon Acquisition Corp. commenced a tender
offer to purchase all of the issued and outstanding shares of common stock of
the Predecessor, at a price of $50.00 per share, net to the seller in cash.
Following the completion of the merger, Simon Acquisition Corp. merged into the
Company and the Company continued as the surviving corporation.

The Merger Agreement contained customary representations and warranties by
the Company to Simon Acquisition Corp. and Holdings, as well as customary
representations and warranties by Simon Acquisition Corp. and Holdings to the
Company.

The Merger Agreement provides that the Company will indemnify and hold
harmless each person who is now or at any time has been a director or officer of
the Company, and their heirs and personal representatives, against liabilities
and expenses incurred in connection with any proceeding arising out of or
pertaining to any action or omission occurring prior to the effective time of
the merger.

66

Pursuant to the merger agreement, promptly following the commencement of
the equity tender offer, the Company commenced a tender offer for its then
outstanding 9 1/4% notes and a solicitation of consents from holders of the
existing notes to amend certain terms of the related indenture to facilitate the
financings contemplated by the merger agreement.

Following the merger of Simon Acquisition Corp. with the Company on April
19, 2002, the Company became a wholly owned subsidiary of Holdings. As a result,
Holdings has the right to appoint all of the Company's directors.

TENDER AND VOTING AGREEMENT

In connection with the execution of the merger agreement, Mr. William W.
Winspear, who, at the time, was the Chairman of the Board, President and Chief
Executive Officer of the Company and who beneficially owned at the time of the
merger agreement 3,097,242 shares of common stock of the Predecessor,
representing approximately 42% of the outstanding shares of common stock of the
Company on a fully diluted basis, entered into a tender and voting agreement
with Simon Acquisition Corp. and Holdings. Mr. Winspear agreed to validly tender
all of his shares and, until the termination of the tender and voting agreement,
to vote or cause to be voted all of the shares which Mr. Winspear has the right
to vote in favor of the merger and the approval of the terms of the merger
agreement and in favor of each of the other transactions contemplated by the
merger agreement, and against any other action that could adversely affect the
transactions contemplated by the merger agreement. Mr. Winspear made customary
representations and warranties relating to ownership of shares of the Company,
power and authority, execution and delivery, no conflicts, no finder's fees, and
reliance by Holdings.

THE STOCKHOLDERS AGREEMENT

The stockholders of Holdings have entered into a stockholders agreement,
which governs certain relationships among, and contains certain rights and
obligations of, such stockholders. The stockholders agreement, among other
things, (1) limits the ability of the stockholders to transfer their shares in
Holdings except in certain permitted transfers as defined therein; (2) provides
for certain tag-along obligations and certain bring-along rights; (3) provides
for certain registration rights; and (4) provides for certain preemptive rights.

The stockholders agreement provides that the parties thereto must vote
their shares to elect a board of directors consisting of at least four persons
designated by the stockholders who are affiliates of Harvest Partners, Inc., our
chief executive officer, a person designated by PPM America Private Equity Fund,
LP and a person designated by Weston Presidio Service Company, LLC. Pursuant to
the stockholders agreement, Harvest Partners, Inc. will have the power to
control the amendment of the certificate of incorporation of Holdings, excluding
changes that would disproportionately and adversely affect the rights of any
stockholder (other than stockholders who are affiliates of Harvest Partners,
Inc.). In addition, all stockholders of Holdings have granted the Harvest funds
the right, in certain circumstances, to require such stockholders to sell their
shares in Holdings in a sale of substantially all of the assets of Holdings or a
majority of the common stock of Holdings or the Company, to any party other than
an affiliate of Harvest Partners, Inc.

Pursuant to the stockholders agreement, the stockholders (other than
stockholders that are affiliates of Harvest Partners, Inc.) are granted
"tag-along" rights under which such stockholders have the option of
participating in certain sales of capital stock of Holdings by the stockholders
who are affiliates of Harvest Partners, Inc. at the same price and other terms
as such affiliates.

Pursuant to the stockholders agreement, the stockholders are entitled to
certain rights with respect to registration under the Securities Act of certain
shares held by them including, in the case of affiliates of Harvest Partners,
Inc., certain demand registration rights. The stockholders agreement also
provides for certain preemptive rights. Subject to certain conditions, the
preemptive rights grant the right to purchase shares in a share issuance of
Holdings.

The stockholders agreement provides that it shall terminate, except with
respect to the registration rights of the stockholders, upon the closing of an
underwritten registered public offering of common stock of Holdings.

67

MANAGEMENT AGREEMENT

The Company entered into a management agreement with Harvest Partners.
Under the management agreement, Harvest Partners received a one-time fee of $5.0
million in connection with structuring and implementing the acquisition of the
Company. In addition, Harvest Partners provides the Company with financial
advisory and strategic planning services. For these services, Harvest Partners
receives an annual fee of $0.8 million, payable on a quarterly basis in advance,
which began on the date of execution of this agreement. The fee will be adjusted
on a yearly basis in accordance with the U.S. Consumer Price Index. The
agreement also provides that Harvest Partners will receive transaction fees in
connection with financings, acquisitions and divestitures of the Company. Such
fees will be a percentage of the applicable transaction. The Company will
reimburse Harvest Partners for all out-of-pocket expenses. The management
agreement has a term of five years from its date of execution and will
automatically be renewed on a yearly basis, beginning in 2004, unless otherwise
specified by Harvest Partners.

AMERCABLE

On June 24, 2002, the Company completed the sale of its AmerCable division
to AmerCable Incorporated, a newly-formed entity controlled by members of
AmerCable management and Wingate Partners III, L.P., for net proceeds of
approximately $28.3 million in cash and the assumption of certain liabilities
pursuant to an asset purchase agreement dated as of the same date. Robert F.
Hogan, Jr., president and chief executive officer of the AmerCable division and
vice president of the Company prior to the sale, is the president, chief
executive officer and chairman of the board of AmerCable Incorporated.

ITEM 14. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

The Company's Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days before the filing of this annual
report (the "Evaluation Date"). Based on their evaluation as of the
Evaluation Date, the Chief Executive Officer and Chief Financial Officer
have concluded that the Company's disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15d-14(c) of the Exchange Act) are effective
to ensure that information required to be disclosed by the Company in
reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within required time periods.

(b) Changes in internal controls.

The Company maintains a system of internal accounting controls that
are designed to provide reasonable assurance that the Company's books and
records accurately reflect the Company's transactions and that the
Company's established policies and procedures are followed. There were no
significant changes to the Company's internal controls or other factors
that could significantly affect its internal controls subsequent to their
evaluation as of the Evaluation Date, including any corrective actions with
regard to significant deficiencies and material weaknesses.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

The following documents are included in this report.

(A)(1) FINANCIAL STATEMENTS

See Index to Financial Statements at Item 8 on Page 29 of this report.

(A)(2) FINANCIAL STATEMENT SCHEDULES

All financial statement schedules have been omitted due to the absence of
conditions under which they are required or because the information required is
included in the financial statements or the notes thereto.

(B) REPORTS ON FORM 8-K

The Company did not file any Current Reports on Form 8-K during the quarter
ended December 31, 2002.

68

(C) EXHIBITS

- ---------------

* Certain provisions of this exhibit have been omitted pursuant to a request
for confidential treatment of information in accordance with Rule 406 of the
Securities Act.

** This document is being furnished in accordance with SEC Release Nos. 33-8212
and 34-47551.

71

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

ASSOCIATED MATERIALS INCORPORATED

By: /s/ MICHAEL CAPORALE, JR.
------------------------------------
Michael Caporale, Jr.
President, Chief Executive Officer
and Director
(Principal Executive Officer)

By: /s/ D. KEITH LAVANWAY
------------------------------------
D. Keith LaVanway
Vice President, Chief Financial
Officer, Treasurer and Secretary
(Principal Financial Officer and
Principal
Accounting Officer)

Date: March 27, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

72

CERTIFICATION

I, Michael Caporale, Jr., President, Chief Executive Officer and Director,
certify that:

1. I have reviewed this annual report on Form 10-K of Associated
Materials Incorporated;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;

4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing equivalent functions):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

By: /s/ MICHAEL CAPORALE, JR.
------------------------------------
Michael Caporale, Jr.
President, Chief Executive Officer
and Director
(Principal Executive Officer)

73

CERTIFICATION

I, D. Keith LaVanway, Vice President, Chief Financial Officer, Treasurer
and Secretary, certify that:

1. I have reviewed this annual report on Form 10-K of Associated
Materials Incorporated;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;

4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing equivalent functions):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

By: /s/ D. KEITH LAVANWAY
------------------------------------
D. Keith LaVanway
Vice President, Chief Financial
Officer,
Treasurer and Secretary
(Principal Financial Officer and
Principal Accounting Officer)

74

EXHIBIT INDEX