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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

ý

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

 

 

 

 

For the quarterly period ended June 27, 2003

 

 

 

OR

 

 

 

o

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 333-05978

 

EURAMAX INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

58-2502320

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

5445 Triangle Parkway, Suite 350,
Norcross, Georgia

 

30092

(Address of principal executive offices)

 

(Zip Code)

 

 

 

Registrant’s telephone number, including area code 770-449-7066

 

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.

 

ý Yes  o No

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Rule 12b-2).

 

o Yes  ý No

 

As of August 11, 2003, Registrant had outstanding 492,495.79 shares of Class A common stock and no shares of Class B common stock.

 

 



 

Part I - Financial Information

 

Item 1.  Financial Statements

 

Euramax International, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

(Thousands of U.S. Dollars)

(Unaudited)

 

 

 

Predecessor

 

Successor

 

Predecessor

 

Successor

 

 

 

Three months
ended
June 28,
2002

 

Two months
ended
May 23,
2003

 

One month
ended
June 27,
2003

 

Six months
ended
June 28,
2002

 

Five months
ended
May 23,
2003

 

One month
ended
June 27,
2003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

171,668

 

$

114,457

 

$

77,194

 

$

304,628

 

$

260,615

 

$

77,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

132,859

 

90,854

 

63,904

 

239,117

 

208,420

 

63,904

 

Selling and general

 

16,400

 

10,563

 

8,159

 

30,949

 

26,153

 

8,159

 

Depreciation and amortization

 

3,025

 

2,531

 

1,571

 

6,449

 

6,276

 

1,571

 

Earnings from operations

 

19,384

 

10,509

 

3,560

 

28,113

 

19,766

 

3,560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(5,872

)

(3,678

)

(1,843

)

(11,233

)

(9,126

)

(1,843

)

Other income (expense), net

 

624

 

292

 

(26

)

542

 

506

 

(26

)

Earnings before income taxes

 

14,136

 

7,123

 

1,691

 

17,422

 

11,146

 

1,691

 

Provision for income taxes

 

5,576

 

2,673

 

562

 

6,782

 

4,254

 

562

 

Net earnings

 

$

8,560

 

$

4,450

 

$

1,129

 

$

10,640

 

$

6,892

 

$

1,129

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2



 

Euramax International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Thousands of U.S. Dollars)

(Unaudited)

 

 

 

Predecessor
December 27,
2002

 

Successor
June 27,
2003

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and equivalents

 

$

11,646

 

$

10,918

 

Accounts receivable, net

 

88,508

 

120,325

 

Inventories

 

78,480

 

90,374

 

Other current assets

 

5,081

 

8,438

 

Total current assets

 

183,715

 

230,055

 

Property, plant and equipment, net

 

112,037

 

129,582

 

Goodwill, net

 

110,799

 

160,406

 

Deferred income taxes

 

4,975

 

4,831

 

Other assets

 

4,914

 

5,740

 

 

 

$

416,440

 

$

530,614

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Cash overdrafts

 

$

1,880

 

$

1,487

 

Accounts payable

 

57,104

 

74,111

 

Accrued expenses and other current liabilities

 

34,251

 

47,039

 

Total current liabilities

 

93,235

 

122,637

 

Long-term debt, less current maturities

 

196,972

 

208,020

 

Deferred income taxes

 

19,421

 

23,560

 

Other liabilities

 

20,593

 

27,731

 

Total liabilities

 

330,221

 

381,948

 

Shareholders’equity:

 

 

 

 

 

Common stock

 

500

 

500

 

Additional paid-in capital

 

53,220

 

155,495

 

Treasury stock

 

(2,056

)

(1,964

)

Restricted stock

 

 

(3,764

)

Retained earnings

 

44,439

 

1,129

 

Accumulated other comprehensive loss

 

(9,884

)

(2,730

)

Total shareholders’ equity

 

86,219

 

148,666

 

 

 

$

416,440

 

$

530,614

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3



 

Euramax International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Thousands of U.S. Dollars)

(Unaudited)

 

 

 

Predecessor

 

Successor

 

 

 

Six months
ended
June 28,
2002

 

Five months
ended
May 23,
2003

 

One month
ended
June 27,
2003

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

549

 

$

(12,045

)

$

11,924

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Proceeds from sales of assets

 

24

 

35

 

44

 

Capital expenditures

 

(2,566

)

(4,944

)

(789

)

Net cash used in investing activities

 

(2,542

)

(4,909

)

(745

)

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Net borrowings (repayments) on revolving credit facility

 

40,004

 

18,264

 

(11,153

)

Repayment of long-term debt

 

(38,951

)

 

 

Changes in cash overdrafts

 

1,229

 

2,603

 

(2,995

)

Proceeds from settlement of currency swap

 

2,790

 

 

 

Issuance of common stock from shares held in treasury

 

 

 

353

 

Purchase of treasury stock

 

 

(2,556

)

(80

)

Deferred financing fees

 

(1,495

)

(116

)

(242

)

Net cash provided by (used in) financing activities

 

3,577

 

18,195

 

(14,117

)

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

1,881

 

778

 

191

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and equivalents

 

3,465

 

2,019

 

(2,747

)

Cash and equivalents at beginning of period

 

5,897

 

11,646

 

13,665

 

Cash and equivalents at end of period

 

$

9,362

 

$

13,665

 

$

10,918

 

 

4



 

Euramax International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Thousands of U.S. Dollars)

(Unaudited)

 

1.  Basis of Presentation:

 

For purposes of this report the “Company” refers to Euramax International, Inc. (“Euramax”) and Subsidiaries, collectively.

 

The Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of the management of the Company, these statements include all adjustments necessary for a fair presentation of the results of all interim periods reported herein. All adjustments are of a normal recurring nature, except for the 2003 Shareholder Transaction described in Note 2, unless otherwise disclosed. Management believes that the disclosures made are adequate for a fair presentation of results of operations, financial position and cash flows. These Condensed Consolidated Financial Statements should be read in conjunction with the year-end Consolidated Financial Statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 27, 2002. The Company's sales are somewhat seasonal, with the second and third quarters typically accounting for the highest sales volumes. Operating results for the period ended June 27, 2003, are not necessarily indicative of future results that may be expected for the year ending December 26, 2003.

 

Per share data has not been presented since such data provides no useful information, as the shares of the Company are closely held.

 

Certain 2002 amounts have been reclassified to conform to current year presentation.

 

2.  2003 Shareholder Transaction

 

On April 15, 2003, Citigroup Venture Capital Equity Partners, L.P. (“CVCEP”) and Citicorp Venture Capital Ltd. (“CVC”), entered into a definitive purchase agreement with CVC European Equity Partners, L.P. and CVC European Equity Partners (Jersey), L.P. (collectively “CVC Europe”), BNP Paribas, independent directors and certain members of management to purchase, for approximately $106.0 million, all of the shares of the Company held by CVC Europe and BNP Paribas, and a portion of the shares held by independent directors and management (“2003 Shareholder Transaction”). The 2003 Shareholder Transaction was completed on June 12, 2003, with CVCEP purchasing 265,762.48 shares of the Company's Class A Common Stock. After the completion of this transaction CVCEP and CVC collectively owned approximately 88.5% of the issued and outstanding shares of the Company, with management of CVCEP and directors and management of the Company holding the remaining shares. Prior to the 2003 Shareholder Transaction, CVC owned approximately 34.5% of the issued and outstanding shares of the Company. This substantial change in ownership arising from CVCEP's acquisition of the Company's stock, together with the Company's subsequent issuance of senior subordinated notes (see Note 12), required that the purchase price paid in excess of the book value of the Company's equity acquired be allocated under the purchase method of accounting to the assets and liabilities of the Company based upon a percentage of their fair values proportional to the percentage of the ownership change. The allocation was based upon preliminary estimates by management of the fair market values of identifiable assets and liabilities, with the remainder allocated to goodwill. The liabilities assumed included approximately $3.4 million of fees related to the transaction, which were paid by the Company on behalf of its shareholders. The Company is currently completing valuations of its assets. The final allocation of the purchase price, which is subject to revision when valuations are completed, may materially differ from the preliminary estimates. The goodwill generated from this transaction is not deductible for income tax purposes. The purchase price has been allocated as follows:

 

5



 

Purchase price

 

$

105,981

 

Less: Company equity acquired

 

53,628

 

Increase in basis

 

$

52,353

 

 

 

 

 

Allocation of increase in basis

 

 

 

Record fair value of inventories

 

$

4,000

 

Record fair value of property, plant and equipment

 

16,000

 

Record fair value of senior subordinated notes

 

(2,040

)

Record fair value of pension liability

 

(6,987

)

Record fair value of deferred financing fees

 

(1,000

)

Record fair value of patent (15 year life)

 

2,500

 

Transaction fees

 

(3,350

)

Record deferred income taxes for effect of step-up in basis of assets

 

(4,864

)

Increase to goodwill, net

 

48,094

 

 

 

$

52,353

 

 

The following unaudited pro-forma information presents the results of operations of the Company as if the 2003 Shareholder Transaction had occurred as of the beginning of the period presented. The pro-forma information is not necessarily indicative of what would have occurred had the acquisitions been made as of such period, nor is it indicative of future results of operations. The pro-forma amounts give effect to appropriate adjustments for the fair value of the assets acquired, liabilities assumed, amortization of property, plant and equipment, intangibles and restricted stock, incurrence of the advisory fees owed to CVC Management and income taxes.

 

 

 

Three months ended

 

Two months ended

 

One month ended

 

Six months ended

 

Five months ended

 

One month ended

 

 

 

June 28, 2002

 

May 23, 2003

 

June 27, 2003

 

June 28, 2002

 

May 23, 2003

 

June 27, 2003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro-forma net sales

 

$

171,668

 

$

114,457

 

$

77,194

 

$

304,628

 

$

260,615

 

$

77,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro-forma net earnings

 

8,101

 

4,157

 

990

 

9,785

 

6,197

 

990

 

 

3.  Summary of Significant Accounting Policies:

 

For information regarding significant accounting policies, see Note 2 to the Consolidated Financial Statements of the Company for the year ended December 27, 2002, set forth in the Company’s Annual Report on Form 10-K.

 

Goodwill

Goodwill increased $48.1 million from December 27, 2002 to June 27, 2003 as a result of applying the purchase method of accounting to the 2003 Shareholder Transaction, as described in Note 2. The remaining change in goodwill is a result of the change in foreign exchange rates used in converting the local currency goodwill balance into U.S. Dollars.

 

Stock Based Compensation

As permitted by SFAS No. 123, “Accounting for Stock-Based Compensation”, the Company has elected to apply APB No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for stock options issued under its equity compensation plan (see Note 10). Had compensation expense related to these stock options been determined based upon the fair value method under SFAS No. 123, net income would have been impacted as follows:

 

6



 

 

 

 

Predecessor

 

Successor

 

Predecessor

 

Successor

 

 

 

Three months
ended
June 28,
2002

 

Two months
ended
May 23,
2003

 

One month
ended
June 27,
2003

 

Six months
ended
June 28,
2002

 

Five months
ended
May 23,
2003

 

One month
ended
June 27,
2003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income, as reported

 

$

8,560

 

$

4,450

 

$

1,129

 

$

10,640

 

$

6,892

 

$

1,129

 

Add: Stock-based employee compensation cost included in reported net income, net of related tax effects

 

 

 

143

 

 

 

143

 

Less: Total stock-based employee compensation expense determined under fair value method for all awards, not of related tax effects

 

 

 

(1,071

)

 

 

(1,071

)

Pro forma net income

 

$

8,560

 

$

4,450

 

$

201

 

$

10,640

 

$

6,892

 

$

201

 

 

The fair value of each option is estimated using the Black-Scholes option-pricing model using a risk free interest rate of 3.20%, an expected option life of 5 years, no volatility and no dividends.

 

Recent Accounting Pronouncements

In April 2002, the FASB issued Statement No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (“SFAS No. 145”). Among other items, SFAS No. 145 updates and clarifies existing accounting pronouncements related to reporting gains and losses from the extinguishment of debt and certain lease modifications that have economic effects similar to sale-leaseback transactions. SFAS No. 145 became effective for the Company on the first day of fiscal year 2003. The Company expects to record other expense, net of tax, of approximately $1.5 million representing unamortized deferred financing fees and the amount paid in excess of the carrying value of the retired debt, related to the senior subordinated notes purchased or redeemed as described in Note 12. Prior to the adoption of SFAS No. 145 the Company would have recognized this amount as an extraordinary loss, net of tax.

 

In December 2002, the FASB issued Statement No. 148, “Accounting for Stock-Based Compensation, Transition and Disclosure” (“SFAS No. 148”). SFAS No. 148 provides alternative methods of transition for a voluntary

 

7



 

change to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure requirements of SFAS No. 123 to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based compensation and the pro forma effect on net income had the fair value of the options been expensed. The disclosure requirements of SFAS No. 148 became effective at its issuance. The adoption of SFAS No. 148 is not expected to have a material impact on the Company’s financial position or results of operations in fiscal year 2003.

 

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which addresses consolidation of variable interest entities.  FIN 46 requires a variable interest entity to be consolidated by a parent company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both.  A variable interest entity is a corporation, partnership, trust or any other legal structure used for business purposes that either does not have equity investors with voting rights or has equity investors that do not provide sufficient financial resources for the entity to support its activities. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003.  For older entities, these requirements will begin to apply in the first fiscal year or interim period beginning after June 15, 2003.  The Company is currently evaluating FIN 46, but the adoption of FIN 46 is not expected to have a material impact on the Company’s financial position or results of operations in fiscal year 2003.

 

In April 2003, the FASB issued Statement No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (SFAS No. 149”). SFAS No. 149 clarifies under what circumstances a contract with an initial net investment meets the characteristics of a derivative, amends the definition of an underlying contract and clarifies when a derivative contains a financing component in order to increase the comparability of accounting practices under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 is not expected to have a material impact on the Company’s financial position or results of operations in fiscal year 2003.

 

4.  Inventories:

 

Inventories were comprised of:

 

8



 

 

 

Predecessor
December 27,
2002

 

Successor
June 27,
2003

 

 

 

 

 

 

 

Raw materials

 

$

60,281

 

$

65,002

 

Work in process

 

2,587

 

5,884

 

Finished products

 

15,612

 

19,488

 

 

 

$

78,480

 

$

90,374

 

 

Inventories are net of related reserves totaling $3,827 at December 27, 2002 and $3,629 at June 27, 2003.

 

5.  Long-Term Obligations:

 

Long-term obligations consisted of the following:

 

 

 

Predecessor
December 27,
2002

 

Successor
June 27,
2003

 

Credit Agreement:

 

 

 

 

 

Revolving Credit Facility

 

$

61,972

 

$

70,980

 

11.25% Senior Subordinated Notes due 2006

 

135,000

 

137,040

 

 

 

$

196,972

 

$

208,020

 

 

As of June 27, 2003, $39.0 million was available under the Revolving Credit Facility.

 

6.  Commitments and Contingencies:

 

Litigation

 

The Company is subject to legal proceedings and claims that have arisen in the ordinary course of business.  Although occasional adverse decisions or settlements may occur, it is the opinion of the Company’s management, based upon information available at this time, that the expected outcome of these matters, individually or in the aggregate, would not reasonably be expected to have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company and its subsidiaries taken as a whole.

 

Environmental Matters

 

The Company’s operations are subject to federal, state, local and European environmental laws and regulations concerning the management of pollution and hazardous substances.

 

The Company has been named as a potentially responsible party in state and Federal administrative and judicial proceedings seeking contribution for costs associated with the investigation, analysis, correction and remediation of environmental conditions at various hazardous waste disposal sites. The Company continues to monitor these actions and proceedings and to vigorously defend both its own interests as well as the interests of its affiliates. The Company’s ultimate liability in connection with present and future environmental claims will depend on many

 

9



 

factors, including its volumetric share of the waste at a given site, the remedial action required, the total cost of remediation, and the financial viability and participation of the other entities that also sent waste to the site. Once it becomes probable that the Company will incur costs in connection with remediation of a site and such costs can be reasonably estimated, the Company establishes or adjusts its reserve for its projected share of these costs. Based upon current law and information known to the Company concerning the size of the sites known to it, anticipated costs, their years of operations and the number of other potentially responsible parties, management believes that the Company’s potential share of the estimated aggregate liability for the costs of remedial actions and related costs and expenses are not material. In addition, the Company establishes reserves for remedial measures required from time to time at its own facilities.  Management believes that the reasonably probable outcomes of these matters will not materially exceed established reserves and will not have a material impact on the future financial position, net earnings or cash flows of the Company. The Company’s reserves, expenditures and expenses for all environmental exposures were not significant for any of the dates or periods presented.

 

In connection with the acquisition of the Company from Alumax Inc. (which has since been acquired by Aluminum Company of America in May 1998, and hereafter referred to as “Alumax”) on September 25, 1996, the Company was indemnified by Alumax for substantially all of its costs, if any, related to specifically identified environmental matters arising prior to the closing date of the acquisition during the period of time it was owned directly or indirectly by Alumax. Such indemnification includes costs that may ultimately be incurred to contribute to the remediation of certain specified existing National Priorities List (“NPL”) sites for which the Company had been named a potentially responsible party under the federal Comprehensive Environmental Response, Compensation, and Liability Information System (“CERCLA”) as of the closing date of the acquisition, as well as certain potential costs for sites listed on state hazardous cleanup lists. The Company does not believe that it has any significant probable liability for environmental claims. Further, the Company believes it to be unlikely that the Company would be required to bear environmental costs in excess of its pro rata share of such costs as a potentially responsible party at any site.

 

Product Warranties

 

The Company provides warranties on certain products. The warranty periods differ depending on the product, but generally range from one year to limited lifetime warranties. The Company provides accruals for warranties based on historical experience and expectations of future occurrence. A summary of the changes in the product warranty accrual follows:

 

10



 

 

 

Predecessor

 

Successor

 

 

 

Two months
ended
May 23,
2003

 

One month
ended
June 27,
2003

 

 

 

 

 

 

 

Beginning balance

 

$

3,045

 

$

3,394

 

Payments made or service provided

 

(257

)

(240

)

Warranties issued

 

447

 

429

 

Change related to changes in foreign currency exchange rates

 

159

 

(47

)

 

 

 

 

 

 

Ending balance

 

$

3,394

 

$

3,536

 

 

7.  Comprehensive Income:

 

 

 

Predecessor

 

Successor

 

Predecessor

 

Successor

 

 

 

Three months
ended
June 28,
2002

 

Two months
ended
May 23,
2003

 

One month
ended
June 27,
2003

 

Six months
ended
June 28,
2002

 

Five months
ended
May 23,
2003

 

One month
ended
June 27,
2003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

8,560

 

$

4,450

 

$

1,129

 

$

10,640

 

$

6,892

 

$

1,129

 

Other comprehensive earnings (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

4,930

 

5,000

 

(2,638

)

4,504

 

6,922

 

(2,638

)

Gain (loss) on derivative instruments, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net changes in fair value of derivatives

 

(1,629

)

(627

)

(228

)

(1,353

)

(324

)

(228

)

Net gains reclassified from OCI into earnings

 

1,431

 

759

 

136

 

1,254

 

423

 

136

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$

13,292

 

$

9,582

 

$

(1,601

)

$

15,045

 

$

13,913

 

$

(1,601

)

 

8.  Income Taxes:

 

The income tax provision for the one month ended June 27, 2003, five months ended May 23, 2003 and the six months ended June 28, 2002 is computed at the effective rate expected to be applicable in each respective full year using the statutory rates on a country by country basis.

 

11



 

9.  Segment Information:

 

For detailed information regarding the Company’s reportable segments, see Note 14 to the Consolidated Financial Statements of the Company for the year ended December 27, 2002, set forth in the Company’s Annual Report on Form 10-K.

 

Information about reported segments and a reconciliation of total segment sales to total consolidated sales and of total segment EBITDA to total consolidated earnings before income taxes, for the periods indicated, is as follows:

 

 

 

Predecessor

 

Successor

 

Predecessor

 

Successor

 

 

 

Three months
ended
June 28,
2002

 

Two months
ended
May 23,
2003

 

One month
ended
June 27,
2003

 

Six months
ended
June 28,
2002

 

Five months
ended
May 23,
2002

 

One month
ended
June 27,
2003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

European Roll Coating

 

$

33,533

 

$

24,056

 

$

15,660

 

$

65,563

 

$

60,719

 

$

15,660

 

U.S. Fabrication

 

121,578

 

75,107

 

52,238

 

206,893

 

161,065

 

52,238

 

European Fabrication

 

17,280

 

15,797

 

9,723

 

33,503

 

39,913

 

9,723

 

Total segment sales

 

172,391

 

114,960

 

77,621

 

305,959

 

261,697

 

77,621

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eliminations

 

(723

)

(503

)

(427

)

(1,331

)

(1,082

)

(427

)

Consolidated net sales

 

$

171,668

 

$

114,457

 

$

77,194

 

$

304,628

 

$

260,615

 

$

77,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

European Roll Coating

 

$

4,480

 

$

3,389

 

$

1,487

 

$

8,999

 

$

9,508

 

$

1,487

 

U.S. Fabrication

 

17,012

 

7,783

 

4,398

 

23,137

 

11,761

 

4,398

 

European Fabrication

 

2,107

 

1,643

 

1,140

 

4,045

 

4,489

 

1,140

 

Total EBITDA for reportable segments

 

23,599

 

12,815

 

7,025

 

36,181

 

25,758

 

7,025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses that are not segment specific

 

(566

)

517

 

(1,920

)

(1,077

)

790

 

(1,920

)

Depreciation and amortization

 

(3,025

)

(2,531

)

(1,571

)

(6,449

)

(6,276

)

(1,571

)

Interest expense, net

 

(5,872

)

(3,678

)

(1,843

)

(11,233

)

(9,126

)

(1,843

)

Consolidated net earnings before income taxes

 

$

14,136

 

$

7,123

 

$

1,691

 

$

17,422

 

$

11,146

 

$

1,691

 

 

Segment assets are not included in the above table because such information is not reported by segment in the information reviewed by the chief operating decision maker for purposes of making decisions about allocating resources to the segments and addressing performance.

 

12



 

The following table reflects revenues from external customers by groups of similar products for the periods indicated:

 

 

 

 

 

Predecessor

 

Successor

 

Predecessor

 

Successor

 

Customers/Markets

 

Primary Products

 

Three months
ended
June 28,
2002

 

Two months
ended
May 23,
2003

 

One month
ended
June 27,
2003

 

Six months
ended
June 28,
2002

 

Five months
ended
May 23,
2003

 

One month
ended
June 27,
2003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Original Equipment Manufacturers (“OEMs”)

 

Painted aluminum sheet and coil; fabricated painted aluminum, laminated and fiberglass panels; RV doors, windows and roofing; and composite building panels

 

$

70,707

 

$

47,552

 

$

29,649

 

$

135,108

 

$

120,289

 

$

29,649

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rural Contractors

 

Steel and aluminum roofing and siding

 

33,088

 

18,892

 

12,796

 

56,663

 

38,980

 

12,796

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home Centers

 

Raincarrying systems, roofing accessories, windows, doors and shower enclosures

 

36,456

 

25,663

 

18,941

 

58,131

 

51,129

 

18,941

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufactured Housing

 

Steel siding and trim components

 

6,668

 

3,526

 

3,076

 

11,344

 

8,031

 

3,076

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributors

 

Metal coils, raincarrying systems and roofing accessories

 

5,712

 

5,832

 

3,747

 

10,252

 

12,084

 

3,747

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial and Architectural Contractors

 

Standing seam panels and siding and roofing accessories

 

4,381

 

3,886

 

2,822

 

8,488

 

9,183

 

2,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home Improvement Contractors

 

Vinyl replacement windows; metal coils, raincarrying systems; metal roofing and insulated roofing panels; shower, patio and entrance doors; and awnings

 

14,656

 

9,106

 

6,163

 

24,642

 

20,919

 

6,163

 

 

 

 

 

$

171,668

 

$

114,457

 

$

77,194

 

$

304,628

 

$

260,615

 

$

77,194

 

 

13



 

10. Shareholders’ Equity

 

Common Stock

In connection with the 2003 Shareholder Transaction, the Company converted 44,346.8 shares of Class B Common Stock into Class A Common Stock.  Additionally, the Company issued 883.75 shares of Class A Common Stock to CVCEP from shares held in treasury as described in Note 11 and issued 9,569.6 shares of restricted Class A Common Stock.

 

Stock Plans

On June 12, 2003, the Company established an equity compensation program, the Euramax International, Inc. 2003 Equity Compensation Plan (“2003 Equity Plan”), for the purpose of attracting and retaining valued employees. Under the 2003 Equity Plan, the Company has granted restricted shares of Class A Common Stock and granted options to purchase shares of Euramax International Class A Common Stock to selected officers and other key employees. The Company has reserved 35,719.6 shares of Class A Common Stock for issuance under the 2003 Equity Plan.

 

The 2003 Equity Plan is to be administered by a committee designated by the board of directors. The committee will have full authority to act in selecting the eligible employees to whom awards of options or restricted stock may be granted. The committee will determine the times at which such awards of restricted stock or options may be granted, the terms and conditions of awards that may be granted under the 2003 Equity Plan and the terms of agreements which will be entered into with employees designated to participate in the 2003 Equity Plan. However, in no event may the exercise price of any non-qualified options granted under the 2003 Equity Plan be less than the fair market value of the underlying shares on the date of grant.

 

The 2003 Equity Plan permits the committee to grant both incentive stock options and non-qualified stock options, with all 25,750 options granted in connection with the 2003 Shareholder Transaction being non-qualified stock options. The committee may determine the number of options granted to each participant, the exercise price of each option, the duration of options (not to exceed 10 years), vesting provisions and all other terms and conditions of such options in individual option agreements. The non-qualified stock option grant agreements in effect on the date hereof provide that each participant will vest in 20% of the shares subject to the option grant on each anniversary of the date of grant, until becoming 100% vested after 5 years. Non-qualified stock option grant agreements under the 2003 Equity Plan provide that upon termination of employment with the Company, the exercise period for vested options will generally be limited, except that vested options will be canceled immediately upon a termination for cause. The non-qualified stock option grant agreements provide for the cancellation of all unvested options upon termination of employment with the Company. Under the 2003 Equity Plan, if any option shares subject to an outstanding option grant are forfeited or if the option grant otherwise terminates without exercise, any of these forfeited or terminated option grant shares may be reissued at the discretion of the committee. In connection with the 2003 Shareholder Transaction the Company issued 25,750 options to purchase shares of Class A Common Stock with an exercise price of $400 per share.

 

Information with respect to option activity under the 2003 Equity Plan is set forth below:

 

 

 

Options
Outstanding

 

Weighted
Average
Exercise
Price

 

 

 

 

 

 

 

Balance, December 27, 2002

 

 

$

 

Options granted

 

25,750

 

400

 

Options exercised

 

 

 

Options forfeited

 

 

 

Options expired

 

 

 

Balance, June 27, 2003

 

25,750

 

$

400

 

 

The 2003 Equity Plan also permits the Company to grant participants restricted shares of Class A Common Stock. The committee will determine the number of shares of restricted stock granted to each participant, the period the restricted stock is unvested and subject to forfeiture and all other terms and conditions applicable to such restricted stock in individual restricted stock agreements. The restricted stock agreements in effect on the date hereof provide that the participant will vest in 100% of the restricted shares five years from the date of grant. If an employee voluntarily terminates his or her employment, the employee will forfeit any unvested shares of restricted stock. If employment is terminated for any reason other than voluntary termination, all unvested shares of the restricted stock shall be accelerated as of the date of non-voluntary termination. All shares of restricted stock granted, and all

 

14



 

shares acquired upon exercise of options granted, under the 2003 Equity Plan will be subject to the stockholders agreement described in Note 11: Related Party Transactions—Stockholders Agreement. In connection with the 2003 Shareholder Transaction, the Company granted 9,569.6 shares of restricted Class A Common Stock with a fair value of $400 per share.

 

The 2003 Equity Plan provides that upon a change in control of the Company, all restricted stock awards shall become fully vested, and each unexercised and outstanding option shall become immediately and fully vested and exercisable. All restricted stock awards shall also become fully vested in the event of an initial public offering of the Company’s common stock. Each option that is exercisable immediately prior to the change in control may be canceled in exchange for a payment in cash of an amount equal to the excess of the fair market value of the common stock underlying the option as of the date of the change in control over the exercise price. The committee may also decide that such options be terminated immediately prior to the change in control, provided that the participant fails to exercise the option within a specified period (of at least seven days) following receipt of written notice of the change in control and of the Company’s intention to terminate the option prior to such change in control. Alternatively, the committee may determine that in the event of a change in control, such options shall be assumed by the successor corporation, and shall be substituted with options involving the common stock of the successor corporation with equivalent value and with the terms and conditions of the substituted options being no less favorable that the options granted by the Company.

 

11.  Related Party Transactions:

 

2003 Shareholder Transaction (see Note 2)

In connection with the 2003 Shareholder Transaction, the Company sold 883.75 shares of its common stock directly to CVCEP for $353,500. The Company also agreed to pay the out-of-pocket fees and expenses of CVCEP and CVC Europe, which in the aggregate were approximately $3.4 million, and gave certain customary indemnities in favor of CVCEP under the stock purchase agreement. CVCEP is an affiliate of CVC, which owned approximately 34.5% of the Company’s common stock at the time of the 2003 Shareholder Transaction. CVC had subsequently transferred its shares to Court Square Capital Limited (“Court Square”), which, like CVC, is an indirect wholly-owned subsidiary of Citigroup Inc.

 

Stockholders Agreement

In connection with the 2003 Shareholder Transaction, the Company entered into a stockholders agreement with CVCEP and certain of its affiliates, Court Square, and certain other stockholders consisting of members of the Company’s management and members of CVCEP’s management (“Minority Stockholders”). The stockholders agreement provides that the Company’s Chief Executive Officer will be a member of the Company’s board of directors.

 

15



 

CVCEP will initially be entitled to designate three additional members of the Company’s board of directors and Court Square will initially be entitled to designate two additional members of the Company’s board of directors (these designation rights to be adjusted from time to time to reflect certain changes in the common stock ownership of CVCEP and Court Square).

 

Under the stockholders agreement, certain corporate actions require the written consent of stockholders holding at least 70% of the Company’s outstanding stock held by all stockholders party to the stockholders agreement. Initially, this will require the written consent of both CVCEP and Court Square. These corporate actions include changes to or issuances of the Company’s equity securities, amendments of organizational documents, payment of dividends, or certain merger or recapitalization transactions. In addition, each action of the board of directors will require the approval of at least one director designated by each of CVCEP and Court Square.

 

The stockholders agreement generally restricts the transfer of shares of the Company’s common stock. Exceptions to this restriction include transfers to affiliates, transfers to the Company, transfers for estate planning purposes and transfers to family members. In each case, so long as any transferee agrees to be bound by the terms of the stockholders agreement. After an initial public offering, additional exceptions to the transfer restrictions will include sales pursuant to certain registration rights of the stockholders.

 

Registration Rights Agreement

In connection with their entry into the stockholders agreement, CVCEP, Court Square and the Minority Stockholders have entered into an amended and restated registration rights agreement with the Company. Pursuant to this registration rights agreement, upon the written request of CVCEP or Court Square, the Company has agreed (subject to customary exceptions), on up to three occasions for CVCEP and up to two occasions for Court Square, to prepare and file a registration statement with the SEC concerning the distribution of all or part of the shares held by CVCEP or Court Square, as the case may be, and use its best efforts to cause the registration statement to become effective. If the Company is eligible to use a “short form” registration statement on Form S-2, Form S-3 or any similar form, CVCEP and Court Square may each make unlimited requests for registration for their shares of the Company’s common stock. If at any time the Company files a registration statement for its common stock (other than pursuant to a demand registration by CVCEP or Court Square, a registration statement on Form S-8, Form S-4 or any similar form, or in connection with certain other registrations), it will use its best efforts to allow other parties to the registration rights agreement to have their shares of the Company’s common stock (or a portion

 

16



 

of their shares under specified circumstances) included in the offering if the registration form proposed to be used may be used to register the shares. Registration expenses of the selling stockholders (other than underwriting fees, brokerage fees and transfer taxes applicable to the shares sold by such stockholders or the fees and expenses of any accountants or other representatives retained by a selling stockholder) will be paid by the Company. The Company has agreed to indemnify the stockholders against certain customary liabilities in connection with any registration.

 

Advisory Agreement

In connection with the 2003 Shareholder Transaction, the Company entered into an advisory agreement with CVC Management LLC (“CVC Management”), pursuant to which CVC Management may provide financial, advisory and consulting services to the Company. In exchange for these services, CVC Management will be entitled to an annual advisory fee. CVC Management’s annual advisory fee will be the greater of $0.6 million per year or 1% of the Company’s consolidated EBITDA (as defined in the advisory agreement), plus out-of-pocket expenses. Annual advisory fees in excess of $1.0 million are subject to the consent of the Company’s lenders under the credit facility. Pursuant to the advisory agreement, the Company paid CVC Management a $1.0 million transaction fee in connection with services provided in connection with the 2003 Shareholder Transaction. The Company has also agreed to pay CVC Management a transaction fee in connection with the consummation of each acquisition, divestiture or financing, including any refinancing, by the Company or any of its subsidiaries, in an amount equal to 1% of the value of the transaction, plus reasonable out-of-pocket expenses. This advisory agreement has an initial term of ten years following the close of the 2003 Shareholder Transaction, subject to automatic one year extensions thereafter unless terminated by either party upon written notice 90 days prior to the expiration of the initial term or any extension thereof. The advisory agreement automatically terminates on a change of control or an initial public offering of the Company’s common stock. There are no minimum levels of service required to be provided pursuant to the advisory agreement. The advisory agreement includes customary indemnification provisions in favor of CVC Management.

 

12.  Subsequent Event:

 

On July 10, 2003, the Company commenced an offer to purchase and solicitation of consents for the outstanding $135.0 million 11.25% senior subordinated notes due 2006 (“the Notes”) subject to the receipt of a consent from the holders of a majority of the principal amount thereof. On August 6, 2003, the Company issued $200.0 million 8.5% senior subordinated notes due 2011 (“the New Notes”). Pursuant to the Advisory Agreement discussed in Note 11, CVC Management will be paid a $2.0 million transaction fee in connection with the issuance of the New Notes. The Company estimates its proceeds from the issuance of the New Notes, net of debt issuance cost, will be $191.5 million. Euramax International, Inc. and Euramax International Holdings, B.V, a newly formed Netherlands holding company, are each co-obligors on the New Notes. Each of Euramax International, Inc's U.S. subsidiaries are guarantors of the New Notes. On August 8, 2003, the Company used the proceeds of the New Notes to purchase approximately $112.9 million of the Notes that had been validly tendered, for approximately $120.4 million, including interest. Following the purchase of the Notes accepted in the tender offer, approximately $22.1 million in aggregate principal amount of the Notes remained outstanding.  The Company currently intends to call any Notes that remain outstanding effective on October 1, 2003, at which time the redemption price will be 101.875% of principal amount plus accrued interest.

 

17



 

13.  Supplemental Condensed Combined Financial Statements:

 

On September 25, 1996, the Notes were issued by Euramax International Limited, Euramax European Holdings Limited and Euramax European Holdings B.V. as co-obligors (the “Co-Obligors”). Euramax International, Inc. has provided a full and unconditional guarantee of the Notes (“Parent Guarantor”). In addition, Amerimax Holdings, Inc., Amerimax Fabricated Products, Inc., Euramax International Holdings Limited and Euramax Continental Limited, holding company subsidiaries of the Company, have provided full and unconditional guarantees of the Notes (collectively, the “Guarantor Subsidiaries”). The following supplemental condensed combining financial statements as of June 27, 2003 and December 27, 2002, and for the two months and five months ended May 22, 2003, one month ended June 27, 2003 and three months and six months ended June 28, 2002, reflect the financial position, results of operations, and cash flows of each of the Parent Guarantor, the Co-Obligors, and such combined information of the Guarantor Subsidiaries and the non-guarantor subsidiaries, principally the operating subsidiaries, (collectively, the “Non-Guarantor Subsidiaries”). The Co-Obligors and Guarantors are wholly owned subsidiaries of Euramax and are each jointly, severally, fully, and unconditionally liable under the Notes. Separate complete financial statements of each Co-Obligor and Guarantor are not presented because management has determined that they are not material to investors.

 

18



 

 

 

Predecessor three months ended June 28, 2002

 

 

 

Euramax
International,
Inc.
(Parent
Guarantor)

 

Euramax
International
Limited
(Co-Obligor)

 

Euramax
European
Holdings
Limited
(Co-Obligor)

 

Euramax
European
Holdings B.V.
(Co-Obligor)

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated
Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

 

$

 

$

 

$

 

$

 

$

171,668

 

$

 

$

171,668

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

132,859

 

 

132,859

 

Selling and general

 

401

 

51

 

 

 

595

 

15,353

 

 

16,400

 

Depreciation and amortization

 

 

 

 

 

10

 

3,015

 

 

3,025

 

(Loss) earnings from operations

 

(401

)

(51

)

 

 

(605

)

20,441

 

 

19,384

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

9,914

 

2,821

 

(1,353

)

2,662

 

12,021

 

 

(26,065

)

 

Interest expense, net

 

(1,655

)

 

(214

)

(51

)

(2,538

)

(1,414

)

 

(5,872

)

Other income (expense), net

 

 

 

2,056

 

179

 

 

(1,611

)

 

624

 

Earnings before income taxes

 

7,858

 

2,770

 

489

 

2,790

 

8,878

 

17,416

 

(26,065

)

14,136

 

(Benefit) provision for income taxes

 

(702

)

(16

)

553

 

51

 

(1,036

)

6,726

 

 

5,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss)

 

$

8,560

 

$

2,786

 

$

(64

)

$

2,739

 

$

9,914

 

$

10,690

 

$

(26,065

)

$

8,560

 

 

19



 

 

 

Predecessor two months ended May 23, 2003

 

 

 

Euramax
International,
Inc.
(Parent
Guarantor)

 

Euramax
International
Limited
(Co-Obligor)

 

Euramax
European
Holdings
Limited
(Co-Obligor)

 

Euramax
European
Holdings B.V.
(Co-Obligor)

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated
Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

 

$

 

$

 

$

 

$

 

$

114,457

 

$

 

$

114,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

90,854

 

 

90,854

 

Selling and general

 

156

 

42

 

 

 

(506

)

10,871

 

 

10,563

 

Depreciation and amortization

 

 

 

 

 

15

 

2,516

 

 

2,531

 

(Loss) earnings from operations

 

(156

)

(42

)

 

 

491

 

10,216

 

 

10,509

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

5,364

 

1,989

 

(390

)

1,639

 

5,931

 

 

(14,533

)

 

Interest expense, net

 

(1,341

)

 

(183

)

(36

)

(1,301

)

(817

)

 

(3,678

)

Other income (expense), net

 

 

 

1,071

 

145

 

 

(924

)

 

292

 

Earnings before income taxes

 

3,867

 

1,947

 

498

 

1,748

 

5,121

 

8,475

 

(14,533

)

7,123

 

(Benefit) provision for income taxes

 

(583

)

(12

)

269

 

38

 

(242

)

3,203

 

 

2,673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

4,450

 

$

1,959

 

$

229

 

$

1,710

 

$

5,363

 

$

5,272

 

$

(14,533

)

$

4,450

 

 

20



 

 

 

Successor one month ended June 27, 2003

 

 

 

Euramax
International,
Inc.
(Parent
Guarantor)

 

Euramax
International
Limited
(Co-Obligor)

 

Euramax
European
Holdings
Limited
(Co-Obligor)

 

Euramax
European
Holdings B.V.
(Co-Obligor)

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated
Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

 

$

 

$

 

$

 

$

 

$

77,194

 

$

 

$

77,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

63,904

 

 

63,904

 

Selling and general

 

463

 

121

 

 

 

1,276

 

6,299

 

 

8,159

 

Depreciation and amortization

 

 

 

 

 

7

 

1,564

 

 

1,571

 

(Loss) earnings from operations

 

(463

)

(121

)

 

 

(1,283

)

5,427

 

 

3,560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

2,190

 

763

 

(194

)

809

 

2,941

 

 

(6,509

)

 

Interest expense, net

 

(812

)

 

(24

)

(16

)

(459

)

(532

)

 

(1,843

)

Other income (expense), net

 

 

 

196

 

(58

)

 

(164

)

 

(26

)

Earnings (loss) before income taxes

 

915

 

642

 

(22

)

735

 

1,199

 

4,731

 

(6,509

)

1,691

 

(Benefit) provision for income taxes

 

(214

)

(36

)

48

 

(25

)

(991

)

1,780

 

 

562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss)

 

$

1,129

 

$

678

 

$

(70

)

$

760

 

$

2,190

 

$

2,951

 

$

(6,509

)

$

1,129

 

 

21



 

 

 

Predecessor six months ended June 28, 2002

 

 

 

Euramax
International,
Inc.
(Parent
Guarantor)

 

Euramax
International
Limited
(Co-Obligor)

 

Euramax
European
Holdings
Limited
(Co-Obligor)

 

Euramax
European
Holdings B.V.
(Co-Obligor)

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated
Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

 

$

 

$

 

$

 

$

 

$

304,628

 

$

 

$

304,628

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

239,117

 

 

239,117

 

Selling and general

 

678

 

109

 

 

 

552

 

29,610

 

 

30,949

 

Depreciation and amortization

 

 

 

 

 

19

 

6,430

 

 

6,449

 

(Loss) earnings from operations

 

(678

)

(109

)

 

 

(571

)

29,471

 

 

28,113

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

13,035

 

5,081

 

(524

)

4,521

 

16,844

 

 

(38,957

)

 

Interest expense, net

 

(3,085

)

 

(323

)

(102

)

(5,111

)

(2,612

)

 

(11,233

)

Other income (expense), net

 

 

 

1,576

 

160

 

 

(1,194

)

 

542

 

Earnings before income taxes

 

9,272

 

4,972

 

729

 

4,579

 

11,162

 

25,665

 

(38,957

)

17,422

 

(Benefit) provision for income taxes

 

(1,368

)

(33

)

376

 

33

 

(1,873

)

9,647

 

 

6,782

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

10,640

 

$

5,005

 

$

353

 

$

4,546

 

$

13,035

 

$

16,018

 

$

(38,957

)

$

10,640

 

 

22



 

 

 

Predecessor five months ended May 23, 2003

 

 

 

Euramax
International,
Inc.
(Parent
Guarantor)

 

Euramax
International
Limited
(Co-Obligor)

 

Euramax
European
Holdings
Limited
(Co-Obligor)

 

Euramax
European
Holdings B.V.
(Co-Obligor)

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated
Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

 

$

 

$

 

$

 

$

 

$

260,615

 

$

 

$

260,615

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

208,420

 

 

208,420

 

Selling and general

 

393

 

105

 

 

 

(988

)

26,643

 

 

26,153

 

Depreciation and amortization

 

 

 

 

 

36

 

6,240

 

 

6,276

 

(Loss) earnings from operations

 

(393

)

(105

)

 

 

952

 

19,312

 

 

19,766

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

8,980

 

5,810

 

925

 

4,560

 

10,980

 

 

(31,255

)

 

Interest expense, net

 

(2,865

)

 

(351

)

(91

)

(3,648

)

(2,171

)

 

(9,126

)

Other income (expense), net

 

 

 

529

 

192

 

 

(215

)

 

506

 

Earnings before income taxes

 

5,722

 

5,705

 

1,103

 

4,661

 

8,284

 

16,926

 

(31,255

)

11,146

 

(Benefit) provision for income taxes

 

(1,170

)

(31

)

56

 

35

 

(696

)

6,060

 

 

4,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

6,892

 

$

5,736

 

$

1,047

 

$

4,626

 

$

8,980

 

$

10,866

 

$

(31,255

)

$

6,892

 

 

23



 

 

 

Predecessor as of December 27, 2002

 

 

 

Euramax
International,
Inc.
(Parent
Guarantor)

 

Euramax
International
Limited
(Co-Obligor)

 

Euramax
European
Holdings
Limited
(Co-Obligor)

 

Euramax
European
Holdings
B.V.
(Co-Obligor)

 

Guarantor
Subsidiaries

 

Non-Guarantor
Subsidiaries

 

Eliminations

 

Consolidated
Totals

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

 

$

 

$

 

$

1

 

$

1

 

$

181

 

$

11,463

 

$

 

$

11,646

 

Accounts receivable, net

 

 

14

 

 

 

121

 

88,373

 

 

88,508

 

Inventories

 

 

 

 

 

 

78,480

 

 

78,480

 

Other current assets

 

508

 

 

 

 

308

 

4,265

 

 

5,081

 

Total current assets

 

508

 

14

 

1

 

1

 

610

 

182,581

 

 

183,715

 

Property, plant and equipment, net

 

 

 

 

 

179

 

111,858

 

 

112,037

 

Amounts due from affiliates

 

102,124

 

77,552

 

55,022

 

 

150,838

 

70,425

 

(455,961

)

 

Goodwill, net

 

 

 

 

 

7,799

 

103,000

 

 

110,799

 

Investment in consolidated subsidiaries

 

153,844

 

34,800

 

(20,675

)

41,906

 

213,277

 

 

(423,152

)

 

Deferred income taxes

 

 

 

1,040

 

 

60

 

3,875

 

 

4,975

 

Other assets

 

 

1,260

 

350

 

379

 

1,357

 

1,568

 

 

4,914

 

 

 

$

256,476

 

$

113,626

 

$

35,738

 

$

42,286

 

$

374,120

 

$

473,307

 

$

(879,113

)

$

416,440

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash overdrafts

 

$

 

$

 

$

 

$

 

$

(181

)

$

2,061

 

$

 

$

1,880

 

Accounts payable

 

 

 

 

 

159

 

56,945

 

 

57,104

 

Accrued expenses and other current liabilities

 

(1,222

)

250

 

(158

)

(7,230

)

(4,623

)

47,234

 

 

34,251

 

Total current liabilities

 

(1,222

)

250

 

(158

)

(7,230

)

(4,645

)

106,240

 

 

93,235

 

Long-term debt, less current maturities

 

37,216

 

70,605

 

27,179

 

 

31,700

 

30,272

 

 

196,972

 

Amounts due to affiliates

 

133,239

 

14,826

 

22,117

 

3,548

 

189,197

 

93,034

 

(455,961

)

 

Deferred income taxes

 

614

 

 

 

 

798

 

18,009

 

 

19,421

 

Other liabilities

 

 

 

 

 

3,229

 

17,364

 

 

20,593

 

Total liabilities

 

169,847

 

85,681

 

49,138

 

(3,682

)

220,279

 

264,919

 

(455,961

)

330,221

 

Shareholders’equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

500

 

2

 

78

 

23

 

35,001

 

6,835

 

(41,939

)

500

 

Additional paid-in capital

 

65,218

 

20,726

 

6,922

 

9,077

 

78,485

 

369,643

 

(496,851

)

53,220

 

Treasury stock

 

(2,056

)

 

 

 

 

 

 

(2,056

)

Retained earnings (deficit)

 

27,652

 

15,384

 

(12,501

)

36,367

 

45,225

 

(149,823

)

82,135

 

44,439

 

Dividends declared

 

 

 

 

 

 

(10,415

)

10,415

 

 

Accumulated other comprehensive loss

 

(4,685

)

(8,167

)

(7,899

)

501

 

(4,870

)

(7,852

)

23,088

 

(9,884

)

Total shareholders’ equity

 

86,629

 

27,945

 

(13,400

)

45,968

 

153,841

 

208,388

 

(423,152

)

86,219

 

 

 

$

256,476

 

$

113,626

 

$

35,738

 

$

42,286

 

$

374,120

 

$

473,307

 

$

(879,113

)

$

416,440

 

 

24



 

 

 

Successor as of June 27, 2003

 

 

 

Euramax
International,
Inc.
(Parent
Guarantor)

 

Euramax
International
Limited
(Co-Obligor)

 

Euramax
European
Holdings
Limited
(Co-Obligor)

 

Euramax
European
Holdings
B.V.
(Co-Obligor)

 

Guarantor
Subsidiaries

 

Non-Guarantor
Subsidiaries

 

Eliminations

 

Consolidated
Totals

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and equivalents

 

$

 

$

 

$

1

 

$

1

 

$

273

 

$

10,643

 

$

 

$

10,918

 

Accounts receivable, net

 

 

41

 

 

 

(1

)

120,285

 

 

120,325

 

Inventories

 

 

 

 

 

 

90,374

 

 

90,374

 

Other current assets

 

1,191

 

 

 

 

1,225

 

6,022

 

 

8,438

 

Total current assets

 

1,191

 

41

 

1

 

1

 

1,497

 

227,324

 

 

230,055

 

Property, plant and equipment, net

 

 

 

 

 

205

 

129,377

 

 

129,582

 

Amounts due from affiliates

 

108,691

 

79,726

 

58,781

 

 

160,985

 

67,776

 

(475,959

)

 

Goodwill, net

 

 

 

 

 

7,799

 

152,607

 

 

160,406

 

Investment in consolidated subsidiaries

 

221,295

 

68,268

 

(14,560

)

67,841

 

283,255

 

 

(626,099

)

 

Deferred income taxes

 

 

 

1,069

 

 

60

 

3,702

 

 

4,831

 

Other assets

 

 

489

 

141

 

162

 

1,151

 

3,797

 

 

5,740

 

 

 

$

331,177

 

$

148,524

 

$

45,432

 

$

68,004

 

$

454,952

 

$

584,583

 

$

(1,102,058

)

$

530,614

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash overdrafts

 

$

 

$

 

$

 

$

 

$

(891

)

$

2,378

 

$

 

$

1,487

 

Accounts payable

 

 

 

 

 

319

 

73,792

 

 

74,111

 

Accrued expenses and other current liabilities

 

1,281

 

186

 

(55

)

(7,907

)

(1,697

)

55,231

 

 

47,039

 

Total current liabilities

 

1,281

 

186

 

(55

)

(7,907

)

(2,269

)

131,401

 

 

122,637

 

Long-term debt, less current maturities

 

37,778

 

71,672

 

27,589

 

 

47,000

 

23,981

 

 

208,020

 

Amounts due to affiliates

 

142,692

 

15,412

 

24,717

 

3,603

 

184,621

 

104,914

 

(475,959

)

 

Deferred income taxes

 

712

 

 

 

 

976

 

21,872

 

 

23,560

 

Other liabilities

 

 

 

4

 

 

3,329

 

24,398

 

 

27,731

 

Total liabilities

 

182,463

 

87,270

 

52,255

 

(4,304

)

233,657

 

306,566

 

(475,959

)

381,948

 

Shareholders’equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

500

 

2

 

78

 

23

 

35,001

 

6,835

 

(41,939

)

500

 

Additional paid-in capital

 

155,866

 

57,470

 

(5,815

)

67,083

 

177,181

 

265,207

 

(561,497

)

155,495

 

Treasury stock

 

(1,964

)

 

 

 

 

 

 

(1,964

)

Restricted stock

 

(3,764

)

 

 

 

 

 

 

(3,764

)

Retained earnings (deficit)

 

1,129

 

678

 

(70

)

760

 

2,190

 

2,951

 

(6,509

)

1,129

 

Accumulated other comprehensive loss

 

(3,053

)

3,104

 

(1,016

)

4,442

 

6,923

 

3,024

 

(16,154

)

(2,730

)

Total shareholders’ equity

 

148,714

 

61,254

 

(6,823

)

72,308

 

221,295

 

278,017

 

(626,099

)

148,666

 

 

 

$

331,177

 

$

148,524

 

$

45,432

 

$

68,004

 

$

454,952

 

$

584,583

 

$

(1,102,058

)

$

530,614

 

 

25



 

 

 

Predecessor six months ended June 28, 2002

 

 

 

Euramax
International,
Inc.
(Parent
Guarantor)

 

Euramax
International
Limited
(Co-Obligor)

 

Euramax
European
Holdings
Limited
(Co-Obligor)

 

Euramax
European
Holdings
B.V.
(Co-Obligor)

 

Guarantor
Subsidiaries

 

Non-Guarantor
Subsidiaries

 

Eliminations

 

Consolidated
Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by operating activities

 

$

(3,641

)

$

15

 

$

(221

)

$

(61

)

$

27,595

 

$

8,289

 

$

(31,427

)

$

549

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sales of assets

 

 

 

 

 

 

24

 

 

24

 

Capital expenditures

 

 

 

 

 

(96

)

(2,470

)

 

(2,566

)

Net cash used in investing activities

 

 

 

 

 

(96

)

(2,446

)

 

(2,542

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowings (repayments) on revolving credit facility

 

 

 

 

 

41,500

 

(1,496

)

 

40,004

 

Repayment of long-term debt

 

 

 

 

 

(33,910

)

(5,041

)

 

(38,951

)

Dividends paid

 

 

 

 

 

 

(31,427

)

31,427

 

 

Change in cash overdrafts

 

 

 

 

 

(1,169

)

2,398

 

 

1,229

 

Proceeds from settlement of currency swap

 

 

 

 

 

 

2,790

 

 

2,790

 

Deferred financing fees

 

 

 

 

 

(909

)

(586

)

 

(1,495

)

Due to/from affiliates

 

3,641

 

(15

)

117

 

(164

)

(33,168

)

29,589

 

 

 

Net cash provided by/(used in) financing activities

 

3,641

 

(15

)

117

 

(164

)

(27,656

)

(3,773

)

31,427

 

3,577

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

 

104

 

160

 

159

 

1,458

 

 

1,881

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and equivalents

 

 

 

 

(65

)

2

 

3,528

 

 

3,465

 

Cash and equivalents at beginning of period

 

 

 

 

94

 

11

 

5,792

 

 

5,897

 

Cash and equivalents at end of period

 

$

 

$

 

$

 

$

29

 

$

13

 

$

9,320

 

$

 

$

9,362

 

 

26



 

 

 

Predecessor five months ended May 23, 2003

 

 

 

Euramax
International,
Inc.
(Parent
Guarantor)

 

Euramax
International
Limited
(Co-Obligor)

 

Euramax
European
Holdings
Limited
(Co-Obligor)

 

Euramax
European
Holdings
B.V.
(Co-Obligor)

 

Guarantor
Subsidiaries

 

Non-Guarantor
Subsidiaries

 

Eliminations

 

Consolidated
Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (used in)/provided by operating activities

 

$

(3,596

)

$

(703

)

$

(629

)

$

(49

)

$

1,783

 

$

(8,851

)

$

 

$

(12,045

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sales of assets

 

 

 

 

 

 

35

 

 

35

 

Capital expenditures

 

 

 

 

 

(47

)

(4,897

)

 

(4,944

)

Net cash used in investing activities

 

 

 

 

 

(47

)

(4,862

)

 

(4,909

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowings on revolving credit facility

 

 

 

 

 

16,800

 

1,464

 

 

18,264

 

Change in cash overdrafts

 

 

 

 

 

(215

)

2,818

 

 

2,603

 

Purchase of treasury stock

 

(2,556

)

 

 

 

 

 

 

(2,556

)

Deferred financing fees

 

 

 

 

 

(71

)

(45

)

 

(116

)

Due to/from affiliates

 

6,152

 

703

 

649

 

(140

)

(18,190

)

10,826

 

 

 

Net cash provided by/(used in) financing activities

 

3,596

 

703

 

649

 

(140

)

(1,676

)

15,063

 

 

18,195

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

 

(20

)

189

 

 

609

 

 

778

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase in cash and equivalents

 

 

 

 

 

60

 

1,959

 

 

2,019

 

Cash and equivalents at beginning of period

 

 

 

1

 

1

 

181

 

11,463

 

 

11,646

 

Cash and equivalents at end of period

 

$

 

$

 

$

1

 

$

1

 

$

241

 

$

13,422

 

$

 

$

13,665

 

 

27



 

 

 

Successor one month ended June 27, 2003

 

 

 

Euramax
International,
Inc.
(Parent
Guarantor)

 

Euramax
International
Limited
(Co-Obligor)

 

Euramax
European
Holdings
Limited
(Co-Obligor)

 

Euramax
European
Holdings
B.V.
(Co-Obligor)

 

Guarantor
Subsidiaries

 

Non-Guarantor
Subsidiaries

 

Eliminations

 

Consolidated
Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (used in)/provided by operating activities

 

$

(920

)

$

609

 

$

311

 

$

(11

)

$

(1,265

)

$

13,200

 

$

 

$

11,924

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sales of assets

 

 

 

 

 

 

44

 

 

44

 

Capital expenditures

 

 

 

 

 

(22

)

(767

)

 

(789

)

Net cash used in investing activities

 

 

 

 

 

(22

)

(723

)

 

(745

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowings on revolving credit facility

 

 

 

 

 

(1,500

)

(9,653

)

 

(11,153

)

Change in cash overdrafts

 

 

 

 

 

(495

)

(2,500

)

 

(2,995

)

Issuance of common stock from shares held in treasury

 

353

 

 

 

 

 

 

 

353

 

Purchase of treasury stock

 

(80

)

 

 

 

 

 

 

(80

)

Deferred financing fees

 

 

 

 

 

(148

)

(94

)

 

(242

)

Due to/from affiliates

 

647

 

(609

)

(313

)

69

 

3,462

 

(3,256

)

 

 

Net cash provided by/(used in) financing activities

 

920

 

(609

)

(313

)

69

 

1,319

 

(15,503

)

 

(14,117

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

 

2

 

(58

)

 

247

 

 

191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and equivalents

 

 

 

 

 

32

 

(2,779

)

 

(2,747

)

Cash and equivalents at beginning of period

 

 

 

1

 

1

 

241

 

13,422

 

 

13,665

 

Cash and equivalents at end of period

 

$

 

$

 

$

1

 

$

1

 

$

273

 

$

10,643

 

$

 

$

10,918

 

 

28



 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Business Overview

 

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements included elsewhere in this document, as well as the year-end Consolidated Financial Statements and Management’s Discussion and Analysis included in the Company’s Annual Report on Form 10-K for the year ended December 27, 2002.

 

The Company is an international producer of value-added aluminum, steel, vinyl and fiberglass fabricated products, with facilities located in all major regions of the United States ("U.S."), as well as in the United Kingdom (“U.K.”), The Netherlands and France. The Company's manufacturing and distribution network consists of 38 strategically located facilities, of which 32 are located in the U.S. and 6 are located in Europe. The Company sells its products principally to two markets, the building and construction market and the transportation market. The Company's core products include specialty coated coils, aluminum recreational vehicle (“RV”) sidewalls, RV doors, farm and agricultural panels, roofing accessories, metal and vinyl raincarrying systems, soffit and fascia systems, and vinyl replacement windows. The Company’s customers include original equipment manufacturers (“OEMs”) such as RV, commercial panel and transportation industry manufacturers; rural contractors; home centers; manufactured housing producers; distributors; industrial and architectural contractors; and home improvement contractors.

 

The Company's Condensed Consolidated Statements of Earnings and Condensed Consolidated Statements of Cash Flows present the results of the Company for the six months ended June 28, 2002, five months ended May 23, 2003 and one month ended June 27, 2003.  2003 results are presented divided into the predecessor period and successor period as a result of the 2003 Shareholder Transaction described in Note 2 to the Condensed Consolidated Financial Statements.  The discussion of the results of operations below combines the predecessor two months ended May 23, 2003 and the successor one month ended June 27, 2003 for comparison to the predecessor three months ended June 28, 2002, and combines the predecessor five months ended May 23, 2003 and the successor one month ended June 27, 2003 for comparison to the predecessor six months ended June 28, 2002.

 

The Company achieved record net sales in the three months and six months ended June 27, 2003.  In connection with the 2003 Shareholder Transaction (see Note 2 to the Condensed Consolidated Financial Statements) and subsequent issuance of senior subordinated notes (see Note 12 to the Condensed Consolidated Financial Statements), accounting principles generally accepted in the U.S. required that the purchase price paid in excess of the book value of the Company's equity acquired be allocated to the assets and liabilities of the Company based upon estimates of their fair values.  This application of purchase accounting resulted in increasing the value of inventory at the time of the 2003 Shareholder Transaction by $4.0 million.  This inventory was sold in June 2003 and accordingly $4.0 million was recorded as cost of goods sold.  This amount does not reflect costs incurred or amounts paid by the Company to prepare inventory for sale and accordingly had no affect on the cash flows from operations of the Company.

 

Results of Operations

 

Quarter Ended June 27, 2003 as Compared to Quarter Ended June 28, 2002

 

The following table sets forth the Company’s Statements of Earnings Data expressed as a percentage of net sales:

 

 

 

Quarters ended

 

 

 

June 27,
2003(1)

 

June 28,
2002

 

Statements of Earnings Data:

 

 

 

 

 

Net sales

 

100.0

%

100.0

%

Costs and expenses:

 

 

 

 

 

Cost of goods sold

 

80.7

 

77.4

 

Selling and general

 

9.8

 

9.6

 

Depreciation and amortization

 

2.1

 

1.8

 

Earnings from operations

 

7.4

 

11.2

 

Interest expense, net

 

(2.9

)

(3.4

)

Other income, net

 

0.1

 

0.4

 

Earnings before income taxes

 

4.6

 

8.2

 

Provision for income taxes

 

1.7

 

3.2

 

Net earnings

 

2.9

%

5.0

%

 

29



 

 

 

Net Sales
Quarters ended

 

Earnings from Operations
Quarters ended

 

In thousands

 

June 27,
2003

 

June 28,
2002

 

Increase/
(decrease)

 

June 27,
2003(1)

 

June 28,
2002

 

Increase/
(decrease)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

127,345

 

$

121,578

 

4.7

%

$

9,029

 

$

14,232

 

(36.6

)%

Europe

 

64,306

 

50,090

 

28.4

%

5,040

 

5,152

 

(2.2

)%

Totals

 

$

191,651

 

$

171,668

 

11.6

%

$

14,069

 

$

19,384

 

(27.4

)%


(1) In connection with the 2003 Shareholder Transaction (see Note 2 to the Condensed Consolidated Financial Statements) and subsequent issuance of senior subordinated notes (see Note 12 to the Condensed Consolidated Financial Statements), accounting principles generally accepted in the U.S. required that the purchase price paid in excess of the book value of the Company's equity acquired be allocated to the assets and liabilities of the Company based upon estimates of their fair values.  This application of purchase accounting resulted in increasing the value of inventory at the time of the 2003 Shareholder Transaction by $4.0 million.  This inventory was sold in June 2003 and accordingly $4.0 million was recorded as cost of goods sold.  This amount does not reflect costs incurred or amounts paid by the Company to prepare inventory for sale and accordingly had no affect on the cash flows from operations of the Company for the six months ended June 27, 2003.

 

 

Net Sales. For the quarter ended June 27, 2003, net sales were $191.7 million compared to $171.7 million for the quarter ended June 28, 2002, an increase of $20.0 million or 11.6%. Net sales in the U.S. increased 4.7% to $127.3 million for the quarter ended June 27, 2003, from $121.6 million for the quarter ended June 28, 2002. This increase in net sales in the U.S. primarily resulted from higher sales to home centers, distributors, industrial and architectural contractors, rural contractors and home improvement contractors, partially offset by lower sales to RV manufacturers. For the quarter ended June 27, 2003, compared to the quarter ended June 28, 2002, sales of rain-carrying products to home centers, distributors and home improvement contractors increased $4.5 million; sales of fabricated metal roofing and siding to industrial and architectural contractors, home centers and rural contractors increased $3.1 million; and sales of lattice/awning products to home improvement contractors increased $0.9 million. Partially offsetting these increases was a decrease in sales to RV manufacturers of $2.9 million.

 

Net sales in Europe increased 28.4% to $64.3 million for the quarter ended June 27, 2003, from $50.1 million for the quarter ended June 28, 2002. Approximately $10.0 million of this increase was due to the strengthening of the British Pound and Euro against the U.S. Dollar.  The balance of the increase in net sales in Europe primarily resulted from higher sales to the European transportation industry, European RV manufacturers and U.K. home centers. These increases were partially offset by lower sales of painted aluminum and steel coil to OEMs (excluding RV manufacturers). For the quarter ended June 27, 2003, compared to the quarter ended June 28, 2002, excluding currency impact, sales from France to the European transportation industry increased $2.6 million; sales of painted aluminum coil and doors and windows to European RV manufacturers increased $1.0 million; sales of residential doors to home centers in the U.K. increased $1.1 million; and sales of bath enclosures and shower doors to customers in the U.K. increased $0.5 million. Partially offsetting these increases was a decrease in sales of painted aluminum and steel coil to OEMs (excluding RV manufacturers) of $0.5 million.

 

Cost of goods sold. Cost of goods sold, as a percentage of net sales, increased to 80.7% for the quarter ended June 27, 2003, from 77.4% for the quarter ended June 28, 2002. This increase is primarily attributable to the $4.0 million write-up in inventories resulting from the application of the purchase method of accounting associated with the 2003 Shareholder Transaction (see Note 2 to the Condensed Consolidated Financial Statements). The $4.0 million write-up was recognized in cost of goods sold in June 2003. The remaining increase is largely attributable to higher aluminum and steel costs, partially offset by higher aluminum and steel selling prices, in addition to higher labor and utility

 

30



 

costs. Higher labor costs resulted primarily from new product and product expansion initiatives undertaken over the past twelve months.

 

Selling and general. Selling and general expenses were $18.7 million in the quarter ended June 27, 2003, compared to $16.4 million in the quarter ended June 28, 2002. This increase largely resulted from higher compensation expense due to bonus payments of $1.4 million associated with the 2003 Shareholder Transaction (see Note 2 to the Condensed Consolidated Financial Statements), together with  higher net sales in the quarter ended June 27, 2003, compared to the quarter ended June 28, 2002.

 

Depreciation and amortization. Depreciation and amortization was $4.1 million for the quarter ended June 27, 2003, compared to $3.0 million for the quarter ended June 28, 2002. This increase primarily resulted from a stronger Euro and British Pound compared to the U.S. Dollar in 2003, in addition to depreciation on capital expenditures that occurred in the last six months of 2002 and the first six months of 2003 and on the increase in basis that resulted from the 2003 Shareholder Transaction.

 

Earnings from operations. Earnings from operations of  $14.1 million for the quarter ended June 27, 2003 reflect $4.0 million charged to expense resulting from the application of purchase accounting.  Earnings from operations declined for the reasons stated above and also due to advisory fees of approximately $0.4 million payable to CVC Management LLC (see Note 11 to the Condensed Consolidated Financial Statements).

 

Earnings from operations in the U.S. decreased to $9.0 million for the quarter ended June 27, 2003, from $14.2 million for the quarter ended June 28, 2002. U.S. earnings from operations in the second quarter of 2003 were reduced by $2.7 million of the $4.0 million write-up in inventories, in addition to $0.9 million of the $1.4 million of additional compensation expense. The remaining decline in U.S. earnings from operations compared to prior year was largely attributable to the decline in sales to U.S. RV manufacturers, along with higher labor, freight and utility costs.

 

Earnings from operations in Europe decreased to $5.0 million for the quarter ended June 27, 2003, from $5.2 million for the quarter ended June 28, 2002. European earnings from operations in the second quarter of 2003 were reduced by $1.3 million of the $4.0 million write-up in inventories, in addition to $0.5 million of the $1.4 million of additional compensation expense. Substantially offsetting the negative impact of these items on earnings from operations in Europe were higher sales from the European Fabrication segment, improved margins on sales from the European Roll Coating segment and the strengthening of the Euro and British Pound against the U.S. Dollar. The strengthening of the Euro and British Pound against the U.S. Dollar increased European earnings from operations by $1.0 million in the quarter ended June 27, 2003, compared to the quarter ended June 28, 2002.

 

Interest expense, net. Net interest expense was $5.5 million for the quarter ended June 27, 2003, compared to $5.9 million for the quarter ended June 28, 2002. The decline in net interest expense is a result of lower outstanding indebtedness and lower interest rates in the quarter ended June 27, 2003, compared to the quarter ended June 28, 2002.

 

Other income, net. Other income decreased to $0.3 million for the quarter ended June 27, 2003, from $0.6 million for the quarter ended June 28, 2002. This decrease resulted from lower foreign exchange gains on unhedged assets or liabilities recognized in the quarter ended June 27, 2003, compared to the quarter ended June 28, 2002.

 

31



 

Provision for income taxes. The income tax provision for the period is based on the effective tax rate expected to be applicable for the full year. The effective rate for the provision for income taxes decreased to 36.7% from 39.4% for the quarters ended June 27, 2003 and June 28, 2002, respectively. The decrease in the effective tax rate is primarily due to a greater proportion of earnings in 2003 in Europe, where the Company has a lower effective tax rate.

 

Six Months Ended June 27, 2003 as Compared to Six Months Ended June 28, 2002

 

The following table sets forth the Company’s Statements of Earnings Data expressed as a percentage of net sales:

 

 

 

Six months ended

 

 

 

June 27,
2003(1)

 

June 28,
2002

 

Statements of Earnings Data:

 

 

 

 

 

Net sales

 

100.0

%

100.0

%

Costs and expenses:

 

 

 

 

 

Cost of goods sold

 

80.6

 

78.5

 

Selling and general

 

10.2

 

10.2

 

Depreciation and amortization

 

2.3

 

2.1

 

Earnings from operations

 

6.9

 

9.2

 

Interest expense, net

 

(3.2

)

(3.7

)

Other income, net

 

0.1

 

0.2

 

Earnings before income taxes

 

3.8

 

5.7

 

Provision for income taxes

 

1.4

 

2.2

 

Net earnings

 

2.4

%

3.5

%

 

 

 

Net Sales
Six months ended

 

Earnings from Operations
Six months ended

 

In thousands

 

June 27,
2003

 

June 28,
2002

 

Increase/
(decrease)

 

June 27,
2003(1)

 

June 28,
2002

 

Increase/
(decrease)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

213,287

 

$

206,893

 

3.1

%

$

11,070

 

$

18,159

 

(39.0

)%

Europe

 

124,522

 

97,735

 

27.4

%

12,256

 

9,954

 

23.1

%

Totals

 

$

337,809

 

$

304,628

 

10.9

%

$

23,326

 

$

28,113

 

(17.0

)%


(1) In connection with the 2003 Shareholder Transaction (see Note 2 to the Condensed Consolidated Financial Statements) and subsequent issuance of senior subordinated notes (see Note 12 to the Condensed Consolidated Financial Statements), accounting principles generally accepted in the U.S.  required that the purchase price paid in excess of the book value of the equity acquired be allocated to the assets and liabilities of the Company based upon their fair values. This application of purchase accounting resulted in increasing the value of inventory at the time of the 2003 Shareholder Transaction by $4.0 million.  This inventory was sold in June 2003 and accordingly $4.0 million was recorded as cost of goods sold.  This amount does not reflect costs incurred or amounts paid by the Company to prepare inventory for sale and accordingly had no affect on the cash flows from operations of the Company.

 

 

Net Sales. For the six months ended June 27, 2003, net sales were $337.8 million compared to $304.6 million for the six months ended June 28, 2002, an increase of $33.2 million or 10.9%. Net sales in the U.S. increased 3.1% to $213.3 million for the six months ended June 27, 2003, from $206.9 million for the six months ended June 28, 2002. This increase in net sales in the U.S. primarily resulted from higher sales to home centers, distributors, industrial and architectural contractors and home improvement contractors, partially offset by lower sales to RV manufacturers and rural contractors. For the six months ended June 27, 2003, compared to the six months ended June 28, 2002, sales of rain-carrying products to home centers, distributors and home improvement contractors increased $5.5 million; sales of fabricated metal roofing and siding to industrial and architectural contractors and home centers increased $2.8 million; sales of vinyl windows and lattice/awning products to home improvement contractors increased $2.5 million.

 

32



 

Partially offsetting these increases were decreases in sales to RV manufacturers of $3.2 million and to rural contractors of $2.1 million.

 

Net sales in Europe increased 27.4% to $124.5 million for the six months ended June 27, 2003, from $97.7 million for the six months ended June 28, 2002. Approximately $19.3 million of this increase was due to the strengthening of the British Pound and the Euro against the U.S. Dollar.  The balance of the increase in net sales in Europe primarily resulted from higher sales to the European transportation industry, European RV manufacturers and U.K. home centers. These increases were partially offset by lower sales of painted aluminum and steel coil to OEMs (excluding RV manufacturers). For the six months ended June 27, 2003, compared to the six months ended June 28, 2002, excluding currency impact, sales from France to the European transportation industry increased $5.0 million; sales of painted aluminum coil and doors and windows to European RV manufacturers increased $2.2 million; sales of residential doors to home centers in the U.K. increased $2.3 million; and sales of bath enclosures and shower doors to customers in the U.K. increased $1.1 million. Partially offsetting these increases was a decrease in sales of painted aluminum and steel coil to OEMs (excluding RV manufacturers) of $2.4 million.

 

Cost of goods sold. Cost of goods sold, as a percentage of net sales, increased to 80.6% for the six months ended June 27, 2003, from 78.5% for the six months ended June 28, 2002. This increase is primarily attributable to the $4.0 million write-up in inventories resulting from the application of the purchase method of accounting associated with the 2003 Shareholder Transaction (see Note 2 to the Condensed Consolidated Financial Statements). The $4.0 million write-up was recognized in cost of goods sold in June 2003. The remaining increase is largely attributable to higher steel costs, partially offset by higher steel selling prices, in addition to higher labor, freight and utility costs. Higher labor costs resulted primarily from new product and product expansion initiatives undertaken over the past twelve months.

 

Selling and general. Selling and general expenses were $34.3 million in the six months ended June 27, 2003, compared to $30.9 million in the six months ended June 28, 2002. This increase largely resulted from higher compensation expense due to bonus payments of $1.4 million associated with the 2003 Shareholder Transaction (see Note 2 to the Condensed Consolidated Financial Statements), together with higher net sales in the six months ended June 27, 2003, compared to the six months ended June 28, 2002.

 

Depreciation and amortization. Depreciation and amortization was $7.8 million for the six months ended June 27, 2003, compared to $6.4 million for the six months ended June 28, 2002. This increase primarily resulted from a stronger Euro and British Pound compared to the U.S. Dollar in 2003, in addition to depreciation on capital expenditures that occurred in the last six months of 2002 and the first six months of 2003 and on the increase in basis that resulted from the 2003 Shareholder Transaction.

 

Earnings from operations. Earnings from operations of $23.3 million for the six months ended June 27, 2003 reflect $4.0 million  charged to expense resulting from the application of purchase accounting.

 

33



 

Earnings from operations declined for the reasons stated above and also due to advisory fees of approximately $0.4 million payable to CVC Management LLC (see Note 11 to the Condensed Consolidated Financial Statements).

 

Earnings from operations in the U.S. decreased to $11.1 million for the six months ended June 27, 2003, from $18.2 million for the six months ended June 28, 2002. U.S. earnings from operations in 2003 were reduced by $2.7 million of the $4.0 million write-up in inventories, in addition to $0.9 million of the $1.4 million additional compensation expense. The remaining decline in U.S. earnings from operations compared to prior year was largely attributable to the decline in sales to U.S. RV manufacturers and rural contractors, along with higher labor, freight and utility costs.

 

Earnings from operations in Europe increased to $12.3 million for the six months ended June 27, 2003, from $10.0 million for the six months ended June 28, 2002. European earnings from operations in 2003 were reduced by $1.3 million of the $4.0 million write-up in inventories, in addition to $0.5 million of the $1.4 million additional compensation expense. The increase in earnings from operations in Europe is largely attributable to higher sales from the European Fabrication segment, higher sales from the European Roll Coating to RV manufacturers, improved margins on sales from the European Roll Coating segment and the strengthening of the Euro and British Pound against the U.S. Dollar. The strengthening of the Euro and British Pound against the U.S. Dollar increased European earnings from operations by $2.3 million in the six months ended June 27, 2003, compared to the six months ended June 28, 2002.

 

Interest expense, net. Net interest expense was $11.0 million for the six months ended June 27, 2003, compared to $11.2 million for the six months ended June 28, 2002. The decline in net interest expense as a result of lower outstanding indebtedness was substantially offset by an increase in interest expense recognized on the Company’s derivatives.

 

Other income, net. Other income remained unchanged at $0.5 million for the six months ended June 27, 2003, compared to the six months ended June 28, 2002.

 

Provision for income taxes. The income tax provision for the period is based on the effective tax rate expected to be applicable for the full year. The effective rate for the provision for income taxes decreased to 37.5% from 38.9% for the six months ended June 27, 2003 and June 28, 2002, respectively. The decrease in the effective tax rate is primarily due to a greater proportion of earnings in 2003 in Europe, where the Company has a lower effective tax rate.

 

Liquidity and Capital Resources

 

Liquidity. The Company’s primary liquidity needs arise from debt service incurred in connection with acquisitions and the funding of capital expenditures. The Company’s liquidity sources at June 27, 2003 include $10.9 million in cash and cash equivalents and an undrawn amount of $39.0 million under its revolving credit facility, subject to borrowing base limitations. At June 27, 2003, the entire $39.0 million of the undrawn amount was available.

 

As discussed in Note 12 to the Condensed Consolidated Financial Statements, on July 10, 2003, the Company commenced an offer to purchase and solicitation of consents for the Company’s outstanding $135.0 million 11.25% senior subordinated notes due 2006 (“the Notes”) subject to the receipt of a consent from the holders of a majority of the principal amount thereof. On August 8, 2003, the Company purchased approximately $112.9 million of the Notes that had been validly tendered, for

 

34



 

approximately $120.4 million, including interest. Following the purchase of the Notes accepted in the tender offer, approximately $22.1 million in aggregate principal amount of the Notes remained outstanding. The Company currently intends to call any Notes that remain outstanding effective on October 1, 2003, at which time the redemption price will be 101.875% of principal amount plus accrued interest. The Company financed the purchase of the Notes through the issuance on August 6, 2003 of $200.0 million 8.5% senior subordinated notes due 2011 (the "New Notes"). The remaining proceeds from the issuance of the $200.0 million of New Notes was used to cover fees and expenses from the issuance of the New Notes and to repay a portion of the existing indebtedness under the revolving credit facility. Immediately following the issuance of the New Notes, purchase of the Notes accepted in the tender offer and repayment of a portion of the existing indebtedness under the revolving credit facility, the Company had approximately $103.0 million of borrowing availability under its revolving credit facility, $22.6 million of which is expected to be used to redeem any Notes that remain outstanding on October 1, 2003. The Company may potentially amend its credit agreement to establish a term loan of up to $45.0 million, a portion of which would be used to fund a potential acquisition for which the Company has been in discussions, from time to time. The Company can give no assurance that this potential acquisition or the establishment of a term loan under its credit agreement will occur. In addition, in the future, the Company may pay a dividend to its shareholders or repurchase some of its outstanding common stock, subject to restrictions that may be contained in agreements governing its existing or future indebtedness. Under the terms of the indenture governing the New Notes, any such dividend or stock repurchase could be up to $70.0 million, subject to compliance with a cash flow ratio test.

 

The Company’s leveraged financial position requires that a substantial portion of the Company’s cash flow from operations be used to pay interest on the Notes and the New Notes, principal and interest under the Company’s credit agreement and other indebtedness. Significant increases in the floating interest rates on the Company’s revolving credit facility would result in increased debt service requirements, which may reduce the funds available for capital expenditures and other operational needs. In addition, the Company’s leveraged position may impede its ability to obtain financing in the future for working capital, capital expenditures and general corporate purposes. Further, the Company’s leveraged position may make it more vulnerable to economic downturns, may limit its ability to withstand competitive pressures, and may limit its ability to comply with restrictive financial covenants required under its credit agreement.

 

The Company’s primary source of liquidity is funds generated from operations, which are supplemented by borrowings under the credit agreement. Net cash (used in) provided by operating activities for the six months ended June 27, 2003 and June 28, 2002, were $(0.1) million and $0.5 million, respectively. The decrease primarily resulted from a larger increase in trade accounts receivable in the first six months of 2003, than in the first six months of 2002, partially offset by a larger increase in income taxes payable in the first six months of 2003, than in the first six months of 2002. The larger increase in trade accounts receivable is due to higher sales volume in the first six months of 2003.

 

Net cash used in investing activities increased to $5.7 million for the six months ended June 27, 2003, from $2.5 million for the six months ended June 28, 2002. This increase is the result of higher capital expenditures in the six months ended June 27, 2003, compared to the six months ended June 28, 2002.

 

Net cash provided by financing activities increased to $4.1 million for the six months ended June 27, 2003, from $3.6 million for the six months ended June 28, 2002. Cash provided by financing activities typically comes from borrowings on the credit agreement. Borrowings on the credit agreement were $7.1 million in the six months ended June 27, 2003, compared to $1.1 million in the six months ended June 28, 2002. During the six months ended June 27, 2003, the Company repurchased common stock in the amount of $2.6 million and issued common stock from held treasury shares in the amount of $0.4 million.

 

The above-noted sources are expected to provide the liquidity required, if necessary, to supplement cash from operations, although no assurance to that effect can be given.

 

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Capital Expenditures. The Company’s capital expenditures were $5.7 million and $2.6 million for the six months ended June 27, 2003 and June 28, 2002, respectively. Capital expenditures in 2003 include approximately $0.6 million for improvements to the paintlines in Helena, Arkansas; Corby, England; and Roermond, The Netherlands; and approximately $3.4 million for several projects related to business expansion. Capital expenditures in 2002 included approximately $0.3 million for improvements to the paintlines in Helena, Arkansas; Corby, England; and Roermond, The Netherlands; and approximately $0.4 million for several projects related to business expansion. The balance of capital expenditures in both periods related to purchases and upgrades of fabricating equipment, transportation and material moving equipment, and information systems.

 

The Company has made and will continue to make capital expenditures to comply with environmental laws. The Company estimates that its environmental capital expenditures for 2003 will approximate $900.0 thousand.

 

Working Capital Management. Working capital was $107.4 million as of June 27, 2003, compared to $90.5 million as of December 27, 2002. The increase in working capital is largely attributable to seasonal demands of the business that result in substantial increases from year end in trade accounts receivable and inventories, partially offset by an increase in trade accounts payable.

 

Environmental Matters

 

The Company’s exposure to environmental matters has not changed significantly from the year ended December 27, 2002. For detailed information regarding environmental matters, see “Management’s Discussion and Analysis – Risk Management” set forth in the Company’s Annual Report on Form 10-K for the year ended December 27, 2002.

 

Note Regarding Forward-Looking Statements:  The Management’s Discussion and Analysis and other sections of this Form 10-Q may contain forward-looking statements that are based on current expectations, estimates and projections about the industries in which the Company operates, and management’s beliefs and assumptions. Such forward-looking statements include terminology such as "may", "will", "should", “expects,” “anticipates,” “intends,” “plans,” “believes,” "contemplates", "projects", "predicts", “estimates,” or variations of such words and similar expressions regarding beliefs, plans, expectations or intentions regarding the future. Forward-looking statements in this report include, but are not limited to: (1) statements regarding the Company’s expectation that its sources of liquidity will provide the liquidity required, if necessary, to supplement lower cash flows from operations; (2) statements regarding management’s expectation that the outcome of legal proceedings and claims that have arisen in the ordinary course of business would not reasonably be expected to have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company and its subsidiaries taken as a whole; and (3) statements regarding management’s belief that the Company’s potential share of the estimated aggregate liability for the costs of remedial actions and related costs and expenses at various hazardous waste disposal sites in which the Company has been named as a defendant in lawsuits or as a potentially responsible party are not material and that the reasonably probable outcome of these matters will not materially exceed established reserves and will not have a material impact on the future financial position, net earnings or cash flows of the Company. These forward-looking statements are based on a number of assumptions that could ultimately prove inaccurate, and, therefore, there can be no assurance that they will prove to be accurate. All such forward-looking

 

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statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Important factors that could cause future financial performance to differ materially and significantly from past results and from those expressed or implied in this document include, without limitation, the risks of acquisition of businesses (including limited knowledge of the businesses acquired and misrepresentations by sellers), changes in business strategy or development plans, the cyclical demand for the Company’s products, the supply and/or price of aluminum and other raw materials, currency exchange rate fluctuations, environmental regulations, availability of financing, competition, reliance on key management personnel, ability to manage growth, loss of customers, and a variety of other factors. For further information on these and other risks, see the “Risk Factors” section of Item 1 of the Company’s Annual Report on Form 10-K for the year ended December 27, 2002, as well as the Company’s other filings with the Securities and Exchange Commission. The Company assumes no obligation to update publicly its forward-looking statements, whether as a result of new information, future events or otherwise.

 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

 

There have been no material changes in the information provided under Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” set forth in the Company’s 10-K for the year ended December 27, 2002.

 

Item 4.  Controls and Procedures

 

Within 90 days prior to the filing of the Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chairman and Chief Executive Officer along with the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, the Company’s Chief Executive Officer  along with the Company’s Chief Financial Officer concluded that as of the evaluation date, the Company’s disclosure controls and procedures (1) are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings and (2) are adequate to ensure that information required to be disclosed by the Company in the reports filed or submitted by the Company under the Exchange Act is recorded, processed and summarized and reported within the time periods specified in the SEC’s rules and forms. Further, the Company’s Chairman and Chief Executive Officer, along with the Company’s Chief Financial Officer, are not aware of any significant changes in disclosure controls and procedures subsequent to the evaluation date.

 

Part II - Other Information

 

Item 1.  Legal Proceedings.

 

The Company is subject to legal proceedings and claims that have arisen in the ordinary course of business. Although occasional adverse decisions or settlements may occur, it is the opinion of the Company’s management, based upon information available at this time, that the expected outcome of these matters, individually or in the aggregate, would not reasonably be expected to have a material

 

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adverse effect on the consolidated financial position, results of operations or cash flows of the Company and its subsidiaries taken as a whole.

 

Item 2.  Changes in Securities and Use of Proceeds

 

Common Stock

 

On June 12, 2003, the Company issued an aggregate of 9,569.6 restricted shares of its Class A Common Stock to certain management employees, including its executive officers Messrs. Smith, Lewis and Vansant, under its 2003 Equity Compensation Plan.

 

On June 12, 2003, the Company issued 883.75 shares of its Class A Common Stock to Citigroup Venture Capital Equity Partners, L.P., an affiliate of the Company, in a private placement for a purchase price of $353,500.

 

Options to Purchase Common Stock

 

On June 12, 2003, the Company granted to certain management and other key employees options to purchase an aggregate of 25,750 shares of its Class A Common Stock, at exercise prices of $400 per share, under its 2003 Equity Compensation Plan.

 

The sale and issuance of securities in the transaction described above were exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering, where the purchasers were sophisticated investors who represented their intention to acquire securities for investment only and not with a view to distribution and received or had access to adequate information about the Company, or in reliance on Rule 701 promulgated under the Securities Act.

 

Item 3.  Defaults Upon Senior Securities.

 

None.

 

Item 4.  Submission of Matters to a Vote of Security Holders.

 

On June 12, 2003, a written consent of stockholders of the Company approved various executive compensation and employee benefit arrangements made by the Company. The written consent was executed by stockholders holding of record approximately 452,736.67 shares out of a total of 482,042.45 shares of the Company's common stock outstanding on the date of the written consent.

 

Item 5.  Other Information.

 

None.

 

Item 6.  Exhibits and Reports on Form 8-K

 

(a)                                  Exhibits:

 

The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.

 

(b)                                 Reports on Form 8-K:

 

On May 12, 2003, the Company filed a report on Form 8-K relating to its financial information for the quarter ended March 28, 2003, as presented in a press release dated May 5, 2003.

 

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SIGNATURES

 

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

 

EURAMAX INTERNATIONAL, INC.

 

Signature

 

Title

 

Date

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ J. DAVID SMITH

 

Chairman, Chief Executive Officer

 

August 11, 2003

J. David Smith

and President

 

 

 

 

 

 

 

 

 

 

 

 

 

/s/ R. SCOTT VANSANT

 

Chief Financial Officer and Secretary

 

August 11, 2003

R. Scott Vansant

 

 

 

 

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Exhibit Index

 

Exhibit
Number

 

Description

10.1

 

Stock Purchase Agreement by and among Citigroup Venture Capital Equity Partners, L.P., CVC Executive Fund LLC, CVC/SSB Employee Fund, L.P., Euramax International, Inc. and the Stockholders of Euramax International, Inc. noted therein, dated as of April 15, 2003

10.2

 

Securities Holders Agreement by and among Euramax International, Inc., Citigroup Venture Capital Equity Partners, L.P., CVC Executive Fund LLC, CVC/SSB Employee Fund, L.P., Citicorp Venture Capital Ltd., The Continuing Investors identified therein and The Management Investors identified therein dated as of April 15, 2003

10.3

 

Advisory Agreement dated as of April 15, 2003 by and among Euramax International, Inc. and CVC Management LLC

10.4

 

Amendment No. 1, dated as of April 15, 2003, to the Executive Employment Agreement, dated as of October 1, 1999, by and between Euramax International, Inc. and J. David Smith

10.5

 

Euramax International, Inc. 2003 Equity Compensation Plan

10.6

 

Restricted Stock Agreement dated April 15, 2003 between Euramax International, Inc. and J. David Smith

10.7

 

Restricted Stock Agreement dated April 15, 2003 between Euramax International, Inc. and Mitchell B. Lewis

10.8

 

Restricted Stock Agreement dated April 15, 2003 between Euramax International, Inc. and R. Scott Vansant

10.9

 

Form Restricted Stock Agreement for the Euramax International, Inc. 2003 Equity Compensation Plan

10.10

 

Form Non-Qualified Stock Option Agreement for the for the Euramax International, Inc. 2003 Equity Compensation Plan

10.11

 

Amended and Restated Registration Rights Agreement dated as of June 12, 2003 by and among Euramax International, Inc., Citicorp Venture Capital Ltd., Citigroup Venture Capital Equity Partners, L.P., CVC Executive Fund LLC and CVC/SSB Employee Fund, L.P., and other stockholders of Euramax International, Inc. named therein

10.12

 

Letter Agreement dated April 15, 2003 between R. Scott Vansant and Euramax International, Inc.

10.13

 

Letter Agreement dated April 15, 2003 between Mitchell B. Lewis and Euramax International, Inc.

10.14

 

Euramax International, Inc.  Supplemental Executive Retirement Plan dated April 15, 2003 for J. David Smith

10.15

 

Euramax International, Inc.  Supplemental Executive Retirement Plan dated April 15, 2003 for Mitchell B. Lewis and R. Scott Vansant

10.16

 

Amendment No. 1 dated April 14, 2003 to the Second Amended and Restated Credit Agreement among Euramax International, Inc and its subsidiaries, BNP Paribas (as Agent and Lender), and the Lenders named therein

10.17

 

Amendment No. 2 and Consent dated May 15, 2003 to the Second Amended and Restated Credit Agreement among Euramax International, Inc. and its subsidiaries, BNP Paribas (as Agent and Lender), and the Lenders named therein

31.1

 

Certification of Chief Executive Office pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

 

Certification of Chief Financial Office pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

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