UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 24, 2004

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)

 

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.

x Yes  o No

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

o Yes  x No

As of November 8, 2004, Registrant had 322,815.17 shares of Class A common stock outstanding and no shares of Class B common stock outstanding.

Part I—Financial Information

Item 1.   Financial Statements

Euramax International, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(Thousands of U.S. Dollars)
(Unaudited)

		Successor					Successor					Successor					Predecessor					Successor
		Three months					Three months					Nine months					Five months					Four months
		ended					ended					ended					ended					ended
		September 24,					September 26,					September 24,					May 23,					September 26,
		2004					2003					2004					2003					2003
Net sales			$	254,212				$	201,117				$	700,102				$	260,615				$	278,311
Costs and expenses:
Cost of goods sold			200,837					160,160					551,443					208,420					224,064
Selling and general			21,738					18,423					63,013					26,153					26,582
Depreciation and amortization			5,342					4,417					14,307					6,276					5,988
Earnings from operations			26,295					18,117					71,339					19,766					21,677
Interest expense, net			(6,092		)			(5,414		)			(17,871		)			(9,126		)			(7,257		)
Other (expense) income, net			(251		)			(561		)			1,105					506					(587		)
Earnings before income taxes			19,952					12,142					54,573					11,146					13,833
Provision for income taxes			7,116					4,512					19,379					4,254					5,074
Net earnings			$	12,836				$	7,630				$	35,194				$	6,892				$	8,759

 

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)

		Successor
		September 24, 2004					December 26, 2003
ASSETS
Current assets:
Cash and cash equivalents			$	40,334				$	48,227
Accounts receivable, net			148,918					121,689
Inventories			120,028					89,543
Other current assets			9,504					8,188
Total current assets			318,784					267,647
Property, plant and equipment, net			155,452					141,437
Goodwill, net			137,706					176,394
Intangible assets, net			44,492					2,492
Deferred income taxes			4,834					3,595
Other assets			15,116					17,264
			$	676,384				$	608,829
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Cash overdrafts			$	838				$	436
Accounts payable			101,682					91,689
Accrued expenses and other current liabilities			56,882					51,239
Current maturities of long-term debt			8,642					7,487
Total current liabilities			168,044					150,851
Long-term debt, less current maturities			293,878					231,807
Deferred income taxes			50,846					29,282
Other liabilities			28,973					26,939
Total liabilities			541,741					438,879
Shareholders’ equity:
Common stock			500					500
Additional paid-in capital			155,495					155,495
Treasury stock			(69,836		)			(1,964		)
Restricted stock			(2,807		)			(3,381		)
Retained earnings			49,950					14,756
Accumulated other comprehensive income			1,341					4,544
Total shareholders’ equity			134,643					169,950
			$	676,384				$	608,829

 

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)

		Successor					Predecessor					Successor
		Nine months					Five months					Four months
		ended					ended					ended
		September 24,					May 23,					September 26,
		2004					2003					2003
Net cash provided by (used in) operating activities			$	6,687				$	(12,045	)			$	35,829
Cash flows from investing activities:
Proceeds from sales of assets			1,042					35					281
Purchases of businesses			(1,287		)			—					—
Capital expenditures			(7,303		)			(4,944		)			(2,919		)
Net cash used in investing activities			(7,548		)			(4,909		)			(2,638		)
Cash flows from financing activities:
Net borrowings (repayments) on revolving credit facility			67,663					18,264					(81,679		)
Issuance of long-term debt			—					—					200,000
Repayment of long-term debt, including premium			(4,370		)			—					(115,986		)
Changes in cash overdrafts			402					2,603					(3,769		)
Expenses relating to the 2003 Stock Transaction			(664		)			—					—
Issuance of common stock from shares held in treasury			—					—					353
Purchase of treasury stock			(67,872		)			(2,556		)			(80		)
Deferred finance fees			(891		)			(116		)			(8,363		)
Net cash (used in) provided by financing activities			(5,732		)			18,195					(9,524		)
Effect of exchange rate changes on cash			(1,300		)			778					(313		)
Net (decrease) increase in cash and cash equivalents			(7,893		)			2,019					23,354
Cash and cash equivalents at beginning of period			48,227					11,646					13,665
Cash and cash equivalents at end of period			$	40,334				$	13,665				$	37,019

 

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

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” and “Euramax” refers to Euramax International, Inc. 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 information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these statements include all adjustments considered necessary for a fair presentation of all interim periods reported herein. All adjustments are of a normal recurring nature, except for the 2003 Stock Transaction described in Note 2, unless otherwise disclosed. Management believes that the disclosures made are adequate for a fair presentation of the Company’s 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 26, 2003.

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 September 24, 2004, are not necessarily indicative of future results that may be expected for the year ending December 31, 2004.

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

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

2. 2003 Stock Transaction:

On April 15, 2003, Citigroup Venture Capital Equity Partners, L.P. (“CVCEP”) and Citigroup 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 Stock Transaction”). The 2003 Stock Transaction was completed on June 12, 2003, with CVCEP purchasing 265,762.48 shares of the Company’s Class A common stock. For accounting purposes, the Company has used May 23, 2003, its May month-end, as the transaction date. 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 Stock Transaction, CVC owned approximately 34.5% of the issued and outstanding shares of the Company. CVCEP is ultimately controlled by Citigroup, Inc. through limited and general partnership interests owned by its subsidiaries. CVC Europe is a group of limited partnerships in which Citigroup, Inc. owns a minority interest, but does not have management or control rights.

5

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Euramax International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Thousands of U.S. Dollars)
(Unaudited)

2. 2003 Stock Transaction: (continued)

The change in ownership, together with the Company’s subsequent issuance of senior subordinated notes, 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 preliminary allocation was based upon estimates by management of the fair market values of identifiable assets and liabilities, with the remainder allocated to goodwill. The liabilities assumed included approximately $3.8 million of fees related to the transaction, which were paid by the Company on behalf of its shareholders. During the second quarter of 2004, the Company finalized its estimates of the fair market values of its property, plant and equipment and intangible assets as of the transaction date. The Company revised its preliminary allocation based upon this final valuation. The preliminary and final allocation of the purchase price is detailed below. The increase in basis resulting from this transaction is not deductible for income tax purposes.

Purchase price		$	105,981
Less: Company equity acquired		53,628
Increase in basis		$	52,353

 

		Preliminary Allocation					Final Allocation
Record fair value of inventories			$	4,000			$	4,000
Record fair value of property, plant and equipment			16,000				28,112
Record fair value of senior subordinated notes			(2,040		)		(2,040		)
Record fair value of deferred financing fees			(1,000		)		(1,000		)
Record fair value of patent (15 year life)			2,500				714
Record fair value of customer relationships (12 year life)			—				42,869
Transaction fees			(3,835		)		(3,835		)
Record income taxes for effect of step-up in basis of assets and transaction fees			(6,270		)		(26,050		)
Increase to goodwill, net			42,998				9,583
			$	52,353			$	52,353

 

Adjustments to reflect changes from the preliminary allocation to the final allocation were recorded in the second quarter of 2004. Such adjustments included recording $5.8 million of amortization of the customer relationship intangible asset and a $5.7 million reduction of depreciation expense. The reduction in depreciation expense resulted from differences in the fair values and remaining useful lives of property, plant and equipment between the preliminary and final estimates. Such adjustments did not have a material affect on the Company’s financial position as of September 24, 2004 or its results of operations for the three and nine months ended September 24, 2004.

6

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Euramax International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Thousands of U.S. Dollars)
(Unaudited)

2. 2003 Stock Transaction: (continued)

The following unaudited pro-forma information presents the results of operations of the Company as if the 2003 Stock 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 2003 Stock Transaction been completed at that time, 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.

		Successor					Successor					Successor					Predecessor					Successor
		Three months					Three months					Nine months					Five months					Four months
		ended					ended					ended					ended					ended
		September 24,					September 26,					September 24,					May 23,					September 26,
		2004					2003					2004					2003					2003
Pro-forma net sales			$	254,212				$	201,117				$	700,102				$	260,615				$	278,311
Pro-forma net earnings			12,836					7,630					35,194					6,421					8,759

 

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 26, 2003, set forth in the Company’s Annual Report on Form 10-K.

Property, Plant and Equipment

In connection with the Company’s finalization of the fair market values of its property, plant and equipment in the second quarter of 2004, the Company reevaluated the useful lives over which its assets are to be depreciated. The estimated remaining useful lives of these assets were determined to range from 2 to 13 years for equipment and from 17 to 20 years for buildings.

Effective June 25, 2004, the Company revised its policy relating to the useful lives of equipment. Under the new policy, the Company depreciates equipment purchased subsequent to June 25, 2004 over useful lives ranging from 3 to 37 years.

Intangible Assets

The Company has recognized intangible assets, apart from goodwill, acquired in business combinations or resulting from the 2003 Stock Transaction at fair value on the date of the transaction. The Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”, effective December 29, 2001. Under SFAS No. 142, indefinite lived intangible assets are not amortized, but are reviewed at least annually for impairment. The Company reviews its indefinite lived intangible assets for impairment as of the first day of its fiscal fourth quarter. The Company amortizes its intangible assets with finite lives over their useful lives based upon the pattern in which the economic benefits of the intangible asset are recognized. If that pattern cannot be determined, a straight-line amortization method is used. Intangible

7

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Euramax International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Thousands of U.S. Dollars)
(Unaudited)

3. Summary of Significant Accounting Policies: (continued)

assets with finite lives are tested for impairment when indicators exist that the carrying amount of an intangible asset may not be recoverable.

Stock Based Compensation

As permitted by SFAS No. 123, “Accounting for Stock-Based Compensation”, as amended by  SFAS No. 148, 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. 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:

			Successor					Successor					Successor					Predecessor					Successor
			Three months					Three months					Nine months					Five months					Four months
			ended					ended					ended					ended					ended
			September 24, 2004					September 26, 2003					September 24, 2004					May 23, 2003					September 26, 2003
Net income, as reported				$	12,836				$	7,630				$	35,194				$	6,892				$	8,759
Add:	Stock-based employee compensation cost included in reported net income, net of related tax effects			—					—					—					—					143
Less:	Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects			(46		)			(46		)			(138		)			—					(205		)
Pro forma net income				$	12,790				$	7,584				$	35,056				$	6,892				$	8,697

 

The fair value of each option was 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.

4. Acquisitions:

On November 18, 2003, pursuant to a tender offer, Amerimax Pennsylvania, Inc., a wholly owned subsidiary of Euramax, acquired 93% of Berger Holdings’ outstanding common shares for $3.90 per share. The acquisition of Berger Holdings was completed on November 25, 2003 by the merger of Amerimax Pennsylvania, Inc. into Berger Holdings, with Berger Holdings as the surviving corporation. As a result of the merger, each common share of Berger Holdings not owned by Euramax was converted into the right to receive $3.90 per share in cash, subject to dissenters’ rights. The total purchase price of this acquisition was approximately $36.8 million. The Company preliminarily allocated the purchase price in excess of the net assets acquired to Berger Holdings’ assets and liabilities under the purchase method of accounting based on estimates by management of fair market values of identifiable assets and liabilities, with the remainder allocated to goodwill. During the second quarter of 2004, the Company revised the allocation of the

8

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Euramax International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Thousands of U.S. Dollars)
(Unaudited)

4. Acquisitions: (continued)

purchase price to reflect final asset and liability valuations. The adjustments to record the final asset and liability valuations did not have a material affect on the Company’s financial position as of September 24, 2004 or its results of operations for the three and nine months ended September 24, 2004. Berger Holdings manufactures metal roof drainage products and roofing accessories as well as residential and commercial snow guards and is included in the Company’s U.S. Fabrication Roof Drainage segment. The results of operations of Berger Holdings are included in the Company’s consolidated statement of earnings from the acquisition date.

5. Inventories:

Inventories were comprised of:

		Successor
		September 24, 2004					December 26, 2003
Raw materials			$	82,387				$	61,832
Work in process			9,248					8,075
Finished products			28,393					19,636
			$	120,028				$	89,543

 

Inventories are net of related reserves totaling $3.6 million at September 24, 2004 and December 26, 2003.

6. Long-Term Obligations:

Long-term obligations consisted of the following:

		Successor
		September 24, 2004					December 26, 2003
Senior Secured Credit Facility:
Revolving Credit Facility			$	66,854				$	—
Term Loan			33,263					36,559
8.50% Senior Subordinated Notes due 2011			200,000					200,000
Mortgage Note Payable			2,125					2,252
Capital Lease Obligations			278					483
			302,520					239,294
Less current maturities			(8,642		)			(7,487		)
			$	293,878				$	231,807

 

As of September 24, 2004, an undrawn amount of $43.1 million was available under the revolving credit facility.

9

Euramax International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Thousands of U.S. Dollars)
(Unaudited)

7. Goodwill:

A summary of changes in the Company’s goodwill by segment for the nine months ended September 24, 2004 is as follows:

		U.S. Fabrication Roof Drainage					U.S. Fabrication Building Materials					European Roll Coating			European Fabrication					Total
Successor balance at December 26, 2003			$	78,479				$	48,977			$	36,969			$	11,969			$	176,394
Adjustment for final allocation relating to the 2003 Stock Transaction			(11,587		)			(15,592		)		(6,693		)		457				(33,415		)
Adjustment for final allocation relating to acquisition of Berger Holdings			(4,838		)			—				—				—				(4,838		)
Foreign exchange translation			—					—				(612		)		177				(435		)
Successor balance at September 24, 2004			$	62,054				$	33,385			$	29,664			$	12,603			$	137,706

 

8. Commitments and Contingencies:

Raw Material Commitments

To assure continuity of supply, the Company negotiates contracts for minimum annual purchases of aluminum from several suppliers. Commitments for minimum annual purchases are typically at an agreed upon cost to convert aluminum ingot into coil. In addition, to ensure a margin on specific sales, the Company may commit to purchase aluminum ingot or coil at a fixed market price for future delivery. For further discussion of the Company’s raw material commitments, see Note 14 to the consolidated financial statements of the Company for the year ended December 26, 2003, set forth in the Company’s Annual Report on Form 10-K.

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.

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.

10

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Euramax International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Thousands of U.S. Dollars)
(Unaudited)

8. Commitments and Contingencies: (continued)

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 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 is 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 be material. 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.

The facility that Berger Bros Company (“Berger”), an operating subsidiary acquired as part of the Berger Holdings acquisition, leases in Ivyland, Pennsylvania has contaminated groundwater resulting from the migration of contaminants from an adjacent property which was formerly the Naval Air Warfare Center, currently an NPL site under CERCLA. The United States Navy is conducting a clean-up of the Naval Air Warfare Center NPL site under the Environmental Protection Agency’s supervision. The owner/landlord of the Berger property obtained liability protection under Pennsylvania’s Brownfield Law by demonstrating to the Commonwealth of Pennsylvania that the contamination is from an off-site source, and under Pennsylvania law that protection benefits the tenant as well. Moreover, under Berger’s lease, the landlord retained any liability for this contamination. Accordingly, although the facility leased by

11

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Euramax International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Thousands of U.S. Dollars)
(Unaudited)

8. Commitments and Contingencies: (continued)

Berger is on an NPL site, the effects of this contamination would not reasonably be expected to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

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:

		Successor					Successor					Successor					Predecessor					Successor
		Three months					Three months					Nine months					Five months					Four months
		ended					ended					ended					ended					ended
		September 24, 2004					September 26, 2003					September 24, 2004					May 23, 2003					September 26, 2003
Beginning balance			$	3,843				$	3,536				$	3,993				$	2,809				$	3,394
Payments made or service provided			(780		)			(1,421		)			(2,219		)			(720		)			(1,661		)
Warranty expense			340					703					1,639					1,119					1,132
Change related to changes in foreign currency exchange rates			5					9					(5		)			186					(38		)
Ending balance			$	3,408				$	2,827				$	3,408				$	3,394				$	2,827

 

9. Comprehensive Income:

		Successor					Successor					Successor					Predecessor					Successor
		Three months					Three months					Nine months					Five months					Four months
		ended					ended					ended					ended					ended
		September 24,					September 26,					September 24,					May 23,					September 26,
		2004					2003					2004					2003					2003
Net earnings			$	12,836				$	7,630				$	35,194				$	6,892				$	8,759
Other comprehensive earnings (loss):
Foreign currency translation adjustment			576					423					(1,095		)			6,922					(2,215		)
Gain (loss) on derivative instruments, net:
Net changes in fair value of derivatives			601					737					(1,970		)			(324		)			509
Net gains reclassified from OCI into earnings			299					(552		)			(138		)			423					(416		)
Comprehensive income			$	14,312				$	8,238				$	31,991				$	13,913				$	6,637

 

12

Euramax International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Thousands of U.S. Dollars)
(Unaudited)

10. Income Taxes:

The income tax provision for the nine months ended September 24, 2004, the five months ended May 23, 2003 and the four months ended September 26, 2003, 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, adjusted for changes in valuation allowances relating to the Company’s state net operating loss carryforwards and capital loss carryforwards.

11. Employee Retirement Plans:

Net periodic pension costs for the Company’s non-contributory defined benefit pension plan covering substantially all U.S. hourly employees include the following components:

		Successor					Successor					Successor					Predecessor					Successor
		Three months ended September 24, 2004					Three months ended September 26, 2003					Nine months ended September 24, 2004					Five months ended May 23, 2003					Four months ended September 26, 2003
Components of net periodic pension cost
Service cost			$	98				$	86				$	294				$	143				$	115
Interest cost			57					46					170					76					61
Expected return on assets			(58		)			(46		)			(176		)			(77		)			(62		)
Amortization of prior service cost			—					1					1					10					1
Recognized actuarial net loss			—					—					—					34					—
Net periodic pension cost			$	97				$	87				$	289				$	186				$	115

 

Net periodic pension costs for the Company’s single employer pension plan covering certain employees in the United Kingdom include the following components:

		Successor					Successor					Successor					Predecessor					Successor
		Three months ended September 24, 2004					Three months ended September 26, 2003					Nine months ended September 24, 2004					Five months ended May 23, 2003					Four months ended September 26, 2003
Components of net periodic pension cost
Service cost			$	272				$	206				$	818				$	342				$	274
Interest cost			458					365					1,374					608					486
Expected return on assets			(347		)			(234		)			(1,042		)			(390		)			(312		)
Recognized actuarial net loss			—					—					—					274					—
Net periodic pension cost			$	383				$	337				$	1,150				$	834				$	448

 

12. Segment Information:

The Company’s acquisition of Berger Holdings, Ltd. on November 25, 2003 led to an assessment of operating segments that resulted in the Company’s identification of the U.S. Fabrication Roof Drainage

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Euramax International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Thousands of U.S. Dollars)
(Unaudited)

12. Segment Information: (continued)

operating segment. The business activities included in the U.S. Fabrication Roof Drainage operating segment were previously included in the U.S. Fabrication segment. Accordingly, prior period segment information has been revised to reflect the Company’s revised segments. The Company’s reportable segments are as follows:

U.S. Fabrication Roof Drainage—The U.S. Fabrication Roof Drainage segment facilities primarily fabricate coated aluminum and steel coil to produce gutters, downspouts, soffit, fascia, gutter accessories and other products. Such products are primarily sold to home centers, distributors and home improvement contractors.

U.S. Fabrication Building Materials—The U.S. Fabrication Building Materials segment facilities primarily fabricate coated aluminum and steel coil to produce roofing and siding panels, doors, windows, vehicle sidewalls and other products. Such products are primarily sold to RV manufacturers, rural contractors, home improvement contractors, industrial and architectural contractors and manufactured housing producers.

European Roll Coating—The European Roll Coating segment facilities primarily roll coat aluminum and steel sheet and coil for RV, transportation and building panel manufacturers.

European Fabrication—The European Fabrication segment facilities primarily fabricate aluminum extrusions and glass to produce windows, doors, shower enclosures, sunroofs and other products. Such products are primarily sold to transportation manufacturers, distributors, home centers and industrial and architectural contractors.

The accounting policies of the segments are the same as those described in Note 2 to the consolidated financial statements of the Company for the year ended December 26, 2003, set forth in the Company’s Annual Report on Form 10-K. Segment data includes intersegment revenues. The Company evaluates the performance of its segments and allocates resources to them based primarily on EBITDA (earnings before income taxes plus interest expense, net, provision for income taxes, and depreciation and amortization).

The Company is organized primarily on the basis of seven operating segments. Certain operating segments with similar economic characteristics have been aggregated according to similarity of products, nature of production processes, types of customers and product distribution methods. Two European subsidiaries have been aggregated into the European Roll Coating segment, two U.S. subsidiaries have been aggregated into the U.S. Fabrication Building Materials segment and two European subsidiaries have been aggregated into the European Fabrication segment. The U.S. Fabrication Roof Drainage operating segment is reported separately. The table below presents information about reported segments for the periods indicated. Expenses, income and assets that are not segment specific relate to holding company and business development activities conducted for the overall benefit of the Company and, accordingly, are not attributable to the Company’s segments.

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