UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

(Mark One)

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

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

Commission file number: 000-24956

Associated Materials, LLC

(Exact Name of Registrant as Specified in Its Charter)

Delaware		75-1872487
(State or Other Jurisdiction of Incorporation of Organization)		(I.R.S. Employer Identification No.)
3773 State Rd. Cuyahoga Falls, Ohio		44223
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code (330) 929 -1811

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of May 13, 2011, all of the registrant’s membership interests outstanding were held by an affiliate of the Registrant.

 

 

ASSOCIATED MATERIALS, LLC
REPORT FOR THE QUARTER ENDED APRIL 2, 2011

		Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets April 2, 2011 and January 1, 2011			1
Unaudited Condensed Consolidated Statements of Operations Quarters ended April 2, 2011 and April 3, 2010			2
Unaudited Condensed Consolidated Statements of Cash Flows Quarters ended April 2, 2011 and April 3, 2010			3
Notes to Unaudited Condensed Consolidated Financial Statements			4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3. Quantitative and Qualitative Disclosures About Market Risk			21
Item 4. Controls and Procedures			21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			22
Item 1A. Risk Factors			22
Item 2. Unregistered Sales of Equity Securities and use of Proceeds			22
Item 3. Defaults Upon Senior Securities			22
Item 4. (Removed and Reserved)			22
Item 5. Other Information			22
Item 6. Exhibits			22
SIGNATURES			23
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements

ASSOCIATED MATERIALS, LLC

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

		April 2,				January 1,
		2011				2011
Assets
Current assets:
Cash and cash equivalents		$	5,682			$	13,789
Accounts receivable, net of allowance for doubtful accounts of $9,863 at April 2, 2011 and $9,203 at January 1, 2011			111,745				118,408
Inventories			175,248				146,215
Income taxes receivable			—				3,291
Prepaid expenses			9,372				8,995
Total current assets			302,047				290,698
Property, plant and equipment, net			135,709				137,862
Goodwill			572,755				566,423
Other intangible assets, net			730,760				731,014
Other assets			29,024				29,907
Total assets		$	1,770,295			$	1,755,904
Liabilities and Member’s Equity
Current liabilities:
Accounts payable		$	101,879			$	90,190
Accrued liabilities			76,029				79,319
Deferred income taxes			13,951				19,989
Income taxes payable			2,244				2,506
Total current liabilities			194,103				192,004
Deferred income taxes			144,668				144,668
Other liabilities			132,989				132,755
Long-term debt			824,185				788,000
Member’s equity			474,350				498,477
Total liabilities and member’s equity		$	1,770,295			$	1,755,904

See accompanying notes to unaudited condensed consolidated financial statements.

ASSOCIATED MATERIALS, LLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

		Quarters Ended
		April 2,					April 3,
		2011					2010
		Successor					Predecessor
Net sales		$	196,736				$	204,237
Cost of sales			156,657					155,798
Gross profit			40,079					48,439
Selling, general and administrative expenses			58,916					47,481
(Loss) income from operations			(18,837	)				958
Interest expense, net			18,700					18,694
Foreign currency (gain)			(30	)				(122	)
Loss before income taxes			(37,507	)				(17,614	)
Income taxes (benefit) provision			(389	)				1,078
Net loss		$	(37,118	)			$	(18,692	)

See accompanying notes to unaudited condensed consolidated financial statements.

ASSOCIATED MATERIALS, LLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

		Quarters Ended
		April 2,					April 3,
		2011					2010
		Successor					Predecessor
Operating Activities
Net loss		$	(37,118	)			$	(18,692	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			12,657					5,633
Amortization of deferred financing costs			1,102					1,007
Amortization of net liabilities recorded in purchase accounting for the fair value of leased facilities and warranty liabilities			(299	)				—
Deferred income taxes			(301	)				1,078
Provision for losses on accounts receivable			872					1,000
Debt accretion			—					63
Loss on sale or disposal of assets other than by sale			84					14
Changes in operating assets and liabilities:
Accounts receivable			6,535					(9,498	)
Inventories			(27,730	)				(22,176	)
Accounts payable and accrued liabilities			7,716					(712	)
Income taxes receivable / payable			(4,610	)				(2,967	)
Other			(871	)				133
Net cash used in operating activities			(41,963	)				(45,117	)
Investing Activities
Capital expenditures			(2,400	)				(5,050	)
Net cash used in investing activities			(2,400	)				(5,050	)
Financing Activities
Net borrowings under ABL facilities			36,185					—
Net borrowings under prior ABL Facility			—					18,000
Financing costs			(36	)				—
Net cash provided by financing activities			36,149					18,000
Effect of exchange rate changes on cash and cash equivalents			107					(56	)
Net decrease in cash and cash equivalents			(8,107	)				(32,223	)
Cash and cash equivalents at beginning of period			13,789					55,905
Cash and cash equivalents at end of period		$	5,682				$	23,682
Supplemental information:
Cash paid for interest		$	673				$	24,714
Cash paid for income taxes		$	4,540				$	2,966

See accompanying notes to unaudited condensed consolidated financial statements.

ASSOCIATED MATERIALS, LLC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTER ENDED APRIL 2, 2011

Note 1 — Basis of Presentation

On October 13, 2010, AMH Holdings II, Inc. (“AMH II”), the then indirect parent company of Associated Materials, LLC, completed its merger (the “Acquisition Merger”) with Carey Acquisition Corp. (“Merger Sub”), pursuant to the terms of the Agreement and Plan of Merger, dated as of September 8, 2010 (the “Merger Agreement”), among Carey Investment Holdings Corp. (now known as AMH Investment Holdings Corp.) (“Parent”), Carey Intermediate Holdings Corp. (now known as AMH Intermediate Holdings Corp.), a wholly-owned direct subsidiary of Parent (“Holdings”), Merger Sub, a wholly-owned direct subsidiary of Holdings, and AMH II, with AMH II surviving such merger as a wholly-owned direct subsidiary of Holdings. After a series of additional mergers (together with the “Acquisition Merger,” the “Merger”), AMH II merged with and into Associated Materials, LLC, with Associated Materials, LLC surviving such merger as a wholly-owned direct subsidiary of Holdings. As a result of the Merger, Associated Materials, LLC (the “Company”) is now an indirect wholly-owned subsidiary of Parent. Approximately 98% of the capital stock of Parent is owned by investment funds affiliated with Hellman & Friedman LLC (“H&F”).

The financial statements for the period ended April 3, 2010 have been presented to reflect the financial results of the Company and its former direct and indirect parent companies, Associated Materials Holdings, LLC, AMH and AMH II (together, the “Predecessor”). The financial statements for the period ended April 2, 2011 have been presented to reflect the financial results of the Company subsequent to the Merger (the “Successor”). The Company’s financial position, results of operations and cash flows prior to the date of the Merger include the activity and results of its former direct and indirect parent companies, which principally consisted of borrowings and related interest expense, and are presented as the results of the Predecessor. The results of operations, including the Merger and results thereafter, are presented as the results of the Successor.

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial reporting, the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, these interim condensed consolidated financial statements contain all of the normal recurring accruals and adjustments considered necessary for a fair presentation of the unaudited results for the quarters ended April 2, 2011 and April 3, 2010. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended January 1, 2011. A detailed description of the Company’s significant accounting policies and management judgments is located in the audited financial statements for the year ended January 1, 2011, included in the Company’s Form 10-K filed with the Securities and Exchange Commission.

The Company is a leading, vertically integrated manufacturer and distributor of exterior residential building products in the United States and Canada. The Company produces a comprehensive offering of exterior building products, including vinyl windows, vinyl siding, aluminum trim coil and aluminum and steel siding and accessories, which are produced at the Company’s 11 manufacturing facilities. The Company also sells complementary products that are manufactured by third parties, such as roofing materials, insulation, exterior doors, vinyl siding in a shake and scallop design and installation equipment and tools. Because most of the Company’s building products are intended for exterior use, the Company’s sales and operating profits tend to be lower during periods of inclement weather. Therefore, the results of operations for any interim period are not necessarily indicative of the results of operations for a full year.

Recent Accounting Pronouncements

Accounting Standards Update (“ASU”) No. 2010-29, Business Combinations (Topic 805)—Disclosure of Supplementary Pro Forma Information for Business Combinations, (“ASU 2010-29”) provides clarification regarding the acquisition date that should be used for reporting the pro forma financial information disclosures required by Topic 805 when comparative financial statements are presented. ASU 2010-29 also requires entities to provide a description of the nature and amount of material, nonrecurring pro forma adjustments that are directly attributable to the business combination. ASU 2010-29 is effective for the Company prospectively for business combinations occurring after December 31, 2010.

Note 2 — Business Combination

Unaudited pro forma operating results of the Company giving effect to the Merger on January 3, 2010 is summarized as follows (in thousands):

		Quarter Ended
		April 3,
		2010
Net sales		$	204,237
Net loss			(22,035	)

Note 3 — Inventories

Inventories are valued at the lower of cost (first in, first out) or market. Inventories consist of the following (in thousands):

		April 2,				January 1,
		2011				2011
Raw materials		$	39,077			$	39,729
Work-in-progress			12,655				10,746
Finished goods and purchased products			123,516				95,740
		$	175,248			$	146,215

Note 4 — Goodwill and Other Intangible Assets

The Merger was accounted for using the acquisition method of accounting. The total purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values. The excess of the cost of the Merger over the fair value of the assets acquired and liabilities assumed resulted in goodwill. Total goodwill was approximately $572.8 million and $566.4 million as of April 2, 2011 and January 1, 2011, respectively. The Company did not recognize any impairment losses of its goodwill during any of the periods presented. The impact of foreign currency translation increased the carrying value of goodwill by $6.4 million for the quarter ended April 2, 2011. None of the Company’s goodwill is deductible for income tax purposes.

The Company’s other intangible assets consist of the following (in thousands):

		April 2, 2011																January 1, 2011
		Average																Average
		Amortization												Net				Amortization												Net
		Period								Accumulated				Carrying				Period								Accumulated				Carrying
		(In Years)				Cost				Amortization				Value				(In Years)				Cost				Amortization				Value
Amortized customer bases		13				$	333,111			$	12,087			$	321,024			13				$	330,915			$	5,453			$	325,462
Non-amortized trade names							409,736				—				409,736								405,552				—				405,552
Total intangible assets						$	742,847			$	12,087			$	730,760							$	736,467			$	5,453			$	731,014

The Company’s non-amortized intangible assets consist of the Alside^®, Revere^® and Gentek^® trade names and are tested for impairment at least annually at the beginning of the fourth quarter.

Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense related to intangible assets was approximately $6.6 million and $0.7 million for the quarters ended April 2, 2011 and April 3, 2010, respectively. The foreign currency translation impact on accumulated amortization of intangibles was less than $0.1 million for the quarter ended April 2, 2011. Amortization expense is expected to be approximately $19.5 million for the remainder of fiscal 2011. Amortization expense is estimated to be $26.1 million per year for fiscal years 2012, 2013, 2014 and 2015.

Note 5 — Long-Term Debt

Long-term debt consists of the following (in thousands):

		April 2,				January 1,
		2011				2011
9.125% notes		$	730,000			$	730,000
Borrowings under the ABL facilities			94,185				58,000
Total long-term debt		$	824,185			$	788,000

9.125% Senior Secured Notes due 2017

In October 2010, in connection with the consummation of the Merger, the Company and AMH New Finance, Inc. (collectively, the “Issuers”) issued and sold $730.0 million of 9.125% Senior Secured Notes due 2017 (the “9.125% notes”). The notes bear interest at a rate of 9.125% per annum and are unconditionally guaranteed, jointly and severally, by each of the Issuers’ direct and indirect domestic subsidiaries that guarantees our obligations under the senior secured asset-based revolving credit facilities (the “ABL facilities”). The first semi-annual interest payment was made on April 29, 2011.

As the Company has not yet completed its offer to exchange all of its outstanding privately placed 9.125% notes for newly registered 9.125% notes as of the date of this filing, the fair value of the 9.125% notes at April 2, 2011 and January 1, 2011 was estimated to be $730.0 million based upon the pricing determined in the private offering of the 9.125% notes at the time of issuance in October 2010.

ABL Facilities

In October 2010, in connection with the consummation of the Merger, the Company entered into the ABL facilities in the amount of $225.0 million (comprised of a $150.0 million U.S. facility and a $75.0 million Canadian facility) pursuant to a revolving credit agreement maturing in 2015 (the “Revolving Credit Agreement”). The revolving credit loans under the Revolving Credit Agreement bear interest at the rate of (1) LIBOR (for eurodollar loans under the U.S. facility) or CDOR (for loans under the Canadian facility), plus an applicable margin of 2.75% as of April 2, 2011, (2) the alternate base rate (which is the highest of a prime rate, the Federal Funds Effective Rate plus 0.50% and a one-month LIBOR rate plus 1.0% per annum), plus an applicable margin of 1.75% as of April 2, 2011, or (3) the alternate Canadian base rate (which is the higher of a Canadian prime rate and the 30-day CDOR Rate plus 1.0%), plus an applicable margin of 1.75% as of April 2, 2011.

As of April 2, 2011, there was $94.2 million drawn under the Company’s ABL facilities and $36.5 million available for additional borrowings. As of April 2, 2011, the per annum interest rate applicable to borrowings under the U.S. portion of the ABL facilities was 3.4%. As of April 2, 2011, the per annum interest rates applicable to borrowings under the Canadian portion of the ABL facilities were in the range of 3.0% to 4.8%. The weighted average interest rate for borrowings under the ABL facilities was 3.9% for the quarter ended April 2, 2011. As of April 2, 2011, the Company had letters of credit outstanding of $7.3 million primarily securing deductibles of various insurance policies.

Note 6 — Comprehensive Loss

Comprehensive loss differs from net loss due to the reclassification of actuarial gains or losses and prior service costs associated with the Company’s pension and other postretirement plans and foreign currency translation adjustments as follows:

		Quarters Ended
		April 2,					April 3,
		2011					2010
		Successor					Predecessor
Net loss		$	(37,118	)			$	(18,692	)
Unrecognized prior service cost and net loss, net of tax			—					242
Foreign currency translation adjustments			12,965					2,864
Comprehensive loss		$	(24,153	)			$	(15,586	)

Note 7 — Retirement Plans

The Company’s Alside division sponsors a defined benefit pension plan which covers hourly workers at its plant in West Salem, Ohio and a defined benefit retirement plan covering salaried employees, which was frozen in 1998 and subsequently replaced with a defined contribution plan. The Company’s Gentek subsidiary sponsors a defined benefit pension plan for hourly union employees at its Woodbridge, New Jersey plant (together with the Alside sponsored defined benefit plans, the “Domestic Plans”) as well as a defined benefit pension plan covering Gentek Canadian salaried employees and hourly union employees at the Lambeth, Ontario plant, a defined benefit pension plan for the hourly union employees at its Burlington, Ontario plant and a defined benefit pension plan for the hourly union employees at its Pointe Claire, Quebec plant (the “Foreign Plans”). Accrued pension liabilities are included in accrued and other long-term liabilities in the accompanying balance sheets. The actuarial valuation measurement date for the defined benefit pension plans is December 31st. Components of defined benefit pension plan costs are as follows (in thousands):

		Quarters Ended
		April 2, 2011									April 3, 2010
		Domestic				Foreign					Domestic				Foreign
		Plans				Plans					Plans				Plans
		Successor									Predecessor
Net periodic pension cost
Service cost		$	186			$	648				$	155			$	604
Interest cost			772				955					778				903
Expected return on assets			(845	)			(1,004	)				(760	)			(867	)
Amortization of unrecognized:
Prior service costs			—				—					7				11
Cumulative net loss			—				—					303				48
Net periodic pension cost		$	113			$	599				$	483			$	699

In March 2010, the President signed into law the Patient Protection and Affordable Care Act (“PPACA”) and the Health Care and Education Reconciliation Act of 2010 (“Reconciliation Act”). The PPACA and Reconciliation Act include provisions that will reduce the tax benefits available to employers that receive Medicare Part D subsidies. During the first quarter of 2010, the Company recognized a $0.1 million impact on its deferred tax asset as a result of the reduced deductibility of the subsidy.

Although changes in market conditions, current pension law and uncertainties regarding significant assumptions used in the actuarial valuations may have a material impact on future required contributions to the Company’s pension plans, the Company currently does not expect funding requirements to have a material adverse impact on current or future liquidity.

The actuarial valuations require significant estimates and assumptions to be made by management, primarily the funding interest rate, discount rate and expected long-term return on plan assets. These assumptions are all susceptible to changes in market conditions. The funding interest rate and discount rate are based on representative bond yield curves maintained and monitored by independent third parties. In determining the expected long-term rate of return on plan assets, the Company considers historical market and portfolio rates of return, asset allocations and expectations of future rates of return.

Note 8 — Business Segments

The Company is in the single business of manufacturing and distributing exterior residential building products. The following table sets forth for the periods presented a summary of net sales by principal product offering (in thousands):

		Quarters Ended
		April 2,					April 3,
		2011					2010
		Successor					Predecessor
Vinyl windows		$	71,709				$	76,337
Vinyl siding products			37,160					39,356
Metal products			36,369					36,375
Third-party manufactured products			37,120					37,563
Other products and services			14,378					14,606
		$	196,736				$	204,237

Note 9 — Product Warranty Costs and Service Returns

Consistent with industry practice, the Company provides to homeowners limited warranties on certain products, primarily related to window and siding product categories. Warranties are of varying lengths of time from the date of purchase up to and including lifetime. Warranties cover product failures such as stress cracks and seal failures for windows and fading and peeling for siding products, as well as manufacturing defects. The Company has various options for remedying product warranty claims including repair, refinishing or replacement and directly incurs the cost of these remedies. Warranties also become reduced under certain conditions of time and change in ownership. Certain metal coating suppliers provide warranties on materials sold to the Company that mitigate the costs incurred by the Company. Reserves for future warranty costs are provided based on management’s estimates of such future costs using historical trends of claims experience, sales history of products to which such costs relate, and other factors. An independent actuary assists the Company in determining reserve amounts related to significant product failures.

As a result of the Merger and the application of purchase accounting, the Company adjusted its warranty reserves to represent an estimate of the fair value of the liability as of the closing date of the Merger. The estimated fair value of the liability was based on an actuarial calculation performed by an independent actuary which projected future remedy costs using historical data trends of claims incurred, claims payments and sales history of products to which such costs relate. The fair value of the expected future remedy costs related to products sold prior to the Merger was based on the actuarially determined estimates of expected future remedy costs and other factors and assumptions the Company believes market participants would use in valuing the warranty reserves. These other factors and assumptions included inputs for claims administration costs, confidence adjustments for uncertainty in the estimates of expected future remedy costs and a discount factor to arrive at the estimated fair value of the liability at the date of the Merger. The excess of the estimated fair value over the expected future remedy costs, which was included in the Company’s warranty reserve at the date of the Merger, is being amortized as a reduction of warranty expense over the expected term such warranty claims will be satisfied. The provision for warranties is reported within cost of sales in the consolidated statements of operations.

A reconciliation of the warranty reserve activity is as follows (in thousands):

		Quarters Ended
		April 2,					April 3,
		2011					2010
		Successor					Predecessor
Balance at the beginning of the period		$	94,712				$	33,016
Provision for warranties issued and changes in estimates for pre-existing warranties			1,372					1,540
Claims paid			(628	)				(1,237	)
Foreign currency translation			477					263
Balance at the end of the period		$	95,933				$	33,582

Note 10 — Manufacturing Restructuring Costs

The following is a reconciliation of the manufacturing restructuring liability of the warehouse facility adjacent to the Ennis manufacturing plant related to the discontinued use (in thousands):

		Quarters Ended
		April 2,					April 3,
		2011					2010
		Successor					Predecessor
Beginning liability		$	4,583				$	5,036
Accretion of related lease obligations			138					91
Payments			(423	)				(397	)
Ending liability		$	4,298				$	4,730

Of the remaining restructuring liability at April 2, 2011, approximately $0.8 million is expected to be paid during the remainder of 2011. Amounts related to the ongoing facility obligations will continue to be paid over the lease term, which ends April 2020.

Note 11 — Subsidiary Guarantors

The Company’s payment obligations under its 9.125% notes are fully and unconditionally guaranteed, jointly and severally, on a senior basis, by its domestic wholly owned subsidiaries, Gentek Holdings, LLC and Gentek Building Products, Inc. AMH New Finance, Inc. (formerly Carey New Finance, Inc.) is a co-issuer of the 9.125% notes and is a domestic wholly owned subsidiary of the Company having no operations, revenues or cash flows for the periods presented.

Associated Materials Canada Limited, Gentek Canada Holdings Limited and Gentek Buildings Products Limited Partnership are Canadian companies and do not guarantee the Company’s 9.125% notes. In the opinion of management, separate financial statements of the respective Subsidiary Guarantors would not provide additional material information that would be useful in assessing the financial composition of the Subsidiary Guarantors.

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
April 2, 2011 (Successor)
(In thousands)

										Subsidiary				Non-Guarantor				Reclassification/
		Company				Co-Issuer				Guarantors				Subsidiaries				Eliminations				Consolidated
Assets
Current assets:
Cash and cash equivalents		$	4,040			$	—			$	—			$	1,642			$	—			$	5,682
Accounts receivable, net			70,621				—				10,624				30,500				—				111,745
Intercompany receivables			387,641				—				12,094				2,265				(402,000	)			—
Inventories			121,119				—				12,281				41,848				—				175,248
Income taxes receivable			19,995				—				—				—				(19,995	)			—
Deferred income taxes			—				—				1,634				—				(1,634	)			—
Prepaid expenses			6,414				—				1,095				1,863				—				9,372
Total current assets			609,830				—				37,728				78,118				(423,629	)			302,047
Property, plant and equipment, net			83,916				—				3,739				48,054				—				135,709
Goodwill			353,432				—				28,978				190,345				—				572,755
Other intangible assets, net			490,870				—				50,894				188,996				—				730,760
Investment in subsidiaries			17,002				—				(30,332	)			—				13,330				—
Intercompany receivable			—				730,000				—				—				(730,000	)			—
Other assets			25,768				—				10				3,246				—				29,024
Total assets		$	1,580,818			$	730,000			$	91,017			$	508,759			$	(1,140,299	)		$	1,770,295
Liabilities And Member’s Equity
Current liabilities:
Accounts payable		$	65,509			$	—			$	11,166			$	25,204			$	—			$	101,879
Intercompany payables			—				—				—				402,000				(402,000	)			—
Accrued liabilities			63,212				—				4,925				7,892				—				76,029
Deferred taxes			11,407				—				—				4,178				(1,634	)			13,951
Income taxes payable			—				—				16,438				5,801				(19,995	)			2,244
Total current liabilities			140,128				—				32,529				445,075				(423,629	)			194,103
Deferred income taxes			85,191				—				14,661				44,816				—				144,668
Other liabilities			78,145				—				26,825				28,019				—				132,989
Long-term debt			803,000				730,000				—				21,185				(730,000	)			824,185
Member’s equity			474,350				—				17,002				(30,332	)			13,330				474,350
Total liabilities and member’s equity		$	1,580,814			$	730,000			$	91,017			$	508,763			$	(1,140,299	)		$	1,770,295

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For The Quarter Ended April 2, 2011 (Successor)
(In thousands)

										Subsidiary				Non-Guarantor				Reclassification/
		Company				Co-Issuer				Guarantors				Subsidiaries				Eliminations				Consolidated
Net sales		$	144,212			$	—			$	34,168			$	51,065			$	(32,709	)		$	196,736
Cost of sales			115,133				—				33,335				40,898				(32,709	)			156,657
Gross profit			29,079				—				833				10,167				—				40,079
Selling, general and administrative expenses			46,641				—				1,042				11,233				—				58,916
Loss from operations			(17,562	)			—				(209	)			(1,066	)			—				(18,837	)
Interest expense, net			18,339				—				—				361				—				18,700
Foreign currency (gain)			—				—				—				(30	)			—				(30	)
Loss before income taxes			(35,901	)			—				(209	)			(1,397	)			—				(37,507	)
Income taxes (benefit)			—				—				—				(389	)			—				(389	)
Loss before equity loss from subsidiaries			(35,901	)			—				(209	)			(1,008	)			—				(37,118	)
Equity loss from subsidiaries			(1,217	)			—				(1,008	)			—				2,225				—
Net loss		$	(37,118	)		$	—			$	(1,217	)		$	(1,008	)		$	2,225			$	(37,118	)

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Quarter Ended April 2, 2011 (Successor)
(In thousands)

										Subsidiary				Non-Guarantor
		Company				Co-Issuer				Guarantors				Subsidiaries				Consolidated
Net cash (used in) provided by operating activities		$	(33,874	)		$	—			$	2,851			$	(10,940	)		$	(41,963	)
Investing Activities
Capital expenditures			(1,630	)			—				(13	)			(757	)			(2,400	)
Net cash used in investing activities			(1,630	)			—				(13	)			(757	)			(2,400	)
Financing Activities
Net borrowings under ABL facilities			15,000				—				—				21,185				36,185
Intercompany transactions			18,669				—				(2,838	)			(15,831	)			—
Financing costs			(36	)			—				—				—				(36	)
Net cash provided by (used in) financing activities			33,633				—				(2,838	)			5,354				36,149
Effect of exchange rate changes on cash and cash equivalents			—				—				—				107				107
Net decrease in cash and cash equivalents			(1,871	)			—				—				(6,236	)			(8,107	)
Cash and cash equivalents at beginning of period			5,911				—				—				7,878				13,789
Cash and cash equivalents at end of period		$	4,040			$	—			$	—			$	1,642			$	5,682

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
January 1, 2011 (Successor)
(In thousands)

										Subsidiary				Non-Guarantor				Reclassification/
		Company				Co-Issuer				Guarantors				Subsidiaries				Eliminations				Consolidated
Assets
Current assets:
Cash and cash equivalents		$	5,911			$	—			$	—			$	7,878			$	—			$	13,789
Accounts receivable, net			85,496				—				11,107				21,805				—				118,408
Intercompany receivables			406,309				—				9,257				2,264				(417,830	)			—
Inventories			99,228				—				10,870				36,117				—				146,215
Income taxes receivable			19,731				—				—				—				(16,440	)			3,291
Deferred income taxes			—				—				1,629				—				(1,629	)			—
Prepaid expenses			6,622				—				1,174				1,199				—				8,995
Total current assets			623,297				—				34,037				69,263				(435,899	)			290,698
Property, plant and equipment, net			86,636				—				4,014				47,212				—				137,862
Goodwill			353,434				—				28,978				184,011				—				566,423
Other intangible assets, net			495,850				—				51,006				184,158				—				731,014
Investment in subsidiaries			5,256				—				(42,289	)			—				37,033				—
Intercompany receivable			—				788,000				—				—				(788,000	)			—
Other assets			26,662				—				(1	)			3,246				—				29,907
Total assets		$	1,591,135			$	788,000			$	75,745			$	487,890			$	(1,186,866	)		$	1,755,904
Liabilities And Member’s Equity
Current liabilities:
Accounts payable		$	66,087			$	—			$	5,761			$	18,342			$	—			$	90,190
Intercompany payables			—				—				—				417,830				(417,830	)			—
Accrued liabilities			63,116				—				7,057				9,146				—				79,319
Deferred income taxes			11,454				—				—				10,164				(1,629	)			19,989
Income taxes payable			—				—				16,440				2,506				(16,440	)			2,506
Total current liabilities			140,657				—				29,258				457,988				(435,899	)			192,004
Deferred income taxes			85,191				—				14,661				44,816				—				144,668
Other liabilities			78,810				—				26,570				27,375				—				132,755
Long-term debt			788,000				788,000				—				—				(788,000	)			788,000
Member’s equity			498,477				—				5,256				(42,289	)			37,033				498,477
Total liabilities and member’s equity		$	1,591,135			$	788,000			$	75,745			$	487,890			$	(1,186,866	)		$	1,755,904

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended April 3, 2010 (Predecessor)
(In thousands)

										Subsidiary				Non-Guarantor				Reclassification/
		Company				Co-Issuer				Guarantors				Subsidiaries				Eliminations				Consolidated
Net sales		$	145,891			$	—			$	29,561			$	57,981			$	(29,196	)		$	204,237
Cost of sales			112,476				—				27,512				45,006				(29,196	)			155,798
Gross profit			33,415				—				2,049				12,975				—				48,439
Selling, general and administrative expenses			37,405				—				808				9,268				—				47,481
(Loss) income from operations			(3,990	)			—				1,241				3,707				—				958
Interest expense, net			18,445				—				2				247				—				18,694
Foreign currency (gain)			—				—				—				(122	)			—				(122	)
(Loss) income before income taxes			(22,435	)			—				1,239				3,582				—				(17,614	)
Income taxes (benefit)			(936	)			—				936				1,078				—				1,078
(Loss) income before equity income from subsidiaries			(21,499	)			—				303				2,504				—				(18,692	)
Equity income from subsidiaries			2,807				—				2,504				—				(5,311	)			—
Net income (loss)		$	(18,692	)		$	—			$	2,807			$	2,504			$	(5,311	)		$	(18,692	)

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Quarter Ended April 3, 2010 (Predecessor)
(In thousands)

										Subsidiary				Non-Guarantor
		Company				Co-Issuer				Guarantors				Subsidiaries				Consolidated
Net cash used in operating activities		$	(36,727	)		$	—			$	(2,000	)		$	(6,390	)		$	(45,117	)
Investing Activities
Capital expenditures			(4,133	)			—				(10	)			(907	)			(5,050	)
Net cash used in investing activities			(4,133	)			—				(10	)			(907	)			(5,050	)
Financing Activities
Net borrowings under prior ABL Facility			18,000				—				—				—				18,000
Dividends from non-guarantor subsidiary			—				—				20,000				(20,000	)			—
Intercompany transactions			20,612				—				(17,996	)			(2,616	)			—
Net cash provided by (used in) financing activities			38,612				—				2,004				(22,616	)			18,000
Effect of exchange rate changes on cash and cash equivalents			—				—				—				(56	)			(56	)
Net decrease in cash and cash equivalents			(2,248	)			—				(6	)			(29,969	)			(32,223	)
Cash and cash equivalents at beginning of period			5,917				—				82				49,906				55,905
Cash and cash equivalents at end of period		$	3,669			$	—			$	76			$	19,937			$	23,682

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

Overview

We are a leading, vertically integrated manufacturer and distributor of exterior residential building products in the United States and Canada. Our core products are vinyl windows, vinyl siding, aluminum trim coil and aluminum and steel siding and accessories. In addition, we distribute third-party manufactured products primarily through our company-operated supply centers. Vinyl windows, vinyl siding, metal products and third-party manufactured products comprised approximately 36%, 19%, 18% and 19%, respectively, of our net sales for quarter ended April 2, 2011. These products are generally marketed under our brand names, such as Alside^®, Revere^® and Gentek^®, and are ultimately sold on a wholesale basis to approximately 50,000 professional exterior contractors (who we refer to as our contractor customers) engaged in home remodeling and new home construction, primarily through our extensive dual-distribution network, consisting of 120 company-operated supply centers, through which we sell directly to our contractor customers, and our direct sales channel, through which we sell to approximately 250 independent distributors and dealers, who then sell to their customers. We estimate that, for the quarter ended April 2, 2011, approximately 70% of our net sales were generated in the residential repair and remodeling market and approximately 30% of our net sales were generated in the residential new construction market. Our supply centers provide “one-stop” shopping to our contractor customers by carrying the products, accessories and tools necessary to complete their projects. In addition, our supply centers augment the customer experience by offering product support and enhanced customer service from the point of sale to installation and warranty service. During the quarter ended April 2, 2011, approximately 70% of our net sales were generated through our network of company-operated supply centers.

Because our exterior residential building products are consumer durable goods, our sales are impacted by, among other things, the availability of consumer credit, consumer interest rates, employment trends, changes in levels of consumer confidence, weather, government incentives and national and regional trends in the housing market. Our sales are also affected by changes in consumer preferences with respect to types of building products. Overall, we believe the long-term fundamentals for the building products industry remain strong, as homes continue to get older, household formation is expected to be strong, demand for energy efficiency products continues and vinyl remains an optimal material for exterior window and siding solutions, all of which we believe bodes well for the demand for our products in the future. In the short term, however, the building products industry continues to be negatively impacted by a weak housing market. Since 2006, sales of existing single-family homes have decreased from peak levels previously experienced, the inventory of existing homes available for sale has increased, and in many areas, home values have declined significantly. In addition, the pace of new home construction has slowed dramatically, as evidenced by declines in 2006 through 2010 in single-family housing starts and announcements from home builders of significant decreases in their orders. Increased delinquencies on sub-prime and other mortgages, increased foreclosure rates and tightening consumer credit markets over the same time period have further hampered the housing market. Our sales volumes are dependent on the strength in the housing market, including both residential remodeling and new residential construction activity. Reduced levels of existing homes sales and housing price depreciation have had a significant negative impact on our remodeling sales over the past few years. In addition, a reduced number of new housing starts has had a negative impact on our new construction sales. As a result of the prolonged housing market downturn, competition in the building products market may intensify, which could result in lower sales volumes and reduced selling prices for our products and lower gross margins. In the event that our expectations regarding the outlook for the housing market result in a reduction in forecasted sales and operating income, and related growth rates, we may be required to record an impairment of certain of our assets, including goodwill and intangible assets. Moreover, a prolonged downturn in the housing market and the general economy may have other consequences to our business, including accounts receivable write-offs due to financial distress of customers and lower of cost or market reserves related to our inventories.

The principal raw materials used by us are vinyl resin, aluminum, steel, resin stabilizers and pigments, glass, window hardware and packaging materials, all of which have historically been subject to price changes. Raw material pricing on certain of our key commodities has fluctuated significantly over the past several years. In response, we have announced price increases over the past several years on certain of our product offerings to offset inflation in raw material pricing and continually monitor market conditions for price changes as warranted. Our ability to maintain gross margin levels on our products during periods of rising raw material costs depends on our ability to obtain selling price increases. Furthermore, the results of operations for individual quarters can and have been negatively impacted by a delay between the timing of raw material cost increases and price increases on our products. There can be no assurance that we will be able to maintain the selling price increases already implemented or achieve any future price increases.

Recently, due to industry-wide shortages of ethylene and other inputs to the vinyl resin manufacturing process, our vinyl resin supplier has invoked a force majeure clause in its supply contract with us, and it has informed us that it will need to reduce its supply commitments with its customers. We use vinyl resin in manufacturing of our vinyl siding and windows. Our supplier has indicated that it expects this shortage to continue for the next few months. Based on our current inventory levels, and the expected reduction in vinyl resin from our supplier, we do not believe that the reduced supply will have a significant impact on our business. However, should the level of supply further contract or continue beyond a few months, or should our supply requirements increase above our current expectations, we may be forced to acquire vinyl resin from other suppliers at higher prices, or we may unable to meet sales demand, which would consequently have a negative impact on our results of operations.

We operate with significant operating and financial leverage. Significant portions of our manufacturing, selling, general and administrative expenses are fixed costs that neither increase nor decrease proportionately with sales. In addition, a significant portion of our interest expense is fixed. There can be no assurance that we will be able to reduce our fixed costs in response to a decline in our net sales. As a result, a decline in our net sales could result in a higher percentage decline in our income from operations. Also, our gross margins and gross margin percentages may not be comparable to other companies, as some companies include all of the costs of their distribution network in cost of sales, whereas we include the operating costs of our supply centers in selling, general and administrative expenses.

Because most of our building products are intended for exterior use, sales tend to be lower during periods of inclement weather. Weather conditions in the first quarter of each calendar year usually result in that quarter producing significantly less net sales and net cash flows from operations than in any other period of the year. Consequently, we have historically had small profits or losses in the first quarter and reduced profits from operations in the fourth quarter of each calendar year. To meet seasonal cash flow needs during the periods of reduced sales and net cash flows from operations, we have typically utilized our revolving credit facilities and repay such borrowings in periods of higher cash flow. We typically generate the majority of our cash flow in the third and fourth quarters.

We seek to distinguish ourselves from other suppliers of residential building products and to sustain our profitability through a business strategy focused on increasing sales at existing supply centers, selectively expanding our supply center network, increasing sales through independent specialty distributor customers, developing innovative new products, expanding sales of third-party manufactured products through our supply center network and driving operational excellence by reducing costs and increasing customer service levels. We continually analyze new and existing markets for the selection of new supply center locations.

On October 13, 2010, AMH Holdings II, Inc. (“AMH II”), the then indirect parent company of Associated Materials, LLC, completed its merger (the “Acquisition Merger”) with Carey Acquisition Corp. (“Merger Sub”), pursuant to the terms of the Agreement and Plan of Merger, dated as of September 8, 2010 (the “Merger Agreement”), among Carey Investment Holdings Corp. (now known as AMH Investment Holdings Corp.) (“Parent”), Carey Intermediate Holdings Corp. (now known as AMH Intermediate Holdings Corp.), a wholly-owned direct subsidiary of Parent (“Holdings”), Merger Sub, a wholly-owned direct subsidiary of Holdings, and AMH II, with AMH II surviving such merger as a wholly-owned direct subsidiary of Holdings. After a series of additional mergers (together with the “Acquisition Merger,” the “Merger”), AMH II merged with and into Associated Materials, LLC, with Associated Materials, LLC surviving such merger as a wholly-owned direct subsidiary of Holdings. As a result of the Merger, Associated Materials, LLC is now an indirect wholly-owned subsidiary of Parent. Approximately 98% of the capital stock of Parent is owned by investment funds affiliated with Hellman & Friedman LLC (“H&F”).

Results of Operations

Our results of operations, along with the results of our then existing direct and indirect parent companies, Associated Materials Holdings, LLC, AMH and AMH II, prior to the date of the Merger are presented as the results of the predecessor (the “Predecessor”). The results of operations, including the Merger and results thereafter, are presented as the results of the successor (the “Successor”).

The following table sets forth for the periods indicated our results of operations (in thousands):

		Quarters Ended
		April 2,					April 3,
		2011					2010
		Successor					Predecessor
Net sales		$	196,736				$	204,237
Cost of sales			156,657					155,798
Gross profit			40,079					48,439
Selling, general and administrative expenses			58,916					47,481
(Loss) income from operations			(18,837	)				958
Interest expense, net			18,700					18,694
Foreign currency (gain)			(30	)				(122	)
Loss before income taxes			(37,507	)				(17,614	)
Income taxes (benefit) provision			(389	)				1,078
Net loss		$	(37,118	)			$	(18,692	)
Other Data:
EBITDA (1)		$	(6,150	)			$	6,713
Adjusted EBITDA (1)			(4,194	)				8,789