<PAGE>
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- --------------------------------------------------------------------------------
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 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER
333-05978
EURAMAX INTERNATIONAL PLC
(Exact name of registrant as specified in its charter)
ENGLAND AND WALES
(State or other jurisdiction of
incorporation or organization)
5335 TRIANGLE PARKWAY, SUITE 550,
NORCROSS, GEORGIA
(Address of principal executive offices)
98-1066997
(I.R.S. Employer Identification No.)
30092
(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. [ X ] Yes [ ] No
As of November 7, 1997, Registrant had outstanding 1,000,000 Ordinary Shares and
34,000,000 Preference Shares. All of these shares were owned by affiliates.
- --------------------------------------------------------------------------------
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<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
-------------- --------------
QUARTER ENDED QUARTER ENDED
SEPTEMBER 27, SEPTEMBER 25,
1997 1996
-------------- --------------
<S> <C> <C>
Net sales......................................................................... $ 155,715 $ 123,986
Costs and expenses:
Cost of goods sold.............................................................. 128,858 102,911
Selling and general............................................................. 13,010 11,104
Depreciation and amortization................................................... 3,302 2,221
-------------- --------------
145,170 116,236
-------------- --------------
Earnings from operations...................................................... 10,545 7,750
Interest income (expense), net.................................................... (5,913) 25
Other income (expense), net....................................................... 518 (184)
-------------- --------------
Earnings before income taxes and extraordinary item........................... 5,150 7,591
Provision for income taxes........................................................ 2,396 2,981
-------------- --------------
Earnings before extraordinary item............................................ 2,754 4,610
Extraordinary item--loss on debt refinancing, net of income tax of $1,088......... 1,758 --
-------------- --------------
Net Earnings...................................................................... 996 4,610
Dividends on redeemable preference shares......................................... 1,318 --
-------------- --------------
Net earnings (loss) available for ordinary shareholders........................... $ (322) $ 4,610
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------- -------------
<S> <C> <C>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 27, SEPTEMBER 25,
1997 1996
------------- -------------
Net sales........................................................................... $ 406,878 $ 363,308
Costs and expenses:
Cost of goods sold................................................................ 329,959 300,185
Selling and general............................................................... 35,540 33,286
Depreciation and amortization..................................................... 8,596 6,995
------------- -------------
374,095 340,466
------------- -------------
Earnings from operations...................................................... 32,783 22,842
Interest expense, net............................................................... (17,110) (622)
Other income (expense), net......................................................... 333 (298)
------------- -------------
Earnings before income taxes and extraordinary item........................... 16,006 21,922
Provision for income taxes.......................................................... 6,119 8,342
------------- -------------
Earnings before extraordinary item............................................ 9,887 13,580
Extraordinary item--loss on debt refinancing, net of income tax of $1,088........... 1,758 --
------------- -------------
Net Earnings........................................................................ 8,129 13,580
Dividends on redeemable preference shares........................................... 3,826 --
------------- -------------
Net earnings available for ordinary shareholders.................................... $ 4,303 $ 13,580
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SUCCESSOR
---------------------------
<S> <C> <C>
SEPTEMBER 27, DECEMBER 27,
1997 1996
------------- ------------
<CAPTION>
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................................... $ 9,450 $ 12,516
Accounts receivable, net........................................................ 95,240 60,767
Inventories..................................................................... 87,819 87,235
Other current assets............................................................ 3,578 2,833
------------- ------------
Total current assets........................................................ 196,087 163,351
Property, plant and equipment, net.................................................. 107,699 107,338
Goodwill............................................................................ 82,630 40,926
Deferred income taxes............................................................... 11,059 --
Other assets........................................................................ 16,622 15,678
------------- ------------
$ 414,097 $ 327,293
------------- ------------
------------- ------------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable................................................................ $ 52,300 $ 38,221
Accrued expenses................................................................ 39,121 25,511
Current maturities of long-term debt............................................ 3,144 2,000
------------- ------------
Total current liabilities................................................... 94,565 65,732
Long-term debt, less current maturities............................................. 253,869 209,740
Other liabilities................................................................... 6,901 4,722
Deferred income taxes............................................................... 15,996 9,735
------------- ------------
Total liabilities........................................................... 371,331 289,929
------------- ------------
Redeemable preference shares........................................................ 39,017 35,191
------------- ------------
Ordinary shareholders' equity:
Ordinary shares................................................................. 1,000 1,000
Retained earnings (deficit)..................................................... 4,118 (185)
Foreign currency translation adjustment......................................... (1,369) 1,358
------------- ------------
Total ordinary shareholders' equity......................................... 3,749 2,173
------------- ------------
$ 414,097 $ 327,293
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------- -------------
<S> <C> <C>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 27, SEPTEMBER 25,
1997 1996
------------- -------------
Net cash provided by operating activities........................................... $ 20,670 $ 20,241
------------- -------------
Cash flows from investing activities:
Proceeds from sale of assets...................................................... 157 233
Adjustment of Fabricated Products purchase price.................................. 3,487 --
Proceeds from the sale of Door and Specialty Products............................. 12,764 --
Purchase of JTJ Laminating, Inc................................................... (2,385) --
Purchase of Fabral................................................................ (77,788) --
Capital expenditures.............................................................. (5,634) (11,518)
------------- -------------
Net cash used in investing activities........................................... (69,399) (11,285)
------------- -------------
Cash flows from financing activities:
Repayment of debt--Revolving Credit Facility...................................... (11,643) --
Repayment of debt--Term Loans..................................................... (14,210) --
Debt proceeds for the purchase of Fabral-Term Loans............................... 40,000 --
Debt proceeds for the purchase of Fabral-Revolving Credit Facility 33,333 --
Net change in due to parent/affiliate............................................. -- (20,973)
------------- -------------
Net cash provided by (used) in financing activities............................. 47,480 (20,973)
------------- -------------
Effect of exchange rate changes on cash............................................. (1,817) (677)
------------- -------------
Net decrease in cash and equivalents................................................ (3,066) (12,694)
Cash and equivalents at beginning of period......................................... 12,516 12,587
------------- -------------
Cash and equivalents at end of period............................................... $ 9,450 $ (107)
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
Euramax International plc 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 plc
and Subsidiaries, collectively.
The Condensed Consolidated Financial Statements of the Company have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission (the "SEC"). 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 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,
1996. Operating results for the period ended September 27, 1997, are not
necessarily indicative of future results that may be expected for the year
ending December 26, 1997. Certain reclassifications have been made to prior
period financial statements to conform with the 1997 presentation.
2. ACQUISITIONS
Pursuant to a purchase agreement between the Company and Alumax Inc. ("Alumax"),
on September 25, 1996, the Company purchased, through its wholly-owned
subsidiaries, all of the issued and outstanding capital stock of the following
Alumax subsidiaries which operated certain portions of Alumax's fabricated
products operations: (i) Amerimax Fabricated Products, Inc. and its wholly owned
subsidiaries, Amerimax Specialty Products, Inc., Amerimax Building Products,
Inc., Amerimax Coated Products, Inc., Johnson Door Products, Inc., and Amerimax
Home Products, Inc.; (ii) Euramax Holdings Limited and its wholly owned
subsidiaries, Ellbee Limited and Euramax Coated Products Limited; (iii) Euramax
Europe B.V. and its wholly owned subsidiary, Euramax Coated Products B.V.; and
(iv) Euramax Industries S.A. and its wholly owned subsidiary Euramax Coated
Products S.A. For purposes of identification and description, the acquired
business is referred to as "Fabricated Products" or the "Predecessor" for the
period prior to the Acquisition and "Euramax" or the "Successor" for the period
subsequent to the Acquisition. The financial statements of the Predecessor
include the combined accounts of the entities referred to as Fabricated
Products. Such Predecessor financial statements have been prepared as if the
Predecessor's businesses had operated as an independent stand-alone entity for
all periods presented. Certain obligations were originally recorded by Alumax on
behalf of the Predecessor such as post-retirement and post-employment benefit
obligations, income taxes, legal and other corporate expenses. These obligations
have been allocated to the Predecessor's financial statements using several
factors including revenues or number of employees or other reasonable methods.
Corporate expenses of Alumax have been allocated to the Predecessor on a basis
management believes is reasonable and represents the expenses as if the
Predecessor were a stand-alone operation. All significant intercompany accounts
and transactions have been eliminated.
The purchase price for the Acquisition of approximately $252.4 million,
including acquisition expenses of approximately $3.9 million and adjustments to
give effect to certain items including cash acquired and working capital, was
allocated to the assets and liabilities of the Company based upon their fair
market value at the date of the Acquisition under the purchase method of
accounting. Such purchase price reflects adjustments to record the results of a
special audit to determine the change in the Fabricated Products
6
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
2. ACQUISITIONS (CONTINUED)
working capital (as defined) from December 31, 1995 through September 25, 1996,
and is not materially different than the amount initially recorded.
Additionally, the allocation of the purchase price was, in certain instances,
based on preliminary information and has been adjusted to reflect final asset
and liability valuations. Such final valuations were not materially different
than amounts initially recorded.
The financing for the Acquisition was provided by: (a) $35.0 million of
preference and ordinary share capital; (b) $135.0 million of Senior Subordinated
Notes; and (c) $100.0 million under a Credit Agreement aggregating $125.0
million.
On July 17, 1997, the Company's wholly owned subsidiary, Amerimax Fabricated
Products, Inc., pursuant to the previously reported agreement (the "Fabral
Purchase Agreement"), acquired all of the issued and outstanding capital stock
of Gentek Holdings, Inc. and its subsidiary Gentek Building Products, Inc.
(collectively "Gentek" or "Fabral") (the "Transaction"). At the Transaction
date, Gentek was comprised principally of Fabral, a division of Gentek
headquartered in Lancaster, Pennsylvania.
Fabral is a manufacturer and distributor of steel and aluminum roofing and wall
paneling products specifically for the agricultural, commercial and industrial
markets. The following unaudited pro forma data present the results of
operations for the nine months ended September 27, 1997 and September 25, 1996,
respectively, as though the Transaction had been completed on the first day of
the fiscal year, and assume that there are no other changes in the operations of
the Company. Such pro forma information includes adjustments to interest
expense; changes in amortization of goodwill relating to the allocation of the
purchase price; and the income tax effect related to these items. The pro forma
results are not necessarily indicative of the financial results that might have
occurred had the Transaction actually taken place on the first day of the fiscal
year, or of the future results of operations.
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------------ ------------------
<S> <C> <C>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 27, 1997 SEPTEMBER 25, 1996
------------------ ------------------
Net sales............................................. $ 461,692 $ 443,295
Earnings before extraordinary item.................... 8,436 13,662
Net earnings.......................................... 6,678 13,662
</TABLE>
The purchase price, including estimated adjustments for changes in net tangible
assets required by the Fabral Purchase Agreement and approximately $2.5 million
in acquisition related fees and expenses, was approximately $77.8 million in
cash. Further adjustment upon determination of the final net tangible assets is
not anticipated to be material. The purchase price has been allocated to the
assets and liabilities of Fabral based upon their estimated fair market value at
the acquisition date under the purchase method of accounting.
The Transaction was financed through borrowings ("Additional Borrowings") of
approximately $38.0 million of senior secured revolving loans and $40.0 million
of senior secured term loans. Such borrowings were available under the Credit
Agreement which was amended and restated to increase the revolving Credit
Facility from $85.0 million to $100.0 million and to provide additional term
loans of $40.0 million (see Extraordinary Item in the Notes to Condensed
Consolidated Financial Statements).
7
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
2. ACQUISITIONS (CONTINUED)
Certain Financial Statements and Exhibits for the Transaction can be found in
the Company's Current Report on Form 8-K, filed August 1, 1997 and Form 8-K/A,
filed September 26, 1997.
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,
1996, set forth in the Company's Annual Report on Form 10-K.
4. INVENTORIES
Inventories were comprised of:
<TABLE>
<CAPTION>
SUCCESSOR
---------------------------
<S> <C> <C>
SEPTEMBER 27, DECEMBER 27,
1997 1996
------------- ------------
Raw materials................................................... $ 62,716 $ 59,430
Work in process................................................. 10,661 12,769
Finished products............................................... 14,442 15,036
------------- ------------
$ 87,819 $ 87,235
------------- ------------
------------- ------------
</TABLE>
5. EXTRAORDINARY ITEM
On July 17, 1997, concurrent with the purchase of Fabral, (see Acquisitions in
the Notes to Condensed Consolidated Financial Statements) the Company amended
and restated its Credit Agreement. As a result of the amendment and restatement,
the Company extinguished all of its outstanding debt at July 17, 1997 under the
previous Credit Agreement. Included in such extinguishment is a loss of $1.8
million, net of income taxes of $1.1 million, on the write-off of deferred
financing fees related to the previous Credit Agreement. Additional financing
fees of $1.3 million were deferred at July 17, 1997 in conjunction with the
amended and restated Credit Agreement.
6. COMMITMENTS AND CONTINGENCIES
The Company has entered into several non-cancelable long-term contracts for the
purchase of aluminum at market values. The aluminum contracts expire in various
years through 1999. Contracted amounts of aluminum are less than the Company's
anticipated requirements.
The Company and its subsidiaries are not currently parties to any pending legal
proceedings other than such proceedings as are incidental to its business.
Management believes that such proceedings would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
consolidated financial position or results of operations of the Company and its
subsidiaries taken as a whole.
8
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company has been named as a defendant in lawsuits or as a potentially
responsible party in state and Federal administrative and judicial proceedings
seeking contribution for costs associated with the investigation, analysis,
correction and remediation of environmental conditions at various hazardous
waste disposal sites. The Company continues to monitor these actions and
proceedings and to vigorously defend both its own interests as well as the
interests of its affiliates. The Company's ultimate liability in connection with
present and future environmental claims will depend on many factors, including
its volumetric share of the waste at a given site, the remedial action required,
the total cost of remediation, and the financial viability and participation of
the other entities that also sent waste to the site. Once it becomes probable
that the Company will incur costs in connection with remediation of a site and
such costs can be reasonably estimated, the Company establishes or adjusts its
reserve for its projected share of these costs. Based upon current law and
information known to the Company concerning the size of the sites known to it,
anticipated costs, their years of operations and the number of other potentially
responsible parties, management believes that it has adequate reserves for the
Company's potential share of the estimated aggregate liability for the costs of
remedial actions and related costs and expenses. In addition, the Company
establishes reserves for remedial measures required from time to time at its own
facilities. Management believes that the reasonably probable outcomes of these
matters will not materially exceed established reserves and will not have a
material impact on the future financial position, net earnings or cash flows of
the Company. The Company's reserves, expenditures and expenses for all
environmental exposures were not significant for any of the dates or periods
presented.
In connection with the Acquisition referred to in Note 2, the Company was
indemnified by Alumax for substantially all of its costs, if any, related to
environmental matters for occurrences arising prior to the closing date of the
Acquisition during the period of time it was owned directly or indirectly by
Alumax. Such indemnification includes costs that may ultimately be incurred to
contribute to the remediation of certain specified existing National Priorities
List ("NPL") sites for which the Company had been named a potentially
responsible party under the federal Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") as of the closing date of the
Acquisition, as well as certain potential costs for sites listed on state
hazardous cleanup lists. With respect to all other environmental matters,
Alumax's obligations are limited to $125.0 million. However, notwithstanding the
indemnity, the Company does not believe that it has any significant probable
liability for environmental claims. Further, the Company believes it to be
unlikely that the Company would be required to bear environmental costs in
excess of its pro rata share of such costs as a potentially responsible party
under CERCLA.
9
<PAGE>
Euramax International plc and Subsidiaries
Notes To Condensed Consolidated Financial Statements (Continued)
(Thousands of U.S. Dollars)
(Unaudited)
7. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS
As described in Note 2, on September 25, 1996, Euramax purchased the Company
from Alumax Inc. The Acquisition was financed, in part, through Senior
Subordinated Notes due 2006 (the "Notes"). The Notes are primary obligations of
Euramax (the "Parent"). The United Kingdom and Netherlands holding company
subsidiaries of Euramax are co-obligors under the Notes (the "Co-obligors"). The
United States holding company subsidiary of Euramax (the "Guarantor") has
provided a full and unconditional guarantee of the Notes. The following
supplemental condensed combined financial statements for the period prior to the
Acquisition (the "Predecessor" period) reflect the combined historical financial
position, results of operations and cash flows of the entities that are the
Parent, the Co-obligors and the Guarantor (collectively, the "Anticipated
Parent, Co-obligors and Guarantor"), and such combined information of the
non-guarantor entities, consisting principally of the operating companies
acquired (collectively, the "Non-guarantor Subsidiaries"). The following
supplemental condensed combined financial statements as of September 27, 1997
(the "Successor" period) reflect the financial position, results of operations,
and cash flows of each of the Parent, the Co-Obligors and Guarantor entities,
and such combined information of the Non-Guarantor Subsidiaries. The Co-obligors
and the Guarantor are wholly-owned subsidiaries of Euramax and are each jointly,
severally, fully, and unconditionally liable under the Notes. Separate complete
financial statements of each Co-obligor and of the Guarantor are not presented
because management has determined that they are not material to investors. For
periods prior to the Acquisition, there were no significant intercompany
balances or transactions between the Anticipated Parent, Co-obligors and
Guarantor entities combined and the Non-guarantor Subsidiaries.
<TABLE>
<CAPTION>
PREDECESSOR
------------------------------------------
FOR THE QUARTER ENDED SEPTEMBER 25, 1996
------------------------------------------
ANTICIPATED
PARENT,
CO-OBLIGORS NON-GUARANTOR COMBINED
AND GUARANTOR SUBSIDIARIES TOTALS
-------------- -------------- ----------
<S> <C> <C> <C>
Net sales............................................................. $ -- $ 123,986 $ 123,986
Cost and expenses:
Cost of goods sold.................................................. -- 102,911 102,911
Selling and general................................................. -- 11,104 11,104
Depreciation and amortization....................................... -- 2,221 2,221
-------------- -------------- ----------
Earnings from operations.......................................... -- 7,750 7,750
Interest income, net.................................................. -- 25 25
Other expense, net.................................................... -- (184) (184)
-------------- -------------- ----------
Earnings before income taxes...................................... -- 7,591 7,591
Provision for income taxes............................................ -- 2,981 2,981
-------------- -------------- ----------
Net earnings.......................................................... $ -- $ 4,610 $ 4,610
-------------- -------------- ----------
-------------- -------------- ----------
</TABLE>
Note: Separate columns for the Anticipated Parent, the Co-obligors and the
Guarantor are not presented as there were no amounts for such entities for the
periods shown.
10
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
7. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
PREDECESSOR
------------------------------------------
<S> <C> <C> <C>
FOR THE NINE MONTHS ENDED SEPTEMBER 25,
1996
------------------------------------------
<CAPTION>
ANTICIPATED
PARENT,
CO-OBLIGORS NON-GUARANTOR COMBINED
AND GUARANTOR SUBSIDIARIES TOTALS
-------------- -------------- ----------
<S> <C> <C> <C>
Net sales............................................................. $ -- $ 363,308 $ 363,308
Cost and expenses:
Cost of goods sold.................................................. -- 300,185 300,185
Selling and general................................................. -- 33,286 33,286
Depreciation and amortization....................................... -- 6,995 6,995
-------------- -------------- ----------
Earnings from operations.......................................... -- 22,842 22,842
Interest expense, net................................................. -- (622) (622)
Other expense, net.................................................... -- (298) (298)
-------------- -------------- ----------
Earnings before income taxes...................................... -- 21,922 21,922
Provision for income taxes............................................ -- 8,342 8,342
-------------- -------------- ----------
Net earnings.......................................................... $ -- $ 13,580 $ 13,580
-------------- -------------- ----------
-------------- -------------- ----------
</TABLE>
Note: Separate columns for the Anticipated Parent, the Co-obligors and the
Guarantor are not presented as there were no amounts for such entities for the
periods shown.
11
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
7. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SUCCESSOR FOR THE QUARTER ENDED SEPTEMBER 27, 1997
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CO-OBLIGORS AND GUARANTOR SUBSIDIARIES
----------------------------------------
<CAPTION>
EURAMAX
EURAMAX AMERIMAX EURAMAX EUROPEAN
INTERNATIONAL HOLDINGS, EUROPEAN HOLDINGS, NON-
PLC INC. HOLDINGS PLC B.V. GUARANTOR
(PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS
------------- ----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales.............................. $ -- $ -- $ -- $ -- $ 155,715 $ --
Cost and expenses:
Cost of goods sold................... -- -- -- -- 128,858 --
Selling and general.................. -- -- -- -- 13,010 --
Depreciation and amortization........ -- -- -- -- 3,302 --
------ ----------- ------------ ------------- ----------- ------------
Earnings from operations........... -- -- -- -- 10,545 --
Equity in earnings (loss) of
subsidiaries......................... 996 2,561 (3,551) 4,339 7,630 (11,975)
Interest income (expense), net......... -- (553) 1,925 1,251 (8,536) --
Other income (expense), net............ -- -- 784 (5,298) 5,032 --
------ ----------- ------------ ------------- ----------- ------------
Earnings (loss) before income taxes
and extraordinary item........... 996 2,008 (842) 292 14,671 (11,975)
Provision (benefit) for income taxes... -- (215) 883 (866) 2,594 --
------ ----------- ------------ ------------- ----------- ------------
Earnings (loss) before
extraordinary item............... 996 2,223 (1,725) 1,158 12,077 (11,975)
Extraordinary item--loss on debt
refinancing, net of income taxes of
$1,088............................... -- -- -- -- 1,758 --
------ ----------- ------------ ------------- ----------- ------------
Net earnings (loss).................... 996 2,223 (1,725) 1,158 10,319 (11,975)
Dividends on redeemable preference
shares............................... 1,318 -- -- -- -- --
------ ----------- ------------ ------------- ----------- ------------
Net earnings (loss) available for
ordinary shareholders................ $ (322) $ 2,223 $ (1,725) $ 1,158 $ 10,319 $ (11,975)
------ ----------- ------------ ------------- ----------- ------------
------ ----------- ------------ ------------- ----------- ------------
<CAPTION>
<S> <C>
TOTALS
----------
<S> <C>
Net sales.............................. $ 155,715
Cost and expenses:
Cost of goods sold................... 128,858
Selling and general.................. 13,010
Depreciation and amortization........ 3,302
----------
Earnings from operations........... 10,545
Equity in earnings (loss) of
subsidiaries......................... --
Interest income (expense), net......... (5,913)
Other income (expense), net............ 518
----------
Earnings (loss) before income taxes
and extraordinary item........... 5,150
Provision (benefit) for income taxes... 2,396
----------
Earnings (loss) before
extraordinary item............... 2,754
Extraordinary item--loss on debt
refinancing, net of income taxes of
$1,088............................... 1,758
----------
Net earnings (loss).................... 996
Dividends on redeemable preference
shares............................... 1,318
----------
Net earnings (loss) available for
ordinary shareholders................ $ (322)
----------
----------
</TABLE>
12
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
7. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SUCCESSOR FOR THE NINE MONTHS ENDED SEPTEMBER 27, 1997
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CO-OBLIGORS AND GUARANTOR SUBSIDIARIES
----------------------------------------
<CAPTION>
EURAMAX
EURAMAX AMERIMAX EURAMAX EUROPEAN
INTERNATIONAL HOLDINGS, EUROPEAN HOLDINGS, NON-
PLC INC. HOLDINGS PLC B.V. GUARANTOR
(PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS
------------- ----------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales.............................. $ -- $ -- $ -- $ -- $ 406,878 $ --
Cost and expenses:
Cost of goods sold................... -- -- -- -- 329,959 --
Selling and general.................. -- -- -- -- 35,540 --
Depreciation and amortization........ -- -- -- -- 8,596 --
------ ----------- ------------ ------------- ----------- ------------
Earnings from operations........... -- -- -- -- 32,783 --
Equity in earnings (loss) of
subsidiaries......................... 8,129 6,555 (351) 9,318 34,224 (57,875)
Interest income (expense), net......... -- (6,809) 231 55 (10,587) --
Other income (expense), net............ -- -- 784 (5,298) 4,847 --
------ ----------- ------------ ------------- ----------- ------------
Earnings before income taxes and
extraordinary item............... 8,129 (254) 664 4,075 61,267 (57,875)
Provision (benefit) for income taxes... -- (2,649) 290 (1,285) 9,763 --
------ ----------- ------------ ------------- ----------- ------------
Earnings before extraordinary
item............................. 8,129 2,395 374 5,360 51,504 (57,875)
Extraordinary item--loss on debt
refinancing, net of income taxes of
$1,088............................... -- -- -- -- 1,758 --
------ ----------- ------------ ------------- ----------- ------------
Net earnings........................... 8,129 2,395 374 5,360 49,746 (57,875)
Dividends on redeemable preference
shares............................... 3,826 -- -- -- -- --
------ ----------- ------------ ------------- ----------- ------------
Net earnings available for ordinary
shareholders......................... $ 4,303 $ 2,395 $ 374 $ 5,360 $ 49,746 $ (57,875)
------ ----------- ------------ ------------- ----------- ------------
------ ----------- ------------ ------------- ----------- ------------
<CAPTION>
<S> <C>
TOTALS
----------
<S> <C>
Net sales.............................. $ 406,878
Cost and expenses:
Cost of goods sold................... 329,959
Selling and general.................. 35,540
Depreciation and amortization........ 8,596
----------
Earnings from operations........... 32,783
Equity in earnings (loss) of
subsidiaries......................... --
Interest income (expense), net......... (17,110)
Other income (expense), net............ 333
----------
Earnings before income taxes and
extraordinary item............... 16,006
Provision (benefit) for income taxes... 6,119
----------
Earnings before extraordinary
item............................. 9,887
Extraordinary item--loss on debt
refinancing, net of income taxes of
$1,088............................... 1,758
----------
Net earnings........................... 8,129
Dividends on redeemable preference
shares............................... 3,826
----------
Net earnings available for ordinary
shareholders......................... $ 4,303
----------
----------
</TABLE>
13
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
7. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SUCCESSOR AS OF SEPTEMBER 27, 1997
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CO-OBLIGORS AND GUARANTOR SUBSIDIARIES
-------------------------------------------
<CAPTION>
EURAMAX
EURAMAX AMERIMAX EURAMAX EUROPEAN
INTERNATIONAL HOLDINGS, EUROPEAN HOLDINGS, NON-
PLC INC. HOLDINGS PLC B.V. GUARANTOR
(PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS
------------- ------------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $ 124 $ -- $ -- $ -- $ 9,326 $ --
Accounts receivable, net............ -- -- -- -- 95,240 --
Inventories......................... -- -- -- -- 88,134 (315)
Other current assets................ -- -- -- -- 3,578 --
------------- ------------- ------------- ------------- ----------- ------------
Total current assets.............. 124 -- -- -- 196,278 (315)
Property, plant and equipment, net.... -- -- -- -- 107,699 --
Amounts due from parent/affiliates.... 70,309 72,189 38,315 36,899 86,014 (303,726)
Goodwill.............................. -- -- -- -- 82,630 --
Investment in consolidated
subsidiaries........................ 42,819 25,102 759 14,381 336,946 (420,007)
Deferred income taxes................. -- 1,398 -- -- 9,661
Other assets.......................... 2,129 -- 843 969 12,681 --
------------- ------------- ------------- ------------- ----------- ------------
$ 115,381 $ 98,689 $ 39,917 $ 52,249 $ 831,909 $ (724,048)
------------- ------------- ------------- ------------- ----------- ------------
------------- ------------- ------------- ------------- ----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................... $ -- $ -- $ -- $ -- $ 52,300 $ --
Accrued expenses.................... 2,010 943 1,379 1,196 33,593 --
Current maturities of long-term
debt.............................. -- -- -- -- 3,144 --
------------- ------------- ------------- ------------- ----------- ------------
Total current liabilities......... 2,010 943 1,379 1,196 89,037 --
Long-term debt, less current
maturities.......................... 70,605 -- 27,179 37,216 118,869 --
Amounts due to parent/affiliates...... -- 78,954 3,148 1,256 220,683 (304,041)
Other liabilities..................... -- -- -- -- 6,901 --
Deferred income taxes................. -- -- -- (997) 16,993 --
------------- ------------- ------------- ------------- ----------- ------------
Total liabilities................. 72,615 79,897 31,706 38,671 452,483 (304,041)
------------- ------------- ------------- ------------- ----------- ------------
Commitments and contingencies......... -- -- -- -- -- --
------------- ------------- ------------- ------------- ----------- ------------
Redeemable preference shares.......... 39,017 -- -- -- -- --
------------- ------------- ------------- ------------- ----------- ------------
Ordinary shareholders' equity:
Ordinary shares..................... 1,000 -- 78 23 21,276 (21,377)
Paid-in capital..................... -- 17,000 6,922 9,077 457,279 (490,278)
Retained earnings................... 4,118 1,792 860 6,198 62,762 (71,612)
Dividends declared.................. -- -- -- -- (141,600) 141,600
Cumulative foreign translation
adjustment........................ (1,369) -- 351 (1,720) (20,291) 21,660
------------- ------------- ------------- ------------- ----------- ------------
Total ordinary shareholders'
equity.......................... 3,749 18,792 8,211 13,578 379,426 (420,007)
------------- ------------- ------------- ------------- ----------- ------------
$ 115,381 $ 98,689 $ 39,917 $ 52,249 $ 831,909 $ (724,048)
------------- ------------- ------------- ------------- ----------- ------------
------------- ------------- ------------- ------------- ----------- ------------
<CAPTION>
<S> <C>
CONSOLIDATED
TOTALS
------------
<S> <C>
Current assets:
Cash and cash equivalents........... $ 9,450
Accounts receivable, net............ 95,240
Inventories......................... 87,819
Other current assets................ 3,578
------------
Total current assets.............. 196,087
Property, plant and equipment, net.... 107,699
Amounts due from parent/affiliates.... --
Goodwill.............................. 82,630
Investment in consolidated
subsidiaries........................ --
Deferred income taxes................. 11,059
Other assets.......................... 16,622
------------
$ 414,097
------------
------------
Current liabilities:
Accounts payable.................... $ 52,300
Accrued expenses.................... 39,121
Current maturities of long-term
debt.............................. 3,144
------------
Total current liabilities......... 94,565
Long-term debt, less current
maturities.......................... 253,869
Amounts due to parent/affiliates...... --
Other liabilities..................... 6,901
Deferred income taxes................. 15,996
------------
Total liabilities................. 371,331
------------
Commitments and contingencies.........
------------
Redeemable preference shares.......... 39,017
------------
Ordinary shareholders' equity:
Ordinary shares..................... 1,000
Paid-in capital..................... --
Retained earnings................... 4,118
Dividends declared.................. --
Cumulative foreign translation
adjustment........................ (1,369)
------------
Total ordinary shareholders'
equity.......................... 3,749
------------
$ 414,097
------------
------------
</TABLE>
14
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
7. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SUCCESSOR AS OF DECEMBER 27, 1996
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CO-OBLIGORS AND GUARANTOR SUBSIDIARIES
-----------------------------------------
<CAPTION>
EURAMAX
EURAMAX AMERIMAX EURAMAX EUROPEAN
INTERNATIONAL HOLDINGS, EUROPEAN HOLDINGS, NON-
PLC INC. HOLDINGS PLC B.V. GUARANTOR
(PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS
------------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 124 $ -- $ -- $ -- $ 12,392 $ --
Accounts receivable, net........... -- -- -- -- 60,767 --
Inventories........................ -- -- -- -- 87,235 --
Other current assets............... -- -- -- -- 2,833 --
------------- ----------- ------------- ------------- ----------- ------------
Total current assets............. 124 -- -- -- 163,227 --
Property, plant and equipment, net... -- -- -- -- 107,338 --
Amounts due from parent/affiliates... 74,765 -- -- 3,358 34,074 (112,197)
Goodwill............................. -- -- -- -- 40,926 --
Investment in consolidated
subsidiaries....................... 37,416 142,743 33,205 37,026 382,113 (632,503)
Other assets......................... 7,561 3,476 853 1,102 2,686 --
------------- ----------- ------------- ------------- ----------- ------------
$ 119,866 $ 146,219 $ 34,058 $ 41,486 $ 730,364 $ (744,700)
------------- ----------- ------------- ------------- ----------- ------------
------------- ----------- ------------- ------------- ----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................... $ -- $ -- $ -- $ -- $ 38,221 $ --
Accrued expenses................... 2,302 (710) 441 570 22,908 --
Current maturities of long-term
debt............................. -- -- -- -- 2,000 --
------------- ----------- ------------- ------------- ----------- ------------
Total current liabilities........ 2,302 (710) 441 570 63,129 --
Long-term debt, less current
maturities......................... 80,200 25,000 23,900 30,900 49,740 --
Amounts due to parent/affiliates..... -- 105,532 884 -- 5,781 (112,197)
Other liabilities.................... -- -- -- -- 4,722 --
Deferred income taxes................ -- -- -- -- 9,735 --
------------- ----------- ------------- ------------- ----------- ------------
Total liabilities................ 82,502 129,822 25,225 31,470 133,107 (112,197)
------------- ----------- ------------- ------------- ----------- ------------
Commitments and contingencies........ -- -- -- -- -- --
------------- ----------- ------------- ------------- ----------- ------------
Redeemable preference shares......... 35,191 -- -- -- -- --
------------- ----------- ------------- ------------- ----------- ------------
Ordinary shareholders' equity:
Ordinary shares.................... 1,000 -- 78 23 16,366 (16,467)
Paid-in capital.................... -- 17,000 6,922 9,077 565,653 (598,652)
Retained earnings (deficit)........ (185) (603) 486 838 13,016 (13,737)
Cumulative foreign translation
adjustment....................... 1,358 -- 1,347 78 2,222 (3,647)
------------- ----------- ------------- ------------- ----------- ------------
Total ordinary shareholders'
equity......................... 2,173 16,397 8,833 10,016 597,257 (632,503)
------------- ----------- ------------- ------------- ----------- ------------
$ 119,866 $ 146,219 $ 34,058 $ 41,486 $ 730,364 $ (744,700)
------------- ----------- ------------- ------------- ----------- ------------
------------- ----------- ------------- ------------- ----------- ------------
<CAPTION>
<S> <C>
CONSOLIDATED
TOTALS
------------
<S> <C>
Current assets:
Cash and cash equivalents.......... $ 12,516
Accounts receivable, net........... 60,767
Inventories........................ 87,235
Other current assets............... 2,833
------------
Total current assets............. 163,351
Property, plant and equipment, net... 107,338
Amounts due from parent/affiliates... --
Goodwill............................. 40,926
Investment in consolidated
subsidiaries....................... --
Other assets......................... 15,678
------------
$ 327,293
------------
------------
Current liabilities:
Accounts payable................... $ 38,221
Accrued expenses................... 25,511
Current maturities of long-term
debt............................. 2,000
------------
Total current liabilities........ 65,732
Long-term debt, less current
maturities......................... 209,740
Amounts due to parent/affiliates..... --
Other liabilities.................... 4,722
Deferred income taxes................ 9,735
------------
Total liabilities................ 289,929
------------
Commitments and contingencies........ --
------------
Redeemable preference shares......... 35,191
------------
Ordinary shareholders' equity:
Ordinary shares.................... 1,000
Paid-in capital.................... --
Retained earnings (deficit)........ (185)
Cumulative foreign translation
adjustment....................... 1,358
------------
Total ordinary shareholders'
equity......................... 2,173
------------
$ 327,293
------------
------------
</TABLE>
15
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The Company employed the purchase method of accounting for the Acquisition
completed in September, 1996. As a result of the required purchase accounting
adjustments, the post-Acquisition financial statements for the period from
September 25, 1996 to September 27, 1997 ("Successor") are not comparable in all
respects to the financial statements for the periods prior to the Acquisition
("Predecessor").
RESULTS OF OPERATIONS
The following table sets forth the Company's Statement of Earnings Data
expressed as a percentage of net sales:
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------
<S> <C> <C>
SEPTEMBER 27, 1997 SEPTEMBER 25, 1996
------------------- -------------------
STATEMENT OF EARNINGS DATA:
Net sales................................................................. 100.0% 100.0%
Costs and expenses:
Cost of goods sold...................................................... 82.8 83.0
Selling and general..................................................... 8.4 9.0
Depreciation and amortization........................................... 2.1 1.8
----- -----
Earnings from operations................................................ 6.7 6.2
Interest expense, net..................................................... 3.8 0.0
Other income (expense), net............................................... 0.3 (0.1)
----- -----
Earnings before income taxes and extraordinary item..................... 3.2 6.1
Provision for income taxes................................................ 1.5 2.4
----- -----
Earnings before extraordinary item...................................... 1.7 3.7
Extraordinary item--loss on debt refinancing, net of income taxes......... 1.1 --
----- -----
Net earnings.............................................................. 0.6% 3.7%
----- -----
----- -----
</TABLE>
QUARTER ENDED SEPTEMBER 27, 1997 AS COMPARED TO QUARTER ENDED SEPTEMBER 25, 1996
NET SALES. Net sales increased 25.6% to $155.7 million for the quarter ended
September 27, 1997, from $124.0 million for the quarter ended September 25,
1996. Approximately $28.9 million of this increase is attributable to net sales
of Fabral, which was acquired by the Company on July 17, 1997 (see Acquisitions
in Notes to Condensed Consolidated Financial Statements). Excluding Fabral, net
sales increased 2.3% or $2.8 million. Increases in shipments, attributable to
aluminum product shipments to OEM markets in Europe and metal raincarrying
systems shipped to home center customers in North America, combined to increase
net sales in 1997 by approximately $10.5 million. In addition, net sales
increased approximately $6.9 million for sales attributable to JTJ Laminating,
Inc., acquired by the Company on March 28, 1997 (see Liquidity and Capital
Resources). These increases were partially offset by (i) weakening of the Dutch
Guilder and French Franc compared to the U.S. Dollar, which reduced net sales
approximately $3.7 million and $1.0 million, respectively, (ii) $9.3 million
decline in sales attributable to divested subsidiaries (see Liquidity and
Capital Resources) and (iii) other individually insignificant occurrences. Net
sales in the U.S. increased 35.1% to $110.4 million for the quarter ended
September 27, 1997, from $81.7 million for the quarter ended September 25, 1996.
Net sales in Europe increased 7.1% to $45.3 million for the quarter ended
September 27, 1997, from $42.3 million for the quarter ended September 25, 1996.
16
<PAGE>
COST OF GOODS SOLD. Cost of goods sold, as a percentage of net sales, decreased
0.3% for the three months ended September 27, 1997, from 83.0% in 1996 to 82.8%
in 1997. This decrease is primarily attributable to (i) lower raw material
prices, (ii) sales of a greater percentage of higher margin aluminum products,
particularly in Europe, and (iii) an overall improvement in gross margin
attributable to higher sales volume.
SELLING AND GENERAL EXPENSES. Selling and general expenses as a percentage of
net sales, decreased 0.6% for the quarter ended September 27, 1997, from 9.0% in
1996 to 8.4% in 1997. This decrease is primarily attributable to Fabral which
had lower selling and general expenses, as a percentage of net sales, than the
Company prior to the Fabral acquisition (see Acquisitions in Notes to Condensed
Consolidated Financial Statements).
DEPRECIATION AND AMORTIZATION. Depreciation and amortization, as a percentage
of net sales, increased 0.3% for the quarter ended September 27, 1997, from 1.8%
in 1996 to 2.1% in 1997. This increase was primarily attributable to
depreciation and amortization arising from the Fabral acquisition.
EARNINGS FROM OPERATIONS. For reasons stated above, earnings from operations in
the U.S. increased from $4.4 million in the third quarter of 1996 to $7.8
million in the third quarter of 1997. Earnings from operations in Europe
decreased to $2.8 million for the three months ended September 27, 1997 from
$3.4 million for the three months ended September 25, 1996.
INTEREST EXPENSE, NET. Net interest expense in the three months ended September
27, 1997 increased substantially to $5.9 million from a level of $25,000 in
income for the three months ended September 25, 1996. This increase was due
primarily to interest on acquisition borrowings.
OTHER EXPENSES, NET. The Company enters into currency swaps with major banking
institutions to reduce the impact of interest rate and exchange rate
fluctuations with respect to debt payments made in foreign currency
denominations. Currency swaps involve exchanges of interest payments and
principal amounts at maturity in differing currencies. Other expenses for the
quarter ended September 27, 1997 included a net unrealized gain of approximately
$300,000 on foreign exchange movements in the UK and a net unrealized loss of
approximately $200,000 in the Netherlands. Remaining income (expense) was not
significant for the quarters ended September 27, 1997 and September 25, 1996.
PROVISION FOR INCOME TAXES. The effective rate for the provision for income
taxes increased from 39.3% to 46.5% for the three months ended September 25,
1996, and September 27, 1997, respectively. This increase was due primarily to
finalization of the Acquisition purchase price allocation as of September 27,
1997. The effective rate also increased due to higher earnings in the U.S. which
are subjected to slightly higher income tax rates than in the European
countries.
EXTRAORDINARY ITEM. The quarter included a loss of approximately $1.8 million,
net of income taxes of $1.1 million, for the write-off of deferred financing
costs in connection with the extinguishment of debt related to the amendment and
restatement of the Company's Credit Agreement to, among other items, provide
available borrowings for the Fabral acquisition (see Extraordinary Item in Notes
to Condensed Consolidated Financial Statements).
17
<PAGE>
The following table sets forth the Company's Statement of Earnings Data
expressed as a percentage of net sales:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------------------
<S> <C> <C>
SEPTEMBER 27, 1997 SEPTEMBER 25, 1996
------------------- -------------------
STATEMENT OF EARNINGS DATA:
Net sales................................................................. 100.0% 100.0%
Costs and expenses:
Cost of goods sold...................................................... 81.1 82.6
Selling and general..................................................... 8.7 9.2
Depreciation and amortization........................................... 2.1 1.9
----- -----
Earnings from operations................................................ 8.1 6.3
Interest expense, net..................................................... 4.2 0.2
Other income (expense), net............................................... 0.1 (0.1)
----- -----
Earnings before income taxes and extraordinary item..................... 4.0 6.0
Provision for income taxes................................................ 1.5 2.3
----- -----
Earnings before extraordinary item...................................... 2.5 3.7
Extraordinary item--loss on debt refinancing, net of income taxes......... 0.4 --
----- -----
Net earnings.............................................................. 2.1% 3.7%
----- -----
----- -----
</TABLE>
NINE MONTHS ENDED SEPTEMBER 27, 1997 AS COMPARED TO NINE MONTHS ENDED SEPTEMBER
25, 1996
NET SALES. Net sales increased 12.0% to $406.9 million for the nine months
ended September 27, 1997, from $363.3 million for the nine months ended
September 25, 1996. Approximately $28.9 million of this increase is attributable
to net sales of Fabral which was acquired by the Company on July 17, 1997 (see
Acquisitions in Notes to Condensed Consolidated Financial Statements). Increases
in aluminum shipments to OEM markets in Europe, raincarrying systems in North
America, and an increase in steel shipments (increases in the first quarter
steel shipments partially offset by declines realized in the second and third
quarters) to producers of manufactured homes combined to increase net sales in
1997 by approximately $26.0 million. In addition, net sales increased
approximately $15.5 million for sales attributable to JTJ Laminating, Inc.,
acquired by the Company on March 28, 1997 (see Liquidity and Capital Resources).
Net sales also increased approximately $3.8 million due to the strengthening of
the British Pound Sterling compared to the U.S. Dollar. These increases were
partially offset by (i) weakening of the Dutch Guilder and French Franc compared
to the U.S. Dollar, which reduced net sales approximately $8.5 million and $2.9
million, respectively, (ii) $12.3 million decline in net sales attributable to
divested subsidiaries (see Liquidity and Capital Resources), (iii) lower
aluminum selling prices precipitated by an approximate 10% reduction in market
prices for bare aluminum sheet and (iv) other individually insignificant
occurrences. Net sales in the U.S. increased 14.9% to $259.0 million for the
nine months ended September 27, 1997, from $225.5 million for the nine months
ended September 25, 1996. Net sales in Europe increased 7.3% to $147.9 million
for the nine months ended September 27, 1997, from $137.8 million for the nine
months ended September 25, 1996.
COST OF GOODS SOLD. Cost of goods sold, as a percentage of net sales, decreased
1.5% for the nine months ended September 27, 1997, from 82.6% in 1996 to 81.1%
in 1997. This decrease is primarily attributable to (i) lower raw material
prices, (ii) sales of a greater percentage of higher margin aluminum products,
particularly in Europe, and (iii) an overall improvement in gross margin
attributable to higher sales volume.
SELLING AND GENERAL EXPENSES. Selling and general expenses as a percentage of
net sales decreased by 0.5% for the nine months ended September 27, 1997, from
9.2% in 1996 to 8.7% in 1997. This decrease is
18
<PAGE>
primarily attributable to Fabral which had lower selling and general expenses,
as a percentage of net sales, than the Company prior to the Fabral acquisition
(see Acquisitions in Notes to Condensed Consolidated Financial Statements).
DEPRECIATION AND AMORTIZATION. Depreciation and amortization, as a percentage
of net sales, increased 0.2% for the nine months ended September 27, 1997, from
1.9% in 1996 to 2.1% in 1997. This increase was primarily attributable to
depreciation and amortization arising from the Fabral acquisition.
EARNINGS FROM OPERATIONS. For reasons stated above, earnings from operations in
the U.S. increased from $9.6 million for the nine months ended September 25,
1996 to $14.7 million for the nine months ended September 27, 1997. Earnings
from operations in Europe increased 36.8% to $18.2 million for the nine months
ended September 27, 1997 from $13.3 million for the nine months ended September
25, 1996.
INTEREST EXPENSE, NET. Net interest expense in the nine months ended September
27, 1997 increased substantially to $17.1 million from a level of $622,000 for
the nine months ended September 25, 1996. This increase was due primarily to
interest on acquisition borrowings.
OTHER EXPENSES, NET. The Company enters into currency swaps with major banking
institutions to reduce the impact of interest rate and exchange rate
fluctuations with respect to debt payments made in foreign currency
denominations. Currency swaps involve exchanges of interest payments and
principal amounts at maturity in differing currencies. Other expenses for the
nine months ended September 27, 1997 included a net unrealized gain of
approximately $300,000 on foreign exchange movements in the UK and a net
unrealized loss of approximately $200,000 in the Netherlands. Remaining income
(expense) was not significant for the nine months ended September 27, 1997 and
September 25, 1996.
PROVISION FOR INCOME TAXES. The effective rate for the provision for income
taxes increased from 38.1% to 38.2% for the nine months ended September 25,
1996, and September 27, 1997, respectively. This increase was due to higher
earnings attributable to the U.S. operations primarily as a result of the Fabral
acquisition. Earnings in the U.S. are subjected to slightly higher income tax
rates than in the European countries.
EXTRAORDINARY ITEM The nine month results ending September 27, 1997 included a
loss of approximately $1.8 million, net of income taxes of $1.1 million, for the
write-off of deferred financing costs in connection with the extinguishment of
debt related to the amendment and restatement of the Company's Credit Agreement
to, among other items, provide available borrowings for the Fabral acquisition
(see Extraordinary Item in Notes to Condensed Consolidated Financial
Statements).
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY. The Company's primary liquidity needs arise from debt service on
indebtedness incurred in connection with the Acquisition and the funding of
capital expenditures. As of September 26, 1997, the Company had outstanding
indebtedness for borrowed money of $257.0 million, $39.0 million of Preference
Shares and ordinary shareholders' equity of $3.7 million. Included in such
indebtedness was approximately $122.0 million under the Credit Agreement,
consisting of $64.4 million under the Term Loan and $57.6 million under the
Revolving Credit Facility. The undrawn amount of the Revolving Credit Facility
at September 26, 1997 was approximately $42.4 million, which was available for
working capital and general corporate purposes, subject to borrowing base
limitations. As of September 26, 1997, this amount was fully available. The
Company's leveraged financial position requires that a substantial portion of
the Company's cash flow from operations be used to pay interest on the Notes,
principal and interest under the Credit Agreement and other indebtedness.
Further, the Company's leveraged position may impede its ability to obtain
financing in the future for working capital, capital expenditures and general
corporate purposes. In addition, the Company's leveraged position may make it
more vulnerable to economic downturns and may limit its ability to withstand
competitive pressures. The Company believes that cash generated from
19
<PAGE>
operations and, subject to borrowing base limitations, borrowings under the
Credit Agreement will be adequate to meet its needs for the foreseeable future,
although no assurance to that effect can be given.
Principal and interest payments under the Credit Agreement and interest payments
on the Notes represent significant liquidity requirements for the Company. With
respect to the $64.4 million of Term Loans, the Company must make scheduled
quarterly principal payments totaling $0.8 million over the remainder of 1997,
$3.9 million in 1998, $7.8 million in 1999, $4.7 million in 2000, $7.0 million
in 2001, $12.4 million in 2002 and $15.9 million in 2003, and $11.9 million in
2004. Interest on the Term Loans and the Revolving Credit Facility will bear
interest at floating rates.
The Company's primary source of liquidity is funds generated from operations,
which will be supplemented by borrowings under the Credit Agreement. Operations
provided cash of $20.7 million in the nine months ended September 26, 1997,
compared to $20.2 million in the nine months ended September 25, 1996. Lower
cash flow due to the decrease in net earnings was more than offset by working
capital reductions, net of the effects of the Fabral acquisition. During the
quarter ended September 27, 1997, goodwill increased approximately $35.1 million
due to the acquisition of Fabral and another $6.3 million for purchase
allocation charges as a result of finalization of various asset and liability
valuations related to the Fabricated Products acquisition. The deferred tax
asset balance at September 27, 1997, included approximately $8.6 million related
to a net operating loss carryforward acquired in the Fabral purchase. Based upon
historical performance and anticipated future earnings at Fabral, the Company
believes that this operating loss carryforward is fully realizable.
On June 2, 1997, the Company sold the assets, along with accounts payable and
open purchase orders, related to its Johnson Door Products, Inc. subsidiary for
approximately $9.1 million in cash. The sales price was determined by
arm's-length negotiations between two unaffiliated parties and was subject to
adjustment based upon the aged balance of accounts receivable greater than
ninety days on September 20, 1997. Such adjustment was not material to the
financial statements.
On June 27, 1997, the Company sold all of the issued and outstanding capital
stock of Amerimax Specialty Products, Inc. for approximately $4.2 million, of
which $3.7 was in cash and $500,000 in a subordinated promissory note payable in
60 monthly installments of principal and accrued interest, such interest
accruing on the unpaid balance at an annual rate of 9.25%. The sales price was
determined by arm's-length negotiations between two unaffiliated parties.
On March 28, 1997, the Company's wholly owned subsidiary, Amerimax Building
Products, Inc., purchased all of the issued and outstanding capital stock of JTJ
Laminating, Inc. ("JTJ") for approximately $1.9 million, along with assumption
of outstanding indebtedness of $1.3 million. At the closing date, approximately
$2.4 million was paid in cash, of which $1.3 million was to extinguish
outstanding indebtedness of JTJ. The remaining purchase price of $800,000 will
be paid in various installments over the next ten years. The sales price was
determined by arm's-length negotiations between two unaffiliated parties and is
subject to further adjustment based upon the change in working capital between
September 30, 1996 and March 28, 1997. This estimated adjustment is included in
the purchase price reported above, and management does not believe the final
adjustment will be significantly different than the estimate.
On July 17, 1997, the Company's wholly owned subsidiary, Amerimax Fabricated
Products, Inc., pursuant to the previously reported agreement (the "Fabral
Purchase Agreement"), acquired all of the issued and outstanding capital stock
of Gentek Holdings, Inc. and its subsidiary Gentek Building Products, Inc.
(collectively "Gentek" or "Fabral") (the "Transaction"). At the Transaction
date, Gentek was comprised principally of Fabral, a division of Gentek
headquartered in Lancaster, Pennsylvania.
The purchase price, including estimated adjustments for changes in net tangible
assets required by the Fabral Purchase Agreement and approximately $2.5 million
in acquisition related fees and expenses, was approximately $77.8 million in
cash. Further adjustment upon determination of the final net tangible assets is
not anticipated to be material. The purchase price was allocated to the assets
and liabilities of Fabral
20
<PAGE>
based upon their estimated fair market value at the acquisition date under the
purchase method of accounting. The Transaction was financed through borrowings
("Additional Borrowings") of approximately $38.0 million of senior secured
revolving loans and $40.0 million of senior secured term loans. Such borrowings
were available under the Credit Agreement which was amended and restated to
increase the Revolving Credit Facility from $85.0 million to $100.0 million and
to provide additional term loans of $40.0 million.
CAPITAL EXPENDITURES. The Company's capital expenditures were $5.6 million and
$11.5 million in the nine months ended September 26, 1997 and September 25,
1996, respectively. Capital expenditures in 1997 include approximately $2.0
million for improvements to paintlines in Corby, England and Roermond, the
Netherlands. Capital expenditures in 1996 include approximately $1.9 million for
the construction of a fabrication plant in Helena, Arkansas. The balance of
capital expenditures in both periods primarily relate to purchases and upgrades
of fabricating equipment, transportation and material moving equipment, and
information systems.
WORKING CAPITAL MANAGEMENT. Working capital was $101.5 million as of September
26, 1997 compared to $120.9 million as of September 25, 1996. The Company
believes that current levels of working capital represent a liquid source of
funds available for future cash flows. The Company believes that further
reductions can be achieved upon completion of current information systems
projects being undertaken in some of the Company's subsidiaries. The Company
believes these systems will offer distinct advantages in monitoring credit, open
receivables and inventory levels, while enabling centralized ordering and
inventory management. However, there can be no assurance that working capital
reductions will be achieved.
Note regarding Private Securities Litigation Reform Act: Statements made by the
Company which are not historical facts are forward looking statements that
involve risks and uncertainties. Actual results could differ materially from
those expressed or implied in forward looking statements. All such forward
looking 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 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, 1996, as
well as the Company's other filings with the Securities and Exchange Commission.
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K: The Company filed a Form 8-K on August 1, 1997, and a
Form 8-K/A on September 26, 1997 reporting the acquisition by the Company of
all of the issued and outstanding capital stock of Gentek Holdings, Inc. and
its subsidiary Gentek Building Products, Inc.
(1) Financial Statements of Business Acquired and Pro Forma information
filed with Form 8-K on August 1, 1997 or with Form 8-K/A on September
26, 1997.
(i) The audited Restructured Consolidated Financial Statements of Gentek
Holdings, Inc. and its Subsidiary Gentek Building Products, Inc. as
of December 31, 1996 and for the three
21
<PAGE>
years then ended. The Report on Audit of Statement of Operations and
Divisional Equity and Cash Flows for Fabral Building Products
Division (an entity comprising selected assets and liabilities of
Alcan Aluminum Corporation) for the period January 1, 1994 to
December 20, 1994.
Gentek was incorporated and established as an entity on September
15, 1994. However, operations of Fabral were not acquired from Alcan
until December 20, 1994.
(ii) The unaudited Restructured Condensed Consolidated Balance Sheet of
Gentek Holdings, Inc. and its Subsidiary, Gentek Building Products,
Inc. as of June 30, 1997 and the unaudited Restructured Condensed
Consolidated Statements of Income of Gentek Holdings, Inc. and its
Subsidiary, Gentek Building Products, Inc. for the six months ended
June 30, 1996 and 1997.
(iii) Pro Forma Financial Information--The unaudited Pro Forma condensed
Combined Balance Sheet of Euramax International plc and
Subsidiaries as of June 28, 1997 and the unaudited Pro Forma
Condensed Combined Statements of Earnings of Euramax International
plc and Subsidiaries for the year ended December 27, 1996 and for
the six months ended June 28, 1997, giving effect to the
Transaction.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, Euramax International plc has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
EURAMAX INTERNATIONAL PLC
<TABLE>
<CAPTION>
SIGNATURE TITLE
-------------------------------------------------- --------------------------------------------------
<S> <C> <C>
/s/ J. DAVID SMITH Chief Executive Officer and President
---------------------------------------
J. David Smith
Dated: November 7, 1997
---------------------------------------
V.P. Finance and Administration and Secretary
/s/ R. SCOTT VANSANT (Principal Financial and Accounting Officer)
---------------------------------------
R. Scott Vansant
Dated: November 7, 1997
---------------------------------------
</TABLE>
23
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