<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 JUNE 27, 1998
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 98-1066997
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
5445 TRIANGLE PARKWAY, SUITE 350, 30092
NORCROSS, GEORGIA (Zip Code)
(Address of principal executive offices)
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 August 10, 1998, Registrant had outstanding 1,000,000 Ordinary Shares
and 34,000,000 Preference Shares. All of these shares were owned by affiliates.
Page 1 of 22
Exhibit Index located on page 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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>
QUARTER ENDED QUARTER ENDED
JUNE 28, JUNE 27,
1997 1998
------------- -------------
<S> <C> <C>
Net sales.......................................................................... $ 136,289 $ 160,434
Costs and expenses:
Cost of goods sold............................................................... 109,065 130,572
Selling and general.............................................................. 11,891 12,736
Depreciation and amortization.................................................... 2,599 3,057
------------- -------------
123,555 146,365
------------- -------------
Earnings from operations....................................................... 12,734 14,069
Interest expense, net.............................................................. (5,579) (6,074)
Other expense, net................................................................. (145) (91)
------------- -------------
Earnings before income taxes................................................... 7,010 7,904
Provision for income taxes......................................................... 2,482 3,366
------------- -------------
Net earnings....................................................................... 4,528 4,538
Dividends on redeemable preference shares.......................................... 1,275 1,463
------------- -------------
Net earnings available for ordinary shareholders................................... $ 3,253 $ 3,075
------------- -------------
------------- -------------
</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>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 28, JUNE 27,
1997 1998
---------------- ----------------
<S> <C> <C>
Net sales.................................................................... $ 251,163 $ 303,523
Costs and expenses:
Cost of goods sold......................................................... 201,101 249,989
Selling and general........................................................ 22,530 24,815
Depreciation and amortization.............................................. 5,294 6,111
-------- --------
228,925 280,915
-------- --------
Earnings from operations................................................. 22,238 22,608
Interest expense, net........................................................ (11,197) (12,134)
Other expense, net........................................................... (185) (132)
-------- --------
Earnings before income taxes............................................. 10,856 10,342
Provision for income taxes................................................... 3,723 4,385
-------- --------
Net earnings................................................................. 7,133 5,957
Dividends on redeemable preference shares.................................... 2,508 2,876
-------- --------
Net earnings available for ordinary shareholders............................. $ 4,625 $ 3,081
-------- --------
-------- --------
</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>
DECEMBER 26, JUNE 27,
1997 1998
------------ ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................ $ 12,914 $ 13,156
Accounts receivable, net............................................................. 78,085 95,793
Inventories.......................................................................... 87,461 83,366
Other current assets................................................................. 2,314 2,472
------------ ----------
Total current assets............................................................... 180,774 194,787
Property, plant and equipment, net..................................................... 113,187 113,322
Goodwill, net.......................................................................... 76,910 75,203
Deferred income taxes.................................................................. 11,004 10,966
Other assets........................................................................... 15,875 13,331
------------ ----------
$ 397,750 $ 407,609
------------ ----------
------------ ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdrafts...................................................................... $ 11,470 $ 1,225
Accounts payable..................................................................... 42,575 60,581
Accrued expenses and other current liabilities....................................... 29,792 26,307
Current maturities of long-term debt................................................. 3,924 17,978
------------ ----------
Total current liabilities.......................................................... 87,761 106,091
Long-term debt, less current maturities................................................ 240,292 226,062
Other liabilities...................................................................... 8,266 7,835
Deferred income taxes.................................................................. 17,555 17,928
------------ ----------
Total liabilities.................................................................. 353,874 357,916
------------ ----------
Redeemable preference shares........................................................... 40,382 43,258
------------ ----------
Ordinary shareholders' equity:
Ordinary shares...................................................................... 1,000 1,000
Retained earnings.................................................................... 4,420 7,501
Accumulated other comprehensive income............................................... (1,926) (2,066)
------------ ----------
Total ordinary shareholders' equity................................................ 3,494 6,435
------------ ----------
------------ ----------
$ 397,750 $ 407,609
------------ ----------
------------ ----------
</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>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 28, JUNE 27,
1997 1998
---------------- ----------------
<S> <C> <C>
Net cash provided by operating activities.................................... $ 23,235 $ 4,010
------- -------
Cash flows from investing activities:
Proceeds from sale of assets............................................... 119 502
Adjustment of Fabricated Products purchase price........................... 3,487 --
Purchase of JTJ Laminating, Inc............................................ (2,385) --
Capital expenditures....................................................... (1,978) (6,241)
------- -------
Net cash used in investing activities.................................... (757) (5,739)
------- -------
Cash flows from financing activities:
Proceeds from long-term debt............................................... 13,416 13,573
Repayment of long-term debt................................................ (23,454) (13,421)
------- -------
Net cash provided by (used in) financing activities...................... (10,038) 152
------- -------
Effect of exchange rate changes on cash...................................... 366 1,819
------- -------
Net increase in cash and equivalents......................................... 12,806 242
Cash and equivalents at beginning of period.................................. 12,516 12,914
------- -------
Cash and equivalents at end of period........................................ $ 25,322 $ 13,156
------- -------
------- -------
</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
("Euramax") 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 26,
1997. Operating results for the period ended June 27, 1998, are not necessarily
indicative of future results that may be expected for the year ending December
25, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
COMPREHENSIVE INCOME
Effective December 27, 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, REPORTING COMPREHENSIVE INCOME. SFAS No.
130 establishes standards for the reporting and display of comprehensive income
and its components in the financial statements. Prior periods have been
reclassified to reflect the adoption of this standard. The adoption of SFAS No.
130 has no material impact on the Company's consolidated results of operations,
financial position or cash flows. Comprehensive income equals net earnings plus
other comprehensive income. For the six months ended June 27, 1998, and June 28,
1997, comprehensive income was approximately $5,817 and $4,820, respectively.
Other comprehensive income refers to revenue, expenses, gains and losses that
are reflected in stockholders' equity but excluded from net earnings. For the
Company, the components of other comprehensive income are principally foreign
currency translation adjustments and minimum pension liability adjustments.
Other comprehensive loss, net of tax, was approximately $(140) and $(2,313) for
the six months ended June 27, 1998, and June 28, 1997, respectively. The
statement requires that total comprehensive income be reported for interim
periods but does not require disclosure of the components of other comprehensive
income for interim periods.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES (FAS 133). FAS 133 is effective for all fiscal quarters
of all fiscal years beginning after June 15, 1999 (December 31, 1999 for the
Company). FAS 133 requires that all derivative instruments be recorded on the
balance sheet at their fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. For fair-value hedge transactions
in which the Company is hedging changes in an asset's, liability's, or firm
commitment's fair value, changes in the fair value of the derivative instrument
will generally be offset in the income statement by changes in the hedged item's
fair
6
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
value. For cash-flow hedge transactions, in which the Company is hedging the
variability of cash flows related to a variable-rate asset, liability, or a
forecasted transaction, changes in the fair value of the derivative instrument
will be reported in other comprehensive income. The gains and losses on the
derivative instrument that are reported in other comprehensive income will be
reclassified as earnings in the periods in which earnings are impacted by the
variability of the cash flows of the hedged item. The ineffective portion of all
hedges will be recognized in current-period earnings. Management is currently
reviewing the provisions of SFAS No. 133 and does not believe that the Company's
financial statements will be materially impacted by the adoption.
For information regarding other significant accounting policies, see Note 2 to
the Consolidated Financial Statements of the Company for the year ended December
26, 1997, set forth in the Company's Annual Report on Form 10-K.
3. INVENTORIES:
Inventories were comprised of:
<TABLE>
<CAPTION>
DECEMBER 26, JUNE 27,
1997 1998
------------ ---------
<S> <C> <C>
Raw materials........................................................ $ 63,768 $ 59,051
Work in process...................................................... 12,029 11,174
Finished products.................................................... 11,664 13,141
------------ ---------
$ 87,461 $ 83,366
------------ ---------
------------ ---------
</TABLE>
4. LONG-TERM OBLIGATIONS:
On July 21, 1998, the Credit Agreement was amended to provide for the prepayment
(the "Prepayment") of term loans equal to 75% of excess cash flow, as defined,
for the period from July 17, 1997 through December 26, 1997. Accordingly,
current maturities of long-term debt as of June 27, 1998 include the Prepayment
of approximately $12.5 million.
For further detailed information regarding the Company's long-term obligations,
see Note 5 to the financial statements contained in the Company's 1997 Annual
Report on Form 10-K.
5. 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 at various
times 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.
7
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
5. 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 of the Company from Alumax Inc. on September
25, 1996, 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.
6. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS:
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 as of June 28, 1997 and June 27, 1998 reflect the
financial position and results of operations 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
8
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
6. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
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.
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 28, 1997
--------------------------------------------------------------------------------------------
CO-OBLIGORS AND GUARANTOR SUBSIDIARIES
---------------------------------------
EURAMAX AMERIMAX EURAMAX EURAMAX
INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN NON-
PLC INC. HOLDINGS PLC HOLDINGS,B.V. GUARANTOR
(PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS
------------ ----------- ------------ ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales................... $ -- $ -- $ -- $ -- $ 136,289 $ -- $ 136,289
Cost and expenses:
Cost of goods sold........ -- -- -- -- 109,065 -- 109,065
Selling and general....... -- -- -- -- 11,891 -- 11,891
Depreciation and
amortization............ -- -- -- -- 2,599 -- 2,599
------------ ----------- ------------ ------------ ----------- ------------ ----------
Earnings from
operations............ -- -- -- -- 12,734 -- 12,734
Equity in earnings of
subsidiaries.............. 4,528 2,919 1,823 2,625 -- (11,895) --
Interest expense, net....... -- (3,002) (879) (616) (1,082) -- (5,579)
Other expense, net.......... -- -- -- -- (145) -- (145)
------------ ----------- ------------ ------------ ----------- ------------ ----------
Earnings (loss) before
income taxes.......... 4,528 (83) 944 2,009 11,507 (11,895) 7,010
Provision for income
taxes..................... -- (1,267) (308) (216) 4,273 -- 2,482
------------ ----------- ------------ ------------ ----------- ------------ ----------
Net earnings................ 4,528 1,184 1,252 2,225 7,234 (11,895) 4,528
Dividends on redeemable
preference shares......... 1,275 -- -- -- -- -- 1,275
------------ ----------- ------------ ------------ ----------- ------------ ----------
Net earnings available for
ordinary shareholders..... $ 3,253 $ 1,184 $ 1,252 $ 2,225 $ 7,234 $ (11,895) $ 3,253
------------ ----------- ------------ ------------ ----------- ------------ ----------
------------ ----------- ------------ ------------ ----------- ------------ ----------
</TABLE>
9
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
6. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 28, 1997
--------------------------------------------------------------------------------------------
CO-OBLIGORS AND GUARANTOR SUBSIDIARIES
---------------------------------------
EURAMAX AMERIMAX EURAMAX EURAMAX
INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN NON-
PLC INC. HOLDINGS PLC HOLDINGS,B.V. GUARANTOR
(PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS
------------ ----------- ------------ ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $ -- $ -- $ -- $ -- $ 251,163 $ -- $ 251,163
Cost and expenses:
Cost of goods sold........ -- -- -- -- 201,101 -- 201,101
Selling and general....... -- -- -- -- 22,530 -- 22,530
Depreciation and
amortization............ -- -- -- -- 5,294 -- 5,294
------------ ----------- ------------ ------------ ----------- ------------ ----------
Earnings from
operations............ -- -- -- -- 22,238 -- 22,238
Equity in earnings of
subsidiaries.............. 7,133 3,994 3,200 4,979 -- (19,306) --
Interest expense, net....... -- (6,256) (1,694) (1,196) (2,051) -- (11,197)
Other expense, net.......... -- -- -- -- (185) -- (185)
------------ ----------- ------------ ------------ ----------- ------------ ----------
Earnings (loss) before
income taxes.......... 7,133 (2,262) 1,506 3,783 20,002 (19,306) 10,856
Provision for income
taxes..................... -- (2,434) (593) (419) 7,169 -- 3,723
------------ ----------- ------------ ------------ ----------- ------------ ----------
Net earnings................ 7,133 172 2,099 4,202 12,833 (19,306) 7,133
Dividends on redeemable
preference shares......... 2,508 -- -- -- -- -- 2,508
------------ ----------- ------------ ------------ ----------- ------------ ----------
Net earnings available for
ordinary shareholders..... $ 4,625 $ 172 $ 2,099 $ 4,202 $ 12,833 $ (19,306) $ 4,625
------------ ----------- ------------ ------------ ----------- ------------ ----------
------------ ----------- ------------ ------------ ----------- ------------ ----------
</TABLE>
10
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
6. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 27, 1998
--------------------------------------------------------------------------------------------
CO-OBLIGORS AND GUARANTOR SUBSIDIARIES
---------------------------------------
EURAMAX AMERIMAX EURAMAX EURAMAX
INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN NON-
PLC INC. HOLDINGS PLC HOLDINGS,B.V. GUARANTOR
(PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS
------------ ----------- ------------ ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales................... $ -- $ -- $ -- $ -- $ 160,434 $ -- $ 160,434
Cost and expenses:
Cost of goods sold........ -- -- -- -- 130,572 -- 130,572
Selling and general....... 105 -- -- -- 12,631 -- 12,736
Depreciation and
amortization............ -- -- -- -- 3,057 -- 3,057
------------ ----------- ------------ ------------ ----------- ------------ ----------
Earnings (loss) from
operations............ (105) -- -- -- 14,174 -- 14,069
Equity in earnings of
subsidiaries.............. 4,682 2,062 1,370 1,734 -- (9,848) --
Interest expense, net....... -- (330) (252) (223) (5,269) -- (6,074)
Other income (expense),
net....................... -- -- (347) 363 (107) -- (91)
------------ ----------- ------------ ------------ ----------- ------------ ----------
Earnings before income
taxes................. 4,577 1,732 771 1,874 8,798 (9,848) 7,904
Provision for income
taxes..................... 39 (179) (131) 5 3,632 -- 3,366
------------ ----------- ------------ ------------ ----------- ------------ ----------
Net earnings................ 4,538 1,911 902 1,869 5,166 (9,848) 4,538
Dividends on redeemable
preference shares......... 1,463 -- -- -- -- -- 1,463
------------ ----------- ------------ ------------ ----------- ------------ ----------
Net earnings available for
ordinary shareholders..... $ 3,075 $ 1,911 $ 902 $ 1,869 $ 5,166 $ (9,848) $ 3,075
------------ ----------- ------------ ------------ ----------- ------------ ----------
------------ ----------- ------------ ------------ ----------- ------------ ----------
</TABLE>
11
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
6. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 27, 1998
--------------------------------------------------------------------------------------------
CO-OBLIGORS AND GUARANTOR SUBSIDIARIES
---------------------------------------
EURAMAX AMERIMAX EURAMAX EURAMAX
INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN NON-
PLC INC. HOLDINGS PLC HOLDINGS,B.V. GUARANTOR
(PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS
------------ ----------- ------------ ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $ -- $ -- $ -- $ -- $ 303,523 $ -- $ 303,523
Cost and expenses:
Cost of goods sold........ -- -- -- -- 249,989 -- 249,989
Selling and general....... 128 -- -- -- 24,687 -- 24,815
Depreciation and
amortization............ -- -- -- -- 6,111 -- 6,111
------------ ----------- ------------ ------------ ----------- ------------ ----------
Earnings (loss) from
operations............ (128) -- -- -- 22,736 -- 22,608
Equity in earnings of
subsidiaries.............. 6,124 457 2,503 4,803 -- (13,887) --
Interest expense, net....... -- (913) (429) (229) (10,563) -- (12,134)
Other income (expense),
net....................... -- -- (273) (753) 894 -- (132)
------------ ----------- ------------ ------------ ----------- ------------ ----------
Earnings (loss) before
income taxes.......... 5,996 (456) 1,801 3,821 13,067 (13,887) 10,342
Provision for income
taxes..................... 39 (407) (162) (389) 5,304 -- 4,385
------------ ----------- ------------ ------------ ----------- ------------ ----------
Net earnings (loss)......... 5,957 (49) 1,963 4,210 7,763 (13,887) 5,957
Dividends on redeemable
preference shares......... 2,876 -- -- -- -- -- 2,876
------------ ----------- ------------ ------------ ----------- ------------ ----------
Net earnings (loss)
available for ordinary
shareholders.............. $ 3,081 $ (49) $ 1,963 $ 4,210 $ 7,763 $ (13,887) $ 3,081
------------ ----------- ------------ ------------ ----------- ------------ ----------
------------ ----------- ------------ ------------ ----------- ------------ ----------
</TABLE>
12
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
6. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
<TABLE>
<CAPTION>
DECEMBER 26, 1997
---------------------------------------------------------------------------------------------
CO-OBLIGORS AND GUARANTOR SUBSIDIARIES
----------------------------------------
EURAMAX AMERIMAX EURAMAX EURAMAX
INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN NON-
PLC INC. HOLDINGS PLC HOLDINGS,B.V. GUARANTOR
(PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS
------------- ----------- ------------ ------------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents... $ -- $ -- $ -- $ -- $ 12,914 $ -- $ 12,914
Accounts receivable, net.... -- -- -- -- 78,085 -- 78,085
Inventories................. -- -- -- -- 87,461 -- 87,461
Other current assets........ -- -- -- -- 2,314 -- 2,314
------------- ----------- ------------ ------------- ----------- ------------ ---------
Total current assets...... -- -- -- -- 180,774 -- 180,774
Property, plant and equipment,
net......................... -- -- -- -- 113,187 -- 113,187
Amounts due from parent/
affiliates.................. 70,492 69,139 40,002 42,591 -- (222,224) --
Goodwill, net................. -- -- -- -- 76,910 -- 76,910
Investment in consolidated
subsidiaries................ 43,929 25,857 (213) 13,516 -- (83,089) --
Deferred income tax asset..... -- 448 -- 2,138 8,418 -- 11,004
Other assets.................. 2,070 -- 856 934 12,015 -- 15,875
------------- ----------- ------------ ------------- ----------- ------------ ---------
$ 116,491 $ 95,444 $ 40,645 $ 59,179 $ 391,304 $ (305,313) $ 397,750
------------- ----------- ------------ ------------- ----------- ------------ ---------
------------- ----------- ------------ ------------- ----------- ------------ ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdrafts............. $ -- $ -- $ -- $ -- $ 11,470 $ -- $ 11,470
Accounts payable............ -- -- -- -- 42,575 -- 42,575
Accrued expenses and other
current liabilities 2,010 (1,609) 410 8,369 20,612 -- 29,792
Current maturities of long-
term debt................. -- -- -- -- 3,924 -- 3,924
------------- ----------- ------------ ------------- ----------- ------------ ---------
Total current
liabilities............. 2,010 (1,609) 410 8,369 78,581 -- 87,761
Long-term debt, less current
maturities.................. 70,605 -- 27,179 37,216 105,292 -- 240,292
Amounts due to
parent/affiliates........... -- 77,779 3,954 -- 140,491 (222,224) --
Other liabilities............. -- -- -- -- 8,266 -- 8,266
Deferred income taxes......... -- -- -- -- 17,555 -- 17,555
------------- ----------- ------------ ------------- ----------- ------------ ---------
Total liabilities......... 72,615 76,170 31,543 45,585 350,185 (222,224) 353,874
------------- ----------- ------------ ------------- ----------- ------------ ---------
Redeemable preference
shares...................... 40,382 -- -- -- -- -- 40,382
------------- ----------- ------------ ------------- ----------- ------------ ---------
Ordinary shareholders' equity:
Ordinary shares............. 1,000 -- 78 23 4,970 (5,071) 1,000
Paid-in capital............. -- 17,000 6,922 9,077 89,458 (122,457) --
Retained earnings
(deficit)................. 4,420 2,381 1,779 6,358 18,714 (29,232) 4,420
Dividends declared.......... -- -- -- -- (70,600) 70,600 --
Accumulated other
comprehensive income...... (1,926) (107) 323 (1,864) (1,423) 3,071 (1,926)
------------- ----------- ------------ ------------- ----------- ------------ ---------
Total ordinary
shareholders' equity.... 3,494 19,274 9,102 13,594 41,119 (83,089) 3,494
------------- ----------- ------------ ------------- ----------- ------------ ---------
$ 116,491 $ 95,444 $ 40,645 $ 59,179 $ 391,304 $ (305,313) $ 397,750
------------- ----------- ------------ ------------- ----------- ------------ ---------
------------- ----------- ------------ ------------- ----------- ------------ ---------
</TABLE>
13
<PAGE>
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THOUSANDS OF U.S. DOLLARS)
(UNAUDITED)
6. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED):
<TABLE>
<CAPTION>
JUNE 27, 1998
---------------------------------------------------------------------------------------------
CO-OBLIGORS AND GUARANTOR SUBSIDIARIES
----------------------------------------
EURAMAX AMERIMAX EURAMAX EURAMAX
INTERNATIONAL HOLDINGS, EUROPEAN EUROPEAN NON-
PLC INC. HOLDINGS PLC HOLDINGS,B.V. GUARANTOR
(PARENT) (GUARANTOR) (CO-OBLIGOR) (CO-OBLIGOR) SUBSIDIARIES ELIMINATIONS TOTALS
------------- ----------- ------------ ------------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents... $ -- $ -- $ -- $ -- $ 13,156 $ -- $ 13,156
Accounts receivable, net.... -- -- -- -- 95,793 -- 95,793
Inventories................. -- -- -- -- 83,366 -- 83,366
Other current assets........ -- -- -- -- 2,472 -- 2,472
------------- ----------- ------------ ------------- ----------- ------------ ---------
Total current assets...... -- -- -- -- 194,787 -- 194,787
Property, plant and equipment,
net......................... -- -- -- -- 113,322 -- 113,322
Amounts due from parent/
affiliates.................. 70,536 71,522 39,592 39,712 -- (221,362) --
Goodwill, net................. -- -- -- -- 75,203 -- 75,203
Investment in consolidated
subsidiaries................ 49,912 26,314 2,315 17,978 -- (96,519) --
Deferred income tax asset..... -- 448 -- 2,094 8,424 -- 10,966
Other assets.................. 1,952 -- 799 863 9,717 -- 13,331
------------- ----------- ------------ ------------- ----------- ------------ ---------
$ 122,400 $ 98,284 $ 42,706 $ 60,647 $ 401,453 $ (317,881) $ 407,609
------------- ----------- ------------ ------------- ----------- ------------ ---------
------------- ----------- ------------ ------------- ----------- ------------ ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdrafts............. $ -- $ -- $ -- $ -- $ 1,225 $ -- $ 1,225
Accounts payable............ -- -- -- -- 60,581 -- 60,581
Accrued expenses and other
current liabilities....... 2,102 (2,016) 241 5,964 20,016 -- 26,307
Current maturities of long-
term debt................. -- -- -- -- 17,978 -- 17,978
------------- ----------- ------------ ------------- ----------- ------------ ---------
Total current
liabilities............. 2,102 (2,016) 241 5,964 99,800 -- 106,091
Long-term debt, less current
maturities.................. 70,605 -- 27,179 37,216 91,062 -- 226,062
Amounts due to
parent/affiliates........... -- 81,075 4,297 -- 135,990 (221,362) --
Other liabilities............. -- -- -- -- 7,835 -- 7,835
Deferred income taxes......... -- -- -- -- 17,928 -- 17,928
------------- ----------- ------------ ------------- ----------- ------------ ---------
Total liabilities......... 72,707 79,059 31,717 43,180 352,615 (221,362) 357,916
------------- ----------- ------------ ------------- ----------- ------------ ---------
Redeemable preference
shares...................... 43,258 -- -- -- -- -- 43,258
------------- ----------- ------------ ------------- ----------- ------------ ---------
Ordinary shareholders' equity:
Ordinary shares............. 1,000 -- 78 23 4,970 (5,071) 1,000
Paid-in capital............. -- 17,000 6,922 9,077 89,458 (122,457) --
Retained earnings
(deficit)................. 7,501 2,332 3,742 10,568 26,477 (43,119) 7,501
Dividends declared.......... -- -- -- -- (70,600) 70,600 --
Accumulated other
comprehensive income...... (2,066) (107) 247 (2,201) (1,467) 3,528 (2,066)
------------- ----------- ------------ ------------- ----------- ------------ ---------
Total ordinary
shareholders' equity.... 6,435 19,225 10,989 17,467 48,838 (96,519) 6,435
------------- ----------- ------------ ------------- ----------- ------------ ---------
$ 122,400 $ 98,284 $ 42,706 $ 60,647 $ 401,453 $ (317,881) $ 407,609
------------- ----------- ------------ ------------- ----------- ------------ ---------
------------- ----------- ------------ ------------- ----------- ------------ ---------
</TABLE>
14
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the Company's Statements of Earnings Data
expressed as a percentage of net sales:
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------
<S> <C> <C>
JUNE 28, 1997 JUNE 27, 1998
--------------- ---------------
Statement of Earnings Data:
Net sales....................................................... 100.0% 100.0%
Costs and expenses:
Cost of goods sold............................................ 80.0 81.4
Selling and general........................................... 8.7 7.9
Depreciation and amortization................................. 1.9 1.9
----- -----
Earnings from operations...................................... 9.4 8.8
Interest expense, net........................................... 4.1 3.8
Other expense, net.............................................. 0.1 0.1
----- -----
Earnings before income taxes.................................. 5.2 4.9
Provision for income taxes...................................... 1.8 2.1
----- -----
Net earnings.................................................... 3.4% 2.8%
----- -----
----- -----
</TABLE>
QUARTER ENDED JUNE 27, 1998 AS COMPARED TO QUARTER ENDED JUNE 28, 1997
NET SALES. Net sales increased 17.7% to $160.4 million for the quarter ended
June 27, 1998, from $136.3 million for the quarter ended June 28, 1997.
Approximately $27.6 million of this increase is attributable to net sales of
Fabral, formerly Gentek Building Products, Inc., which was acquired by the
Company on July 17, 1997. 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 for the quarter ended June 27, 1998, by approximately $2.4 million as
compared to net sales for the quarter ended June 28, 1997. In addition, net
sales increased by (i) $2.8 million and $693,000 due to increased demand for
specialty coated coil in Southern Europe and fabricated metal for the
recreational vehicle market in the U.S., respectively, (ii) $261,000 due to
strengthening of the Pound Sterling compared to the U.S. Dollar, and (iii)
approximately $525,000 for sales attributable to Amerimax Laminated Products,
Inc., formerly JTJ Laminating, Inc., acquired by the Company on March 28, 1997.
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
$1.1 million and $390,000, respectively, (ii) a $7.9 million decline in sales
attributable to divested subsidiaries in 1997 and (iii) other individually
insignificant occurrences. Net sales in the U.S. increased 23.9% to $104.1
million for the quarter ended June 27, 1998, from $84.1 million for the quarter
ended June 28, 1997. Net sales in Europe increased 7.8% to $56.3 million for the
quarter ended June 27, 1998, from $52.2 million for the quarter ended June 28,
1997.
COST OF GOODS SOLD. Cost of goods sold, as a percentage of net sales, increased
1.4% for the three months ended June 27, 1998, from 80.0% in 1997 to 81.4% in
1998. This increase is primarily attributable to sales of a greater percentage
of lower margin product (steel) from the Fabral acquisition and higher paint
costs at the Company's paint line facility in Helena, Arkansas, partially offset
by (i) sales of a greater percentage of higher margin aluminum products,
particularly in Europe, and (ii) an overall improvement in gross margin
attributable to higher sales volume.
15
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, as a percentage of net sales, decreased 0.8% for the
quarter ended June 27, 1998, from 8.7% in 1997 to 7.9% in 1998. 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.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization, as a percentage
of net sales, for the quarter ended June 27, 1998, approximated expenses for the
quarter ended June 28, 1997.
EARNINGS FROM OPERATIONS. For reasons stated above, earnings from operations in
the U.S. increased to $7.4 million in the second quarter of 1998 from $5.4
million in the second quarter of 1997. Earnings from operations in Europe
decreased to $6.7 million for the three months ended June 27, 1998, from $7.3
million for the three months ended June 28, 1997, primarily as a result of the
weakening of the Dutch Guilder and French Franc.
INTEREST EXPENSE, NET. Net interest expense in the three months ended June 27,
1998, increased 8.9% from $5.6 million for the three months ended June 28, 1997,
to $6.1 million for the three months ended June 27, 1998. This increase was due
primarily to additional interest as a result of debt incurred for the Fabral
acquisition.
OTHER EXPENSES, NET. Other expenses were not significant for the quarters ended
June 27, 1998 and June 28, 1997.
PROVISION FOR INCOME TAXES. The effective rate for the provision for income
taxes increased from 35.4% to 42.6% for the three months ended June 28, 1997,
and June 27, 1998, respectively. This increase was primarily due to
non-deductible goodwill arising from acquisitions made in 1997.
16
<PAGE>
The following table sets forth the Company's Statements of Earnings Data
expressed as a percentage of net sales:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------
<S> <C> <C>
JUNE 28, 1997 JUNE 27, 1998
--------------- ---------------
Statement of Earnings Data:
Net sales....................................................... 100.0% 100.0%
Costs and expenses:
Cost of goods sold............................................ 80.1 82.4
Selling and general........................................... 9.0 8.2
Depreciation and amortization................................. 2.1 2.0
----- -----
Earnings from operations...................................... 8.8 7.4
Interest expense, net........................................... 4.4 4.0
Other expense, net.............................................. 0.1 0.0
----- -----
Earnings before income taxes.................................. 4.3 3.4
Provision for income taxes...................................... 1.5 1.4
----- -----
Net earnings.................................................... 2.8% 2.0%
----- -----
----- -----
</TABLE>
SIX MONTHS ENDED JUNE 27, 1998 AS COMPARED TO SIX MONTHS ENDED JUNE 28, 1997
NET SALES. Net sales increased 20.8% to $303.5 million for the six months ended
June 27, 1998, from $251.2 million for the six months ended June 28, 1997.
Approximately $47.9 million of this increase is attributable to net sales of
Fabral, formerly Gentek Building Products, Inc., which was acquired by the
company on July 17, 1997. Increases in shipments, attributable to aluminum
product shipments to OEM markets in Europe and metal raincarrying systems to
home center customers in North America, combined to increase sales for the six
months ended June 27, 1998, by approximately $13.3 million as compared to net
sales for the six months ended June 28, 1997. In addition, net sales increased
by (i) $2.1 million, $2.0 million and $1.4 million due to increased demand for
specialty coated coil in Southern Europe, custom windows in France and
fabricated metal for the recreational vehicle market in the U.S., respectively,
(ii) $457,000 due to strengthening of the Pound Sterling compared to the U.S.
Dollar, and (iii) approximately $6.7 million for sales attributable to Amerimax
Laminated Products, Inc., formerly JTJ Laminating, Inc., acquired by the Company
on March 28, 1997. 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 $3.5 million and $1.2 million, respectively, (ii) $17.3
million decline in sales in door and appliance products due to divestitures of
the subsidiaries producing these product lines, and (iii) other individually
insignificant occurrences. Net sales in the U.S. increased 27.1% to $188.8
million for the six months ended June 27, 1998, from $148.6 million for the six
months ended June 28, 1997. Net sales in Europe increased 11.8% to $114.7
million for the six months ended June 27, 1998, from $102.6 million for the six
months ended June 28, 1997.
COST OF GOODS SOLD. Cost of goods sold, as a percentage of net sales, increased
2.3% for the six months ended June 27, 1998, from 80.1% in 1997 to 82.4% in
1998. This increase is primarily attributable to sales of a greater percentage
of lower margin product (steel) from the Fabral acquisition and higher paint
costs at the Company's paint line facility in Helena, Arkansas, partially offset
by (i) sales of a greater percentage of higher margin aluminum products,
particularly in Europe, and (ii) an overall improvement in gross margin
attributable to higher sales volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, as a percentage of net sales, decreased 0.8% for the
six months ended June 27, 1998, from 9.0% in 1997 to 8.2% in 1998. This
17
<PAGE>
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.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization, as a percentage
of net sales, decreased 0.1% from 2.1% in 1997 to 2.0% 1998.
EARNINGS FROM OPERATIONS. For reasons stated above, earnings from operations in
the U.S. increased from $7.4 million in the first half of 1997 to $8.6 million
in the first half of 1998. Earnings from operations in Europe decreased 5.7% to
$14.0 million for the six months ended June 27, 1998 from $14.8 million for the
six months ended June 28, 1997. Approximately $700,000 of the decrease in Europe
is a result of the weakening of the Dutch Guilder and French Franc.
INTEREST EXPENSE, NET. Net interest expense in the six months ended June 27,
1998 increased 8.4% from $11.2 million for the six months ended June 28, 1997,
to $12.1 million for the six months ended June 27, 1998. This increase was due
primarily to additional interest as a result of debt incurred for the Fabral
acquisition.
OTHER EXPENSES, NET. Other expenses were not significant in the six-month
periods ended June 27, 1998 and June 28, 1997.
PROVISION FOR INCOME TAXES. The effective rate for the provision for income
taxes increased from 34.3% to 42.4% for the six months ended June 28, 1997, and
June 27, 1998, respectively. This increase was due to non-deductible goodwill
arising from 1997 acquisitions.
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 June 27, 1998, the Company had outstanding
indebtedness for borrowed money of $244.0 million, $43.3 million of Preference
Shares and ordinary shareholders' equity of $6.4 million, representing a
decrease of $.2 million and increases of $2.9 million and $2.9 million,
respectively, from December 26, 1997. Included in such indebtedness was
approximately $109.0 million under the Company's credit agreement, consisting of
$62.0 million under the Company's term loans and $47.0 million under the
Company's revolving credit facility. The undrawn amount of the revolving credit
facility at June 27, 1998, was approximately $53.0 million, which was available
for working capital and general corporate purposes, subject to borrowing base
limitations. As of June 27, 1998, 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 Company's 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
operations and, subject to borrowing base limitations, borrowings under the
Company's 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 $62.0 million of term loans, the Company must make scheduled
quarterly principal payments totaling $14.9 million over the remainder of 1998,
$7.8 million in 1999, $4.7 million in 2000, $7.0 million in 2001, $12.4 million
in 2002 and $15.2 million in 2003. The term loans and the revolving credit
facility bear interest at floating rates.
On July 21, 1998, the Credit Agreement was amended to provide for the prepayment
(the "Prepayment") of term loans equal to 75% of excess cash flow, as defined,
for the period from July 17, 1997 through
18
<PAGE>
December 26, 1997. Accordingly, current maturities of long-term debt as of June
27, 1998 include the Prepayment of approximately $12.5 million.
The Company's primary source of liquidity is funds generated from operations,
which are supplemented by borrowings under the credit agreement. Net cash
provided by operating activities decreased $19.2 million during the six months
ended June 27, 1998 compared to the six months ended June 28, 1997. Decreased
operating cash flows in 1998 as compared to 1997 are primarily due to a one time
reduction of working capital in 1997 due to the sale of two subsidiaries and an
increase in accounts receivable related to the seasonality of Fabral in 1998.
These decreases were partially offset by an increase in accounts payable which
was not as significant as in the same period in 1997 due to the timing of
payments.
CAPITAL EXPENDITURES. The Company's capital expenditures were $6.2 million and
$2.0 million in the six months ended June 27, 1998, and June 28, 1997,
respectively. Capital expenditures in 1998 include approximately $1.3 million
for improvements to paintlines in Helena, Arkansas; Roermond, The Netherlands
and Corby, England. 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.
The Company has made and will continue to make capital expenditures to comply
with Environmental Laws. The Company estimates that its environmental capital
expenditures will be approximately $500,000 in 1998.
IMPACT OF THE YEAR 2000 ISSUE. Management continues to evaluate the effect of
the Year 2000 issue on the Company. Ongoing assessment supports preliminary
findings that the total cost of addressing the issue is not expected to have a
material effect on the Company's business, financial condition or results of
operations.
EUROPEAN CURRENCY. The 1992 treaty on European Union provides that, on January
1, 1999, a new single European currency, the "Euro," will become a currency in
its own right, replacing the currencies of the eleven initial members of the
European Union. Management continues to prepare for the Euro, particularly with
respect to the Company's European subsidiaries. Preparations include analyses to
determine the cost of conversion, the economic impact on the Company, and a
schedule for the introduction of the Euro as a house currency for the
appropriate subsidiaries. Preparations also include coordination with customers,
suppliers and financial institutions to ensure a smooth transition. The Company
expects to be able to transact business in the Euro beginning on January 1,
1999.
WORKING CAPITAL MANAGEMENT. Working capital was $88.7 million as of June 27,
1998. Excluding Fabral, working capital was $63.8 million as of June 27, 1998,
compared to $104.1 million as of June 28, 1997. The Company believes that
current levels of working capital represent a liquid source of funds available
for future cash flows. The Company also believes that further reductions in
working capital 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 further working
capital reductions will be achieved.
RECENT ACCOUNTING PRONOUNCEMENTS. In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards No.
133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (FAS 133). FAS
133 is effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999 (December 31, 1999 for the Company). FAS 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derviatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derviative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. For fair-value hedge transactions in which the Company is hedging
changes in an asset's, liability's, or firm commitment's fair value, changes in
the fair value of the derivative instrument will generally be offset in the
income statement
19
<PAGE>
by changes in the hedged item's fair value. For cash-flow hedge transcations, in
which the Company is hedging the variability of cash flows related to a
variable-rate asset, liability, or a forcasted transaction, changes in the fair
value of the derivative instrument will be reported in other comprehensive
income. The gains and loses on the derivative instrument that are reported in
other comprehensive income will be reclassified as earnings in the periods in
which earnings are impacted by the variability of the cash flows of the hedged
item. The ineffective portion of all hedges will be recognized in current-period
earnings. Management is currently reviewing the provisions of SFAS No. 133 and
does not beleieve that the Company's financial statements will be materially
impacted by the adoption.
NOTE REGARDING FORWARD LOOKING STATEMENTS: The Management's Discussion and
Analysis and other sections of this Form 10-Q may contain forward looking
statements that are based on current expectations, estimates and projections
about the industries in which the Company operates, management's beliefs and
assumptions made by management. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "estimates," or variations of such words and
similar expressions are intended to identify such forward looking statements.
These forward-looking statements are based on a number of assumptions that could
ultimately prove inaccurate, and, therefore, there can be no assurance that they
will prove to be accurate. All such forward looking statements are subject to
the safe harbor created by the Private Securities Litigation Reform Act of 1995.
Important factors that could cause future financial performance to differ
materially and significantly from past results and from those expressed or
implied in this document include, without limitation, the risks of acquisition
of businesses (including limited knowledge of the businesses acquired and
misrepresentations by sellers), changes in business strategy or development
plans, the cyclical demand for the Company's products, the supply and/or price
of aluminum and other raw materials, currency exchange rate fluctuations,
environmental regulations, availability of financing, competition, reliance on
key management personnel, ability to manage growth, loss of customers, and a
variety of other factors. For further information on these and other risks, see
the "Risk Factors" section of Item 1. of the Company's Annual Report on Form
10-K for the year ended December 26, 1997, 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)(1) The following consolidated financial statements of Euramax
International plc and its subsidiaries are included in Part I, Item 1.
Condensed Consolidated Statements of Earnings for the quarters ended
June 28, 1997, and June 27, 1998
Condensed Consolidated Statements of Earnings for the six months ended
June 28, 1997, and June 27, 1998
Condensed Consolidated Balance Sheets at December 26, 1997, and June 27,
1998
Condensed Consolidated Statements of Cash Flows for the six months ended
June 28, 1997, and June 27, 1998
Notes to condensed consolidated financial statements
(b) The Company filed no reports on Form 8-K during the three months ended
June 27, 1998.
20
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
(c) Exhibits:
<TABLE>
<C> <S>
2.1** Purchase Agreement dated as of April 28, 1997, among the Company and Genstar
Capital Corporation ("GCC"), Ontario Teachers' Pension Plan Board and the
Management Stockholders of Gentek Holdings, Inc. ("Holdings") as sellers GCC as
sellers' representative; Holdings and Gentek Building Products, Inc. ("GBPI").
(Incorporated by reference to Exhibit 2.1 of the Registrant's Form 8-K filed August
1, 1997).
3.1* Articles of Association of Euramax International plc
3.2* Memorandum and Articles of Association of Euramax European Holdings plc
3.3* Articles of Association of Euramax International B.V.
3.4* Articles of Incorporation of Amerimax Holdings, Inc.
3.5* Bylaws of Amerimax Holdings, Inc.
4.3* Indenture, dated as of September 25, 1996, by and among Euramax International plc,
Euramax European Holdings plc, Euramax European Holdings B.V., Amerimax Holdings,
Inc. and the Chase Manhattan Bank, as Trustee.
4.4* Deposit Agreement, dated as of September 25, 1996, by and among Euramax
International plc, Euramax European Holdings plc, Euramax European Holdings B.V.,
and The Chase Manhattan Bank, as book-entry depositary
4.5* Registration Rights Agreement, dated as of September 25, 1996, by and among Euramax
International plc, Euramax European Holdings plc, Euramax European Holdings B.V.,
Amerimax Holdings, Inc. and J.P. Morgan Securities Inc. and Goldman Sachs & Co.
4.6* Purchase Agreement dated as of September 18, 1996, by and among Euramax
International Ltd., Euramax European Holdings Ltd., Euramax European Holdings B.V.,
Amerimax Holdings, Inc. and J.P. Morgan Securities Inc. and Goldman Sachs & Co.
21.1** Subsidiaries of Euramax International plc
27 Financial Data Schedule
</TABLE>
- ------------------------
* Incorporated by reference to the Exhibit with the same number in the
Registrant's Registration Statement on Form S-4 (333-05978) which became
effective on February 7, 1997.
** Incorporated by reference to the Exhibit with the same number in the
Registrant's Annual Report on Form 10-K (333-05978) which was filed on March
12, 1998.
21
<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 DATE
- ------------------------------------------------ ---------------------------------------- ------------------
<S> <C> <C>
/s/ J. DAVID SMITH
- -------------------------------------- Chief Executive Officer and President
J. David Smith August 10, 1998
/s/ R. SCOTT VANSANT
- -------------------------------------- Chief Financial Officer and Secretary
R. Scott Vansant August 10, 1998
</TABLE>
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-25-1998
<PERIOD-START> DEC-27-1997
<PERIOD-END> JUN-27-1998
<CASH> 13,156
<SECURITIES> 0
<RECEIVABLES> 99,400
<ALLOWANCES> 3,607
<INVENTORY> 83,366
<CURRENT-ASSETS> 194,787
<PP&E> 161,853
<DEPRECIATION> 48,531
<TOTAL-ASSETS> 407,609
<CURRENT-LIABILITIES> 106,091
<BONDS> 135,000
0
43,258
<COMMON> 1,000
<OTHER-SE> 5,435
<TOTAL-LIABILITY-AND-EQUITY> 407,609
<SALES> 303,523
<TOTAL-REVENUES> 303,523
<CGS> 249,989
<TOTAL-COSTS> 249,989
<OTHER-EXPENSES> 27,467
<LOSS-PROVISION> 3,591
<INTEREST-EXPENSE> 12,134
<INCOME-PRETAX> 10,342
<INCOME-TAX> 4,385
<INCOME-CONTINUING> 5,957
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,081
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
