<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 24, 2000
----------------------
ATRIUM COMPANIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 333-20095 75-2642488
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of incorporation) Identification Number)
1341 W. MOCKINGBIRD LANE
SUITE 1200W 75247
DALLAS, TEXAS (Zip code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (214) 630-5757
N/A
(former address if changed since last report)
================================================================================
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
This Report on Form 8-K/A amends the Registrant's Report on Form 8-K dated
October 24, 2000, which was filed on November 9, 2000 to include the financial
statements and pro forma financial information required by Item 7 of Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Report of Independent Accountants (see page 4)
Combined Balance Sheets as of September 30, 2000 and December 31, 1999
(see page 5)
Combined Statement of Operations for the nine months ended September
30, 2000 and years ended December 31, 1999 and 1998 (see page 6)
Combined Statement of Stockholders' and Divisional Equity for the nine
months ended September 30, 2000 and years ended December 31, 1999 and
1998 (see page 7)
Combined Statement of Cash Flows for the nine months ended September
30, 2000 and years ended December 31, 1999 and 1998 (see page 8)
Notes to Combined Financial Statements (see page 9)
(b) PRO FORMA FINANCIAL INFORMATION
Introduction (see page 19)
Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2000
(see page 20)
Notes to Unaudited Pro Forma Consolidated Balance Sheet as of September
30, 2000 (see page 21)
Unaudited Pro Forma Consolidated Statement of Operations for the
nine months ended September 30, 2000 (see page 22)
Notes to Unaudited Pro Forma Consolidated Statements of Operations for
the nine months ended September 30, 2000 (see page 23)
Unaudited Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1999 (see page 24)
Notes to Unaudited Pro Forma Consolidated Statements of Operations for
the year ended December 31, 1999 (see page 25)
2
<PAGE>
(c) EXHIBITS
*2.1 Stock Purchase Agreement, dated as of March 30, 2000, among Ellison
Extrusion Systems, Inc., The Ellison Company, Inc. and Atrium
Companies, Inc.;
*2.2 Second Amended and Restated Purchase Agreement between The Ellison
Company, Inc., Atrium and D and W Holdings, Inc., entered into as of
October 17, 2000
*2.3 Purchase Agreement among D and W Holdings, Inc., as issuer, and the
Purchasers named therein, dated as of October 25, 2000
*4.0 Exchange and Registration Rights Agreement among D and W Holdings,
Inc., as issuer, and the Purchasers named therein, dated as of October
25, 2000
*4.1 Registration Rights and Stockholders Agreement among D and W
Holdings, Inc., GE Investment Placement Partners II and the Purchasers
named therein, dated as of October 25, 2000
*10.1 First Amended and Restated Credit Agreement, dated as of October 2,
1998 and amended and restated as of October 25, 2000, between Atrium
Companies, Inc., as borrower, the Guarantors party thereto, Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
Lead Arranger and Syndication Agent, and Bank One, Texas, N.A., as
Documentation Agent, and Fleet National Bank, as Administrative Agent,
and the Lenders party thereto
*99.1 Press Release of Atrium Companies, Inc. dated October 26, 2000.
--------------------------------
*Incorporated by reference from the Registrant's Report on Form 8-K dated
October 24, 2000 and filed on November 9, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATRIUM CORPORATION
By: /s/ Jeff L. Hull
---------------------------------------
Name: Jeff L. Hull
Title: President and CEO
By: /s/ Eric W. Long
---------------------------------------
Name: Eric W. Long
Title: Chief Financial Officer and Secretary
Date: January 8, 2001
3
<PAGE>
ELLISON WINDOWS & DOORS AND ELLISON EXTRUSION
SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants 4
Combined Balance Sheets as of September 30, 2000 and December 31, 1999 5
Combined Statements of Operations for the nine months ended September 30, 2000
and for the years ended December 31, 1999 and 1998 6
Combined Statements of Stockholder's and Divisional Equity for the nine months ended
September 30, 2000 and for the years ended December 31, 1999 and 1998 7
Combined Statements of Cash Flows for the nine months ended September 30, 2000
and for the years ended December 31, 1999 and 1998 8
Notes to Combined Financial Statements 9
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Boards of Directors and Stockholders of
Atrium Companies, Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, stockholder's and divisional equity and cash
flows present fairly, in all material respects, the combined financial position
of Ellison Windows & Doors and Ellison Extrusion Systems, Inc. at September
30, 2000 and December 31, 1999, and the results of their operations and their
cash flows for the nine months ended September 30, 2000 and each of the years
ended December 31, 1999 and 1998, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Companies' management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As discussed in Note 15, on October 24, 2000, the Companies were acquired by
Atrium Companies, Inc.
PricewaterhouseCoopers LLP
Dallas, Texas
December 21, 2000
4
<PAGE>
ELLISON WINDOWS & DOORS AND ELLISON EXTRUSION
SYSTEMS, INC.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 396 $ 696
Accounts receivable, net of allowance of $2,069 and $419, respectively 11,427 8,351
Inventories 6,470 8,008
Prepaid expenses and other current assets - 70
---------- ----------
Total current assets 18,293 17,125
Property, plant and equipment, net of accumulated depreciation
of $11,152 and $8,871, respectively 17,233 16,316
Cash surrender value of life insurance 258 245
Goodwill and intangible assets, net of accumulated amortization
of $829 and $1,485, respectively 3,179 4,525
Other assets 911 361
---------- ----------
Total assets $ 39,874 $ 38,572
========== ==========
LIABILITIES AND STOCKHOLDER'S AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable $ 5,101 $ 2,197
Accrued liabilities 4,863 2,598
Notes payable 502 500
Due to parent, non-interest bearing 3,904 -
Deferred compensation 3,137 -
---------- ----------
Total current liabilities 17,507 5,295
Long-term liabilities:
Notes payable - 500
Deferred tax liability 732 620
Due to parent, non-interest bearing - 10,994
Deferred compensation - 2,562
---------- ----------
Total long-term liabilities 732 14,676
---------- ----------
Total liabilities 18,239 19,971
---------- ----------
Commitments and Contingencies (Note 12) - -
Stockholder's and divisional equity:
Class A voting common stock $1.88 par value, 100,000 shares
authorized, issued and outstanding 188 188
Retained earnings and divisional equity 21,447 18,413
---------- ----------
Total stockholder's and divisional equity 21,635 18,601
---------- ----------
Total liabilities, stockholder's and divisional equity $ 39,874 $ 38,572
========== ==========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
5
<PAGE>
ELLISON WINDOWS & DOORS AND
ELLISON EXTRUSION SYSTEMS, INC.
COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS YEAR YEAR
ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
2000 1999 1998
------------- ------------ ------------
<S> <C> <C> <C>
Net sales $ 82,097 $ 89,648 $ 77,496
Cost of goods sold 57,649 62,119 55,469
----------- ----------- -----------
Gross profit 24,448 27,529 22,027
----------- ----------- -----------
Operating expenses:
Selling, delivery, general and administrative expenses 12,466 13,937 12,714
Amortization expense 325 207 211
Corporate allocation 1,648 1,801 1,558
Special charge 2,843 - -
----------- ----------- -----------
17,282 15,945 14,483
----------- ----------- -----------
Income from operations 7,166 11,584 7,544
Interest expense - 18 43
Other expenses (income), net (10) 35 8
----------- ----------- -----------
Income before income taxes 7,176 11,531 7,493
Provision for income taxes 1,589 1,596 1,162
----------- ----------- -----------
Net income $ 5,587 $ 9,935 $ 6,331
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
6
<PAGE>
ELLISON WINDOWS & DOORS AND
ELLISON EXTRUSION SYSTEMS, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S AND DIVISIONAL EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RETAINED
CLASS A EARNINGS TOTAL STOCKHOLDER'S
----------------------------- AND DIVISIONAL AND DIVISIONAL
SHARES AMOUNT EQUITY EQUITY
------------- ------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1997 100,000 $ 188 $ 7,823 $ 8,011
Net income - - 6,331 6,331
Dividends - - (2,121) (2,121)
------------- ------------- ---------------- -------------------
Balance, December 31, 1998 100,000 188 12,033 12,221
Net income - - 9,935 9,935
Dividends - - (3,555) (3,555)
------------- ------------- ---------------- -------------------
Balance, December 31, 1999 100,000 188 18,413 18,601
Net income - - 5,587 5,587
Contributed capital - - 1,033 1,033
Dividends - - (3,586) (3,586)
------------- ------------- ---------------- -------------------
Balance, September 30, 2000 100,000 $ 188 $ 21,447 $ 21,635
============= ============= ================ ===================
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
7
<PAGE>
ELLISON WINDOWS & DOORS AND
ELLISON EXTRUSION SYSTEMS, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE YEARS ENDED SEPTEMBER 30, 2000 AND
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS YEAR YEAR
ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
2000 1999 1998
------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 5,587 $ 9,935 $ 6,331
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 2,959 3,291 2,726
Provision for bad debts (242) 49 (321)
Special charge 2,843 - -
(Gain)/loss on sales of assets - 37 -
Deferred tax provision 112 105 75
Increase in cash surrender value of life insurance policies (13) (25) (24)
Corporate allocation waived 1,033 - -
Changes in assets and liabilities:
Accounts receivable (4,726) (532) (2,195)
Inventories 1,538 (2,875) (82)
Other assets (710) (360) (57)
Accounts payable 2,904 (163) 563
Accrued liabilities 1,306 563 174
Income taxes payable - (800) 570
Deferred compensation 575 738 420
----------- ----------- -----------
Net cash provided by operating activities 13,166 9,963 8,180
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures (3,251) (6,457) (4,773)
Payment for supply agreement - - (2,002)
Cash proceeds from sale of property, plant & equipment - 29 4
----------- ----------- -----------
Net cash used in investing activities (3,251) (6,428) (6,771)
----------- ----------- -----------
Cash flows from financing activities:
Payments of notes payable (498) - (1,000)
Proceeds from issuance of notes payable - - 2,000
Increase (decrease) in due to parent (7,090) 262 (62)
Dividends paid (2,627) (3,555) (2,121)
----------- ----------- -----------
Net cash used by financing activities (10,215) (3,293) (1,183)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (300) 242 226
Cash, beginning of period 696 454 228
----------- ----------- -----------
Cash, end of period $ 396 $ 696 $ 454
=========== =========== ===========
Supplemental disclosure:
Cash paid during the period for:
Interest $ - $ 3 $ 42
Income taxes, net of refunds $ 1,257 $ 2,349 $ 518
</TABLE>
The accompanying notes are an integral part of
the combined financial statements.
8
<PAGE>
ELLISON WINDOWS & DOORS AND
ELLISON EXTRUSION SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
--------------------------------------------------------------------------------
1. ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION:
Ellison Windows & Doors ("EWD"), a division of The Ellison Company, Inc.
("Ellison"), is located in Welcome, North Carolina and manufactures vinyl
windows and doors. EWD's customers include building products
distributors, "do-it-yourself" home centers, lumberyards and speciality
dealers located throughout the United States. Ellison Extrusion Systems,
Inc. ("EES") is a wholly-owned subsidiary of Ellison, which extrudes
vinyl exclusively for EWD.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF COMBINATION
The combined financial statements include the accounts of EWD and EES.
The combined companies are referred to herein as the "Company." All
significant intercompany transactions and balances have been eliminated
in the combination.
REVENUE RECOGNITION
Revenue from the sale of windows is recorded at the time of delivery to
the customer. Estimates of warranty costs and allowances are also
established to record the effects of sales returns at the time of
delivery.
CASH
Ellison maintains the majority of EWD's cash through a central cash
account. Cash belonging to EWD in the central account at the period end
is transferred to Ellison to reduce the amount due to parent. EES
maintains its own cash accounts.
CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially expose the Company to
concentrations of credit risk, consist primarily of trade accounts
receivable. The Company performs ongoing credit evaluations of its
customers' financial condition and generally requires no collateral. The
Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends and
other information. The Company has sales to significant customers as
follows (presented as a percentage of actual net sales):
<TABLE>
<CAPTION>
PERIOD ENDED
------------------------------------
CUSTOMER 9/30/00 12/31/99 12/31/98
-------- ------- -------- --------
<S> <C> <C> <C>
Reynolds Building Products 13% 17% 14%
Lowe's Companies, Inc. 32% 24% 26%
Norandex Inc. 13% 14% 13%
</TABLE>
9
<PAGE>
ELLISON WINDOWS & DOORS AND
ELLISON EXTRUSION SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
--------------------------------------------------------------------------------
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or
market. Work-in-process and finished goods inventories consist of
materials, labor and manufacturing overhead. Inventory costs include
direct materials, labor and manufacturing overhead.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation. The Company depreciates the assets principally on a
straight-line basis for financial reporting purposes over their estimated
useful lives, as follows:
<TABLE>
<CAPTION>
ESTIMATED USEFUL LIFE
---------------------
<S> <C>
Leasehold improvements 7-10 years
Machinery & equipment 3-12 years
Furniture & fixtures 3-5 years
</TABLE>
Leasehold improvements are amortized on a straight-line basis over the
shorter of the lease term or the estimated useful life of the asset.
Gains or losses on disposition are based on the net proceeds and the
adjusted carrying amount of the assets sold or retired. Expenditures for
maintenance, minor renewals and repairs are expensed as incurred, while
major replacements and improvements are capitalized.
INTANGIBLE ASSETS AND GOODWILL
Intangible assets consist primarily of the cost allocated to a supply
agreement with a customer (Note 13) and appraised values assigned to
customer lists related to acquisitions. These assets are being amortized
on the straight-line method over periods ranging from 5-20 years.
Goodwill represents the excess of cost over fair market value of net
assets acquired. Goodwill is being amortized over 40 years on a
straight-line basis. Management continually reviews the carrying value of
intangibles and goodwill for recoverability based on anticipated
undiscounted cash flows of the assets to which it relates. The Company
considers operating results, trends and prospects of the Company, as well
as competitive comparisons. The Company also takes into consideration
competition within the building materials industry and any other events
or circumstances which might indicate potential impairments. When
goodwill is determined not to be recoverable, an impairment is recognized
as a charge to operations.
ADVERTISING DISPLAYS
The Company capitalizes the costs of advertising displays for which they
retain ownership. These costs are amortized over the estimated life of
three years. Advertising display costs included in other noncurrent
assets were $860 and $292, at September 30, 2000 and December 31, 1999,
respectively.
10
<PAGE>
ELLISON WINDOWS & DOORS AND
ELLISON EXTRUSION SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
--------------------------------------------------------------------------------
INCOME TAXES
The stockholders of Ellison have elected, under the provisions of
Subchapter S of the Internal Revenue Code and similar state provisions,
to have the taxable income of Ellison reported for income tax purposes as
income of the stockholders. Accordingly, as EWD is a division of Ellison,
no provision for Federal or state income taxes on earnings of EWD is
provided as such income taxes are the obligation of the stockholders.
EES, a Delaware corporation, is liable, under the Internal Revenue Code
and similar state provisions, for federal and state income taxes on
earnings as such income taxes are the obligation of EES.
The provision for income taxes is based on pretax income as reported for
financial statement purposes. Deferred income taxes are provided in
accordance with the liability method of accounting for income taxes to
recognize the tax effects of temporary differences between financial
statement and income tax accounting.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities"
amended by SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FAS No. 133 -
Amendment of FAS No. 133" (combined "SFAS 133"). SFAS 133 establishes
accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS 133 requires that changes in
the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gain and losses to offset related
results on the hedged item in the statement of operations, and requires
that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting.
SFAS 133 is effective for fiscal years beginning after June 15, 2000 and
earlier application is permitted as of the beginning of any fiscal
quarter subsequent to June 15, 2000. SFAS 133 cannot be applied
retroactively. SFAS 133 must be applied to (a) derivative instruments and
(b) certain derivative instruments embedded in hybrid contracts that were
issued, acquired, or substantively modified after December 31, 1997 (and,
at the Company's election, before January 1, 1998).
The Company is in the process of quantifying the impact of adopting SFAS
133 on its financial statements and has not determined the timing of or
method of adoption of SFAS 133.
In December 1999, the Securities and Exchange Commission ("Commission")
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101") which provides guidance on revenue
recognition issues. In June 2000, the Commission issued Staff Accounting
Bulletin No.101B, "Second Amendment: Revenue Recognition in Financial
Statements" which delayed the implementation of SAB 101 until the fourth
fiscal quarter of fiscal years beginning after December 15, 1999.
Management does not believe the implementation of SAB 101 will have a
material effect on the Company's financial position or results of
operations.
11
<PAGE>
ELLISON WINDOWS & DOORS AND
ELLISON EXTRUSION SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
--------------------------------------------------------------------------------
USE OF ESTIMATES
The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from these estimates. Significant estimates are used in calculating bad
debt, medical and warranty accruals, and in recognizing deferred tax
assets and liabilities.
ADVERTISING COSTS
Advertising costs are expensed when incurred and were $635, $535 and $549
for the nine months ended September 30, 2000, and for the years ended
December 31, 1999 and 1998, respectively. These costs are reflected in
"selling, delivery, general and administrative" in the combined
statements of operations.
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of accounts receivable, accounts payable and other
current liabilities approximate fair market value due to their short
maturities.
4. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------------- --------------------
<S> <C> <C>
Raw materials $ 4,458 $ 5,373
Work-in-process 263 89
Finished goods 1,749 2,546
-------------------- --------------------
$ 6,470 $ 8,008
==================== ====================
</TABLE>
12
<PAGE>
ELLISON WINDOWS & DOORS AND
ELLISON EXTRUSION SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
--------------------------------------------------------------------------------
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------------- --------------------
<S> <C> <C>
Leasehold improvements $ 379 $ 370
Machinery and equipment 25,412 20,611
Deposits on machinery and equipment 210 2,049
Furniture and fixtures 2,384 2,157
-------------------- --------------------
28,385 25,187
Less accumulated depreciation (11,152) (8,871)
-------------------- --------------------
$ 17,233 $ 16,316
==================== ====================
</TABLE>
Depreciation expense was $2,334, $2,684 and $2,165 for the nine months
ended September 30, 2000 and for the years ended December 31, 1999 and
1998, respectively.
6. DUE TO PARENT
Ellison provides financing to the Company as needed. No interest is
charged for these advances. Due to parent advances for 1999 are
classified as noncurrent liabilities since Ellison agreed not to require
repayment of any advances before January 1, 2001. The Company is required
to repay the advances as cash flow permits. In connection with the sale
of the Company in 2000, (Note 15) the due to parent advances were repaid
in October 2000 and have been classified as a current liability.
Ellison also provides short-term financing for which there is an interest
charge at Ellison's variable borrowing rate (7.57% at December 31, 1999).
There was no short-term financing at September 30, 2000. Interest expense
on short-term financing amounted to $0 in 2000, $18 in 1999 and $43 in
1998.
7. NOTE PAYABLE
In connection with the supply agreement described in Note 13, EWD signed
a non-interest bearing note payable for $2,000 to a customer. The note
was originally scheduled to be paid in installments of $1,000 upon
delivery of certain inventory and equipment acquired under the agreement
and $500 each on July 1, 1999 and 2000. During 1999, the terms of the
note were amended to extend the due dates of the remaining $500
installments to March 1, 2000 and 2001.
13
<PAGE>
ELLISON WINDOWS & DOORS AND
ELLISON EXTRUSION SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
--------------------------------------------------------------------------------
8. ACCRUED LIABILITIES
Accrued expenses and other liabilities consisted of:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------------- --------------------
<S> <C> <C>
Salaries, wages and related taxes $ 1,091 $ 837
Sales, use and property taxes 85 7
Advertising allowances and customer rebates 1,751 1,257
Warranty reserve 251 218
Medical reserve 564 279
Dividends 959 -
Income taxes 162 -
-------------------- --------------------
$ 4,863 $ 2,598
==================== ====================
</TABLE>
9. DEFERRED COMPENSATION
Ellison entered into agreements with certain Company employees whereby
Ellison will pay to the employees upon their termination a specified
percentage of the greater of the book value of the Company, a defined
formula based on earnings of Ellison or if the Company is sold a
percentage of the sales price. The Company has recorded an accrual of
$3,137 and $2,562 as of September 30, 2000 and December 31, 1999,
respectively, based on the terms in the agreements. In connection with
the sale of the Company in 2000 (Note 15), $10,980 was paid in deferred
compensation upon consumption of the sale.
14
<PAGE>
ELLISON WINDOWS & DOORS AND
ELLISON EXTRUSION SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
--------------------------------------------------------------------------------
10. FEDERAL INCOME TAX
Temporary differences that give rise to the deferred income tax assets
and liabilities are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
Deferred income tax assets:
Medical reserve $ 11 $ 6
------------- ------------
11 6
Deferred income tax liabilities
Depreciation (741) (625)
Amortization of goodwill (2) (1)
------------- ------------
(743) (626)
------------- ------------
Net deferred income tax asset (liability) (732) (620)
Less: current deferred tax asset - -
------------- ------------
Long-term deferred tax liability $ (732) $ (620)
============= ============
</TABLE>
A valuation allowance is required against deferred tax assets if based on
the weight of available evidence, it is more likely than not that some or
all of the deferred tax assets will not be realized. As of September 30,
2000 and December 31, 1999, no valuation reserve was required.
The components of the provision for income taxes is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
2000 1999 1998
----------------- ------------ ------------
<S> <C> <C> <C>
Federal income tax provision
Current $ 1,194 $ 1,227 $ 873
Deferred 99 89 76
State income tax provision
Current 283 264 214
Deferred 12 16 (1)
----------------- ------------ ------------
Provision for income taxes $ 1,589 $ 1,596 $ 1,162
================= ============ ============
</TABLE>
15
<PAGE>
ELLISON WINDOWS & DOORS AND
ELLISON EXTRUSION SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
--------------------------------------------------------------------------------
Reconciliation of the federal statutory income tax rate to the effective
tax rate, was as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
2000 1999 1998
----------------- ------------ ------------
<S> <C> <C> <C>
Tax computed at statutory rate $ 2,439 $ 3,920 $ 2,548
EWD (income) not subject to
corporate income taxes (1,079) (2,572) (1,512)
State taxes, net of federal benefit 195 185 141
Other 34 63 (15)
----------------- ------------ ------------
Provision for income taxes $ 1,589 $ 1,596 $ 1,162
================= ============ ============
</TABLE>
11. RELATED PARTY TRANSACTION
Ellison allocates overhead to EWD at a rate of 2% of sales per year for
management fees and to cover other administrative costs. The allocation
was $1,648, $1,801 and $1,558 for the nine months ended September 30,
2000 and the years ended December 31, 1999 and 1998, respectively. During
2000, Ellison ceased requiring reimbursement for such fees and $1,033 has
therefore been reflected as a capital contribution from Ellison.
12. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company has entered into operating lease agreements for certain
manufacturing space and transportation equipment. Total rent expense for
the nine months ended September 30, 2000 and the years ended December 31,
1999 and 1998, was $1,742, $2,125 and $1,887, respectively. Rent expense
of $1,119, $1,404 and $1,308 for the nine months ended September 30, 2000
and for the years ended December 31, 1999 and 1998, respectively, was
paid to a stockholder of Ellison. Future minimum rents due under
operating leases with initial or remaining terms greater than twelve
months are as follows:
<TABLE>
<S> <C>
2000 $ 525
2001 2,098
2002 2,031
2003 1,931
2004 1,212
Thereafter 8
-----------
$ 7,805
===========
</TABLE>
16
<PAGE>
ELLISON WINDOWS & DOORS AND
ELLISON EXTRUSION SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
--------------------------------------------------------------------------------
Approximately $6,180 of future minimum lease payments are due to a
stockholder of Ellison for the rental of operating facilities. EES is
a guantor on certain debt of Ellison related to the purchase by Ellison
of EES. Such debt approximates $650 at September 30, 2000.
CONTINGENCIES
The Company is party to various claims, legal actions and complaints
arising in the ordinary course of business. In the opinion of management,
all such matters are without merit or are of such kind, or involve such
amounts, that an unfavorable disposition would not have a material effect
on the consolidated financial position, results of operations or
liquidity of the Company.
13. SUPPLY AGREEMENT
On February 18, 1998, EWD entered into a five-year supply agreement with
a major customer under which the customer will purchase product from EWD
on a private label basis. The terms of the agreement stipulate that EWD
will manufacture products for the customer in accordance with the
customer's specifications in sufficient quantities under the customer's
trademarks, tradenames and logos. During the term of the agreement, the
customer agrees to purchase all of its requirements for products solely
from EWD provided that EWD can meet those requirements.
In exchange for the right to be the customer's exclusive supplier and for
certain equipment and inventory transferred to EWD under the agreement,
EWD issued the customer a $2,000 non-interest bearing note payable and
agreed to provide $250 of replacement parts for products previously
manufactured and sold by the customer. EWD recorded an intangible asset
of $2,002 related to the supply agreement which represents the excess of
the total consideration given by EWD over the appraised value of
equipment and inventory received from the customer. This intangible asset
is being amortized over the five-year term of the supply agreement as a
reduction of sales. Such amortization totaled $300, $400 and $350 for
the nine months ended September 30, 2000 and the years ended December 31,
1999 and 1998, respectively.
In October 2000, the major customer to the supply agreement filed for
Chapter 11 bankruptcy. As a result, the Company assessed the
recoverability of certain intangibles and accounts receivable related to
the supply agreement. Based upon current and estimated future
undiscounted cash flows, the Company determined that a portion of these
intangibles would not be recoverable. Accordingly, the Company has
adjusted the carrying value of these assets to their estimated fair value
and recorded an impairment charge of $951 and bad debt expense of $1,892
related to the outstanding receivables, both of which are classified in
operating income as a special charge.
14. DEFINED CONTRIBUTION PLAN
The Company's employees participate in a savings plan, which qualifies
under Section 401(k) of the Internal Revenue Code. Participants are
allowed to contribute up to a fixed percentage of their compensation with
the Company making matching contributions, as determined by the board of
directors, of up to 2.5% of compensation. The Company contributed $212,
$240 and $211 to the plan for the nine month period ended September 30,
2000 and for the years ended December 31, 1999 and 1998, respectively.
17
<PAGE>
ELLISON WINDOWS & DOORS AND
ELLISON EXTRUSION SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
--------------------------------------------------------------------------------
15. SUBSEQUENT EVENT
On October 24, 2000, the Company was acquired by Atrium Companies, Inc.
("Atrium"), a company engaged in the manufacture and sale of windows, and
various building materials throughout the United States, for
approximately $125,000. The transaction was comprised of approximately
$98,000 of cash and $27,000 of stock in Atrium's parent.
18
<PAGE>
INTRODUCTION
On October 24, 2000, Atrium Companies, Inc. ("Atrium") completed the
acquisition of the stock of Ellison Extrusion Systems, Inc. and substantially
all of the operating assets of The Ellison Company, Inc.'s Windows and Doors
Division (hereinafter collectively referred to as "Ellison"). The transaction
is valued at approximately $125 million. The combination makes Atrium the
largest non-wood window and patio door manufacturer in the United States,
based on unit sales, with revenues of approximately $500 million and over
4,000 employees operating in more than 50 facilities nationwide.
The transaction was comprised of approximately $98 million of cash and $27.3
million of Atrium's parent holding company stock. The cash portion of the
purchase price and fees and expenses of $9.5 million were funded through a
combination of debt and new equity, including $26 million of new equity from
Atrium's current equity sponsors, $36.5 million of Senior PIK Notes issued by
Atrium's parent and contributed to Atrium as equity, $24 million from the
previously announced divestiture of Atrium's Wing Industries, Inc. and Patio
Door assets and $23 million of senior debt borrowed from Atrium's current
senior facility. As part of the transaction, John Ellison Jr., Chairman of
The Ellison Company, Inc., became a stockholder in the combined company and a
member of the Board of Directors of Atrium Companies, Inc.
The pro forma information presents the historical balance sheet information of
Atrium and Ellison as of September 30, 2000 assuming the purchase transaction
occurred as of that date. Pro forma information is also presented for the nine
months ended September 30, 2000 and for the year ended December 31, 1999
assuming this transaction occurred as of the beginning of such periods.
The pro forma effects of certain 1999 acquisitions as presented in Atrium's
1999 Annual Report on Form 10-K and the August 2000 divestiture of the assets
of its Wing Industries, Inc. subsidiary and Atrium Wood Patio Door division as
described in Atrium quarterly report on Form 10-Q for September 30, 2000 are
not presented in the accompanying pro forma information.
The unaudited pro forma adjustments are based on available information and
certain assumptions the Company believes are reasonable.
The unaudited pro forma consolidated financial information should be read in
conjunction with the financial statements of Atrium and Ellison and is not
necessarily indicative of future results of operations and should not be
viewed as fully representative of past performances of the combined entities.
The unaudited pro forma consolidated financial information has not been
prepared in accordance with generally accepted accounting principles.
19
<PAGE>
ATRIUM COMPANIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------------- --------------------------------------
ATRIUM ELLISON ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,391 $ 396 $ - $ 3,787
Restricted cash 23,930 (23,930)(a) -
Assets held for sale 460 - - 460
Accounts receivable, net 57,037 11,427 - 68,464
Inventories 41,934 6,470 343 (b) 48,747
Prepaid expenses and other current assets 4,180 - - 4,180
Deferred tax asset 3,118 - - 3,118
----------------- ------------- ----------------- -----------------
Total current assets 134,050 18,293 (23,587) 128,756
PROPERTY, PLANT AND EQUIPMENT, net 32,816 17,233 2,905 (c) 52,954
GOODWILL, net 261,986 3,179 93,971 (d) 359,136
DEFERRED FINANCING COSTS, net 16,338 - 4,197 (e) 20,535
DEFERRED TAX ASSET 12,460 - (732)(f) 11,728
OTHER ASSETS 6,561 1,169 - 7,730
----------------- ------------- ----------------- -----------------
Total assets $ 464,211 $ 39,874 $ 76,754 $ 580,839
================= ============= ================= =================
CURRENT LIABILITIES:
Current portion of notes payable $ 2,296 $ 502 $ (500)(g) $ 2,298
Accounts payable 31,216 5,101 - 36,317
Accrued liabilities 30,694 4,863 (959)(h) 34,598
Due to parent, non-interest bearing 3,904 (3,904)(i) -
Deferred compensation 3,137 (3,137)(i) -
----------------- ------------- ----------------- -----------------
Total current liabilities 64,206 17,507 (8,500) 73,213
----------------- ------------- ----------------- -----------------
LONG-TERM LIABILITIES:
Notes payable 329,072 - 23,348 (j) 352,420
Deferred tax liability - 732 (732)(f) -
Other long-term liabilities 2,748 - - 2,748
----------------- ------------- ----------------- -----------------
Total long-term liabilities 331,820 732 22,616 355,168
----------------- ------------- ----------------- -----------------
Total liabilities 396,026 18,239 14,116 428,381
----------------- ------------- ----------------- -----------------
STOCKHOLDER'S EQUITY:
Common stock - 188 (188)(k) -
Paid-in capital 114,951 - 84,273 (l) 199,224
Retained earnings (accumulated deficit) and
divisional equity (46,766) 21,447 (21,447)(m) (46,766)
----------------- ------------- ----------------- -----------------
Total stockholder's equity 68,185 21,635 62,638 152,458
----------------- ------------- ----------------- -----------------
Total liabilities and stockholder's equity $ 464,211 $ 39,874 $ 76,754 $ 580,839
================= ============= ================= =================
</TABLE>
20
<PAGE>
ATRIUM COMPANIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
(a) Represents the use of restricted cash of $23,930 to acquire Ellison Windows
& Doors and Ellison Extrusion Systems, Inc. ("Ellison"). The following is a
summary of the sources and uses for this transaction:
<TABLE>
<S> <C>
Sources:
Cash of Ellison maintained by Ellison Companies, Inc. at closing $3,000
Restricted cash 23,930
Net increase in debt 23,348
Contribution from Atrium Corporation 84,273
--------
Total sources $134,551
========
Uses:
Purchase price of Ellison $125,466
Transaction expenses capitalized as acquisition related costs 4,888
Deferred financing costs 4,197
--------
Total uses $134,551
========
</TABLE>
(b) Represents the adjustment required to write up the finished goods of
Ellison to net realizable value.
(c) Represents the adjustment required to write up the property, plant and
equipment of Ellison to fair market value.
(d) Represents the excess of cost over the fair value of the net assets in the
acquisition of Ellison:
<TABLE>
<S> <C>
Purchase price for Ellison acquisition, net of cash acquired of $3,000 $122,466
Book value of the net assets of Ellison (21,635)
Fair value adjustment to inventory and property, plant and equipment (3,248)
Elimination of liabilities not assumed (8,500)
---------
Excess of cost over fair value of the net assets acquired 89,083
Fees and expenses related to Ellison acquisition 4,888
---------
Net increase to goodwill $93,971
=========
</TABLE>
(e) Represents the deferred financing costs related to the financing of the
Ellison transaction.
(f) Represents the reclassification of the non-current deferred tax liability
of Ellison to non-current deferred tax asset.
(g) Represents the elimination of a note payable as this liability was not
assumed by the Company.
(h) Represents the elimination of dividends payable included in accrued
liabilities as this liability was not assumed by the Company.
(i) Represents the elimination of this entire liability as it was not assumed
by the Company.
(j) Represents the increase in notes payable as follows:
<TABLE>
<S> <C>
Issuance of new tranche A term loan $14,000
Issuance of additional tranche B term loan 12,000
Issuance of additional tranche C term loan 12,000
Repayment of revolving credit facility (14,652)
--------
Net increase in notes payable $23,348
========
</TABLE>
(k) Represents the elimination of the historical common stock of Ellison.
(l) Represents the contribution from Atrium Corporation to complete the
Ellison transaction.
(m) Represents the elimination of the historical retained earnings of Ellison.
21
<PAGE>
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ATRIUM ELLISON
NINE NINE
MONTHS MONTHS COMBINED
ENDED ENDED AS OF ATRIUM AFTER
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, PRO FORMA ELLISON
2000 2000 2000 ADJUSTMENTS TRANSACTION
----------------- -------------- ---------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 383,395 $ 82,097 $ 465,492 $ - $ 465,492
Cost of goods sold 291,961 57,649 349,610 - 349,610
----------------- -------------- ---------------- ------------- ------------------
Gross profit 91,434 24,448 115,882 - 115,882
Operating expenses:
Selling, delivery, general and
administrative expenses 96,025 14,114 110,139 (1,648) (a) 107,915
(576) (b)
Amortization expense 6,687 325 7,012 3,524 (c) 10,536
Special charges 25,708 2,843 (g) 28,551 28,551
----------------- -------------- ---------------- ------------- ------------------
128,420 17,282 145,702 1,300 147,002
----------------- -------------- ---------------- ------------- ------------------
Income (loss) from operations (36,986) 7,166 (29,820) (1,300) (31,120)
Interest expense 26,945 - 26,945 1,772 (d) 29,072
355 (e)
Other income (expense), net 1,441 10 1,451 - 1,451
----------------- -------------- ---------------- ------------- ------------------
Income before income taxes (62,490) 7,176 (55,314) (3,427) (58,741)
Provision (benefit) for income taxes (15,326) 1,589 (13,737) 502 (f) (13,235)
----------------- -------------- ---------------- ------------- ------------------
Net income (loss) $ (47,164) $ 5,587 $ (41,577) $ (3,929) $ (45,506)
================= ============== ================ ============= ==================
</TABLE>
22
<PAGE>
ATRIUM COMPANIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
(a) Represents elimination of corporate service charge at Ellison as a
result of the acquisition.
(b) Represents elimination of deferred compensation expense at Ellison.
(c) Represents increase in amortization expense related to goodwill
associated with the acquisition of Ellison. Goodwill is being amortized
over 20 years.
(d) Represents the adjustments to interest expense had Atrium's current
capital structure been in place as of January 1, 2000.
<TABLE>
<S> <C>
Interest expense resulting from the borrowing of
$14,000 at 9.73% on Atrium's term loan A........... $ 1,022
Interest expense resulting from the borrowing of
$12,000 at 9.98% on Atrium's term loan B........... 898
Interest expense resulting from the borrowing of
$12,000 at 10.23% on Atrium's term loan C.......... 921
Paydown on revolving credit facility of $14,652 at
9.73%.............................................. (1,069)
----------
Net increase in interest expense as a result of
Ellison acquisition................................ $ 1,772
==========
</TABLE>
(e) Represents increase in amortization of deferred financing costs
associated with the acquisition of Ellison.
(f) Represents the income tax effect of the pro forma adjustments reflected
above assuming a statutory income tax rate of 40%, adjusting for the
portion of new goodwill which is not deductible for tax purposes and
the adjustment necessary to provide for income taxes on the portion of
taxable income generated by EWD as it was a division of The Ellison
Company, a Subchapter S corporation, and thus, did not provide for
income taxes in the financial statements presented.
(g) Amount represents a write-off of an intangible asset and a bad debt
pertaining to a supply agreement with a significant customer. These
assets were excluded from the transaction with the Company. See
footnote 13 to the combined financial statements of Ellison Windows &
Doors and Ellison Extrusion Systems, Inc. for further discussion.
23
<PAGE>
ATRIUM COMPANIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ATRIUM
YEAR ENDED ELLISON ATRIUM AFTER
DECEMBER 31, YEAR ENDED PRO FORMA ELLISON
1999 (a) DECEMBER 31, 1999 ADJUSTMENTS TRANSACTION
------------ ----------------- ----------- ------------
<S> <C> <C> <C> <C>
Net Sales $ 498,456 $ 89,648 $ - $ 588,104
Cost of goods sold 340,909 62,119 - 403,028
------------ ----------------- ----------- ------------
Gross profit 157,547 27,529 - 185,076
Operating expenses:
Selling, delivery, general and
administrative expenses 107,780 15,738 (1,801)(b) 120,978
(739)(c)
Amortization expense 8,717 207 4,699 (d) 13,623
Non cash stock option compensation expense 128 - - 128
Special charge 1,886 - - 1,886
------------ ----------------- ----------- ------------
118,511 15,945 2,159 136,615
------------ ----------------- ----------- ------------
Income (loss) from operations 39,036 11,584 (2,159) 48,461
Interest expense 28,524 18 2,362 (e) 31,377
473 (f)
Other income (expense), net 283 (35) - 248
------------ ----------------- ----------- ------------
Income before income taxes 10,795 11,531 (4,994) 17,332
Provision (benefit) for income taxes 6,641 1,596 1,808 (g) 10,045
------------ ----------------- ----------- ------------
Net income (loss) before extraordinary item $ 4,154 $ 9,935 $ (6,802) $ 7,287
============ ================= =========== ============
</TABLE>
24
<PAGE>
ATRIUM COMPANIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
(a) As reported in the statement of operations of Atrium Companies, Inc.
for the year ended December 31, 1999 included in the Report on
Form 10-K.
(b) Represents elimination of corporate service charge at Ellison as a
result of the acquisition.
(c) Represents elimination of deferred compensation expense at Ellison.
(d) Represents increase in amortization expense on goodwill associated with
the acquisition of Ellison. Goodwill is being amortized over 20 years.
(e) Represents the adjustments to interest expense had Atrium's current
capital structure been in place as of January 1, 1999.
<TABLE>
<S> <C>
Interest expense resulting from the borrowing of $14,000 at 9.73% on
Atrium's term loan A................................................... $ 1,362
Interest expense resulting from the borrowing of $12,000 at 9.98% on
Atrium's term loan B................................................... 1,198
Interest expense resulting from the borrowing of $12,000 at 10.23% on
Atrium's term loan C................................................... 1,228
Paydown on revolving credit facility of $14,652 at 9.73%............... (1,426)
-------
Net increase in interest expense as a result of Ellison acquisition.... $ 2,362
=======
</TABLE>
(f) Represents increase in amortization of deferred financing costs
associated with the acquisition of Ellison.
(g) Represents the income tax effect of the pro forma adjustments reflected
above assuming a statutory income tax rate of 40%, adjusting for
portion of new goodwill which is not deductible for tax purposes and
the adjustment necessary to provide for income taxes on the portion of
taxable income generated by EWD as it was a division of The Ellison
Company, a subchapter S corporation, and thus, did not provide for
income taxes in the financial statements presented.
25
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER
-------
*2.1 Stock Purchase Agreement, dated as of March 30, 2000, among Ellison
Extrusion Systems, Inc., The Ellison Company, Inc. and Atrium
Companies, Inc.;
*2.2 Second Amended and Restated Purchase Agreement between The Ellison
Company, Inc., Atrium and D and W Holdings, Inc., entered into as of
October 17, 2000
*2.3 Purchase Agreement among D and W Holdings, Inc., as issuer, and the
Purchasers named therein, dated as of October 25, 2000
*4.0 Exchange and Registration Rights Agreement among D and W Holdings,
Inc., as issuer, and the Purchasers named therein, dated as of October
25, 2000
*4.1 Registration Rights and Stockholders Agreement among D and W
Holdings, Inc., GE Investment Placement Partners II and the Purchasers
named therein, dated as of October 25, 2000
*10.1 First Amended and Restated Credit Agreement, dated as of October 2,
1998 and amended and restated as of October 25, 2000, between Atrium
Companies, Inc., as borrower, the Guarantors party thereto, Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
Lead Arranger and Syndication Agent, and Bank One, Texas, N.A., as
Documentation Agent, and Fleet National Bank, as Administrative Agent,
and the Lenders party thereto
*99.1 Press Release of Atrium Companies, Inc. dated October 26, 2000.
-------------------------
*Incorporated by reference from the Registrant's Report on Form 8-K dated
October 24, 2000 and filed on November 9, 2000.
26
