SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------
F0RM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 033-64788
ASSOCIATED MATERIALS INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 75-1872487
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation of Organization)
2200 ROSS AVENUE, SUITE 4100 EAST, DALLAS, TEXAS 75201
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (214) 220-4600
NOT APPLICABLE
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Indicate by check X whether the registrant (1) has filed all reports
required to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Shares of Common Stock, $.0025 par value outstanding at May 2, 1997:
4,914,400
Shares of Class B Common Stock, $.0025 par value outstanding at May 2,
1997: 2,700,000
<PAGE>
ASSOCIATED MATERIALS INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets................................................. 1
March 31, 1997 (Unaudited) and December 31, 1996
Statements of Operations (Unaudited)........................... 2
Quarter ended March 31, 1997 and 1996
Statements of Cash Flows (Unaudited)........................... 3
Quarter ended March 31, 1997 and 1996
Notes to Financial Statements (Unaudited)...................... 4
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition................................. 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................... 8
SIGNATURES........................................................... 9
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
ASSOCIATED MATERIALS INCORPORATED
BALANCE SHEETS
(In Thousands, Except Share Data)
March 31, December 31,
1997 1996
--------- ------------
(Unaudited)
ASSETS
Current assets:
Cash ........................................... $ 1,660 $ 2,384
Accounts receivable, net ....................... 48,080 47,208
Inventories .................................... 57,109 58,357
Income taxes receivable ........................ 1,240 587
Other current assets ........................... 2,789 3,025
--------- --------
Total current assets ............................... 110,878 111,561
Property, plant and equipment, net ................. 52,141 51,649
Investment in Amercord Inc. ........................ 11,322 11,320
Other assets ....................................... 2,761 3,179
--------- --------
Total assets ....................................... $ 177,102 $177,709
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdrafts ................................ $ 5,643 $ 4,853
Accounts payable ............................... 18,591 17,114
Accrued liabilities ............................ 16,714 22,965
Revolving line of credit ....................... 19,306 13,058
Current portion of long-term debt .............. 1,750 1,750
--------- --------
Total current liabilities .......................... 62,004 59,740
Deferred income taxes .............................. 1,161 1,884
Other liabilities .................................. 3,382 3,489
Long-term debt ..................................... 79,900 80,350
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 100,000 at
March 31, 1997 and December 31,
1996
Issued and outstanding shares -
0 at March 31, 1997 and
December 31, 1996 ......................... -- --
Common stock, $.0025 par value:
Authorized shares - 15,000,000
Issued and outstanding shares -
4,914,400 at March 31, 1997
and 4,893,504 at December 31, 1996 ......... 12 12
Common stock, Class B, $.0025 par value:
Authorized, issued, and outstanding
shares - 2,700,000 at March 31, 1997
and December 31, 1996 ...................... 7 7
Less: Treasury stock, at cost - 20,896
shares at March 31, 1997
and 0 at December 31, 1996 ................... (204) --
Capital in excess of par ....................... 306 185
Retained earnings .............................. 30,534 32,042
--------- --------
Total stockholders' equity ..................... 30,655 32,246
--------- --------
Total liabilities and stockholders' equity ......... $ 177,102 $177,709
========= ========
See accompanying notes.
-1-
<PAGE>
ASSOCIATED MATERIALS INCORPORATED
STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Data)
QUARTER ENDED
MARCH 31,
----------------------
1997 1996
-------- --------
Net sales .......................................... $ 79,116 $ 65,426
Cost of sales ...................................... 59,101 50,871
-------- --------
20,015 14,555
Selling, general and administrative expense ........ 19,302 17,777
-------- --------
Income (loss) from operations ...................... 713 (3,222)
Interest expense ................................... 2,633 2,778
-------- --------
(1,920) (6,000)
Equity in earnings of Amercord Inc. ................ 2 154
-------- --------
Income (loss) before income tax expense ............ (1,918) (5,846)
Income tax benefit ................................. (788) (2,373)
-------- --------
Net loss ........................................... $ (1,130) $ (3,473)
======== ========
Loss per common share .............................. $ (0.15) $ (0.45)
======== ========
Weighted average common and common
equivalent shares outstanding .................... 7,745 7,763
======== ========
See accompanying notes.
-2-
<PAGE>
ASSOCIATED MATERIALS INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
QUARTER ENDED
MARCH 31,
------------------
1997 1996
------- -------
OPERATING ACTIVITIES
Net loss ................................................. $(1,130) $(3,473)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization ....................... 1,550 1,449
Deferred income taxes ............................... (723) (153)
Equity in earnings of Amercord Inc. ................. (2) (154)
Changes in operating assets and liabilities:
Accounts receivable, net ......................... (872) 4,700
Inventories ...................................... 1,248 2,491
Income taxes receivable .......................... (653) (2,434)
Bank overdrafts .................................. 790 (1,468)
Accounts payable and accrued liabilities ......... (4,774) (1,349)
Other assets and liabilities ..................... 497 (240)
------- -------
Net cash used by operating activities .................... (4,069) (631)
INVESTING ACTIVITIES
Additions to property, plant and equipment, net .......... (1,932) (3,016)
FINANCING ACTIVITIES
Net increase in revolving line of credit ................. 6,248 3,576
Principal payments of long-term debt ..................... (450) (450)
Dividends paid ........................................... (379) --
Treasury stock acquired .................................. (200) --
Options exercised ........................................ 58 --
------- -------
Net cash provided by financing activities ................ 5,277 3,126
------- -------
Net decrease in cash ..................................... (724) (521)
Cash at beginning of period .............................. 2,384 2,279
------- -------
Cash at end of period .................................... $ 1,660 $ 1,758
======= =======
Supplemental information:
Cash paid for interest ................................... $ 4,621 $ 4,842
======= =======
Net cash paid for income taxes ........................... $ 807 $ 115
======= =======
See accompanying notes.
-3-
<PAGE>
ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited financial statements of Associated Materials Incorporated (the
"Company") for the quarter ended March 31, 1997 have been prepared in accordance
with generally accepted accounting principles for interim financial reporting,
the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. These
financial statements should be read in conjunction with the audited financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996 filed with the Securities and Exchange
Commission. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of the
interim financial information have been included. The results of operations for
any interim period are not necessarily indicative of the results of operations
for a full year.
NOTE 2 - INVENTORIES
Inventories are valued at the lower of cost (first in, first out) or market.
Inventories consist of the following (in thousands):
March 31, December 31,
1997 1996
--------- ------------
Raw materials................................... $12,855 $14,903
Work in process................................. 5,759 5,276
Finished goods and purchased stock.............. 38,495 38,178
------- -------
$57,109 $58,357
======= =======
NOTE 3 - INVESTMENT IN AMERCORD INC. ("AMERCORD")
The Company's investment in Amercord, a 50% owned affiliate, is accounted for
using the equity method. Condensed statements of operations for Amercord are
presented below (in thousands):
QUARTER ENDED
MARCH 31,
---------------------
1997 1996
------- -------
Net sales....................................... $21,616 $21,985
Costs and expenses.............................. 21,187 21,022
------- -------
Income from operations.......................... 429 963
Interest expense................................ 423 474
Income tax expense.............................. 2 181
------- -------
Net income...................................... $ 4 $ 308
======= =======
Company's share of net income................... $ 2 $ 154
======= =======
NOTE 4 - EARNINGS PER COMMON SHARE
Earnings per common share computations are determined using the treasury stock
method based on weighted average common and common equivalent shares outstanding
during the periods presented. Fully diluted earnings per common share are not
significantly different than primary earnings per common share.
-4-
<PAGE>
NOTE 5 - RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with current
period presentation.
-5-
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1997 COMPARED TO QUARTER ENDED MARCH 31, 1996
The table below sets forth for the periods indicated certain items of the
Company's financial statements by segment:
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
--------------------------------------------------------
1997 1996
------------------------ -------------------------
PERCENTAGE OF PERCENTAGE OF
AMOUNT TOTAL NET SALES AMOUNT TOTAL NET SALES
------ --------------- ------ ---------------
<S> <C> <C> <C> <C>
Total Company:
Net sales - Alside .............. $64,827 81.9% $ 55,113 84.2%
Net sales - AmerCable ........... 14,289 18.1 10,313 15.8
------- ----- -------- -----
Total net sales ................ 79,116 100.0 65,426 100.0
Gross profit .................... 20,015 25.3 14,555 22.3
Selling, general and
administrative expense (1) .... 19,302 24.4 17,777 27.2
------- ----- -------- -----
Income (loss) from operations ... $ 713 .9% $ (3,222) (4.9)%
======= ===== ======== =====
Alside:
Net sales ....................... $64,827 100.0% $ 55,113 100.0%
Gross profit .................... 17,876 27.6 14,772 26.8
Selling, general and
administrative expense ........ 17,745 27.4 16,448 29.8
------- ----- -------- -----
Income (loss) from operations ... $ 131 .2% $ (1,676) (3.0)%
======= ===== ======== =====
AmerCable:
Net sales ....................... $14,289 100.0% $ 10,313 100.0%
Gross profit .................... 2,139 15.0 (217) (2.1)
Selling, general and
administrative expense ........ 1,046 7.3 811 7.9
------- ----- -------- -----
Income (loss) from operations ... $ 1,093 7.7% $ (1,028) (10.0)%
======= ===== ======== =====
</TABLE>
(1) Consolidated selling, general and administrative expenses include corporate
expenses of $511,000 and $518,000 for the three month periods ended March 31,
1997 and 1996, respectively.
OVERVIEW
The Company's income from operations increased to $713,000 for the first quarter
of 1997 as compared to a loss from operations of $3.2 million for the 1996
period due primarily to increased sales volume and improved production
efficiency. The Company's net sales increased 20.9% to $79.1 million in the
first quarter of 1997 as compared with the same period in 1996 due to strong
unit sales growth at its Alside and AmerCable divisions.
ALSIDE. Alside's income from operations was $131,000 for the quarter ended
March 31, 1997, an increase of $1.8 million from the $1.7 million loss from
operations the for same period in 1997. The increase in income from operations
was due primarily to increased sales volume across the majority of Alside's
product lines. Alside's net sales increased $9.7 million or 17.6% in the quarter
ended March 31, 1997 as compared to the same period in 1996 due primarily to
increased unit sales of vinyl siding and vinyl windows of 22.0% and 34.3%,
respectively. Net sales were favorably impacted by a mild winter in 1997. Gross
profit as a percentage of net sales increased to 27.6% in the 1997 period from
26.8% in the 1996 period due to increased production efficiency which was
partially offset by increased vinyl resin prices. Selling, general and
administrative expense increased to $17.7 million from $16.4 in
-6-
<PAGE>
1996 due to increased personnel costs at its supply centers as well as other
costs associated with the higher volume. Selling, general and administrative
expense decreased as a percentage of net sales.
AMERCABLE. AmerCable's income from operations was $1.1 million for the
quarter ended March 31, 1997 compared to a loss from operations of $1.0 million
for the same period in 1996 due primarily to increased sales and lower
production costs. Net sales increased $4.0 million or 38.6% in 1997 as compared
to 1996 due to increased unit volume and higher selling prices. Gross profit as
a percentage of net sales increased to 15.0% for the 1997 period from (2.1)% for
the 1996 period due to improved production efficiencies and higher sales prices.
Selling, general and administrative expense increased from $811,000 to $1.0
million but decreased as a percentage of net sales.
AMERCORD. The Company recorded $2,000 in equity in the after tax earnings
of Amercord for the quarter ended March 31, 1997 as compared with $154,000
during the same period in 1996. Amercord's net sales decreased 1.7% to $21.6
million in the 1997 period compared to 1996 as lower sales prices were only
partially offset by increased tire cord volume. Gross profit decreased from $1.7
million in 1996 to $1.1 million in 1997 due primarily to lower sales prices
which were partially offset by lower production costs experienced in 1997.
Selling, general and administrative expense decreased from $691,000 in 1996 to
$652,000 in 1997 due primarily to decreased wage and benefit costs.
Net interest expense decreased $145,000 or 5.2% in the quarter ended March 31,
1997 compared to the same period in 1996 due to decreases in the Company's
average borrowings.
LIQUIDITY AND CAPITAL RESOURCES
Borrowings under the Company's existing credit facility were $19.3 million at
March 31, 1997, excluding outstanding letters of credit totaling $8.8 million
securing $6.8 million of taxable notes and certain other obligations. Because of
the seasonal nature of Alside's business, the Company's borrowing requirements
are traditionally highest during the second quarter. At March 31, 1997 the
Company had an available borrowing capacity of approximately $20.9 million.
Net cash used by operations was $4.1 million in the quarter ended March 31, 1997
compared with $631,000 in the same period in 1996. The increase in cash used by
operations in the 1997 period was due principally to higher accounts receivable
resulting from higher sales for the period ending March 31, 1997 as compared to
the 1996 period.
Capital expenditures totaled $1.9 million for the quarter ended March 31, 1997,
compared with $3.0 million during the same period in 1996. Expenditures in the
1997 period were primarily used to increase window welding and assembly capacity
and increase vinyl siding extrusion capacity.
The Company believes the future cash flows from operations and its borrowing
capacity under its existing credit agreement will be sufficient to satisfy its
obligations to pay principal and interest on its outstanding debt, maintain
current operations and provide sufficient capital for presently anticipated
capital expenditures. However, there can be no assurances that the cash so
generated by the Company will be sufficient for such purposes.
EFFECTS OF INFLATION
The Company believes that the effects of inflation on its operations have not
been material during the past two years. Inflation could adversely affect the
Company if inflation results in significantly higher interest rates or
substantial weakness in economic conditions. Alside's principal raw material,
vinyl resin, has been subject to rapid price increments. Alside has historically
been able to pass on price increases to its customers. No assurances can be
given that Alside will continue to be able to pass on any price increases.
-7-
<PAGE>
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K.
Exhibits
27 Financial Data Schedule.
Reports on Form 8-K
During the quarter ended March 31, 1997, Associated Materials
Incorporated filed no Current Reports on Form 8-K.
-8-
<PAGE>
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.
ASSOCIATED MATERIALS INCORPORATED
(Registrant)
Date: May 2, 1997 By: \s\ ROBERT L. WINSPEAR
Robert L. Winspear,
Vice President, Treasurer and
Secretary
(Principal Financial and
Accounting Officer)
-9-
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
27 Financial Data Schedule
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,660
<SECURITIES> 0
<RECEIVABLES> 52,668
<ALLOWANCES> 4,588
<INVENTORY> 57,109
<CURRENT-ASSETS> 110,878
<PP&E> 97,989
<DEPRECIATION> 45,848
<TOTAL-ASSETS> 177,102
<CURRENT-LIABILITIES> 62,004
<BONDS> 79,900
0
0
<COMMON> 19
<OTHER-SE> 30,636
<TOTAL-LIABILITY-AND-EQUITY> 177,102
<SALES> 79,116
<TOTAL-REVENUES> 79,116
<CGS> 59,101
<TOTAL-COSTS> 78,403
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,633
<INCOME-PRETAX> (1,918)
<INCOME-TAX> (788)
<INCOME-CONTINUING> (1,130)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,130)
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
