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 JUNE 30, 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 U 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.
Yes [X] No [_]
Shares of Common Stock, $.0025 par
value outstanding at August 13, 1997: 4,916,400
Shares of Class B Common Stock, $.0025 par
value outstanding at August 13, 1997: 2,700,000
<PAGE>
ASSOCIATED MATERIALS INCORPORATED
FORM 10-Q
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1997
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets................................................. 1
June 30, 1997 (Unaudited) and December 31, 1996
Statements of Operations (Unaudited)........................... 2
Quarter and six months ended June 30, 1997 and 1996
Statements of Cash Flows (Unaudited)........................... 3
Six months ended June 30, 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 4. Submission of Matters to a Vote of Security Holders....... 10
Item 6. Exhibits and Reports on Form 8-K.......................... 10
SIGNATURES........................................................... 11
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
ASSOCIATED MATERIALS INCORPORATED
BALANCE SHEETS
(In Thousands, Except Share Data)
June 30, December 31,
1997 1996
---------- ----------
(Unaudited)
ASSETS
Current assets:
Cash ........................................... $ 2,856 $ 2,384
Accounts receivable, net ....................... 54,699 47,208
Inventories .................................... 62,672 58,357
Income taxes receivable ........................ -- 587
Other current assets ........................... 3,688 3,025
---------- ----------
Total current assets ............................... 123,915 111,561
Property, plant and equipment, net ................. 53,338 51,649
Investment in Amercord Inc. ........................ 11,425 11,320
Other assets ....................................... 2,648 3,179
---------- ----------
Total assets ....................................... $ 191,326 $ 177,709
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdrafts ................................ $ 5,863 $ 4,853
Accounts payable ............................... 25,431 17,114
Accrued liabilities ............................ 24,061 22,965
Revolving line of credit ....................... 11,255 13,058
Income taxes payable ........................... 2,426 --
Current portion of long-term debt .............. 1,750 1,750
---------- ----------
Total current liabilities .......................... 70,786 59,740
Deferred income taxes .............................. 1,421 1,884
Other liabilities .................................. 3,272 3,489
Long-term debt ..................................... 79,500 80,350
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 100,000 at June 30,
1997 and December 31, 1996
Issued and outstanding shares - 0 at June
30, 1997 and December 31, 1996 ............ -- --
Common stock, $.0025 par value:
Authorized shares - 15,000,000
Issued and outstanding shares - 4,914,400
at June 30, 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 June 30, 1997 and
December 31, 1996 .......................... 7 7
Less: Treasury stock, at cost - 20,896
shares at June 30, 1997 and 0 at
December 31, 1996 ............................ (204) --
Capital in excess of par ....................... 306 185
Retained earnings .............................. 36,226 32,042
---------- ----------
Total stockholders' equity ..................... 36,347 32,246
---------- ----------
Total liabilities and stockholders' equity ......... $ 191,326 $ 177,709
========== ==========
See accompanying notes.
-1-
<PAGE>
ASSOCIATED MATERIALS INCORPORATED
STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales ................................... $ 107,676 $ 95,933 $ 186,792 $ 161,359
Cost of sales ............................... 74,694 67,253 133,795 118,124
---------- ---------- ---------- ----------
32,982 28,680 52,997 43,235
Selling, general and administrative expense . 20,827 19,670 40,129 37,447
---------- ---------- ---------- ----------
Income from operations ...................... 12,155 9,010 12,868 5,788
Interest expense ............................ 2,640 2,768 5,273 5,546
---------- ---------- ---------- ----------
9,515 6,242 7,595 242
Equity in earnings of Amercord Inc. ......... 105 881 107 1,035
---------- ---------- ---------- ----------
Income before income tax expense ............ 9,620 7,123 7,702 1,277
Income tax expense .......................... 3,927 2,552 3,139 179
---------- ---------- ---------- ----------
Net income .................................. $ 5,693 $ 4,571 4,563 1,098
========== ========== ========== ==========
Earnings per common share ................... $ 0.73 $ 0.59 $ 0.59 0.14
========== ========== ========== ==========
Weighted average common and common
equivalent shares outstanding ............. 7,785 7,716 7,785 7,716
========== ========== ========== ==========
</TABLE>
See accompanying notes.
-2-
<PAGE>
ASSOCIATED MATERIALS INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
Six Months Ended
June 30,
--------------------
1997 1996
-------- --------
OPERATING ACTIVITIES
Net income ............................................ $ 4,563 $ 1,098
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization .................... 3,131 2,895
Deferred income taxes ............................ (463) 149
Equity in earnings of Amercord Inc. .............. (107) (1,035)
Changes in operating assets and liabilities:
Accounts receivable, net ...................... (7,491) (5,418)
Inventories ................................... (4,315) (2,916)
Income taxes receivable/payable ............... 3,071 (216)
Bank overdrafts ............................... 1,010 1,291
Accounts payable and accrued liabilities ...... 9,413 11,101
Other assets and liabilities .................. (553) (736)
-------- --------
Net cash provided by operating activities ............. 8,259 6,213
INVESTING ACTIVITIES
Additions to property, plant and equipment, net ....... (4,609) (5,296)
FINANCING ACTIVITIES
Net increase (decrease) in revolving line of credit ... (1,803) 1,038
Principal payments of long-term debt .................. (850) (850)
Dividends paid ........................................ (379) --
Treasury stock acquired ............................... (204) --
Options exercised ..................................... 58 --
-------- --------
Net cash provided by (used in) financing activities ... (3,178) 188
-------- --------
Net increase in cash .................................. 472 1,105
Cash at beginning of period ........................... 2,384 2,279
-------- --------
Cash at end of period ................................. $ 2,856 $ 3,384
======== ========
Supplemental information:
Cash paid for interest ................................ $ 5,262 $ 5,545
======== ========
Net cash paid for income taxes ........................ $ 1,050 $ 243
======== ========
See accompanying notes.
-3-
<PAGE>
ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited financial statements of Associated Materials Incorporated (the
"Company") for the quarter and six months ended June 30, 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):
June 30, December 31,
1997 1996
-------- --------
Raw materials ........................ $ 15,546 $ 14,903
Work in process ...................... 5,953 5,276
Finished goods and purchased stock ... 41,173 38,178
-------- --------
$ 62,672 $ 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):
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales ............................ $ 18,566 $ 21,956 $ 40,182 $ 43,941
Costs and expenses ................... 17,861 20,616 39,049 41,638
-------- -------- -------- --------
Income from operations ............... 705 1,340 1,133 2,303
Interest expense ..................... 376 441 799 915
Income tax expense ................... 120 333 120 514
-------- -------- -------- --------
Net income before cumulative effect
of a change in accounting principle 209 566 214 874
Cumulative effect of a change in
accounting principle (net of tax) . -- 1,196 -- 1,196
-------- -------- -------- --------
Net income ........................... $ 209 $ 1,762 $ 214 $ 2,070
======== ======== ======== ========
Company's share of net income ........ $ 105 $ 881 $ 107 $ 1,035
======== ======== ======== ========
</TABLE>
-4-
<PAGE>
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.
NOTE 5 - RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with current
period presentation.
NOTE 6 - ACCOUNTING CHANGES
In February 1997 the Financial Accounting Standards board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128") which
specified a new methodology for calculating earnings per share and is effective
for fiscal years ending after December 15, 1997. This statement will have no
effect on the financial position, results of operations or cash flows of the
Company but will require a restatement of prior period earnings per share. The
Company believes that the earnings per share calculated under SFAS 128 will not
be materially different than the current method used.
In addition, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and
Statement of Financial Accounting Standards No. 131, "Disclosures About Segments
of an Enterprise and Related Information" which are effective for financial
statement periods beginning after December 15, 1997. The Company believes that
these statements will have no effect on the Company's financial position,
results of operations or cash flows.
-5-
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1997 COMPARED TO QUARTER ENDED JUNE 30, 1996
The table below sets forth for the periods indicated certain items of the
Company's financial statements by segment:
<TABLE>
<CAPTION>
Quarter Ended June 30,
-------------------------------------------------------------
1997 1996
---------------------------- -----------------------------
Percentage of Percentage of
Amount Total Net Sales Amount Total Net Sales
---------- --------------- ---------- ---------------
<S> <C> <C> <C> <C>
Total Company:
Net sales - Alside .......... $ 94,165 87.5% $ 85,403 89.0%
Net sales - AmerCable ....... 13,511 12.5 10,530 11.0
---------- --------------- ---------- ---------------
Total net sales ............ 107,676 100.0 95,933 100.0
Gross profit ................ 32,982 30.6 28,680 29.9
Selling, general and
administrative expense (1) . 20,827 19.3 19,670 20.5
---------- --------------- ---------- ---------------
Income from operations ...... $ 12,155 11.3% $ 9,010 9.4%
========== =============== ========== ===============
Alside:
Net sales ................... $ 94,165 100.0% $ 85,403 100.0%
Gross profit ................ 30,835 32.7 28,503 33.4
Selling, general and
administrative expense ..... 19,058 20.2 18,021 21.1
---------- --------------- ---------- ---------------
Income from operations ...... $ 11,777 12.5% $ 10,482 12.3%
========== =============== ========== ===============
AmerCable:
Net sales ................... $ 13,511 100.0% $ 10,530 100.0%
Gross profit ................ 2,147 15.9 177 1.7
Selling, general and
administrative expense ..... 1,123 8.3 1,047 9.9
---------- --------------- ---------- ---------------
Income (loss) from operations $ 1,024 7.6% $ (870) (8.2)%
========== =============== ========== ===============
</TABLE>
(1) Consolidated selling, general and administrative expenses include corporate
expenses of $646,000 and $602,000 for the quarters ended June 30, 1997 and
1996, respectively.
OVERVIEW
The Company's net income increased 24.5% to $5.7 million for the quarter ended
June 30, 1997 as compared to the 1996 period due to higher operating income at
its Alside and AmerCable divisions. Income from operations increased 34.9% or
$3.1 million to $12.2 million for the quarter ended June 30, 1997 as compared to
$9.0 million for the 1996 period due primarily to higher sales volume at Alside
and AmerCable as well as lower production costs at its AmerCable division. Net
sales increased 12.2% to $107.7 million in the second quarter of 1997 as
compared to the 1996 period due to higher sales volume.
ALSIDE. Alside's income from operations was $11.8 million for the quarter
ended June 30, 1997, an increase of 12.4% from $10.5 million for same period
1996. The increase in income from operations was due to increased sales volume
across the majority of Alside's product lines. Alside's net sales increased $8.8
million or 10.3% to $94.2 million for the quarter ended June 30, 1997 as
compared to the same period 1996 as unit sales of vinyl siding and vinyl windows
increased 10.9% and 18.6%, respectively. Gross profit as a percentage of net
sales decreased slightly to 32.7% in the 1997 period from 33.4% in the 1996
period due to higher raw material prices (principally vinyl resin). Selling,
general and administrative expense increased 5.8% to $19.1 million for the
quarter ended June 30, 1997 due
-6-
<PAGE>
to higher advertising expenditures and higher salaries and wages resulting from
additional sales personnel and increased incentive compensation. Selling,
general and administrative expense decreased as a percentage of net sales.
AMERCABLE. AmerCable's income from operations increased $1.9 million to
$1.0 million for the quarter ended June 30, 1997 as compared to a loss from
operations of $870,000 for the same period in 1996 due primarily to increased
sales volume and lower production costs. Net sales increased $3.0 million or
28.3% for the quarter ended June 30, 1997 as compared to 1996 due to increased
sales volume across all major product lines. Gross profit as a percentage of net
sales increased to 15.9% for the quarter ended June 30, 1997 from 1.7% for the
same period in 1996 due to improved labor productivity and material
efficiencies. Selling, general and administrative expense increased to $1.1
million for the quarter ended June 30, 1997 due primarily to higher incentive
compensation. Selling, general and administrative expense decreased as a
percentage of net sales.
OTHER. The Company recorded $105,000 in equity in the after tax earnings
of Amercord for the quarter ended June 30, 1997 as compared with $881,000 for
the same period in 1996. The Company's share of second quarter 1996 after tax
income was $283,000 exclusive of the Company's share of the cumulative change in
accounting principle of $598,000. Amercord's net sales decreased 15.4% to $18.6
million in the quarter ended June 30, 1997 as compared to the 1996 period due to
lower sales volume and lower average unit selling prices. Gross profit decreased
from $2.1 million for the quarter ended June 30, 1996 to $1.7 million for the
same period in 1997 due primarily to lower sales volume and sales prices which
were only partially offset by lower manufacturing costs achieved through
increased production efficiencies. Selling, general and administrative expense
increased from $734,000 for the quarter ended June 30, 1996 to $967,000 for the
same period in 1997. The Company expects Amercord's average selling prices to
further decline during 1997 which may adversely affect Amercord's results of
operations.
Net interest expense decreased $128,000 or 4.6% in the quarter ended June
30, 1997 compared with the same period in 1996 primarily due to lower borrowing
requirements experienced on the Company's line of credit in the 1997 period.
-7-
<PAGE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996.
The table below sets forth for the periods indicated certain items of the
Company's financial statements by segments.
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------
1997 1996
---------------------------- -----------------------------
Percentage of Percentage of
Amount Total Net Sales Amount Total Net Sales
---------- --------------- ---------- ---------------
<S> <C> <C> <C> <C>
Total Company:
Net sales - Alside .......... $ 158,992 85.1% $ 140,516 87.1%
Net sales - AmerCable ....... 27,800 14.9 20,843 12.9
---------- --------------- ---------- ---------------
Total net sales ............ 186,792 100.0 161,359 100.0
Gross profit ................ 52,997 28.4 43,235 26.8
Selling, general and
administrative expense (1) . 40,129 21.5 37,447 23.2
---------- --------------- ---------- ---------------
Income from operations ...... $ 12,868 6.9% $ 5,788 3.6%
========== =============== ========== ===============
Alside:
Net sales ................... $ 158,992 100.0% $ 140,516 100.0%
Gross profit ................ 48,711 30.6 43,275 30.8
Selling, general and
administrative expense ..... 36,803 23.1 34,469 24.5
---------- --------------- ---------- ---------------
Income from operations ...... $ 11,908 7.5% $ 8,806 6.3%
========== =============== ========== ===============
AmerCable:
Net sales ................... $ 27,800 100.0% $ 20,843 100.0%
Gross profit (loss) ......... 4,286 15.4 (40) (0.2)
Selling, general and
administrative expense ..... 2,169 7.8 1,858 8.9
---------- --------------- ---------- ---------------
Income (loss) from operations $ 2,117 7.6% $ (1,898) (9.1)%
========== =============== ========== ===============
</TABLE>
(1) Consolidated selling, general and administrative expenses include
corporate expenses of $1,157,000 and $1,120,000 for the six month periods
ended June 30, 1997 and 1996, respectively.
OVERVIEW
The Company's net income increased 315.6% to $4.6 million for the six months
ended June 30, 1997 as compared to the 1996 period primarily due to higher
operating income at both its Alside and its AmerCable divisions. The increased
operating income was due to higher sales volume at Alside and AmerCable as well
as substantial production efficiency gains at AmerCable. The Company's net sales
increased 15.8% to $186.8 million due to net sales increases of 13.1% and 33.4%
for Alside and AmerCable, respectively.
ALSIDE. Alside's income from operations increased 35.2% or $3.1 million to
$11.9 million for the six months ended June 30, 1997 as compared to $8.8 million
for the same period in 1996. The increase in income from operations was due to
increased sales volume across the majority of Alside's product lines. Alside's
net sales increased $18.5 million or 13.1% for the six months ended June 30,
1997 as compared to the same period in 1996 due primarily to increased unit
sales of vinyl siding and vinyl windows of 15.2% and 24.6%, respectively. Gross
profit as a percentage of net sales decreased slightly to 30.6% for the six
month period ended June 30, 1997 as compared to the same period in 1996 as
higher average unit selling prices for Alside's siding products were offset by
increased raw material costs, principally vinyl resin. Selling, general and
administrative expense increased to $36.8 million for the six months ended June
30, 1997 from $34.5 million for the same period in 1996 but decreased as a
percentage of net sales. The increase in selling, general and administrative was
due primarily to an increase in advertising expenditures and an increase in
employee compensation.
AMERCABLE. AmerCable's income from operations increased $4.0 million to
$2.1 million for the six months ended June 30, 1997 compared to a loss from
operations of $1.9 million for the same period in 1996 due primarily to lower
production costs, increased sales volume and higher average selling prices. Net
sales increased $7.0 million
-8-
<PAGE>
or 33.4% for the six months ended June 30, 1997 as compared to the same period
in 1996 due to increased sales prices and volume. Gross profit as a percentage
of net sales increased to 15.4% for the six months ended June 30, 1997 from
(.2)% for the same period in 1996 due to improved labor productivity and
material efficiencies and higher sales prices. Selling, general and
administrative expense increased to $2.2 million but decreased as a percentage
of net sales.
OTHER. The Company recorded $107,000 in equity in the after tax earnings
of Amercord for the six months ended June 30, 1997 as compared with $1.0 million
for the same period in 1996. The Company's share of after tax income for the six
months ended June 30, 1996 was $437,000 exclusive of the Company's share of the
cumulative change in accounting principle of $598,000. Amercord's net sales
decreased 8.6% to $40.2 million in the six month period ended June 30, 1997 as
compared to the same period in 1996 due primarily to a decrease in the average
unit selling price of its products. Gross profit decreased from $3.7 million for
the six months ended June 30, 1996 to $2.8 million for the same period in 1997
due primarily to lower sales prices which were partially offset by lower tire
cord manufacturing costs. Selling, general and administrative expense increased
to $1.6 million for the six months ended June 30, 1997 from $1.4 for the same
period in 1996.
Net interest expense decreased $273,000 or 4.9% in the six months ended
June 30, 1997 compared with the same period in 1996 primarily due to lower
borrowing requirements experienced on the Company's line of credit during the
second quarter of 1997 compared to the 1996 period.
LIQUIDITY AND CAPITAL RESOURCES
Borrowings under the Company's existing credit facility were $11.3 million at
June 30, 1997, excluding outstanding letters of credit totaling $8.9 million
securing $6.4 million of taxable notes and certain other obligations. At June
30, 1997 the Company had an available borrowing capacity of approximately $29.8
million.
Net cash provided by operations was $8.3 million in the six months ended June
30, 1997 compared with $6.2 in the same period in 1996. The increase in cash
provided by operations in the 1997 period was due principally to higher net
income for the period ended June 30, 1997 as compared to the 1996 period.
Capital expenditures totaled $4.6 million for the six months ended June 30,
1997, compared with $5.3 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.
The Company currently has $75 million of 11 1/2% senior subordinated notes
outstanding. These notes are callable at the option of the Company beginning in
August 1998 at 104.313% of the outstanding principal amount thereof, decreasing
to 100% of the principal amount in August 2001. The Company may seek to
refinance all or part of the notes in order to obtain more favorable interest
rates. No assurances can be given that the Company will be able to obtain such
financing or the terms on which such financing may be available.
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.
-9-
<PAGE>
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
On May 19, 1997, the majority shareholder took action by written
consent to approve an amendment to the 1994 Stock Incentive Plan.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1* Associated Materials Incorporated Amended and Restated 1994
Stock Incentive Plan.
27 Financial Data Schedule.
(b) Reports on Form 8-K
During the quarter ended June 30, 1997, Associated Materials
Incorporated filed no Current Reports on Form 8-K.
- --------------------
* Constitutes a compensatory plan or arrangement.
-10-
<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: August 13, 1997 By: /S/ ROBERT L. WINSPEAR
Robert L. Winspear, Vice President,
Treasurer and Secretary
(Principal Financial and Accounting Officer)
-11-
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
10.1* Amended and Restated
1994 Stock Incentive Plan
27 Financial Data Schedule
* Constitutes a compensatory plan or arrangement.
-12-
EXHIBIT 10.1
ASSOCIATED MATERIALS INCORPORATED
AMENDED AND RESTATED
1994 STOCK INCENTIVE PLAN
<PAGE>
ASSOCIATED MATERIALS INCORPORATED
AMENDED AND RESTATED
1994 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Page
----
1. Purpose............................................................ 1
2. Definitions........................................................ 1
3. Shares Available under the Plan.................................... 2
4. Option Rights...................................................... 2
5. Restricted Shares.................................................. 3
6. Deferred Shares.................................................... 4
7. Transferability.................................................... 5
8. Adjustments........................................................ 5
9. Fractional Shares.................................................. 5
10. Withholding Taxes.................................................. 5
11. Certain Terminations of Employment or Consulting
Services, Hardship and Approved Leaves of Absence.................. 5
12. Administration of the Plan ........................................ 6
13. Foreign Employees.................................................. 6
14. Amendments and Other Matters....................................... 6
15. Options Issued Pursuant to Other Plans or Agreements............... 7
16. Termination of the Plan............................................ 7
<PAGE>
ASSOCIATED MATERIALS INCORPORATED
AMENDED AND RESTATED
1994 STOCK INCENTIVE PLAN
1.PURPOSE. The purpose of this Associated Materials Incorporated Amended
and Restated 1994 Stock Incentive Plan is to attract and retain directors and
officers and other salaried employees of and consultants to Associated Materials
Incorporated, a Delaware corporation and its Subsidiaries and to provide such
persons with incentives and rewards for superior performance.
2. DEFINITIONS. As used in this Plan,
"BOARD" means the Board of Directors of the Corporation and, to the
extent of any delegation by the Board to a committee thereof pursuant to Section
12 of this Plan, such committee.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COMMON SHARES" means (i) shares of the Common Stock, $.0025 par value
per share, of the Corporation and (ii) any security into which Common Shares may
be converted by reason of any transaction or event of the type referred to in
Section 8 of this Plan.
"CORPORATION" means Associated Materials Incorporated, a Delaware
corporation.
"DATE OF GRANT" means the date specified by the Board on which a grant
of Option Rights or a grant or sale of Restricted Shares or Deferred Shares
shall become effective, which shall not be earlier than the date on which the
Board takes action with respect thereto.
"DEFERRAL PERIOD" means the period of time during which Deferred Shares
are subject to deferral limitations under Section 6 of this Plan.
"DEFERRED SHARES" means an award pursuant to Section 6 of this Plan of
the right to receive Common Shares at the end of a specified Deferral Period.
"INCENTIVE STOCK OPTION" means an Option Right that is intended to
qualify as an "incentive stock option" under Section 422 of the Code or any
successor provision thereto.
"MARKET VALUE PER SHARE" means the fair market value of the Common
Shares as determined by the Board from time to time.
"OPTIONEE" means the person so designated in an agreement evidencing an
outstanding Option Right.
"OPTION PRICE" means the purchase price payable upon the exercise of an
Option Right.
"OPTION RIGHT" means the right to purchase Common Shares from the
Corporation upon the exercise of an option granted pursuant to Section 4 of this
Plan.
"PARTICIPANT" means a person who is selected by the Board to receive
benefits under this Plan and (i) is at that time an officer, including without
limitation an officer who may also be a member of the Board,
<PAGE>
or other salaried employee of or a consultant to the Corporation or any
Subsidiary, (ii) any member of the Board, or (iii) has agreed to commence
serving in any such capacity.
"PLAN" means this Associated Materials Incorporated Amended and Restated
1994 Stock Incentive Plan.
"RESTRICTED SHARES" means Common Shares as to which neither the
substantial risk of forfeiture nor the restrictions on transfer referred to in
Section 5 hereof has expired.
"SUBSIDIARY" means a corporation, partnership, joint venture,
unincorporated association or other entity in which the Corporation has a direct
or indirect ownership or other equity interest; provided, however, for purposes
of determining whether any person may be a Participant for purposes of any grant
of Incentive Stock Options, "Subsidiary" means any corporation in which the
Corporation owns or controls directly or indirectly at least 50 percent of the
total combined voting power represented by all classes of stock issued by such
corporation at the time of the grant.
3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as
provided in Section 8 of this Plan, the number of Common Shares issued or
transferred and covered by outstanding awards granted under this Plan shall not
in the aggregate exceed 800,000 Common Shares, which may be Common Shares of
original issuance or Common Shares held in treasury or a combination thereof.
For the purposes of this Section 3(a):
(i) Upon payment in cash of the benefit provided by any award
granted under this Plan, any Common Shares that were covered by that
award shall again be available for issuance or transfer hereunder.
(ii) Common Shares covered by any award granted under this Plan
shall be deemed to have been issued or transferred, and shall cease to
be available for future issuance or transfer in respect of any other
award granted hereunder, at the earlier of the time when they are
actually issued or transferred or the time when dividends or dividend
equivalents are paid thereon; provided, however, that Restricted Shares
shall be deemed to have been issued or transferred at the earlier of the
time when they cease to be subject to a substantial risk of forfeiture
or the time when dividends are paid thereon.
(b) Notwithstanding anything to the contrary contained in this Plan,
including without limitation Section 3(a) hereof, the aggregate number of Common
Shares actually issued or transferred by the Corporation upon the exercise of
the Incentive Stock Options shall not exceed 800,000 Common Shares.
4.OPTION RIGHTS. The Board may from time to time authorize grants to
Participants of options to purchase Common Shares upon such terms and conditions
as the Board may determine in accordance with the following provisions:
(a) Each grant shall specify the number of Common Shares to
which it pertains.
(b) Except for any options to purchase Common Shares issued in
accordance with Section 15 below, each grant shall specify an Option
Price per Common Share, which shall be equal to or greater than the
Market Value per Share on the Date of Grant.
(c) Each grant shall specify the form of consideration to be
paid in satisfaction of the Option Price and the manner of payment of
such consideration, which may include (i) cash in the form of currency
or check or other cash equivalent acceptable to the Corporation, (ii)
nonforfeitable, unrestricted Common Shares, which are already owned by
the Optionee and have a value at the time of exercise that is equal to
the Option Price, (iii) any other legal consideration that the Board may
deem appropriate, including without limitation any form of consideration
authorized
-2-
<PAGE>
under Section 4(d) below, on such basis as the Board may determine in
accordance with this Plan and (iv) any combination of the foregoing.
(d) On or after the Date of Grant of any Option Right (other
than an Incentive Stock Option), the Board may determine that payment of
the Option Price may also be made in whole or in part in the form of
Restricted Shares or other Common Shares that are subject to risk of
forfeiture or restrictions on transfer. Unless otherwise determined by
the Board on or after the Date of Grant, whenever any Option Price is
paid in whole or in part by means of any of the forms of consideration
specified in this Section 4(d), the Common Shares received by the
Optionee upon the exercise of the Nonqualified Option shall be subject
to the same risks of forfeiture or restrictions on transfer as those
that applied to the consideration surrendered by the Optionee; provided,
however, that such risks of forfeiture and restrictions on transfer
shall apply only to the same number of Common Shares received by the
Optionee as applied to the forfeitable or restricted Common Shares
surrendered by the Optionee.
(e) Any grant may provide for deferred payment of the Option
Price from the proceeds of sale through a broker of some or all of the
Common Shares to which the exercise relates.
(f) Successive grants may be made to the same Participant
regardless of whether any Option Rights previously granted to the
Participant remain unexercised.
(g) Each grant shall specify the period or periods of continuous
employment, or continuous engagement of the consulting services, of the
Optionee by the Corporation or any Subsidiary that are necessary before
the Option Rights or installments thereof shall become exercisable, and
any grant may provide for the earlier exercise of the Option Rights in
the event of a change in control of the Corporation or other similar
transaction or event.
(h) Option Rights granted pursuant to this Section 4 may be (i)
options, including, without limitation, Incentive Stock Options, that
are intended to qualify under particular provisions of the Code, (ii)
options that are not intended so to qualify, or (iii) combinations of
the foregoing.
(i) On or after the Date of Grant of any Option Rights (other
than Incentive Stock Options), the Board may provide for the payment to
the Optionee of dividend equivalents thereon in cash or Common Shares on
a current, deferred or contingent basis, or the Board may provide that
any dividend equivalents shall be credited against the Option Price.
(j) No Option Right granted pursuant to this Section 4 may be
exercised more than 10 years from the Date of Grant.
(k) Each grant shall be evidenced by an agreement, in the form
the Board may approve consistent with this Plan, which shall be executed
on behalf of the Corporation by any officer thereof and delivered to and
accepted by the Optionee.
5. RESTRICTED SHARES. The Board may also authorize grants or sales to
Participants of Restricted Shares upon such terms and conditions as the Board
may determine in accordance with the following provisions:
(a) Each grant or sale shall constitute an immediate transfer of
the ownership of Common Shares to the Participant in consideration of
the performance of services, entitling such Participant to dividend,
voting and other ownership rights, subject to the substantial risk of
forfeiture and restrictions on transfer hereinafter referred to.
(b) Each grant or sale may be made without additional
consideration from the Participant or in consideration of a payment by
the Participant that is less than the Market Value per
-3-
<PAGE>
Share on the Date of Grant.
(c) Each grant or sale shall provide that the Restricted Shares
covered thereby shall be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period to be
determined by the Board on the Date of Grant, and any grant or sale may
provide for the earlier termination of such period in the event of a
change in control of the Corporation or other similar transaction or
event.
(d) Each grant or sale shall provide that, during the period for
which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares shall be prohibited or
restricted in the manner and to the extent prescribed by the Board on
the Date of Grant. Such restrictions may include without limitation
rights of repurchase or first refusal in the Corporation or provisions
subjecting the Restricted Shares to a continuing substantial risk of
forfeiture in the hands of any transferee.
(e) Any grant or sale may require that any or all dividends or
other distributions paid on the Restricted Shares during the period of
such restrictions be automatically sequestered and reinvested on an
immediate or deferred basis in additional Common Shares, which may be
subject to the same restrictions as the underlying award or such other
restrictions as the Board may determine.
(f) Each grant or sale shall be evidenced by an agreement, in
the form the Board may approve consistent with this Plan, which shall be
executed on behalf of the Corporation by any officer thereof and
delivered to and accepted by the Participant. Unless otherwise directed
by the Board, all certificates representing Restricted Shares, together
with a stock power that shall be endorsed in blank by the Participant
with respect to the Restricted Shares, shall be held in custody by the
Corporation until all restrictions thereon lapse.
6.DEFERRED SHARES. The Board may also authorize grants or sales of
Deferred Shares to Participants upon such terms and conditions as the Board may
determine in accordance with the following provisions:
(a) Each grant or sale shall constitute the agreement by the
Corporation to issue or transfer Common Shares to the Participant in the
future in consideration of the performance of services, subject to the
fulfillment during the Deferral Period of such conditions as the Board
may specify.
(b) Each grant or sale may be made without additional
consideration from the Participant or in consideration of a payment by
the Participant that is less than the Market Value per Share on the Date
of Grant.
(c) Each grant or sale shall provide that the Deferred Shares
covered thereby shall be subject to a Deferral Period, which shall be
fixed by the Board on the Date of Grant, and any grant or sale may
provide for the earlier termination of the Deferral Period in the event
of a change in control of the Corporation or other similar transaction
or event.
(d) During the Deferral Period, the Participant shall not have
any right to transfer any rights under the subject award, shall not have
any rights of ownership in the Deferred Shares and shall not have any
right to vote the Deferred Shares, but the Board may on or after the
Date of Grant authorize the payment of dividend equivalents on the
Deferred Shares in cash or additional Common Shares on a current,
deferred or contingent basis.
(e) Each grant or sale shall be evidenced by an agreement in the
form the Board may approve consistent with this Plan, which shall be
executed on behalf of the Corporation by any
-4-
<PAGE>
officer thereof and delivered to and accepted by the Participant.
7.TRANSFERABILITY. (a) Unless otherwise permitted under the terms of the
applicable agreement approved by the Board, (i) no Option Right or other
derivative security granted under this Plan may be transferred by a Participant
except by will or the laws of descent and distribution, or (ii) Option Rights
granted under this Plan may not be exercised during a Participant's lifetime
except by the Participant or, in the event of the Participant's legal
incapacity, by his guardian or legal representative acting in a fiduciary
capacity on behalf of the Participant under state law and court supervision.
(b) Any grant made under this Plan may provide that all or any
part of the Common Shares that are to be issued or transferred by the
Corporation upon the exercise of Option Rights or upon the termination
of the Deferral Period applicable to Deferred Shares or upon the
termination of the period during which Restricted Shares are subject to
the substantial risk of forfeiture and restrictions on transfer referred
to in Section 5 of this Plan, shall be subject to further restrictions
upon transfer.
8. ADJUSTMENTS. The Board may make or provide for such adjustments in
the number of Common Shares covered by outstanding Option Rights, Restricted
Shares and Deferred Shares granted hereunder, the Option Prices per Common Share
applicable to any such Option Rights and the kind of shares (including shares of
another issuer) covered thereby, as the Board may in good faith determine to be
equitably required in order to prevent dilution or expansion of the rights of
Participants that otherwise would result from (i) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Corporation, or (ii) any merger, consolidation, spin-off,
spin-out, split-off, split-up, reorganization, partial or complete liquidation
or other distribution of assets, issuance of warrants or other rights to
purchase securities or any other corporate transaction or event having an effect
similar to any of the foregoing. In the event of any such transaction or event,
the Board may provide in substitution for any or all outstanding awards under
this Plan such alternative consideration as it may in good faith determine to be
equitable under the circumstances and may require in connection therewith the
surrender of all awards so replaced. Moreover, the Board may on or after the
Date of Grant provide in the agreement evidencing any award under this Plan that
the holder of the award may elect to receive an equivalent award in respect of
securities of the surviving entity of any merger, consolidation or other
transaction or event having a similar effect, or the Board may provide that the
holder will automatically be entitled to receive such an equivalent award. The
Board may also make or provide for such adjustments in the maximum number of
Common Shares specified in Section 3 of this Plan as the Board may in good faith
determine to be appropriate in order to reflect any transaction or event
described in this Section 8.
9. FRACTIONAL SHARES. The Corporation shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Board may provide for the
elimination of fractions or for the settlement thereof in cash.
10. WITHHOLDING TAXES. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Corporation for the withholding are insufficient,
it shall be a condition to the receipt of any such payment or the realization of
any such benefit that the Participant or such other person make arrangements
satisfactory to the Corporation for payment of the balance of any taxes required
to be withheld. At the discretion of the Board, any such arrangements may
include relinquishment of a portion of any such payment or benefit. The
Corporation and any Participant or such other person may also make similar
arrangements with respect to the payment of any taxes with respect to which
withholding is not required.
11. CERTAIN TERMINATIONS OF EMPLOYMENT OR CONSULTING SERVICES, HARDSHIP
AND APPROVED LEAVES OF ABSENCE. Notwithstanding any other provision of this Plan
to the contrary, in the event of termination of employment or consulting
services by reason of death, disability, normal retirement, early retirement
with the consent of the Corporation, termination of employment or consulting
services to enter public service with the consent of the Corporation or leave of
absence approved by the Corporation, or in
-5-
<PAGE>
the event of hardship or other special circumstances, of a Participant who holds
an Option Right that is not immediately and fully exercisable, any Restricted
Shares as to which the substantial risk of forfeiture or the prohibition or
restriction on transfer has not lapsed or any Deferred Shares as to which the
Deferral Period is not complete, the Board may take any action that it deems to
be equitable under the circumstances or in the best interests of the
Corporation, including without limitation waiving or modifying any limitation or
requirement with respect to any award under this Plan.
12. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by
the Board; provided however, the Board may delegate all or any portion of its
authorities under this Plan to a committee thereof. In the event, and to the
extent, of any such delegation, the term "Board" as used in this Plan shall be
deemed to mean the such committee.
(b) The interpretation and construction by the Board of any
provision of this Plan or any agreement, notification or document
evidencing the grant of Option Rights, Restricted Shares or Deferred
Shares, and any determination by the Board pursuant to any provision of
this Plan or any such agreement, notification or document, shall be
final and conclusive. No member of the Board shall be liable for any
such action taken or determination made in good faith.
13. FOREIGN EMPLOYEES. In order to facilitate the making of any grant or
combination of grants under this Plan, the Board may provide for such special
terms for awards to Participants who are foreign nationals, or who are employed
by the Corporation or any Subsidiary outside of the United States of America, as
the Board may consider necessary or appropriate to accommodate differences in
local law, tax policy or custom. Moreover, the Board may approve such
supplements to, or amendments, restatements or alternative versions of, this
Plan as it may consider necessary or appropriate for such purposes without
thereby affecting the terms of this Plan as in effect for any other purpose;
provided, however, that no such supplements, amendments, restatements or
alternative versions shall include any provisions that are inconsistent with the
terms of this Plan as then in effect, unless this Plan could have been amended
to eliminate such inconsistency without further approval by the stockholders of
the Corporation.
14. AMENDMENTS AND OTHER MATTERS. (a) This Plan may be amended from time
to time by the Board; provided, however, except as expressly authorized by this
Plan, no such amendment shall increase the maximum numbers of Common Shares
specified in Section 3(a) hereof, without the further approval of the
stockholders of the Corporation.
(b) The Board may condition the grant of any award or
combination of awards authorized under this Plan on the surrender or
deferral by the Participant of his or her right to receive a cash bonus
or other compensation otherwise payable by the Corporation or a
Subsidiary to the Participant.
(c) This Plan shall not confer upon any Participant any right
with respect to continuance of employment or other service with the
Corporation or any Subsidiary and shall not interfere in any way with
any right that the Corporation or any Subsidiary would otherwise have to
terminate any Participant's employment or other service at any time.
(d) To the extent that any provision of this Plan would prevent
any Option Right that was intended to qualify as an Incentive Stock
Option from so qualifying, any such provision shall be null and void
with respect to any such Option Right; provided, however, that any such
provision shall remain in effect with respect to other Option Rights,
and there shall be no further effect on any provision of this Plan.
(e) The Board may permit Participants to elect to defer the
issuance of Common Shares or the settlement of awards in cash under the
Plan pursuant to such rules, procedures or programs as it may establish
for purposes of this Plan. The Board also may provide that deferred
settlements include the payment or crediting of dividend equivalents or
interest on the deferral amounts.
-6-
<PAGE>
15. OPTIONS ISSUED PURSUANT TO OTHER PLANS OR AGREEMENTS.
Notwithstanding anything to the contrary contained in this Plan, upon the
consent of the holder thereof, each option to purchase one Common Share issued
pursuant to any other plan of, or agreement with, the Corporation, which has
neither been exercised nor expired pursuant to its terms, shall be converted
into an Option Right to purchase one Common Share, as the same shall be adjusted
pursuant to the terms of Section 8 hereof as if in effect from the date such
option was granted, with substantially similar terms as the terms of the
original option.
16. TERMINATION OF THE PLAN. No further awards shall be granted under
this Plan after the passage of 10 years from the date on which this Plan is
first approved by the stockholders of the Corporation.
-7-
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0
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