ASSOCIATED MATERIALS INC, 10-K405, 2000-03-24

ASSOCIATED MATERIALS INC
10-K405, 2000-03-24
PLASTICS PRODUCTS, NEC

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<PAGE> 1
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------------
FORM 10-K
(Mark one)

[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1999.

[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required) for the transition period from
____________ to ____________.

Commission File Number 0-24956

----------------

ASSOCIATED MATERIALS INCORPORATED
(Exact name of Registrant as specified in its charter)

----------------

DELAWARE 75-1872487
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)

2200 ROSS AVENUE, SUITE 4100 EAST
DALLAS, TEXAS 75201
(Address of executive offices)
(214) 220-4600
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
NONE

Securities registered pursuant to Section 12(g) of the Act:

TITLE OF CLASS
-----------------------------------------
COMMON STOCK, PAR VALUE, $.0025 PER SHARE

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the Common Stock and Class B Common Stock held by
non-affiliates of the Registrant as of March 9, 2000 was approximately
$45,935,517.

As of March 9, 2000 the Registrant had 6,469,270 shares of Common Stock and
1,550,000 shares of Class B Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 25, 2000, to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A, are incorporated herein by
reference in Part III.

================================================================================

<PAGE> 2

PART I

ITEM 1. BUSINESS

Associated Materials Incorporated (the "Company") is a leading, vertically
integrated manufacturer and nationwide distributor of exterior residential
building products through its Alside division ("Alside"). Alside's core products
are vinyl siding and vinyl windows. These products are marketed on a wholesale
basis to more than 35,000 professional contractors engaged in home remodeling
and new home construction principally through Alside's nationwide network of 70
Alside Supply Centers. Alside's vinyl product offerings also include vinyl
fencing, vinyl decking and vinyl garage doors. In 1999, Alside accounted for
approximately 90% of the Company's net sales. In addition to Alside, the
Company's operations include its AmerCable division ("AmerCable"), a specialty
electrical cable manufacturer. The Company was incorporated in Delaware in 1983.

INDUSTRY OVERVIEW

Vinyl siding competes with other materials, such as wood, masonry and
metals, for a share of the residential siding market. Vinyl siding has greater
durability and requires less maintenance than wood siding, and generally is less
expensive than wood, masonry or metal siding. According to an industry study
jointly prepared by Sabre Associates, Inc. and Pure Strategy (the "Sabre
Study"), based on unit sales, vinyl siding accounted for approximately 50% of
the exterior siding market in 1998 versus approximately 17% in 1985. Since the
early 1980's, vinyl siding has become the preferred siding product for
professional home remodeling contractors and their customers, and commanded
approximately 62% of the home remodeling marketplace for siding according to the
most recent Sabre Study. More recently, vinyl siding has achieved increased
acceptance in the new construction market, as builders and home buyers have
recognized vinyl's low maintenance, durability and price advantages. The Company
believes that vinyl siding will continue to gain market share in the new
residential construction market while remaining the preferred product of the
remodeling marketplace.

Vinyl windows require less maintenance, are more durable than either wood
or aluminum windows and provide greater energy efficiency than aluminum windows.
According to the Sabre Study, based on unit sales, approximately 51% of all
residential windows sold in 1998 were vinyl windows versus approximately 27% in
1991. Since the early 1990's, vinyl windows have become the preferred window
product for professional home remodeling contractors and their customers, and
commanded approximately 75% of the home remodeling marketplace for windows. More
recently, vinyl windows have achieved increased acceptance in the new
construction market as a result of builders and home buyers recognizing vinyl's
favorable attributes, the enactment of local legal or building code requirements
that mandate more energy efficient windows and the increased development and
promotion of vinyl window products by national window manufacturers. The Company
believes that vinyl windows will continue to gain market share in the new
residential construction market while remaining the preferred product of the
remodeling marketplace.

ALSIDE

PRODUCTS. Alside's principal product offerings are vinyl siding and vinyl
windows, which together accounted for approximately 68.4% of Alside's 1999 net
sales. Alside also manufactures a variety of other products including vinyl
fencing, vinyl decking, vinyl garage doors and semi-custom cabinets.

The vinyl siding market consists of three segments: economy/new
construction, standard and premium. Vinyl siding quality is determined by its
rigidity, resistance to fading, thickness and ease of installation as well as
other factors. Prior to 1996, Alside targeted its products primarily to the
standard segment. More recently, the Company has broadened its product lines to
increase its penetration of the premium and economy segments. The Company
believes that its innovation in product development was key to its siding sales
growth in the past and will continue to be a principal factor in its sales
growth in future years. For example, in late 1995, Alside introduced its
patented Charter Oak siding, which enabled Alside to penetrate the premium
segment of the vinyl siding market. The Company believes that Charter Oak sets
the standard for premium vinyl siding products today. Alside introduced its
Conquest siding product in 1997, which has enabled Alside to achieve additional
market penetration in the economy/new construction segment of the siding
industry. During 1998, Alside introduced CenterLock, a patented product
positioned in the standard market segment. In 1999, Alside introduced Odyssey
Plus, an improved and updated version of its popular Odyssey siding product. In
addition to these new products, Alside has increased the number of colors and
profiles offered within its existing siding products and continues to increase
and improve upon the breadth of its vinyl siding product lines. Alside offers
limited warranties ranging from 50-year warranties to lifetime warranties with
its siding products.

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Alside divides its window products into the economy, standard and premium
categories. Product quality within the vinyl window industry is determined by a
number of competitive features including method of construction and materials
used. Rather than manufacturing standard size windows, Alside custom
manufactures virtually all of its windows to fit existing window openings.
Custom fabrication provides Alside's customers with a product that is less
expensive to install and more attractive after installation. All of Alside's
window products are accompanied by a limited lifetime warranty.

A summary of Alside's siding and window product offerings is presented in
the table below according to the Company's product line classification:

PRODUCT LINE SIDING PRODUCTS WINDOW PRODUCTS
----------------------------------------------------------------------
<S> <C> <C>
Premium Charter Oak UltraMaxx
Greenbriar Omni
Williamsport
----------------------------------------------------------------------
Standard Odyssey Geneva
Odyssey Plus Excalibur
CenterLock
----------------------------------------------------------------------
Economy Conquest Performance Series -
Alpha New Construction
Centurion
</TABLE>

In 1993, Alside introduced vinyl fencing as a product line under the brand
name UltraGuard, currently a leading brand of both agricultural and residential
vinyl fencing. Sales of UltraGuard fencing accounted for less than 5% of
Alside's net sales in 1999. Alside introduced a raised panel vinyl garage door
in 1997 under the brand name Premium Garage Doors. Alside also manufactures
semi-custom cabinets for the kitchen and bath under the brand name UltraCraft.
Cabinet sales accounted for approximately 6% of Alside's net sales in 1999.
Alside primarily markets its fencing, garage doors and cabinets through
independent dealers and not through its Supply Centers.

To complete its line of siding products, Alside also distributes metal
siding and related building products manufactured by other companies. The sale
of metal siding and related building products has declined from 19% of Alside's
sales in 1993 to 5% in 1999 as these products have been displaced by vinyl
products. Alside also selectively distributes a variety of complementary
building products manufactured by others, including wood windows, roofing
materials, insulation, cabinets and installation equipment and tools.

MARKETING AND DISTRIBUTION. Traditionally, most vinyl siding has been sold
to the home remodeling marketplace through independent distributors. The Company
believes that Alside is one of only two major vinyl siding manufacturers that
market their products primarily through company-owned distribution centers.
Alside has a nationwide distribution network of 70 Alside Supply Centers which
market Alside manufactured products and other complementary building products to
more than 35,000 professional home improvement and new construction contractors.
The Company believes that Alside Supply Centers provide "one-stop shopping" to
meet the specialized needs of its contractor-customers by distributing more than
2,000 building and remodeling products, including a broad range of
Company-manufactured vinyl siding and vinyl windows as well as products
manufactured by others, including metal siding, wood windows, roofing materials,
insulation, cabinets and installation equipment. In 1999, approximately 79% of
Alside's sales were made through its Supply Centers. In addition to sales and
promotional support, contractors look to their local Alside Supply Center to
provide a broad range of specialty product offerings in order to maximize their
ability to attract remodeling and homebuilding customers.

Alside believes that distributing products through its Supply Centers
provides the Company with certain competitive advantages such as (a)
long-standing customer relationships, (b) the ability to implement targeted
marketing programs and (c) a permanent presence in local markets. Many of
Alside's contractor-customers have established long-standing relationships with
their local Supply Center based upon individualized service and credit terms,
quality products, timely delivery, breadth of product offerings, strong sales
and promotional programs and competitive prices. Alside supports its
contractor-customer base with marketing and promotional programs that include
product sample cases, sales literature, product videos and other sales and
promotional materials. Professional contractors use these materials to sell
remodeling construction services to prospective customers. The customer
generally relies on the professional contractor to specify the brand of siding
or window to be purchased, subject to the customer's price, color and quality
requirements. Alside's daily contact with its contractor-customers also enables
it to closely monitor activity in each of the remodeling and new construction
markets in which Alside competes. This direct presence in the marketplace
permits Alside to obtain current local market information, providing Alside with
the ability to recognize trends in the marketplace earlier and adapt its product
offerings on a location-by-location basis.

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<PAGE> 4
Many of Alside's contractor-customers install both vinyl siding and vinyl
windows. Because Alside manufactures and distributes both vinyl windows and
vinyl siding, its contractor-customers can acquire both products from a single
source, which the Company believes provides Alside with a competitive advantage
in marketing these products to its target customer base. Furthermore, Alside has
the ability to achieve economies of scale in sales and marketing by developing
integrated programs on either a national or local basis for its vinyl siding and
vinyl window products.

Each of Alside's Supply Centers is evaluated as a separate profit center,
and compensation of Supply Center personnel is based in part on the Supply
Center's operating results. Decisions to open new Supply Centers, and to close
or relocate existing Supply Centers, are based on Alside's continuing assessment
of market conditions and individual location profitability. During 1999, Alside
added three Supply Centers to its distribution network and closed two
underperforming locations. The Company presently expects to open up to seven new
Supply Centers in 2000. Alside has developed formal training and recruiting
programs for Supply Center personnel which it expects to improve its ability to
staff new locations.

Through certain of its Supply Centers, Alside's Builder Service Division
provides full-service product installation of its vinyl siding products,
principally to new homebuilders who value the importance of installation
services. Alside also provides installation services for vinyl replacement
windows through certain of its Supply Centers.

Alside sells its manufactured products to large direct dealers and
distributors, generally in those areas where no Alside Supply Center currently
exists. These sales accounted for approximately 21% of Alside's 1999 net sales.
Despite their aggregate lower percentage of total sales, Alside's largest
individual customers are its large direct dealers and independent distributors.
Alside carefully monitors and evaluates its activity with these customers to
ensure the profitability of this higher volume, lower margin business. No single
customer accounted for 5% or more of Alside's 1999 sales. Alside increased its
network of independent distributors in 1999 and intends to seek to further
increase its network of independent distributors in 2000 in strategic areas to
improve its penetration into certain markets.

MANUFACTURING. Prior to 1999, Alside manufactured all of its vinyl siding
at its Ennis, Texas plant, which the Company believes is a low-cost
manufacturing facility. During 1999, the Company completed construction of a new
vinyl manufacturing facility in order to meet its sales expectations for
Alside's siding products. This new facility is located in Freeport, Texas. The
Freeport facility increased Alside's vinyl siding production capacity by
approximately 25% over 1998 levels. Alside expects to transfer some production
equipment from its Ennis, Texas plant to the Freeport plant in 2000. In
addition, Alside plans to purchase additional extrusion equipment to further
increase Freeport's capacity. The Company believes that the Freeport plant's
capacity can be doubled with only moderate expenditures of $3.0 million to $4.0
million. Alside also operates a vinyl extrusion facility in West Salem, Ohio to
produce vinyl window extrusions as well as vinyl fence and garage door panels.
Alside operates three window fabrication plants which each use vinyl extrusions
manufactured by Alside for the majority of their production requirements,
produce their own glass inserts and utilize high speed welding and cleaning
equipment for their welded window products. By producing its own vinyl
extrusions and glass inserts, Alside believes it achieves significant cost
savings and higher product quality compared to purchasing these materials from
third-party suppliers.

Alside's vinyl extrusion plants generally operate on a three-shift basis to
optimize equipment productivity and utilize additional equipment to increase
capacity to meet higher seasonal needs. Alside's window plants generally operate
on a single shift basis utilizing both a second shift and increased numbers of
leased production personnel to meet higher seasonal needs.

RAW MATERIALS. The principal raw materials used by Alside are vinyl resins,
resin stabilizers and pigments, packaging materials, window hardware and glass,
all of which are available from a number of suppliers. The price of vinyl resin
has been, and may continue to be, volatile. Alside has a contract with its resin
supplier to supply substantially all of its contract vinyl resin requirements
and believes that its requirements could also be met by other suppliers. Alside
generally had been able to pass through price increases in raw materials to its
customers. The price of vinyl resin increased significantly during 1999. Alside
implemented a price increase in late 1999 and a second price increase on January
1, 2000. Although gross profit margins on vinyl siding declined temporarily due
to the time lag between vinyl resin cost increases and the selling price
increases, these price increases have offset the 1999 increases in vinyl resin
prices. Alside expects the price of vinyl resin to continue to increase in 2000
and has announced a price increase to its direct independent distributors
effective the second quarter of 2000.

COMPETITION. Except for Owens Corning, no company within the residential
siding industry competes with Alside on both the manufacturing and distribution
levels. There are, however, numerous small and large manufacturers of metal and
vinyl siding products, some of whom are larger in size and have greater
financial resources than the Company. Alside competes with Owens Corning and
numerous large and small distributors of building products in its capacity as a
distributor of these products. The market for vinyl replacement windows is
highly fragmented, and Alside believes that no single

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manufacturer accounts for a significant percentage of national sales. Alside
believes that the market trend towards sales of welded vinyl windows, which
Alside began manufacturing in 1992 and which require expensive, more
sophisticated production equipment, will result in further consolidation of the
window fabrication industry. Alside and its competitors generally compete on
price, product performance, and sales and service support to professional
contractors. Competition varies by region. Alside also faces competition from
alternative materials: wood and aluminum in the window market, and wood, masonry
and metal in the siding market. However, the Company believes Alside's products
are competitive, and in most sectors are gaining share at the expense of these
alternative materials due to vinyl's superior qualities, including its lower
material cost, durability and low maintenance requirements.

AMERCABLE

AmerCable accounted for approximately 10% of the Company's net sales in
1999. AmerCable manufactures and markets a variety of jacketed electrical cable
specially designed to meet industry technical standards and end-users'
specifications. AmerCable divides its products into three categories: mining
cables, marine and shipboard cables, and industrial cables, which accounted for
46%, 29% and 25% of its 1999 sales, respectively. AmerCable markets its cable
principally to independent distributors who resell to the end user, except for
certain marine products that are distributed through its Offshore/Marine Cable
Specialists division.

The principal raw material used by AmerCable is copper strand, which is
available from a number of suppliers. Historically, copper strand has been
subject to rapid price changes. AmerCable generally prices its cable products
based upon market prices for copper at time of shipment. As a result, sudden
decreases in copper prices can result in inventory being in excess of its net
realizable value. In certain instances, AmerCable may guarantee a fixed copper
price for its products where there is a significant time lag between the
purchase order and shipment. In these cases, AmerCable generally attempts to
hedge its position on copper prices.

AmerCable competes with numerous large and small manufacturers. Many of its
competitors have substantially greater resources than the Company. AmerCable
generally does not compete in the more commodity-oriented wire and cable
markets, such as residential building wire and computer network cable.

AMERCORD

In addition to its Alside and AmerCable divisions, the Company owns a 9.9%
interest in Amercord Inc. ("Amercord"). Amercord manufactures and markets steel
cord and bead wire to the tire manufacturing industry. In the fourth quarter of
1999, Amercord was recapitalized. In this transaction, the Company reduced its
ownership in Amercord from 50.0% to 9.9%. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

EMPLOYEES

Alside's employment needs vary seasonally with sales and production levels.
As of December 31, 1999, Alside had approximately 1,800 full-time employees,
including approximately 820 hourly workers. The West Salem, Ohio plant is
Alside's only unionized manufacturing facility, employing approximately 90
covered workers as of December 31, 1999. Additionally, approximately 45 hourly
workers in certain Supply Center locations are covered by collective bargaining
agreements. The Company considers Alside's labor relations to be good.

Alside operates vinyl window manufacturing plants in Cedar Rapids, Iowa;
Kinston, North Carolina; and Akron, Ohio with leased production employees. The
Company believes that the employee leasing program provides it with scheduling
flexibility for seasonal production loads and with competitive advantages in
obtaining principally unskilled labor personnel. The aggregate number of leased
employees in the window plants ranges from approximately 400 to 600 people,
based on seasonal production requirements.

As of December 31, 1999, AmerCable employed approximately 195 people,
including 112 hourly workers, none of whom are covered by collective bargaining
agreements. AmerCable maintains good relations with its employees.

TRADEMARKS AND PATENTS

Alside has registered and nonregistered trade names and trademarks covering
the principal brand names and product lines under which its products are
marketed. Although Alside considers each of these items to be valuable, the
Company does not currently believe this property, other than the "Alside(R)"
trademark, to be material. Alside has obtained patents on certain claims
associated with its siding products, which the Company believes distinguish
Alside's products from those of its competitors.

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GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

The Company is subject to numerous federal and state statutes and
regulations relating to, among other things, air and water quality, the
discharge of materials into the environment and safety and health issues. The
Company does not expect compliance with these requirements to have a material
impact on the Company's earnings or competitive position in the foreseeable
future. Additionally, no significant capital expenditures are presently
anticipated related to compliance with these requirements.

The Company entered into a consent order dated August 25, 1992 with the
United States Environmental Protection Agency pertaining to corrective action
requirements associated with the use of hazardous waste storage facilities at
its Akron, Ohio location. With the exception of a small container storage area,
the use of these facilities was terminated prior to the acquisition of the
Alside assets by the Company from USX Corporation ("USX") in 1984. The effects
of the past practices at this facility are continuing to be investigated
pursuant to the terms of the consent order. The Company believes that USX bears
financial responsibility for substantially all of the direct costs of corrective
action at these facilities under the relevant contract terms and under statutory
and common law. To date, USX has reimbursed the Company for substantially all of
the direct costs of corrective action at these facilities, and the Company
expects that USX will continue to reimburse the Company for substantially all of
the direct costs of corrective action at these facilities. As a result, the
Company believes that any material claims resulting from this proceeding will
not have a material adverse effect on the Company.

EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following information concerning the executive officers and other key
employees of the Company is as of March 9, 2000.

William W. Winspear, 66, has been Chairman of the Board, President and
Chief Executive Officer of the Company since its inception in 1983. Mr. Winspear
was President and Chief Executive Officer of Chaparral Steel Company from 1975
to 1982. Mr. Winspear is the father of Robert L. Winspear.

Donald L. Kaufman, 68, has been President of Alside since 1974 and has been
Chief Executive Officer of Alside since 1982. Mr. Kaufman joined Alside in 1955
and became a Director and a Vice President of the Company in 1984.

Robert F. Hogan, 43, has been President and Chief Executive Officer of
AmerCable since 1993 and Vice President of the Company since 1984. Prior to
becoming President of AmerCable, Mr. Hogan was Treasurer and Secretary of the
Company from 1984 to 1993.

Robert L. Winspear, 34, joined the Company in 1993, was named Vice
President, Treasurer and Secretary in October 1993 and was named Chief Financial
Officer in 1998. Prior to joining the Company, Mr. Winspear was a Senior in the
Financial Consulting and Audit division of Arthur Andersen LLP, where he had
been employed since 1988. Mr. Winspear is the son of William W. Winspear.

James R. Bussman, 52, has been Executive Vice President - Corporate
Services of Alside since 1983. Mr. Bussman has held various other positions with
Alside since 1972, and was named a Vice President of the Company in 1984.

Michael R. St. Clair, 53, was named Executive Vice President - Finance of
Alside in 1994. Mr. St. Clair had been Senior Vice President - Finance of Alside
since joining the Company from The Warner & Swasey Company, Inc., a machine tool
manufacturing company, in 1985. Mr. St. Clair was named a Vice President of the
Company in 1986.

Michael Caporale, Jr., 48, joined the Company in January 2000 as President,
Alside Window Manufacturing. From 1995 to 1999 Mr. Caporale was employed by
Great Lakes Window, most recently as President.

Wayne D. Fredrick, 53, was named Group Vice President - Window Products of
Alside in 1997. From 1990 to 1996, Mr. Fredrick was Senior Vice President -
Window Products of Alside. Mr. Fredrick joined Alside in 1973.

Benjamin L. McGarry, 52, was named Group Vice President - Vinyl
Manufacturing of Alside in 1997. From 1984 to 1996, Mr. McGarry was Senior Vice
President - Manufacturing of Alside. Mr. McGarry joined Alside in 1980.

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James E. Renshaw, 52, joined the Company in 1998 as President, Alside
Supply Centers. From 1983 to 1998 Mr. Renshaw was employed by Sherwin-Williams,
most recently as President and General Manager of Sherwin-Williams Eastern
Division.

Officers of the Company serve at the discretion of the Board of Directors.
Messrs. Bussman, St. Clair, Caporale, Fredrick, McGarry and Renshaw are
considered key employees of the Company because of their responsibilities as
divisional officers in the respective capacities indicated. The Company,
however, does not consider these employees to be executive officers of the
Company.

ITEM 2. PROPERTIES

The Company's operations include both owned and leased facilities as
described below:

LOCATION PRINCIPAL USE SQUARE FEET
-------- ------------- -----------
<S> <C> <C>
ALSIDE

Akron, Ohio Alside Headquarters 70,000
Vinyl Windows, Vinyl Fencing and Vinyl
Garage Doors 577,000

Ennis, Texas Vinyl Siding Products, Vinyl Fencing 301,000

Freeport, Texas Vinyl Siding Products 120,000

West Salem, Ohio Vinyl Window Extrusions, Fencing
and Garage Door Panels 173,000

Liberty, North Carolina Cabinets 159,000

Kinston, North Carolina Vinyl Windows 319,000 (1)

Cedar Rapids, Iowa Vinyl Windows 128,000 (1)

AMERCABLE

El Dorado, Arkansas AmerCable Headquarters and 317,000
Electrical Cable

Houston, Texas Cable Distribution 33,000 (1)
</TABLE>
- --------------------

(1) Leased facilities.

Management believes that the Company's facilities are generally in good
operating condition and are adequate to meet anticipated requirements in the
near future.

Alside also operates 70 Alside Supply Centers in major metropolitan areas
throughout the United States. Except for one owned location in Akron, Ohio, the
Company leases its Supply Centers for terms generally ranging from five to seven
years with renewal options. The Supply Centers range in size from 6,000 square
feet to 50,000 square feet depending on sales volume and the breadth and type of
products offered at each location.

The leases for Alside's window plants extend through 2000 for the Cedar
Rapids location and 2003 for the Kinston location. Each lease is renewable at
the Company's option for an additional five-year period. The Company's corporate
headquarters occupy approximately 3,500 square feet of leased office space in
Dallas, Texas. Under the Company's existing credit agreement with KeyBank, N.A.
(the "Credit Agreement"), the bank lender holds a security interest in the
Company's contract rights, including real property leases.

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ITEM 3. LEGAL PROCEEDINGS

The Company is involved from time to time in litigation arising in the
ordinary course of its business, none of which, after giving effect to the
Company's existing insurance coverage, is expected to have a material adverse
effect on the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

The Company's Common Stock is traded on The Nasdaq National Market with the
ticker symbol "SIDE." The following table shows the price range of the Company's
Common Stock since it began trading on a "when issued" basis on February 26,
1998:

<TABLE>
<CAPTION>
Prices
--------------------------------
Quarter High Low
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 First (commencing February 26) $20.00 $16.00
1998 Second 19.88 12.63
1998 Third 13.50 7.50
1998 Fourth 11.75 5.94
-----------------------------------------------------------------------------------------
Year $20.00 $ 5.94
-----------------------------------------------------------------------------------------
1999 First $11.69 $10.13
1999 Second 15.00 10.50
1999 Third 16.00 13.00
1999 Fourth 16.38 14.00
-----------------------------------------------------------------------------------------
Year $16.38 $10.13
-----------------------------------------------------------------------------------------
</TABLE>

HOLDERS

At March 9, 2000, the Company had 44 record holders of Common Stock. The
Prudential Insurance Company of America ("Prudential") is the record holder of
all 1,550,000 shares of the Company's outstanding Class B Common Stock, par
value $.0025 per share ("Class B Common Stock"), which shares of Class B Common
Stock are convertible, at the holder's option, into shares of Common Stock on a
basis of one share of Common Stock for each share of Class B Common Stock. In
this report, the Company's Common Stock and Class B Common Stock are referred to
collectively as "common shares."

DIVIDENDS

The Company paid dividends of $0.075 and $0.10 per common share in 1998 and
1999, respectively. On March 1, 2000, the Board of Directors of the Company
announced a cash dividend of $0.10 per common share payable to stockholders of
record on March 20, 2000. The Company presently intends to pay an annual cash
dividend. However, the Company's future dividend policy will depend upon the
Company's capital requirements, results of operations, financial condition and
other factors as the Company's Board of Directors deems relevant. Further, the
payment of cash dividends is restricted by covenants in the Credit Agreement and
the Indenture pursuant to which the Company's 9 1/4% Senior Subordinated Notes
("9 1/4% Notes") were issued.

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ITEM 6. SELECTED FINANCIAL DATA

The selected financial information set forth below for the five-year period
ended December 31, 1999 was derived from the financial statements of the Company
which have been audited by Ernst & Young LLP, independent auditors. The data
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the financial statements,
related notes and other financial information included elsewhere in this report.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................... $ 350,029 $ 356,471 $ 397,690 $ 407,933 $ 452,586
Cost of sales............................... 264,080 255,579 283,514 283,644 314,914
--------- --------- --------- --------- ---------
Gross profit................................ 85,949 100,892 114,176 124,289 137,672
Selling, general and administrative
expenses ................................ 73,207 77,740 81,142 88,727 96,028
Other income, net(1)........................ - - - 2,673 -
--------- --------- --------- --------- ---------
Income from operations...................... 12,742 23,152 33,034 38,235 41,644
Interest expense............................ 11,474 10,882 9,795 7,565 6,779
Equity in (earnings) loss of Amercord(2)... (537) (1,724) 626 1,881 1,337
Writedown of Amercord(3).................... - - - 4,351 -
--------- --------- --------- --------- ---------
Income before income tax expense............ 1,805 13,994 22,613 24,438 33,528
Income tax expense.......................... 545 5,172 9,524 11,382 13,038
--------- --------- --------- --------- ---------
Income before extraordinary item............ 1,260 8,822 13,089 13,056 20,490
Extraordinary item(4)....................... - - - 4,107 -
--------- --------- --------- --------- ---------
Net income.................................. $ 1,260 $ 8,822 $ 13,089 $ 8,949 $ 20,490
========= ========= ========= ========= =========
SHARE DATA:
Basic earnings per common share before
extraordinary item....................... $ 0.17 $ 1.16 $ 1.72 $ 1.58 $ 2.52
Diluted earnings per common share before
extraordinary item(5).................... 0.16 1.14 1.69 1.55 2.46
Weighted average number of diluted shares... 7,695 7,746 7,756 8,403 8,344
Dividends per share......................... $ - $ - $ 0.05 $ 0.075 $ 0.100

OTHER DATA:
EBITDA(6)................................... $ 18,082 $ 29,025 $ 39,555 $ 45,452 $ 50,163
Capital expenditures........................ 7,683 8,110 8,758 14,261 18,915
Cash provided by operating activities....... 5,328 15,055 22,496 26,768 15,229
Cash used in investing activities........... (7,203) (8,087) (7,941) (14,712) (17,619)
Cash provided by (used in) financing
activities .............................. 2,452 (6,863) (15,004) 973 (9,142)
Ratio of EBITDA to interest expense......... 1.58x 2.67x 4.04x 6.01x 7.40x

</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................. $ 46,551 $ 51,821 $ 61,191 $ 79,225 $ 85,878
Total assets................................ 172,053 177,709 178,504 189,319 206,296
Short-term debt, including current
maturities .............................. 19,921 14,808 2,314 3,600 -
Long-term debt, less current maturities .... 82,100 80,350 78,600 75,000 75,000
Stockholders' equity........................ 23,306 32,246 44,734 64,378 79,326
</TABLE>
- ---------------------

(1) The Company recorded a $5.9 million curtailment gain due to the freeze of
the Alside Retirement Plan at December 31, 1998. The Company also accrued
an additional $3.3 million expense for retiree medical benefits related to
the 1989 closure of Alside's metal siding plant.

(2) In 1996, the Company's equity in the earnings of Amercord was affected by a
change in accounting principle, a settlement of a royalty dispute and an
asset impairment writedown, the net amount of which was approximately
$800,000 in income.

(3) The Company recorded a pretax writedown on its investment in Amercord in
anticipation of a loss on the sale of Amercord. (footnotes continued on
following page)

8
<PAGE> 10

(4) The extraordinary item represents, net of tax, the loss recognized on the
writeoff of debt issuance costs and the prepayment premium paid on the
purchase of the Company's 11 1/2% Senior Subordinated Notes ("11 1/2%
Notes") in 1998.

(5) In accordance with the Commission Staff Accounting Bulletin, Topic 4D,
shares of Common Stock issued during the 12-month period prior to the
Company's initial public offering at prices below the initial public
offering price have been included in the calculation as if these shares
were outstanding for all periods presented. Earnings per share for all
periods prior to the initial public offering in 1998 were computed in
accordance with Topic 4D.

(6) EBITDA is calculated as income from operations plus depreciation and
amortization. The Company has included information concerning EBITDA
because it believes that EBITDA is used by certain investors as one measure
of an issuer's historical ability to service its debt. EBITDA should not be
considered as an alternative to, or more meaningful than, net income as an
indicator of the Company's operating performance or to cash flows as a
measure of liquidity. EBITDA as presented above for the Company may not be
comparable to similarly titled measures reported by other companies.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

GENERAL. The Company consists of two operating divisions, Alside and
AmerCable. In addition, the Company owns an interest in Amercord, which was
accounted for using the equity method until November 1999 when it was
recapitalized, reducing the Company's interest in Amercord from 50% to 9.9%.
Since the recapitalization, the Company has accounted for Amercord under the
cost method.

The Company's results of operations are primarily affected by the operating
results of Alside, which accounted for more than 86% of the Company's net sales
in each of the last three years. Because its residential building products are
consumer durable goods, Alside's sales are impacted by the availability of
consumer credit, consumer interest rates, employment trends, changes in levels
of consumer confidence, national and regional trends in new housing starts and
general economic conditions. Alside's sales are also affected by changes in
consumer preferences with respect to types of building products. Alside's
products are used in the repair and remodeling, as well as the new construction,
sectors of the building industry. For each of the three years in the period
ended December 31, 1999, Alside believes that its sales were made primarily to
the repair and remodeling sector.

The Company believes that vinyl building products will continue to gain
market share from metal and wood products due to vinyl's favorable attributes,
which include its durability, lower maintenance cost and lower cost compared to
wood and metal. Although no assurances can be given, the Company further
believes that these increases in market share, together with Alside's increased
marketing efforts, will increase Alside's sales of vinyl siding, vinyl windows
and other complementary building products.

The Company operates with substantial operating and financial leverage.
Significant portions of Alside's selling, general and administrative expenses
are fixed costs that neither increase nor decrease proportionately with sales.
As a result, a percentage change in Alside's net sales will have a greater
percentage effect on Alside's income from operations. In addition, interest
expense related to the Company's long-term debt is fixed.

AMERCABLE. AmerCable focuses on a core group of cable products that it
believes better utilize its manufacturing efficiencies and marketing and
distribution capabilities. Its cable products are used primarily in the mining
and offshore drilling industries; therefore, AmerCable's results can be affected
by a slowdown in the mining and offshore drilling industries as a result of
lower commodity prices. AmerCable's sales can also be effected by the price of
copper as AmerCable generally prices its cable products based upon market prices
for copper at the time of shipment.

AMERCORD. The Company recorded a $4.4 million writedown on its investment
in Amercord in 1998 in anticipation of a loss on the sale of Amercord. In
November 1999, Amercord was recapitalized, and in that transaction the Company's
interest in Amercord was reduced from 50% to 9.9%. As a result of the
recapitalization, the Company received $1.2 million in cash (net of related
expenses) and a subordinated note for $1.5 million due November 2004. The
Company has the right to require Amercord to purchase the Company's remaining
9.9% interest for $2.0 million in November 2003.

9
<PAGE> 11

SEGMENT DATA. Alside accounted for more than 86% of the Company's net sales
and income from operations in each of the three years in the period ended
December 31, 1999. In 1999, Alside accounted for approximately 94% of the
Company's income from operations exclusive of corporate selling, general and
administrative expenses. Management believes that a discussion of the Company's
results and financial position for these periods is enhanced by presenting
segment information for Alside and AmerCable. The tables below set forth for the
periods indicated certain items from the Company's financial statements:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------
1999 1998 1997
---------------------- --------------------- --------------------
% OF % OF % OF
TOTAL NET TOTAL NET TOTAL NET
AMOUNT SALES AMOUNT SALES AMOUNT SALES
--------- ------- --------- ------- --------- -------
( IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED:
Net sales - Alside.................... $ 408,428 90.2% $ 355,997 87.3% $ 344,000 86.5%
Net sales - AmerCable................. 44,158 9.8 51,936 12.7 53,690 13.5
--------- ------- --------- ------- --------- -------
Total net sales.................... 452,586 100.0 407,933 100.0 397,690 100.0
Gross profit.......................... 137,672 30.4 124,289 30.5 114,176 28.7
Selling, general and
administrative expenses (1)........ 96,028 21.2 88,727 21.8 81,142 20.4
Other income, net..................... - - 2,673 0.7 - -
--------- ------ --------- ------- --------- -------
Income from operations................ 41,644 9.2 38,235 9.4 33,034 8.3
Interest expense...................... 6,779 1.5 7,565 1.9 9,795 2.5
Equity in loss of Amercord............ 1,337 0.3 1,881 0.4 626 0.1
Writedown of Amercord................. - - 4,351 1.1 - -
--------- ------ --------- ------- --------- -------
Income before income tax expense.... 33,528 7.4 24,438 6.0 22,613 5.7
Income tax expense.................... 13,038 2.9 11,382 2.8 9,524 2.4
--------- ------- --------- ------- --------- -------
Income before extraordinary item...... $ 20,490 4.5% $ 13,056 3.2% $ 13,089 3.3%
========= ======= ========= ======= ========= =======

ALSIDE:
Net sales............................. $ 408,428 100.0% $ 355,997 100.0% $ 344,000 100.0%
Gross profit.......................... 129,996 31.8 113,797 32.0 104,716 30.4
Selling, general and
administrative expenses............ 87,588 21.4 81,282 22.8 74,301 21.6
Other income, net..................... - - 2,673 0.7 - -
--------- ------ --------- ------- --------- -------
Income from operations................ $ 42,408 10.4% $ 35,188 9.9% $ 30,415 8.8%
========= ======= ========= ======= ========= =======

AMERCABLE:
Net sales............................. $ 44,158 100.0% $ 51,936 100.0% $ 53,690 100.0%
Gross profit.......................... 7,676 17.4 10,492 20.2 9,460 17.6
Selling, general and
administrative expenses............ 4,801 10.9 4,718 9.1 4,374 8.1
--------- ------- --------- ------- --------- -------
Income from operations................ $ 2,875 6.5% $ 5,774 11.1% $ 5,086 9.5%
========= ======= ========= ======= ========= =======
</TABLE>

- -----------------------

(1) Consolidated selling, general and administrative expenses include corporate
expenses of $3.6 million, $2.7 million and $2.5 million for the years 1999,
1998 and 1997, respectively.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998

GENERAL. The Company's net sales increased 11.0% to $452.6 million in 1999
as compared to $407.9 million in 1998 due to higher sales at the Company's
Alside division. Income from operations increased to $41.6 million as compared
to $38.2 million in 1998 due to increased profitability at Alside, which was
partially offset by AmerCable's results from operations. Income before
extraordinary item was $20.5 million or $2.46 per share on 8.3 million weighted
average shares in 1999 as compared to $13.1 million or $1.55 per share on 8.4
million weighted average shares in 1998. The Company's 1998 income before
extraordinary item was $14.7 million or $1.75 per share exclusive of the
one-time accounting adjustments.

10
<PAGE> 12

ALSIDE. Alside's net sales increased 14.7% to $408.4 million in 1999 as
compared to $356.0 million in 1998 due primarily to higher sales volume.
Alside's sales increased across all product lines in 1999 as compared to 1998.
During 1999, unit sales of vinyl siding and vinyl windows increased 16.2% and
11.0%, respectively, as compared to 1998. Gross profit as a percentage of net
sales decreased slightly to 31.8% in 1999 as compared to 32.0%. Selling, general
and administrative expense increased 7.8% to $87.6 million in 1999 as compared
to $81.3 million in 1998 but decreased as a percentage of net sales. The
increase in selling, general and administrative expense was due primarily to
higher personnel costs, including incentive compensation. Income from operations
increased $7.2 million, or 20.5% to $42.4 million in 1999 as compared to $35.2
million in 1998 due to higher sales and favorable fixed cost absorption.
Exclusive of the $2.7 million one-time accounting adjustments recorded in 1998
as discussed below, income from operations increased $9.9 million or 30.4%.

AMERCABLE. AmerCable's net sales decreased to $44.2 million in 1999 as
compared to $51.9 million in 1998 due primarily to lower sales volume of mining
and offshore drilling products. Lower commodity prices resulted in decreased
demand for mining and offshore drilling cable. Commodity prices improved during
the last half of 1999. Gross profit as a percentage of net sales decreased to
17.4% in 1999 as compared to 20.2% in 1998 due to lower sales volume and lower
fixed cost absorption resulting from lower production volume. Selling, general
and administrative expense increased to $4.8 million in 1999 as compared to $4.7
million in 1998 as lower incentive compensation was offset by higher personnel
costs resulting from the hiring of additional sales personnel as well as higher
advertising expenditures. Income from operations decreased to $2.9 million in
1999 as compared to $5.8 million in 1998 due primarily to lower sales volume and
lower fixed cost absorption.

AMERCORD. In November 1999, Amercord was recapitalized. In this
transaction, the Company's interest in Amercord was reduced from 50% to 9.9%. As
a result of the recapitalization, the Company received cash of $1.2 million (net
of related expenses) and a subordinated note for $1.5 million due November 2004.
In addition, the Company has the right to require Amercord to purchase the
Company's remaining 9.9% interest for $2.0 million in November 2003. The Company
currently accounts for Amercord using the cost method of accounting. Prior to
Amercord's recapitalization, the Company accounted for Amercord using the equity
method of accounting. The Company recorded a loss of $1.3 million on its equity
in the losses of Amercord during 1999.

OTHER. Net interest expense decreased $786,000 or 10.4% in 1999 as compared
to 1998 primarily due to a decrease in the Company's borrowings and the
repayment of the Company's taxable notes in April 1999. The Company recorded
interest income of $329,000 in 1999. The Company's effective tax rate decreased
to 38.9% in 1999 due to lower state taxes. In 1998, the Company's Board of
Directors approved a stock repurchase program of up to 800,000 shares of Common
Stock. During 1999, the Company repurchased 467,000 shares of Common Stock under
this program, which increased earnings per share by $0.07 per share (after
interest and tax effects).

YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997

GENERAL. The Company's net sales increased $10.2 million to $407.9 million
in 1998 as compared to $397.7 million in 1997 due to higher sales at the
Company's Alside division. Income from operations increased $5.2 million or
15.7% to $38.2 million in 1998 due to increased profitability at both the Alside
and AmerCable divisions and $2.7 million of additional operating income
resulting from one-time accounting adjustments at Alside. The Company recorded a
pretax writedown of $4.4 million on its Amercord investment in anticipation of
the sale of Amercord. The Company's income before extraordinary item was $13.1
million, or $1.55 per share on 8.4 million weighted average shares in 1998 as
compared to $13.1 million, or $1.69 per share on 7.8 million shares in 1997.
Exclusive of the one-time accounting adjustments and the extraordinary item, the
Company's net income was $14.7 million or $1.75 per diluted share for the year
ended December 31, 1998.

ALSIDE. Net sales increased $12.0 million or 3.5% to $356.0 million in 1998
from $344.0 million in 1997 due to higher sales along all product lines with the
exception of vinyl windows. Net sales of vinyl siding, kitchen cabinets and
vinyl fence increased 9.4%, 14.4% and 17.8% respectively in 1998 as compared to
1997. Unit sales of vinyl windows decreased 10.6% in 1998 compared to 1997 due
to the loss of two customers, one of which ceased operations due to financial
difficulties. Gross profit as a percentage of net sales increased to 32.0% in
1998 from 30.4% in 1997 due primarily to lower resin prices which were partially
offset by the manufacturing inefficiencies at Alside's window manufacturing
plants. Alside has since reorganized its window manufacturing management and
operations to improve quality, increase customer responsiveness and lower costs.
Selling, general and administrative expense increased 9.4% to $81.3 million in
1998 from $74.3 million in 1997 due primarily to higher personnel costs, lease
expenses and advertising costs. The higher costs were the result of increases to
Alside's sales force, the addition of new and expanded Supply Center locations
and an enhanced focus on sales and marketing. Alside recorded a $5.9 million
curtailment gain upon freezing the Alside Retirement

11
<PAGE> 13

Plan on December 31, 1998. Alside also accrued an additional $3.3 million for
retiree medical benefits related to the 1989 closing of its metal siding plant.
This additional accrual was based upon a recent actuarial study taking into
account unfavorable claims experience. The net effect of these adjustments was a
$2.7 million increase in operating income. Income from operations as a
percentage of sales increased to 9.9% in 1998 from 8.8% in 1997 due to increased
profits and the accounting adjustments discussed above.

AMERCABLE. AmerCable's net sales decreased 3.3% to $51.9 million in 1998 as
compared to $53.7 million in 1997 due primarily to lower copper prices.
AmerCable's products are generally sold with copper as a pass-through component.
AmerCable's net sales would have been approximately $55.1 million if adjusted to
1997 copper prices. Gross profit as a percentage of sales increased to 20.2% in
1998 as compared to 17.6% in 1997 due primarily to improved product mix.
Selling, general and administrative expense increased 7.9% to $4.7 million in
1998 as compared to $4.4 million in 1997 due to higher personnel costs. Income
from operations increased 13.5% to $5.8 million in 1998 from $5.1 million in
1997 due to higher gross profits which were partially offset by higher selling,
general and administrative expense.

AMERCORD. The Company recorded a loss of $1.9 million (or $0.22 per share)
reflecting its share of the after-tax loss of Amercord for the year ended 1998
as compared to a loss of $626,000 for the same period in 1997. Amercord's loss
from operations increased to $4.6 million in 1998 as compared to $469,000 for
1997. The higher losses in 1998 were due primarily to lower average sales prices
for both tire cord and tire bead. Manufacturing efficiencies have continued to
improve at Amercord but were more than offset by a 9.1% decrease in average
sales price.

OTHER. Net interest expense decreased $2.2 million or 22.8% in 1998 as
compared to 1997 primarily due to a decrease in the Company's borrowings, the
purchase of the 11 1/2% Notes and the issuance of the 9 1/4% Notes. The Company
recorded interest income of $413,000 in 1998.

EXTRAORDINARY ITEM. In March 1998, the Company purchased $72.9 million of
its outstanding 11 1/2% Notes through a tender offer and consent solicitation.
In August 1998, the Company redeemed the $2.1 million principal amount of the 11
1/2% Notes that remained outstanding after the tender offer. As a result of the
transactions, the Company incurred an extraordinary charge of approximately $4.1
million net of taxes of $2.9 million resulting from the write-off of debt
issuance costs and the premium paid in connection with the purchase and
redemption of the 11 1/2% Notes.

QUARTERLY FINANCIAL DATA

GENERAL. Because most of Alside's building products are intended for
exterior use, Alside's sales and operating profits tend to be lower during
periods of inclement weather. Weather conditions in the first quarter of each
calendar year historically result in that quarter producing significantly less
sales revenue than in any other period of the year. As a result, the Company has
historically had small profits or losses in the first quarter, and reduced
profits in the fourth quarter of each calendar year due to the significant
impact of Alside on the Company's performance.

12
<PAGE> 14

Quarterly sales and operating profit data for the Company in 1998 and 1999 are
shown in the table below:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
--------------- ------------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1998
Net sales - Alside.......................... $ 64,393 $ 94,961 $ 102,593 $ 94,050
Net sales - AmerCable....................... 14,257 13,828 11,608 12,243
---------- --------- --------- ---------
Total net sales........................... 78,650 108,789 114,201 106,293
Gross profit................................ 22,330 34,089 36,530 31,340
Income from operations(1)................... 1,856 12,038 12,574 11,767
Income (loss) before extraordinary
item(2).................................. (767) 5,385 5,741 2,697
Basic earnings (loss) per common share
before extraordinary item................. (0.10) 0.64 0.68 0.32
Diluted earnings (loss) per common share
before extraordinary item................. (0.10) 0.63 0.67 0.32

1999
Net sales - Alside.......................... $ 74,109 $ 109,155 $117,466 $ 107,698
Net sales - AmerCable....................... 10,488 9,753 10,922 12,995
---------- --------- --------- ---------
Total net sales........................... 84,597 118,908 128,388 120,693
Gross profit................................ 25,155 38,833 39,468 34,216
Income from operations...................... 3,260 14,587 14,464 9,333
Net Income.................................. 800 7,596 7,332 4,762
Basic earnings per common share............. 0.10 0.94 0.91 0.59
Diluted earnings per common share........... 0.09 0.91 0.88 0.58
</TABLE>

- -----------------------

(2) The Company recorded a pretax writedown on its investment in Amercord in
anticipation of a loss on the sale of Amercord.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $15.2 million, $26.8 million
and $22.5 million in 1999, 1998 and 1997, respectively. The decrease in
operating cash flow in 1999 was primarily due to higher accounts receivable and
inventory balances at year-end. The increase in accounts receivable was due to
the 15% increase in fourth quarter 1999 sales as compared to the same period in
1998. Year-end inventory balances resulted from higher finished goods at
Alside's Supply Centers due to higher sales and higher raw materials at its
window manufacturing operations due to poor inventory management. AmerCable's
inventory levels increased due to the expansion of its consigned inventory
program in order to ensure its large customers have adequate inventory in stock.
The increased operating cash flows in 1998 were due to improved operating
performance at Alside and AmerCable, as well as lower working capital
requirements in 1998 as compared to 1997.

In May 1999, the Company amended its existing $50 million bank credit
facility to extend the term of the facility through May 2002. Available
borrowings under the Credit Agreement are limited to the lesser of the total
facility less unused letters of credit or availability based on percentages of
eligible accounts receivable and inventories. The Credit Agreement is secured by
substantially all of the Company's assets other than the Company's owned real
property, equipment and its interest in Amercord. At December 31, 1999, $1.6
million of this facility had been used to secure various insurance letters of
credit. At December 31, 1999 the Company had an available borrowing capacity
under the Credit Agreement of approximately $48.4 million.

Capital expenditures totaled $18.9 million, $14.3 million and $8.8 million
in 1999, 1998 and 1997, respectively. Expenditures in 1999 were primarily used
to complete the new vinyl siding manufacturing facility, expand extrusion
capacity for window profiles and vinyl fence, expand capacity and increase
manufacturing efficiency for semi-custom cabinets and increase production
flexibility and capacity at AmerCable. Capital expenditures on the new vinyl
siding manufacturing plant were $9.8 million in 1999. 1998 expenditures were
primarily used to increase window welding and assembly capacity and to increase
vinyl siding extrusion and blending capacity, including the construction of the
new Freeport vinyl siding manufacturing plant. Capital expenditures on the new
vinyl siding manufacturing plant were

13
<PAGE> 15

$4.2 million in 1998. Expenditures in 1997 were primarily used to increase vinyl
extrusion capacity for siding, windows and fencing as well as to increase and
automate window fabrication capacity. The Company has historically funded these
capital expenditure requirements out of cash generated from operating activities
or borrowings under its bank credit facility.

The Company believes that capital expenditures ranging from $8.0 million to
$10.0 million represent a base level of spending needed to maintain its
manufacturing facilities as well as provide for modest increases in capacity and
further automation. The Board of Directors has approved capital expenditures of
$9.8 million for 2000. Presently anticipated capital expenditures in 2000 will
increase extrusion capacity for vinyl siding, vinyl fence and window profiles.
Approximately $1.2 million of the 2000 capital expenditures have been allocated
to AmerCable, primarily for capacity expansion and process improvements.

In March 1998, the Company completed a tender offer and consent
solicitation with respect to its 11 1/2% Notes. In the tender offer, the Company
purchased $72.9 million of the $75.0 million 11 1/2% Notes. Simultaneously with
the consummation of the tender offer, the Company issued $75.0 million of 9 1/4%
Notes. Concurrently with these transactions, the Company completed an initial
public offering of 2,448,120 shares of Common Stock of which 808,520 shares were
sold by the Company. The remaining 1,639,600 shares were sold by certain of the
Company's stockholders, including the holder of the Class B Common Stock who
converted 1,150,000 shares of Class B Common Stock into Common Stock on a
one-to-one basis in connection with the offering. Net proceeds to the Company,
after underwriting discounts and offering expenses, from the Common Stock and
9 1/4% Note offerings were $11.5 million and $72.4 million, respectively. The
Company redeemed the $2.1 million principal amount of 11 1/2% Notes that
remained outstanding in August 1998.

In connection with the recapitalization of Amercord in November 1999, the
Company guaranteed a $3.0 million note secured by Amercord's real property.
Should the guarantee be exercised by Amercord's lender, the Company and Ivaco
have the option to assume the loan. Ivaco Inc. ("Ivaco") has indemnified the
Company for 50% of any loss under the guarantee.

Effective October 1, 1998, the Company established an Employee Stock
Purchase Plan ("ESPP"). Employees participating in the ESPP can purchase shares
of Common Stock at a 15% discount to fair market value through payroll
deductions of up to 25% of their eligible compensation. The Company registered
250,000 shares of Common Stock with the Securities and Exchange Commission
("SEC") in September 1998 for issuance pursuant to the ESPP. During 1999 and
1998, the Company issued 80,919 and 35,327 shares of Common Stock pursuant to
ESPP, resulting in net proceeds to the Company of approximately $851,000 and
$225,000, respectively.

On October 27, 1998 the Company's Board of Directors approved a program to
repurchase up to 800,000 shares of Common Stock in open market transactions
depending on market, economic and other factors. At December 31, 1999, the
Company had repurchased 514,000 shares of Common Stock under this program at a
cost of $6.1 million.

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, provide sufficient capital for presently
anticipated capital expenditures and fund its stock repurchase program. However,
there can be no assurances that the cash so generated by the Company will be
sufficient for these purposes.

YEAR 2000

The Company began its Year 2000 program in 1997 in order to ensure all
systems were Year 2000 compliant. The Company completed all modifications
necessary to ensure its systems were Year 2000 compliant during the fourth
quarter of 1999. To date, the Company has not experienced any Year 2000 problems
with its systems or with its suppliers. The Company will continue to monitor and
evaluate Year 2000 issues to determine the possible risks that may affect the
Company's operations. The Company's costs to address Year 2000 issues were
approximately $350,000.

EFFECTS OF INFLATION

The Company believes that the effects of inflation on its operations have
not been material during the past three 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 changes. Although Alside has
historically been able to pass on price increases to its customers, during 1997
Alside did not generally pass on any additional costs or savings resulting from
changes in resin prices. The price of vinyl resin increased significantly during
1999. Alside implemented a price increase in late 1999 and a second price
increase on January 1, 2000. Although gross profit margins on vinyl siding
declined temporarily due to the time lag between vinyl resin cost increases and
the selling price increases, the price increases have offset the 1999 increases
in vinyl resin prices. Alside expects the price of

14
<PAGE> 16

vinyl resin to continue to increase in 2000 and has announced a price increase
to its direct independent distributors effective the second quarter of 2000. No
assurances can be given that Alside will be able to pass on any price increases
in the future.

FINANCIAL ACCOUNTING STANDARDS

In June 1999 the Financial Accounting Standards Board issued Statement of
Financial Accounting No. 137, "Deferral of the Effective Date of FASB Statement
133" which defers the implementation of Statement 133 for one year. The Company
believes Statement No. 133 will not have a material effect on the Company's
financial position, results of operations or cash flows.

CERTAIN FORWARD-LOOKING STATEMENTS

This report contains "forward-looking statements" as that term is defined
in the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on the beliefs of, and estimates and assumptions made by
and information currently available to, the Company's management. When used in
this report, the words "anticipate," "believe," "estimate," "expect," "intend,"
and similar words, as they relate to the Company or the Company's management,
identify forward-looking statements. These statements reflect the current views
of the Company's management regarding the operations and results of operations
of the Company as well as its customers and suppliers. These statements are
subject to certain risks and uncertainties. Some of the factors that might cause
a difference are discussed below. Should one or more of these risks or
uncertainties occur, or should management's assumptions or estimates prove
incorrect, actual results and events may vary materially from those discussed in
the forward-looking statements.

GENERAL INDUSTRY, ECONOMIC, INTEREST RATES AND OTHER CONDITIONS. The
exterior residential building products industry in which Alside operates may be
significantly affected by changes in national and local economic and other
conditions, including employment levels, changing demographic considerations,
availability of financing, interest rates and consumer confidence, all of which
are outside of the Company's control. A prolonged recession affecting the
residential construction industry could result in a significant decrease in the
Company's financial performance.

SUBSTANTIAL FIXED COSTS. A significant portion of Alside's selling, general
and administrative expenses are fixed costs which do not fluctuate
proportionately with sales. As a result, a percentage decline in Alside's net
sales has a greater percentage effect on Alside's operating income.

CHANGING RAW MATERIAL COSTS AND AVAILABILITY. The principal raw material
used in producing Alside's vinyl products is vinyl resin, which historically has
changed significantly in price. Although Alside has generally been able to pass
on price increases in vinyl resin to its customers, there can be no assurance
that in the future the market will respond favorably to selling price increases
or that the Company will otherwise be able to absorb these cost increases
without significantly affecting its margins. Additionally, a major interruption
in the delivery of vinyl resin to Alside would disrupt Alside's operations and
could have an adverse effect on the Company's financial condition and results of
operations. Alside has contracts with a vendor to supply substantially all of
its vinyl resin requirements and believes its requirements could also be met by
other suppliers. Copper is the principal raw material used by AmerCable in the
manufacture of its products. Historically, copper has been subject to rapid
price changes. A decrease in the price of copper may also affect the Company's
gross margins as AmerCable generally prices its cable products based on market
prices for copper at the time of shipment. As a result, sudden decreases in
copper prices can result in lower gross profit margins in future periods. See
Item 7 -- "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in this report.

SUBSTANTIAL FINANCIAL LEVERAGE. The Company has substantial financial
leverage. As of December 31, 1999, the Company's total indebtedness was
approximately $75.0 million and its stockholders' equity was $79.3 million. The
Company's high level of indebtedness presents certain risks to its security
holders and could adversely affect, among other things, the ability of the
Company to obtain additional financing in the future and to respond to market
and general economic conditions, extraordinary capital requirements and other
factors. The Company's bank credit agreement includes covenants that require the
maintenance of certain financial ratios and net worth. This credit agreement
also restricts the Company's ability to repurchase its Common Stock and to pay
dividends. Outstanding borrowings under the bank credit agreement are secured by
substantially all of the assets of the Company other than the Company's real
property, equipment and its interests in Amercord. In addition, the Indenture
under which the Company's 9 1/4% notes were issued contains covenants that,
among other things, limits the Company's ability to incur additional
indebtedness, pay dividends, make certain investments and repurchase stock or
subordinated indebtedness. See Item 7. -- "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources" in this report.

15
<PAGE> 17

WEATHER IMPACTS QUARTERLY RESULTS. Because most of Alside's building
products are intended for exterior use, sales tend to be lower during periods of
inclement weather. Weather conditions in the first quarter of each calendar year
usually result in that quarter producing significantly less sales revenue than
in any other period of the year. Consequently, the Company has historically had
small profits or losses in the first quarter and reduced profits from operations
in the fourth quarter of each calendar year. See Item 7. -- "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Quarterly Financial Data" in this report.

COMPETITION FROM OTHER VINYL BUILDING PRODUCT MANUFACTURERS AND ALTERNATIVE
BUILDING PRODUCT MATERIALS. With the exception of Owens Corning, no other
company within the vinyl residential siding market competes with Alside in both
manufacturing and distribution. However, Alside does compete with other
manufacturers of vinyl building products. Some of these companies are larger and
have greater financial resources than the Company. The Company also competes
with Owens Corning and numerous large and small distributors of building
products in its capacity as a distributor of these products. Additionally, the
Company's products face competition from alternative materials: wood and
aluminum in the window market, and wood, masonry and metal in the siding market.
There can be no assurance the Company will not be adversely impacted by its
competitors or alternative materials. See Item 1. -- "Business -- Alside --
Competition" in this report.

COSTS OF ENVIRONMENTAL COMPLIANCE. The Company's operations are subject to
various environmental statutes and regulations, including laws and regulations
addressing materials used in the manufacturing of the Company's products. In
addition, certain of the Company's operations are subject to federal, state and
local environmental laws and regulations that impose limitations on the
discharge of pollutants into the air and water and establish standards for the
treatment, storage and disposal of solid and hazardous wastes. Future
expenditures may be necessary as compliance standards and technology change.
Unforeseen significant expenditures required to maintain compliance, including
unforeseen liabilities, could have an adverse effect on the Company's business
and financial condition. See Item 1. -- "Business -- Government Regulation and
Environmental Matters" in this report.

ITEM 7a. DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

The Company had $6.6 million in short-term investments at December 31,
1999. The short-term investments are highly liquid with original maturities of
less than three months and are subject to interest-rate risk. The value of these
investments would decline in the event of increases in market interest rates.
The Company generally holds these investments until maturity thus avoiding the
losses resulting from sudden changes in interest rates. Declines in interest
rates would reduce the amount of the Company's interest income.

The Company borrows under its revolving credit facility from time to time
for general corporate purposes, including working capital requirements and
capital expenditures. Borrowings under the revolving credit facility bear
interest at either the prime commercial rate or LIBOR plus 1.25% at the option
of the Company. Therefore, the Company is also subject to fluctuations in
interest rates as a result of the terms of this credit facility. At December 31,
1999, the Company had no borrowings under its revolving credit facility.

The Company has $75.0 million of Senior Subordinated Notes due 2008 that
bear a fixed interest rate of 9 1/4%. The fair value of the Company's 9 1/4%
Notes is sensitive to changes in interest rates.

The Company has periodically entered into interest rate swap agreements in
order to manage its exposure to interest rate changes. At December 31, 1999, the
Company had no interest rate swaps.

FOREIGN CURRENCY EXCHANGE RATE RISK

The Company's revenues are primarily from domestic customers and are
realized in U.S. dollars. Accordingly, the Company believes its direct foreign
currency exchange rate risk is not material. In the past, the Company has hedged
against foreign currency exchange rate fluctuations on specific sales or
equipment purchasing contracts. At December 31, 1999 the Company had no currency
hedges in place.

16
<PAGE> 18

COMMODITY PRICE RISK

Copper is one of the primary raw materials used by its AmerCable division.
The Company from time to time uses forward contracts as a hedge against changes
in copper prices for specific contracts. At December 31, 1999, no raw material
forward contracts were in place. See Item 7 -- "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Certain
Forward-Looking Statements -- Changing Raw Material Costs and Availability" in
this report.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ASSOCIATED MATERIALS INCORPORATED
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors..................................................................... 18
Balance Sheets as of December 31, 1999 and 1998.................................................... 19
Statements of Operations for the years ended December 31, 1999, 1998 and 1997...................... 20
Statements of Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997............ 21
Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997...................... 22
Notes to Financial Statements...................................................................... 23
</TABLE>

17
<PAGE> 19

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Associated Materials Incorporated

We have audited the accompanying balance sheets of Associated Materials
Incorporated as of December 31, 1999 and 1998 and the related statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards 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. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Associated Materials
Incorporated at December 31, 1999 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States.

ERNST & YOUNG LLP

Dallas, Texas
February 4, 2000

18
<PAGE> 20

ASSOCIATED MATERIALS INCORPORATED
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................... $ 3,432 $ 14,964
Accounts receivable, net of allowance for doubtful accounts of $4,864
and $4,159 at December 31, 1999 and 1998, respectively.................... 52,583 45,756
Inventories.................................................................. 69,651 56,245
Income taxes receivable...................................................... 226 -
Other current assets......................................................... 3,872 3,572
---------- ----------
Total current assets............................................................. 129,764 120,537
Property, plant and equipment, net............................................... 71,682 61,130
Investment in Amercord Inc....................................................... 2,393 4,961
Other assets..................................................................... 2,457 2,691
---------- ----------
Total assets..................................................................... $ 206,296 $ 189,319
========== ==========
</TABLE>

LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current liabilities:
Accounts payable............................................................. $ 16,933 $ 11,713
Accrued liabilities.......................................................... 26,953 25,417
Income taxes payable......................................................... - 582
Current portion of long-term debt............................................ - 3,600
---------- ----------
Total current liabilities........................................................ 43,886 41,312
Deferred income taxes............................................................ 2,236 2,616
Other liabilities................................................................ 5,848 6,013
Long-term debt................................................................... 75,000 75,000
Commitments and Contingencies
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 100,000 shares at December 31, 1999 and 1998
Issued shares - 0 at December 31, 1999 and 1998.......................... - -
Common stock, $.0025 par value:
Authorized shares - 15,000,000 at December 31, 1999 and 1998 Issued
shares - 7,024,666 at December 31, 1999 and 6,938,747 at
December 31, 1998..................................................... 17 17
Common stock Class B, $.0025 par value:
Authorized and issued shares - 1,550,000 at December 31, 1999 and
December 31, 1998..................................................... 4 4
Less: Treasury stock, at cost - 555,396 shares at December 31, 1999 and
88,396 at December 31, 1998.............................................. (6,626) (1,048)
Capital in excess of par..................................................... 13,154 12,273
Retained earnings............................................................ 72,777 53,132
---------- ----------
Total stockholders' equity....................................................... 79,326 64,378
---------- ----------
Total liabilities and stockholders' equity....................................... $ 206,296 $ 189,319
========== ==========
</TABLE>

See accompanying notes.

19
<PAGE> 21

ASSOCIATED MATERIALS INCORPORATED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net sales .................................................... $ 452,586 $ 407,933 $ 397,690
Cost of sales................................................. 314,914 283,644 283,514
---------- ---------- ----------
137,672 124,289 114,176
Selling, general and administrative........................... 96,028 88,727 81,142
Other income, net............................................. - 2,673 -
---------- ---------- ----------
Income from operations........................................ 41,644 38,235 33,034
Interest expense.............................................. 6,779 7,565 9,795
---------- ---------- ----------
34,865 30,670 23,239
Equity in loss of Amercord Inc................................ 1,337 1,881 626
Writedown of investment in Amercord Inc....................... - 4,351 -
---------- ---------- ----------
Income before income tax and extraordinary item............... 33,528 24,438 22,613
Income tax expense............................................ 13,038 11,382 9,524
---------- ---------- ----------
Income before extraordinary item.............................. 20,490 13,056 13,089

Extraordinary loss from retirement of debt, net of
income taxes.............................................. - 4,107 -
---------- ---------- ----------
Net income .................................................. $ 20,490 $ 8,949 $ 13,089
========== ========== ==========

Earnings Per Common Share - Basic:

Income before extraordinary item.............................. $ 2.52 $ 1.58 $ 1.72

Extraordinary loss from retirement of debt.................... - (0.50) -
---------- ---------- ----------
Net income .................................................. $ 2.52 $ 1.08 $ 1.72
========== ========== ==========

Earnings Per Common Share - Assuming Dilution:

Income before extraordinary item.............................. $ 2.46 $ 1.55 $ 1.69

Extraordinary loss from retirement of debt.................... - (0.49) -
---------- ---------- ----------
Net income .................................................. $ 2.46 $ 1.06 $ 1.69
========== ========== ==========
</TABLE>
See accompanying notes.

20
<PAGE> 22

ASSOCIATED MATERIALS INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
CLASS B CAPITAL IN TOTAL
COMMON STOCK COMMON STOCK TREASURY STOCK EXCESS RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT OF PAR EARNINGS EQUITY
------ ------ ------ ------ ------ ------- ------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996.... 4,894 $ 12 2,700 $ 7 - $ - $ 185 $32,042 $32,246
Net income and total
comprehensive income....... - - - - - - - 13,089 13,089
Cash dividends ($0.05 per
share)..................... - - - - - - - (379) (379)
Exercise of Common Stock
options and related tax
benefits................... 41 - - - - - 320 - 320
Purchase of treasury shares... - - - - 41 (542) - - (542)
----- ---- ----- ---- --- ------- ------- ------- -------
Balance at December 31, 1997.... 4,935 12 2,700 7 41 (542) 505 44,752 44,734
Net income and total
comprehensive income....... - - - - - - - 8,949 8,949
Cash dividends ($0.075 per
share)..................... - - - - - - - (569) (569)
Exercise of Common Stock
options and related tax
benefits................... 10 - - - - - 60 - 60
Purchase of treasury shares... - - - - 47 (506) (506)
Common Stock issued........... 809 2 - - - - 11,483 - 11,485
Common Stock issued under
Employee Stock Purchase
Plan....................... 35 - - - - - 225 - 225
Conversion of Class B Common
Stock to Common Stock...... 1,150 3 (1,150) (3) - - - - -
----- ---- ----- ---- --- ------- ------- ------- -------
Balance at December 31, 1998.... 6,939 17 1,550 4 88 (1,048) 12,273 53,132 64,378
Net income and total
comprehensive income....... - - - - - - - 20,490 20,490
Cash dividends ($0.10 per
share)..................... - - - - - - - (845) (845)
Exercise of Common Stock
options and related tax
benefits................... 5 - - - - - 30 - 30
Purchase of treasury shares... - - - - 467 (5,578) (5,578)
Common Stock issued under
Employee Stock Purchase
Plan....................... 81 - - - - - 851 - 851
----- ---- ----- ---- --- ------- ------- ------- -------
Balance at December 31, 1999.... 7,025 $ 17 1,550 $ 4 555 $(6,626) $13,154 $72,777 $79,326
===== ==== ===== ==== ==== ======== ======= ======= =======
</TABLE>
See accompanying notes.

21
<PAGE> 23

ASSOCIATED MATERIALS INCORPORATED
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................................ $ 20,490 $ 8,949 $ 13,089
Adjustments to reconcile net income to net cash used by operating
activities:
Depreciation and amortization...................................... 8,519 7,217 6,521
Deferred income taxes.............................................. (380) 665 67
Provision for losses on accounts receivable........................ 2,323 3,500 3,500
Equity in loss of Amercord Inc..................................... 1,337 1,881 626
Writedown of investment in Amercord Inc............................ - 4,351 -
Loss (gain) on sale of assets...................................... 51 30 (348)
Extraordinary loss on retirement of debt, net of income taxes...... - 4,107 -
Other income, net.................................................. - (2,673) -
Changes in operating assets and liabilities:
Accounts receivable............................................. (9,150) (59) (5,489)
Inventories..................................................... (13,406) 376 1,736
Other current assets............................................ (300) (281) (266)
Bank overdrafts................................................. - (4,769) (84)
Accounts payable................................................ 5,220 (3,370) (2,031)
Accrued liabilities............................................. 1,536 3,415 4,988
Income taxes receivable/payable................................. (808) 3,726 480
Other assets.................................................... (38) 66 96
Other liabilities............................................... (165) (363) (389)
--------- --------- ---------
Net cash provided by operating activities............................. 15,229 26,768 22,496

INVESTING ACTIVITIES
Additions to property, plant and equipment............................ (18,915) (14,261) (8,758)
Proceeds from sale of assets.......................................... 65 49 817
Proceeds from sale of Amercord interest............................... 1,231 - -
Investment in Amercord Inc............................................ - (500) -
--------- --------- ---------
Net cash used in investing activities................................. (17,619) (14,712) (7,941)

FINANCING ACTIVITIES
Proceeds from issuance of long-term debt.............................. - 75,000 -
Net proceeds from issuance of common stock............................ 851 11,710 -
Net decrease in revolving line of credit.............................. - (564) (12,494)
Principal payments of long-term debt.................................. (3,600) (1,750) (1,750)
Principal payments of 11 1/2% Senior Subordinated Notes............... - (75,000) -
Prepayment premium on early retirement of debt........................ - (4,899) -
Debt issuance costs................................................... - (2,509) -
Dividends paid........................................................ (845) (569) (379)
Treasury stock acquired............................................... (5,578) (506) (542)
Options exercised..................................................... 30 60 161
--------- --------- ---------
Net cash provided by (used in) financing activities................... (9,142) 973 (15,004)
--------- --------- ---------
Net increase (decrease) in cash....................................... (11,532) 13,029 (449)
Cash at beginning of period........................................... 14,964 1,935 2,384
--------- --------- ---------
Cash at end of period................................................. $ 3,432 $ 14,964 $ 1,935
========= ========= =========
Supplemental Information:
Cash paid for interest............................................ $ 7,108 $ 8,924 $ 10,110
========= ========= =========
Cash paid for income taxes........................................ $ 14,313 $ 8,259 $ 9,098
========= ========= =========
</TABLE>
See accompanying notes.

22
<PAGE> 24

ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

Line of Business

Associated Materials Incorporated (the "Company") consists of two operating
divisions, Alside and AmerCable. Alside is engaged principally in the
manufacture and distribution of exterior residential building products to
professional contractors throughout the United States. AmerCable manufactures
jacketed electrical cable utilized in a variety of industrial applications. The
Company also owns an interest in Amercord Inc. ("Amercord"), which was accounted
for using the equity method until November 1999 when Amercord was recapitalized,
reducing the Company's interest in Amercord from 50% to 9.9%. Since the
recapitalization, the Company has accounted for Amercord under the cost method.
Amercord manufactures and sells steel tire cord and tire bead wire used in the
tire manufacturing industry.

Accounting Changes

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" which is
effective for fiscal years beginning after June 15, 1999. The Statement
establishes accounting and reporting standards for derivative instruments and
requires that a company recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. In June 1999, the Financial Accounting Standards Board issued
SFAS No. 137, "Deferral of the Effective Date of FASB Statement 133" which
defers the implementation of Statement 133 for one year. The Company believes
these statements will not have a material effect on the Company's financial
position, results of operations or cash flows.

Revenue Recognition

Product sales are recognized at the time of shipment and when payment is
reasonably certain.

Inventories

Inventories are valued at the lower of cost (first-in, first-out) or
market.

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost. Depreciation is provided
by the straight-line method over the estimated useful lives of the assets which
range from 3 to 30 years.

Income Tax

Income taxes have been provided using the liability method in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

Derivatives

From time to time the Company hedges its position with respect to raw
material or currency fluctuations on specific contracts by entering into forward
contracts or purchase options, the cost of which are realized upon the
completion of the contract. No such contracts were in place at December 31,
1999.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions regarding the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

23
<PAGE> 25

ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Advertising

The Company expenses advertising costs as incurred. Advertising expense was
$8.5 million, $8.7 million and $8.0 million in 1999, 1998 and 1997,
respectively.

Reclassifications

Certain prior period amounts have been reclassified to conform with the
current period presentation.

2. INVESTMENT IN AMERCORD

The Company owns an interest in Amercord, a manufacturer of steel tire cord
and tire bead wire used in the tire manufacturing industry. The Company recorded
equity in the losses of Amercord of $1.3 million, $1.9 million and $0.6 million
in 1999, 1998 and 1997, respectively.

During 1998, the Company announced its intention to sell its 50% interest
in Amercord. The Company recorded a pretax write-down of $4,351,000 ($0.38 per
share after tax) on its investment in Amercord in anticipation of a loss on the
sale of Amercord.

During the fourth quarter of 1999, Amercord was recapitalized, reducing the
Company's interest in Amercord from 50% to 9.9%. As a result of the
recapitalization, the Company received cash of $1.2 million (net of related
expenses) and a subordinated note for $1.5 million due November 2004. In
addition, the Company has the right to require Amercord to purchase the
Company's remaining 9.9% interest for $2.0 million in November 2003. The Company
currently accounts for Amercord using the cost method of accounting. Prior to
Amercord's recapitalization, the Company accounted for Amercord using the equity
method of accounting.

The Company has guaranteed a $3.0 million note secured by Amercord's real
property. Should the guarantee be exercised by Amercord's lender, the Company
and Ivaco Inc. ("Ivaco") have the option to assume the loan. Ivaco has
indemnified the Company for 50% of any loss under the guarantee.

The fair value of the $1.5 million note and the 9.9% equity ownership
(taking into consideration the $2.0 million put option) at December 31, 1999 was
$1.2 million and $1.1 million, respectively. These amounts are included in
Investment in Amercord Inc. in the accompanying balance sheets.

3. ALLOWANCE FOR DOUBTFUL ACCOUNTS

Changes in the allowance for doubtful accounts on accounts receivable for
the years ended December 31 consist of (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of period.................................. $ 4,159 $ 4,423 $ 3,749
Provision for losses.......................................... 2,323 3,500 3,500
Losses sustained (net of recoveries).......................... 1,618 3,764 2,826
-------- -------- --------
Balance at end of period........................................ $ 4,864 $ 4,159 $ 4,423
======== ======== ========
</TABLE>

4. INVENTORIES

Inventories at December 31 consist of (in thousands):
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Raw materials............................................................... $ 20,043 $ 16,422
Work-in-progress............................................................ 5,937 4,728
Finished goods and purchased stock.......................................... 43,671 35,095
--------- ---------
$ 69,651 $ 56,245
========= =========
</TABLE>

24
<PAGE> 26

ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31 consist of (in thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Land....................................................................... $ 1,939 $ 1,369
Buildings.................................................................. 30,472 24,221
Construction in process.................................................... 3,281 5,210
Machinery and equipment.................................................... 98,106 84,474
--------- ---------
133,798 115,274
Less accumulated depreciation.............................................. 62,116 54,144
--------- ---------
$ 71,682 $ 61,130
========= =========
</TABLE>

6. ACCRUED LIABILITIES AND OTHER LIABILITIES

Accrued liabilities at December 31 consist of (in thousands):
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Employee compensation...................................................... $ 11,419 $ 10,258
Sales promotions and incentives............................................ 4,635 4,293
Employee benefits.......................................................... 4,054 4,191
Interest................................................................... 2,326 2,326
Other...................................................................... 4,519 4,349
--------- ---------
$ 26,953 $ 25,417
========= =========
</TABLE>

Other liabilities of $5,848,000 at December 31, 1999 consist primarily of
accruals for retiree medical benefits related to the 1989 closure of the
Company's metal plant. In 1998, the Company accrued an additional $3,278,000 for
retiree medical benefits based upon an actuarial study taking into account
unfavorable claims experience.

7. REVOLVING CREDIT ARRANGEMENTS

In May 1999, the Company amended its $50 million credit agreement with
KeyBank, N.A. ("Credit Agreement") to extend the term to May 31, 2002. Available
borrowings under the Credit Agreement are limited to the lesser of the total
facility less unused letters of credit or availability based on percentages of
eligible accounts receivable and inventories. Unused letters of credit totaled
$1,645,000 at December 31, 1999, primarily related to insurance. The Company's
available borrowing capacity at December 31, 1999 was approximately $48,355,000.
The Credit Agreement includes covenants that require the maintenance of certain
financial ratios and net worth and that place restrictions on the repurchase of
common stock and the payment of dividends. Outstanding borrowings under the
Credit Agreement are secured by substantially all of the assets of the Company
other than the Company's real property, equipment and its interest in Amercord.

Interest is payable on borrowings under the revolving credit facility at
either the prime commercial rate (8.50% at December 31, 1999) or LIBOR plus
1.25% at the option of the Company and on the unused credit facility at a rate
of .25%. Letter of credit fees of 1.25% are paid at origination.

The weighted average interest rate for borrowings under the revolving
credit facility was 7.75% and 8.15% for December 31, 1999 and 1998,
respectively.

25
<PAGE> 27

ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. LONG-TERM DEBT

Long-term debt at December 31 consists of (in thousands):

1999 1998
--------- ---------
<S> <C> <C>
Taxable Variable Rate Demand Notes......................................... $ - $ 3,600
9 1/4% Senior Subordinated Notes due 2008.................................. 75,000 75,000
--------- ---------
75,000 78,600
Less amounts due in one year............................................... - 3,600
--------- ---------
$ 75,000 $ 75,000
========= =========
</TABLE>

In March 1998, the Company purchased $72,900,000 of its outstanding 11 1/2%
Senior Subordinated Notes due August 15, 2003 ("11 1/2% Notes") through a tender
offer and consent solicitation. As a result of this transaction, the Company
incurred an extraordinary charge of $4,054,000, net of income taxes of
$2,841,000, resulting from the premium paid in connection with the purchase of
the 11 1/2% Notes and the write-off of debt issuance costs associated with the
11 1/2% Notes.

Simultaneously with the consummation of the tender offer, the Company
issued $75,000,000 of 9 1/4% Senior Subordinated Notes due March 1, 2008 (the
"9 1/4% Notes") with interest payable semi-annually on March 1 and September 1
commencing September 1, 1998. The 9 1/4% Notes are senior subordinated unsecured
obligations of the Company and are subordinated in right of payment to all
existing and future "Senior Indebtedness" of the Company (as that term is
defined in the indenture pursuant to which the 9 1/4% Notes were issued (the
"9 1/4% Note Indenture")).

The 9 1/4% Notes are redeemable at the Company's option, in whole or in
part, at any time on or after March 1, 2003, at redemption prices ranging from
104.625% commencing on March 1, 2003 and reducing to 100% on March 1, 2006 and
thereafter. The 9 1/4% Note Indenture includes certain covenants that limit the
Company's ability to incur additional indebtedness, pay dividends and make other
restrictive payments, consummate certain transactions and other matters similar
to those which existed under the indenture pursuant to which the 11 1/2% Notes
were issued (the "11 1/2% Note Indenture").

On August 17, 1998, the Company redeemed the $2,100,000 principal amount of
11 1/2% Notes that remained outstanding after the tender offer. As a result of
this transaction, the Company incurred an extraordinary charge of approximately
$53,000, net of income taxes of $37,000, resulting from the premium paid in
connection with the redemption.

The fair value of the 9 1/4% Notes at December 31, 1999 was $74,190,000
based upon quoted market price.

9. COMMITMENTS

Commitments for future minimum lease payments under noncancelable operating
leases, principally for manufacturing and distribution facilities and certain
equipment, are approximately $10,235,000, $7,736,000, $6,454,000, $4,745,000,
$3,134,000 and $3,432,000 for the years ending December 31, 2000, 2001, 2002,
2003, 2004 and thereafter, respectively. Lease expense was approximately
$13,141,000, $12,171,000 and $10,901,000 for the years ended December 31, 1999,
1998 and 1997, respectively.

10. INCOME TAXES

Income tax expense for the years ended December 31 consists of (in
thousands):

<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ---------------------- ---------------------
Current Deferred Current Deferred Current Deferred
--------- ---------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes.......... $ 11,776 $ (364) $ 6,366 $ 542 $ 7,816 $ 55
State income taxes............ 1,642 (16) 1,473 123 1,641 12
--------- ---------- --------- --------- --------- --------
$ 13,418 $ (380) $ 7,839 $ 665 $ 9,457 $ 67
========= ========== ========= ========= ========= ========
</TABLE>

26
<PAGE> 28

ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred income taxes as of December 31 are as follows (in
thousands):

<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Deferred tax assets:
Medical benefits........................................................ $ 2,252 $ 2,722
Bad debt expense........................................................ 1,052 474
Pension expense......................................................... 305 869
Inventory costs......................................................... 833 671
Capital loss on Amercord Inc. .......................................... 3,564 -
Other................................................................... 782 1,455
--------- ---------
Total deferred tax assets.................................................. 8,788 6,191
Deferred tax liabilities:
Depreciation............................................................ 10,507 8,627
Other................................................................... 517 180
--------- ---------
Total deferred tax liabilities............................................. 11,024 8,807
--------- ---------
Net deferred tax liabilities............................................... $ (2,236) $ (2,616)
========= =========
</TABLE>

The reconciliation of the statutory rate to the Company's effective income
tax rate for the years ended December 31 follows:

<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Statutory rate............................................... 35.0% 35.0% 35.0%
State income tax, net of federal income tax benefit.......... 3.2 5.5 4.6
Equity in loss of Amercord................................... - 6.0 .8
Other........................................................ 0.7 1.2 1.7
------ ------ ------
Effective rate............................................... 38.9% 47.7% 42.1%
====== ====== ======
</TABLE>

11. STOCKHOLDERS' EQUITY

In March 1998, the Company completed an initial public offering ("IPO") of
2,448,120 shares of common stock at an offering price to the public of $16.00
per share. In the IPO, 808,520 shares were sold by the Company and 1,639,600
shares were sold by certain of the Company's stockholders. The offering resulted
in an increase in stockholders' equity of $11,485,000.

In connection with the IPO, 1,150,000 shares of Class B common stock were
converted into 1,150,000 shares of common stock. The Class B common stock is
convertible on a one-for-one basis into common stock at any time subject to
legal restrictions, if any, applicable to the holder of these shares. The Class
B common stock has the same rights and privileges extended to the common stock
except that the holder of Class B common stock may vote only on matters
pertaining to changes in the Certificate of Incorporation; the sale, lease, or
disposition of certain assets; mergers or consolidations; or the liquidation or
dissolution of the Company.

In October 1998 the Company's Board of Directors approved a stock
repurchase program. Under this program, the Company has been authorized to
purchase up to 800,000 shares of common stock in open market transactions
depending on market, economic and other factors. During 1999 and 1998, the
Company repurchased 467,000 and 47,000 shares of its common stock under the
stock repurchase program at a cost of $5,578,000 and $506,000.

12. EARNINGS PER SHARE

Earnings per share for 1997 was calculated in accordance with the
Securities and Exchange Commission ("Commission") Staff Accounting Bulletin,
Topic 4D in anticipation of the Company's initial public offering in the first
quarter of 1998. Topic 4D requires shares of common stock issued during the
12-month period prior to the initial public offering at prices below the public
offering price be included in the calculation of diluted earnings per share as
if they were outstanding for all periods presented.

27
<PAGE> 29

ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Numerator:
Numerator for basic and diluted earnings per common share--
income before extraordinary item...................... $ 20,490 $ 13,056 $ 13,089
Denominator:
Denominator for basic earnings per common share--
weighted-average shares............................... 8,126 8,260 7,594
Effect of dilutive securities:
Employee stock options................................ 218 143 162
--------- --------- ---------
Denominator for diluted earnings per common share--
adjusted weighted-average shares...................... 8,344 8,403 7,756
========= ========= =========
Basic earnings per common share before extraordinary item......... $ 2.52 $ 1.58 $ 1.72
========= ========= =========
Diluted earnings per common share before extraordinary item....... $ 2.46 $ 1.55 $ 1.69
========= ========= =========
</TABLE>

Options to purchase 40,000 and 70,000 shares of common stock with a
weighted average exercise price of $16.00 and $13.14 per share were outstanding
for the years ended December 31, 1999 and December 31, 1998, respectively, but
were excluded from the diluted earnings per share calculation because the option
exercise price was greater than the average market price of the common stock
during the period.

13. STOCK PLANS

The Company has a stock option plan, whereby it grants stock options to
certain directors, officers and key employees. The Company has authorized
800,000 shares of common stock to be issued under the plan. No options were
granted under the plan in 1999. The options granted in 1997 and 1998 were
granted at fair market value on the grant date and are exercisable for ten
years. Options vest by either of the following methods: one-half vests upon the
grant date with the remainder vesting after two years or twenty-percent vests
upon the grant date with an additional twenty percent vesting each year
commencing on the first anniversary of the grant date. All outstanding options
granted under the stock option plan are non-statutory stock options.

Transactions during 1997, 1998 and 1999 under this plan are summarized
below:

<TABLE>
<CAPTION>
SHARES PRICE
-------- ----------------
<S> <C> <C>
Options outstanding at December 31, 1996......................... 212,300 $2.925 to $5.00
Exercised........................................................ (40,500) $2.925 to $5.00
Granted ......................................................... 140,000 $12.00 to $16.00
Expired or canceled.............................................. (4,500) $5.00
------- ----------------
Options outstanding at December 31, 1997......................... 307,300 $2.925 to $16.00
Exercised........................................................ (10,000) $2.925
Granted ........................................................ 275,000 $9.00
------- ----------------
Options outstanding at December 31, 1998......................... 572,300 $2.925 to $16.00
Exercised........................................................ (5,000) $2.925
------- ----------------
Options outstanding at December 31, 1999......................... 567,300 $2.925 to $16.00
</TABLE>

Options to purchase 407,800, 298,800 and 233,550 shares were exercisable at
December 31, 1999, 1998 and 1997, respectively. The weighted average exercise
price of options outstanding was $8.50, $8.45 and $7.79 at December 31, 1999,
1998 and 1997, respectively.

28
<PAGE> 30

ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes significant ranges of outstanding and
exercisable options at December 31, 1999:

OPTIONS OUTSTANDING
---------------------------------------------------------
WEIGHTED AVERAGE OPTIONS EXERCISABLE
REMAINING ----------------------------
SHARES LIFE IN YEARS EXERCISE PRICE SHARES EXERCISE PRICE
----------- ------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
121,800 3.67 $ 2.925 121,800 $ 2.925
30,500 5.41 $ 5.000 30,500 $ 5.000
275,000 8.66 $ 9.000 115,500 $ 9.000
100,000 7.17 $ 12.000 100,000 $ 12.000
40,000 7.42 $ 16.000 40,000 $ 16.000

</TABLE>

The Company adopted the disclosure provisions of SFAS No. 123 in 1996 but
continues to measure stock-based compensation in accordance with APB No. 25. Pro
forma information regarding net income and earnings per share is required by
SFAS No. 123, and has been determined as if the Company had accounted for its
stock options under the fair value method of that statement. The weighted
average fair value at date of grant for options granted during 1998 and 1997 was
$7.53 and $6.09 per option, respectively. In 1997 the fair value of the options
was estimated at the date of the grant using the minimum value method option
pricing model assuming dividend yields of 1.0%, a weighted-average expected life
of an option of 10 years and a risk-free interest rate of 7.03%. In 1998 the
fair value of the options was estimated at the date of the grant using the Black
Scholes option pricing model with the following weighted-average assumptions for
1998: risk free interest rate of 5.45%, dividend yield of 1.0%, volatility
factor of the expected market price of the stock of 1.00, and a weighted-average
expected life of the option of 10 years.

Stock based compensation costs would have reduced net income by $475,000,
$669,000 and $389,000 or $0.06, $0.08 and $0.05 per basic and diluted share in
1999, 1998 and 1997, respectively, if the fair values of the options granted in
that year had been recognized as compensation expense on a straight-line basis
over the vesting period of the grant. The pro forma effect on net income for
1999, 1998 and 1997 may not be representative of the pro forma effect on net
income in future years.

Effective October 1, 1998 the Company established an Employee Stock
Purchase Plan ("ESPP"). The ESPP allows employees to purchase the Company's
common stock at 85% of the lower of the fair market value on the first day of
the option period or the last day of the option period. The Company registered
250,000 shares of common stock for issuance under the ESPP. During 1999 and
1998, employees purchased 80,919 and 35,327 shares under the ESPP at average
prices of $10.52 and $6.378 per share.

14. BUSINESS SEGMENTS

The Company has two reportable segments: building products and electrical
cable products. The principal business activities of the building products
segment are the manufacture of vinyl siding, vinyl windows and cabinets, and the
wholesale distribution of these and other complementary building products
principally to professional home remodeling and new construction contractors.
The principal business activity of the electrical cable segment is the
manufacture and sale of jacketed electrical cable.

The Company evaluates performance and allocates resources based on
operating profit, which is net sales less operating expenses.

29
<PAGE> 31

ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Comparative financial data by reportable segment for the years ended
December 31 are as follows (in thousands):

1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net sales:
Building products................................. $ 408,428 $ 355,997 $ 344,000
Electrical cable products......................... 44,158 51,936 53,690
---------- ---------- ----------
$ 452,586 $ 407,933 $ 397,690
========== ========== ==========
Operating profits (losses):
Building products................................. $ 42,408 $ 35,188 $ 30,415
Electrical cable products......................... 2,875 5,774 5,086
Corporate expense................................. (3,639) (2,727) (2,467)
---------- ---------- ----------
$ 41,644 $ 38,235 $ 33,034
========== ========== ==========
Identifiable assets:
Building products................................. $ 167,024 $ 139,279 $ 139,751
Electrical cable products......................... 26,673 21,213 20,349
Corporate......................................... 12,599 28,827 18,404
---------- ---------- ----------
$ 206,296 $ 189,319 $ 178,504
========== ========== ==========
Depreciation and amortization:
Building products................................. $ 6,900 $ 5,719 $ 5,029
Electrical cable products......................... 1,347 1,181 1,096
Corporate......................................... 272 317 396
---------- ---------- ----------
$ 8,519 $ 7,217 $ 6,521
========== ========== ==========
Net additions to property, plant and equipment:
Building products................................. $ 16,018 $ 12,658 $ 8,108
Electrical cable products......................... 2,897 1,596 635
Corporate......................................... - 7 15
---------- ---------- ----------
$ 18,915 $ 14,261 $ 8,758
========== ========== ==========
</TABLE>

Identifiable assets by segment are those used in the Company's operations
in each segment. Corporate assets are principally the Company's cash and cash
equivalents and its investment in Amercord. The Company operates principally in
the United States. Neither aggregate export sales nor sales to a single customer
have accounted for 10% or more of consolidated net sales in any of the years
presented.

15. RETIREMENT PLANS

The Company sponsors a defined benefit pension plan, The Premium Building
Products Company Hourly Employees Pension Plan ("Premium Plan"), which covers
approximately 250 participants. The Company froze the Alside defined benefit
retirement plan ("Alside Plan") effective December 31, 1998 and replaced it with
a defined contribution plan effective January 1, 1999. As a result of the plan
freeze, the Company recorded a $5,951,000 curtailment gain in 1998. Accrued
pension liabilities are included in accrued liabilities in the accompanying
balance sheets.

30
<PAGE> 32

ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Information regarding the Company's defined benefit plans is as follows:

<TABLE>
<CAPTION>
1999 1998
----------------------------- ----------------------------
ALSIDE PREMIUM ALSIDE PREMIUM
PLAN PLAN PLAN PLAN
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION
Projected benefit obligation at beginning of
year......................................... $25,818,400 $ 988,298 $29,332,966 $ 915,091
Service cost.................................... 0 38,144 1,477,380 37,718
Interest cost................................... 1,845,841 68,168 2,033,577 62,459
Plan amendments................................. - - - -
Curtailment..................................... - - (6,810,534) -
Actuarial (gain) loss........................... (360,718) (91,910) 744,449 (16,665)
Benefits paid................................... (980,536) (12,545) (959,438) (10,305)
----------- ----------- ----------- -----------
Projected benefit obligation at end of year..... $26,322,987 $ 990,155 $25,818,400 $ 988,298
=========== =========== =========== ===========
CHANGE IN PLAN ASSETS
Fair value of assets at beginning of year....... $30,406,944 $ 807,158 $26,680,890 $ 681,713
Actual return on plan assets.................... 4,919,956 119,427 4,685,492 108,050
Employer contributions.......................... - 4,100 - 27,700
Benefits paid................................... (980,536) (12,545) (959,438) (10,305)
----------- ----------- ----------- -----------
Fair value of assets at end of year............. 34,346,364 918,140 30,406,944 807,158

Funded status................................... 8,023,377 (72,015) 4,588,544 (181,140)
Unrecognized:
Transition (asset) obligation............... - 28,402 - 35,503
Prior service costs......................... - 50,367 - 56,609
Cumulative net (gain) loss.................. (8,638,631) (226,527) (6,212,198) (87,484)
----------- ----------- ----------- -----------
Accrued pension cost............................ $ (615,254) $ (219,773) $(1,623,654) $ (176,512)
=========== =========== =========== ===========
KEY ASSUMPTIONS AS OF DECEMBER 31
Discount rate................................... 7.50% 7.50% 7.00% 7.00%
Long-term rate of return on assets.............. 9.00% 9.00% 9.00% 9.00%
Salary increases................................ N/A N/A N/A N/A

NET PERIODIC PENSION COST
Service cost.................................... $ - $ 38,144 $ 1,477,380 $ 37,718
Interest cost................................... 1,845,841 68,168 2,033,577 62,459
Expected return on assets....................... (2,688,695) (72,294) (2,356,027) (62,323)
Amortization of unrecognized:...................
Transition (asset) obligation............... - 7,101 215,539 7,101
Prior service costs......................... - 6,242 25,520 6,242
Cumulative net (gain) loss.................. (165,546) - (128,180) -
----------- ----------- ----------- -----------
Net periodic pension cost....................... $(1,008,400) $ 47,361 $ 1,267,809 $ 51,197
=========== =========== =========== ===========
</TABLE>

The Company sponsors two defined contribution plans (the "401(k) Plans")
intended to provide assistance in accumulating personal savings for retirement.
The 401(k) Plans are qualified as a tax-exempt plan under Sections 401(a) and
401(k) of the Internal Revenue Code. The Alside 401(k) Plan covers all
full-time, non-union employees of Alside and matches up to 4.0% of eligible
compensation. For the year ended December 31, 1999 the Company's pre-tax
contribution to the Alside 401(k) Plan was $2,100,000. The AmerCable 401(k) Plan
covers all full-time employees of AmerCable and

31
<PAGE> 33

matches up to 3.5% of eligible compensation. For the years ended December 31,
1999, 1998 and 1997 the Company's pre-tax contributions to the AmerCable 401(k)
Plan were $215,000, $201,000 and $175,000, respectively.

16. CONTINGENCIES

The Company entered into a consent order dated August 25, 1992 with the
United States Environmental Protection Agency pertaining to corrective action
requirements associated with the use of hazardous waste storage facilities at
its Akron, Ohio location. With the exception of a small container storage area,
the use of these facilities was terminated prior to the acquisition of the
facilities by the Company from USX Corporation (USX) in 1984. The Company
believes that USX bears financial responsibility for substantially all of the
direct costs of corrective action at these facilities under relevant contract
terms and under statutory and common law. The effects of the past practices of
these facilities are continuing to be investigated pursuant to the terms of the
consent order and as a result the Company is unable to reasonably estimate a
reliable range of the aggregate cost of corrective action at this time. To date,
USX has reimbursed the Company for substantially all of the direct costs of
corrective action at these facilities. The Company expects that USX will
continue to reimburse the Company for substantially all of the direct costs of
corrective action at these facilities. As a result, the Company believes that
any material claims resulting from this proceeding will not have a material
adverse effect on the Company.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

32
<PAGE> 34

ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item with respect to the Company's
directors is set forth under the caption "Election of Directors" in the
Company's Proxy Statement for the 1999 Annual Meeting of Stockholders to be held
on May 25, 2000 ("Proxy Statement"), to be filed with the Commission pursuant to
Regulation 14A, which is incorporated herein by reference.

The information required by this item regarding executive officers is set
forth in Item 1 of Part 1 of this report, and incorporated herein by reference.

Information required by this item regarding compliance with Section 16 of
the Securities Exchange Act of 1934, as amended, by persons subject to this
section is set forth under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance," in the Proxy Statement to be filed pursuant to Regulation
14A, which information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is set forth under the captions
"Director Compensation," "Executive Officer Compensation," "Option/SAR Grants in
1999," and "Aggregated Option/SAR Exercises in 1999 and December 31, 1999
Option/SAR Values" in the Proxy Statement, to be filed with the Commission
pursuant to Regulation 14A, which is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is set forth under the caption
"Beneficial Ownership of Common Stock" in the Proxy Statement, to be filed with
the Commission pursuant to Regulation 14A, which is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is set forth under the caption
"Certain Relationships and Related Transactions" in the Proxy Statement, to be
filed with the Commission pursuant to Registration 14A, which is incorporated
herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

The following documents are included in this report.

(a)(1) FINANCIAL STATEMENTS

See Index to Financial Statements at Item 8 on page 17 of this report.

(a)(2) FINANCIAL STATEMENT SCHEDULES

All financial statement schedules have been omitted since the required
information is not present or not present in amounts sufficient to require
submission of schedules, or because the information required is included in the
financial statements and notes thereto.

(b) REPORTS ON FORM 8-K

During the quarter ended December 31, 1999, the Company filed no Current
Reports on Form 8-K.

33
<PAGE> 35

ASSOCIATED MATERIALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
(c) EXHIBITS

<S> <C> <C>
3.1 -- Restated Certificate of Incorporation, as amended, of Associated
Materials Incorporated (the "Company") (incorporated by reference to
Exhibit 3.1 to the Company's Registration Statement on Form S-1,
Commission File No. 33-84110 (the "1994 Registration Statement")).

3.2 -- Restated Bylaws of the Company (incorporated by reference to Exhibit
3.2 of the 1994 Registration Statement).

4.1 -- Form of Indenture between the Company and U.S. Trust Company of
Texas, N.A., as Trustee (the "9 1/4% Note Indenture") (incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement on
Form S-1, Commission File No. 33-42067 (the "1997 Debt Registration
Statement")).

4.2 -- Form of Senior Subordinated Note under the 9 1/4% Note Indenture
(incorporated by reference to Exhibit A to Exhibit 4.1 to the 1997
Debt Registration Statement).

4.3 -- Registration Rights Agreement, dated as of August 19, 1993, among
the Company, PruSupply Capital Assets, Inc. ("PruSupply"), W.W.
Winspear, M.M. Winspear, D.J. Allan, M.G. Winspear, D.W. Winspear, R.L.
Winspear, B.W. Meyer, The Principal/The Eppler, Guerin & Turner, Inc.,
Frank T. Lauinger, John Wallace and Bonnie B. Smith (incorporated by
reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 (the "1993 Form 10-K")).

4.4 -- Stockholders' Agreement, dated as of August 19, 1993, among the
Company, PruSupply, W.W. Winspear and M.M. Winspear (incorporated by
reference to Exhibit 4.4 to the 1993 Form 10-K).

4.5 -- Amendment to the Stockholders' Agreement, dated as of April 1, 1994,
among the Company, PruSupply, W.W. Winspear and M.M. Winspear
(incorporated by reference to Exhibit 4.5 to the 1994 Registration
Statement).

4.6 -- Second Amendment to the Stockholders' Agreement, dated as of July 1,
1994, among the Company, PruSupply, W.W. Winspear and M.M. Winspear
(incorporated by reference to Exhibit 4.6 to the 1994 Registration
Statement).

4.7 -- Third Amendment to the Stockholders' Agreement, dated as of October
12, 1994, among the Company, Prudential and the Winspear Family
Limited Partnership (incorporated by reference to Exhibit 4.15 to the
1994 Registration Statement).

4.8 -- Assumption Agreement, effective as of July 29, 1994, by the Winspear
Family Limited Partnership (incorporated by reference to Exhibit 4.7
to the 1994 Registration Statement).

4.9 -- Assumption Agreement, effective as of September 30, 1994 by The
Prudential Insurance Company of America ("Prudential") (incorporated
by reference to Exhibit 4.14 to the 1994 Registration Statement).

10.1 -- Agreement of Sale, dated as of January 30, 1984, between USX
Corporation (formerly United States Steel Corporation) ("USX") and the
Company (incorporated by reference to Exhibit 10.1 to the 1993
Registration Statement).

10.2 -- Amendment Agreement, dated as of February 29, 1984, between USX and
the Company (incorporated by reference to Exhibit 10.2 to the 1993
Registration Statement).

10.3 -- Form of Indemnification Agreement between the Company and each of
the Directors and executive officers of the Company (incorporated by
reference to Exhibit 10.14 to the 1994 Registration Statement).

10.4* -- Associated Materials Incorporated Amended and Restated 1994 Stock
Incentive Plan (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the period ended June 30,
1997).
</TABLE>

34
<PAGE> 36

<TABLE>

<S> <C> <C>
10.5* -- Letter Agreement, dated May 13, 1983, between Donald L. Kaufman and
Company, as amended (incorporated by reference to Exhibit 10.4 to the
1994 Registration Statement).

10.6 -- Second Amended and Restated Loan and Security Agreement, dated as of
April 2, 1996, between the Company and KeyBank (the "Credit Agreement")
(incorporated by reference to Exhibit 10.1 to the March 31, 1996 Form
10-Q).

10.7 -- Third amendment to Second Amended and Restated Loan and Security
Agreement and Waiver, dated May 21, 1999 between the Company and
KeyBank relating to the Credit Agreement (incorporated by reference to
Exhibit 10.1 to the June 30, 1999 Form 10-Q).

10.8 -- Third Amended and Restated Note, dated April 2, 1996, from the
Company to KeyBank relating to the Credit Agreement (incorporated by
reference to Exhibit 10.1 to the March 31, 1996 Form 10-Q).

10.9* -- Associated Materials Incorporated Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1998).

21.1 -- List of Subsidiaries of the Company (incorporated by reference to
Exhibit 21.1 to the December 31, 1998 Form 10-K).

23.1 -- Consent of Ernst & Young LLP.

24.1 -- Power of Attorney of directors and certain executive officers of the
Company.

27.1 -- Financial Data Schedule.
</TABLE>

- -----------------
*Constitutes a compensatory plan or arrangement.

35
<PAGE> 37

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Dallas,
State of Texas on March 22, 2000.

ASSOCIATED MATERIALS INCORPORATED

By: /s/ ROBERT L. WINSPEAR
------------------------------
Robert L. Winspear
Chief Financial Officer,
Vice President, Secretary and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the date indicated:

<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
WILLIAM W. WINSPEAR* Chairman of the Board, President and
- -------------------------------------------- Chief Executive Officer
William W. Winspear (Principal Executive Officer)

/s/ ROBERT L. WINSPEAR Chief Financial Officer, Vice President,
- -------------------------------------------- Secretary and Treasurer
Robert L. Winspear (Principal Financial and Accounting Officer)

Director
- --------------------------------------------
Richard I. Galland

JOHN T. GRAY* Director
- --------------------------------------------
John T. Gray

DONALD L. KAUFMAN* Director
- --------------------------------------------
Donald L. Kaufman

JAMES F. LEARY* Director
- --------------------------------------------
James F. Leary

ALAN B. LERNER* Director
- --------------------------------------------
Alan B. Lerner

A. A. MEITZ* Director
- --------------------------------------------
A. A. Meitz
</TABLE>

Robert L. Winspear, by signing his name hereto, signs and executes this
document on behalf of each of the above-named officers and directors of
Associated Materials Incorporated on the 22 day of March, 2000, pursuant to a
power of attorney executed on behalf of each of these officers and directors,
and contemporaneously filed hereunto with the Securities and Exchange
Commission.

* By: /s/ ROBERT L. WINSPEAR
----------------------------------
Robert L. Winspear
Attorney-in-Fact

36
<PAGE> 38

INDEX TO EXHIBITS
<TABLE>

3.2 -- Restated Bylaws of the Company (incorporated by reference to Exhibit
3.2 of the 1994 Registration Statement).

4.2 -- Form of Senior Subordinated Note under the 9 1/4% Note Indenture
(incorporated by reference to Exhibit A to Exhibit 4.1 to the 1997 Debt
Registration Statement).

4.4 -- Stockholders' Agreement, dated as of August 19, 1993, among the
Company, PruSupply, W.W. Winspear and M.M. Winspear (incorporated by
reference to Exhibit 4.4 to the 1993 Form 10-K).

4.7 -- Third Amendment to the Stockholders' Agreement, dated as of October
12, 1994, among the Company, Prudential and the Winspear Family Limited
Partnership (incorporated by reference to Exhibit 4.15 to the 1994
Registration Statement).

4.8 -- Assumption Agreement, effective as of July 29, 1994, by the Winspear
Family Limited Partnership (incorporated by reference to Exhibit 4.7 to
the 1994 Registration Statement).

4.9 -- Assumption Agreement, effective as of September 30, 1994 by The
Prudential Insurance Company of America ("Prudential") (incorporated by
reference to Exhibit 4.14 to the 1994 Registration Statement).

10.2 -- Amendment Agreement, dated as of February 29, 1984, between USX and
the Company (incorporated by reference to Exhibit 10.2 to the 1993
Registration Statement).

<PAGE> 39

<TABLE>

<S> <C> <C>
10.5* -- Letter Agreement, dated May 13, 1983, between Donald L. Kaufman and
Company, as amended (incorporated by reference to Exhibit 10.4 to the
1994 Registration Statement).

10.7 -- Third Amendment to Second Amended and Restated Note and Security
Agreement and Waiver, dated May 21, 1999 between the Company and
KeyBank relating to the Credit Agreement (incorporated by reference to
Exhibit 10.1 to the June 30, 1999 Form 10-Q).

10.8 -- Third Amended and Restated Note, dated April 2, 1996, from the
Company to KeyBank relating to the Credit Agreement (incorporated by
reference to Exhibit 10.1 to the March 31, 1996 Form 10-Q).

21.1 -- List of Subsidiaries of the Company (incorporated by reference to
Exhibit 21.1 to the December 31, 1998 Form 10-K).

23.1 -- Consent of Ernst & Young LLP.

24.1 -- Power of Attorney of directors and certain executive officers of the
Company.

27.1 -- Financial Data Schedule.
</TABLE>

- -----------------
*Constitutes a compensatory plan or arrangement.

<PAGE> 1
EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements
(Forms S-8) pertaining to the Associated Materials Incorporated Employee Stock
Purchase Plan (File No. 333-63435) and the Associated Materials Incorporated
Amended and Restated 1994 Stock Incentive Plan (File No. 333-63445) of our
report dated February 4, 2000, with respect to the financial statements of
Associated Materials Incorporated included in the Annual Report (Form 10-K) for
the year ended December 31, 1999.

ERNST & YOUNG LLP

Dallas, Texas
March 17, 2000

<PAGE> 1
EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned hereby
constitutes and appoints William W. Winspear, Robert L. Winspear and James E.
O'Bannon, and any of them, the true and lawful attorney or attorneys-in-fact,
with full power of substitution and resubstitution, to sign on behalf Associated
Materials Incorporated, a Delaware corporation (the "Company"), and on behalf of
the undersigned in my capacity as an officer and/or a director of the Company,
the Company's Annual Report on Form 10-K for the year ended December 31, 1999,
and to sign any or all amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended, and the regulations promulgated thereunder, granting unto said
attorney or attorneys-in-fact, and any of them with or without the others, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as the undersigned may or could in person,
hereby ratifying and confirming all that said attorney or attorneys-in-fact or
any of them or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.

IN WITNESS WHEREOF, I have executed this Power of Attorney effective as
of March 15, 2000.

<TABLE>
<S> <C>
/s/ WILLIAM W. WINSPEAR /s/ DONALD L. KAUFMAN
- -------------------------------- --------------------------------
William W. Winspear Donald L. Kaufman

/s/ ROBERT L. WINSPEAR /s/ JAMES F. LEARY
- -------------------------------- --------------------------------
Robert L. Winspear James F. Leary

/s/ ALAN B. LERNER
- -------------------------------- --------------------------------
Richard I. Galland Alan B. Lerner

/s/ JOHN T. GRAY /s/ A.A. MEITZ
- -------------------------------- --------------------------------
John T. Gray A.A. Meitz
</TABLE>

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,432
<SECURITIES> 0
<RECEIVABLES> 57,447
<ALLOWANCES> 4,864
<INVENTORY> 69,651
<CURRENT-ASSETS> 129,764
<PP&E> 133,798
<DEPRECIATION> 62,116
<TOTAL-ASSETS> 206,296
<CURRENT-LIABILITIES> 43,886
<BONDS> 75,000
0
0
<COMMON> 21
<OTHER-SE> 79,305
<TOTAL-LIABILITY-AND-EQUITY> 206,296
<SALES> 452,586
<TOTAL-REVENUES> 0
<CGS> 314,914
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 96,028
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,779
<INCOME-PRETAX> 33,528
<INCOME-TAX> 13,038
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,490
<EPS-BASIC> 2.52
<EPS-DILUTED> 2.46

</TABLE>