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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ending December 27, 1996
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-14338
EURAMAX INTERNATIONAL plc
(Exact name of registrant as specified in its charter)
England and Wales 98-0166997
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No,)
5335 Triangle Pkwy Suite 550, Norcross GA. 30092
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 449-7066
Securities registered pursuant to Section
12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
None *
(Title of Class)
* Certain notes issued by the Registrant are traded on the Luxembourg Stock
Exchange.
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 registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. |X|
As of April 30, 1997, Registrant has outstanding 1,000,000 Ordinary Shares
and 34,000,000 Preference Shares. All of these shares were owned by affiliates
of the Company.
433340.3
Statements contained in this Form 10-K that are not historical facts are forward
looking statements that are subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. Those statements involve risks and
uncertainties. The actual results of Euramax International plc and Subsidiaries
(the "Company", "Euramax") could differ significantly from past results, and
from those expressed or implied in forward looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in "Business," particularly "Business-Risk Factors," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" as well as those discussed elsewhere in this Form 10-K.
Part I
Item 1. Business
General
Euramax International plc is a leading international producer of aluminum and
steel products with facilities in the U.S., the U.K., The Netherlands and
France. Euramax's products include painted sheet and coil, siding, roofing,
raincarrying systems, windows, doors and various fabricated trim parts and
components. The Company is a leading supplier to several niche markets. The
Company believes that in 1996 it sold at least 45% and 60% of the aluminum
sidewalls used by RV manufacturers in the U.S. and Europe, respectively. In the
same year, the Company sold aluminum and steel gutters and downspouts to more
than 30 of the largest 50 home centers in the U.S. The Company believes that in
1996 it sold at least 80% of all metal Do-It-Yourself raincarrying products sold
to U.S. home centers. The Company also believes that it sold at least 40% of the
steel siding sold to producers of manufactured housing in the U.S. Net sales for
1996 in the U.S. and Europe were $301.1 million and $187.8 million,
respectively.
Euramax operates downstream of producers of aluminum coil, steel coil and
aluminum ingot. These producers supply the Company with aluminum coil, steel
coil and aluminum extrusions. The Company sold approximately 137.5 and 167.1
million pounds of aluminum and steel, respectively, in 1996. To a lesser extent,
the Company also distributes and fabricates products manufactured from vinyl and
fiberglass. The Company's products are sold primarily to manufacturers of RV's
and manufactured housing, rural building contractors, distributors and home
centers.
Euramax is a national supplier in several of its key U.S. product lines and the
only national supplier with in-house coil coating capabilities to supply steel
siding to manufactured housing customers and aluminum sidewalls to RV
manufacturers. This gives the Company certain advantages over regional suppliers
who do not have in-house manufacturing capabilities or national distribution
networks. In addition, extensive in-house manufacturing capabilities coupled
with product offerings made from alternate raw materials enable Euramax to react
to changing customer preferences.
Euramax is a holding company formed by (i) ACP Holding Company ("ACP"), an
affiliate of Citicorp Venture Capital, Ltd. and (ii) CVC European Equity
Partners, L.P. ("CVCEEP") and CVC European Equity Partners (Jersey), L.P.,
(collectively with CVCEEP, "CVC Europe", and collectively with ACP, the
"Investor Group") to acquire certain portions of the fabricated products
operations of Alumax Inc. ("Alumax") pursuant to the Acquisition (defined
below). See "The Transactions." The Company's operations are conducted through
subsidiaries in the U.S. and Europe.
The Transactions
Pursuant to a purchase agreement (the "Acquisition Agreement") dated June 24,
1996 between the Company and Alumax, on September 25, 1996 (the "Closing Date"),
the Company purchased, through its wholly-owned subsidiaries, all of the issued
and outstanding capital stock of certain of Alumax's subsidiaries which operate
certain portions of Alumax's fabricated products operation (the "Acquisition").
The purchase price was approximately $251.2 million, which includes estimated
acquisition expenses of $3.9 million and adjustments for certain items including
cash acquired and working capital. The purchase price is subject to further
adjustments upon determination of the final working capital. In order to finance
the purchase price, including the payment of deferred financing fees which were
approximately $9.9 million, the Company and certain of its wholly-owned
subsidiaries (i) incurred approximately $100.0 million of indebtedness under a
credit agreement providing for $40.0 million in term loans and a revolving
credit facility of up to $85.0 million (the "Credit Agreement"), (ii) issued
$135.0 million of subordinated notes and (iii) issued to the Investor Group,
certain members of management of the Company (the "Management Investors") and an
affiliate of Banque Paribas (the agent under the Credit Agreement), an aggregate
of approximately $35.0 million in preference and ordinary shares (the "Equity
Contribution").
-1-
Business Strategy
The Company's strategy is to expand its leadership position as a producer of
aluminum and steel products and to further broaden its current diversity of
products, customers and geographic regions in which it operates. To enhance the
Company's operations and profitability, the Company expects to pursue a strategy
of identifying and acquiring businesses and assets that would enable it to offer
complementary products or expand geographic coverage. The Company believes that
its strategy of expanding market share, broadening the diversity of its
businesses and continuing to provide customers with superior products through
responsive, efficient and cost effective distribution systems will be an
effective means of increasing profitability while preserving cash flow.
Market Leadership and Diversity of Business
The Company's position as a leading international downstream producer of
aluminum and steel products has enabled it to benefit from diversification
across economic and product cycles among different geographic regions and
customer groups. This diversification has historically enabled Euramax to
maintain stable margins even though demand for certain products may be affected
by changes in general and regional economic conditions such as trends in
disposable income.
Leadership in several markets: The Company's leadership in a variety of niche
markets has enabled it to maintain consistent operating results. For example,
the Company is a leading supplier of steel and aluminum sidewalls and siding to
U.S. RV and manufactured housing producers. The Company believes that its 1996
sales of raincarrying systems represent a majority of such products sold to U.S.
home centers. Similar leading positions are enjoyed by the Company's roll formed
aluminum sheet and coil products sold to RV manufacturers in the U.S. and
Europe.
Manufacturing expertise and diversity of products: The Company's technological
expertise and its ability to fabricate from alternative materials has allowed it
to develop new products and applications and to respond to the changing product
requirements of its customers. Over time, Euramax has increased its ability to
offer products manufactured from steel, vinyl and fiberglass, allowing it to
meet regional material preferences, to provide substitute products for end-users
and to retain customers in the event of demand shifts between raw materials.
Geographic diversity: The Company's sales span both the continental U.S. and
Europe, with each representing approximately 61.6% and 38.4% of 1996 net sales,
respectively. The Company has manufacturing or distribution facilities
strategically located in the U.K., The Netherlands, France and all regions of
the continental U.S. The Company's geographic diversity of sales limits reliance
on any single regional economy in the U.S. or national economy in Europe.
Customer diversity. The Company is diversified by both size and type of
customer. Of the Company's more than 3,700 customers, no single customer
accounted for more than 4.6% of net sales in 1996. The top ten customers
accounted for approximately 21.1% of 1996 net sales and represented five
distinct end-use markets. These characteristics minimize the Company's reliance
on individual customers or end-use markets.
Distribution capability. The Company's manufacturing and distribution network
consists of 29 strategically located facilities, of which 24 are located in all
major regions of the United States, and five are located in Europe. Euramax's
network of facilities allows the Company to offer a more comprehensive service
than its regional competitors and to meet the increasing demands of its
customers for short delivery lead times.
Manufacturing Processes
The Company's manufacturing processes employ a variety of equipment and several
types of facilities. Management believes that the Company's effective deployment
of equipment enables it to manufacture standard and custom products efficiently
and economically. The Company has the equipment necessary for manufacturing
substantially all of its products in-house and is able to avoid most forms of
outsourcing. This capability provides certain marketing and pricing advantages,
including the ability to better control delivery time and to develop new and
customer specific products in a more expeditious manner.
The Company's manufacturing process generally begins with painting aluminum or
steel coil through a process known as roll coating. Once coated, the aluminum or
steel is further fabricated through selected processes which include tension
leveling, embossing, slitting, rollforming, brake pressing, notching and
bending. These processes complete the appropriate steps to fabricate a finished
product.
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The Company's coating and fabrication capabilities are described in more detail
as follows:
Coating (painting): Roll coating is the process of applying a variety of liquid
coatings to bare aluminum or steel coil, providing a baked-on finish that is
both protective and decorative. Over 100 million pounds of aluminum and over 30
million pounds of steel are roll coated by the Company at its eight roll coating
operations annually. The Company has three such coating lines in the U.S. and
five in Europe. The Company's roll coating facility in Roermond, The Netherlands
is one of only two facilities in the world capable of coating coil up to 100
inches in width. The Roermond line services a variety of expanding markets in
which wide coated aluminum is becoming increasingly important. Wide coils
provide customers with the opportunity to produce products more economically by
reducing labor costs and requiring fewer joints and seams in their manufacturing
processes.
The Company also employs powder coating on a line recently installed to paint
aluminum and steel sheets in the U.K. This line is one of only a few in the
world with the ability to paint customized and exotic finishes, allowing unique
design possibilities on aluminum and steel sheets. These finishes include
textures, patterns and decorative styling which have many different
applications. The Company coats aluminum extrusions on its two European powder
spray coating lines, which are located in France and in the U.K. Two of the
Company's lines in the U.S. are used to spray paint steel entry doors. A
specialized roller painting operation for appliance parts provides flexibility
in specialty decorating parts for certain appliance manufacturers.
Anodizing is an electrochemical process which alters an aluminum surface through
a controlled and accelerated oxidation process which, if desired, may also color
the material. Anodizing provides a high quality architectural finish to aluminum
extrusions which is demanded by certain customers. Anodizing is a key
manufacturing process offered by the Company at two of its European facilities.
Fabrication: After coating, much of the Company's coil is processed through
slitting operations which cut coils into more narrow widths. The cut coils may
then undergo a variety of downstream production processes which further
fabricate the aluminum and steel sheet to form the desired product. Fabrication
equipment includes rollformers, punch and brake presses and expanding machinery
for a variety of applications.
The Company also utilizes specialized equipment to inject and laminate foam to
provide insulation and rigidity to metal doors and panels. Production machinery
also includes equipment to bend, notch and cut aluminum and vinyl extrusions
required, together with glass, for the assembly of windows and doors.
-3-
Products and Customers
The Company's products are sold to a diverse group of customers operating in a
variety of industries. The Company's sales and marketing effort is organized on
a decentralized basis in order to provide the required services to the broad
customer and geographic mix with which Euramax is involved. Customers include:
o OEMs, including RV, commercial panel and appliance manufacturers
o Home Centers
o Manufactured Housing
o Distributors
o Rural Contractors
o Home Improvement Contractors
The table below lists the Company's key products, materials used, customers and
end-users, and sales regions:
- - - ------------------------------------------ --------------------- ------------------------------------- --------------------------
Products Materials Customers and End-Users Sales Regions
- - - ------------------------------------------ --------------------- ------------------------------------- --------------------------
Specialty Coated Coils (painting Aluminum, Steel OEMs, RV Manufacturers, Europe
aluminum and steel coils) Various Building Panel
Manufacturers
Roofing & Siding Aluminum, Steel, OEMs, RV Manufacturers, U.S., Europe
Vinyl, Fiberglass Manufactured Housing, Rural
Contractors, Distributors, Home
Improvement Contractors
Raincarrying Systems (gutters, Aluminum, Steel, Home Centers, Manufactured U.S., Canada
downspouts) Vinyl Housing, Rural Contractors,
Home Improvement Contractors
Soffit (roof overhangs), Fascia (trims), Aluminum, Steel Home Centers, Manufactured U.S.
Flashing (roofing valley material) Housing, Rural Contractors,
Home Improvement Contractors
Entry Doors Aluminum, Steel, OEMs, RV Manufacturers, U.S., Europe
Fiberglass Distributors, Home Improvement
Contractors
Windows Aluminum, Vinyl OEMs, RV Manufacturers, Home U.S., Europe
Improvement Contractors
Appliance Trims Aluminum, Vinyl OEMs, Appliance Manufacturers U.S.
Original Equipment Manufacturers ("OEMs") (49.6% of 1996 net sales)
The Company supplies OEMs such as RV manufacturers, commercial panel and
appliance manufacturers. The Company's principal OEM customers are described
below.
Recreational Vehicle Manufacturers. The Company is a leading supplier of various
aluminum products to RV manufacturers in the U.S. and Europe. These products
primarily consist of painted aluminum sheet and fabricated painted aluminum
panels. The Company uses its decorative graphic coating lines to produce
aluminum panels with decorative detailing in a variety of colors. The Company
also supplies RV doors, windows and finished aluminum roofing panels. In
addition, the Company began supplying laminated aluminum and fiberglass panels
to RV manufacturers in 1995.
The Company believes its decorative coating capabilities in the U.S. and in
Europe provide a technological advantage not enjoyed by its competitors. These
capabilities enable the Company to paint a stripe or other decorative pattern
directly onto the aluminum sheet according to customer specifications.
Competitors do not have these abilities; instead, they offer a decorative tape
which must be applied to the aluminum sheet. The tape cannot be applied with the
tight tolerances achieved by the Company's painting process, and
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does not offer the same graphics variety. In response to demand for laminated
products in the U.S. markets, the Company recently opened a lamination line
which can laminate, among other things, fiberglass and aluminum.
Commercial Panel Manufacturers: The Company sells painted aluminum coil to
customers who produce commercial building panels. These panels become part of a
total package of commercial building wall panels and facades. The Company also
produces a composite "sandwich" building panel comprised of two aluminum skins
with a polystyrene core, which insulates and abates noise. The panels are used
in both residential (e.g., room additions and patio enclosures) and commercial
applications (e.g., service stations and school buildings), as well as in the
construction of "cold rooms" used for the storage of perishable goods.
Appliance Manufacturers: The Company enjoys a leading position in the U.S. niche
market for decorated refrigerator trims. The Company provides door trims, drawer
fascias, shelf fronts, handles and freezer trims under contracts with the five
largest U.S. home appliance manufacturers. In 1993, the Company added vinyl
extruding capabilities in response to market changes and growing preference for
vinyl extruded parts. The Company intends to utilize its expertise to produce
and market its products in other applications including other appliances and
automobiles. In Europe, the Company provides coated coil to certain appliance
manufacturers for additional fabrication.
Other Manufacturers: The Company also uses its decorative and coil coating
capabilities for products supplied to overhead door manufacturers and producers
of refrigerated transport containers. Door manufacturers produce the overhead
doors, adding the necessary hardware and accessory items to complete the
product. Transport container manufacturers represent a growing market for the
Company's products.
Home Centers (17.5% of 1996 net sales)
The Company's home center customers supply the well-established Do-It-Yourself
("DIY") market in the U.S., Canada, the United Kingdom and The Netherlands. The
Company sells building and construction products, such as residential rain
gutter systems, roof flashing products, soffits, fascias, doors, screen door
guards, shower, patio, steel roofing and siding, and residential doors. These
products, which are designed for ease of installation by DIY consumers, are
produced with aluminum, galvanized or painted steel, or occasionally with vinyl
depending on regional preferences. Home centers include small hardware stores,
large cooperative buying groups, lumberyards and major home center retailers.
The Company believes that it is the leading supplier of DIY metal raincarrying
systems in the U.S. Competitors are generally regional and thus do not have the
advantages of a nationwide service and distribution network such as the
Company's. In addition, the Company has invested in a product bar coding system
which can be used by the sophisticated inventory scanning systems prevalent in
home centers. The Company expects to exploit these strengths to introduce
additional DIY products that could be sold through this distribution channel.
Manufactured Housing (8.3% of 1996 net sales)
The Company sells rollformed steel siding and trim parts to producers of
manufactured housing in the U.S. These products are used for exterior walls and
roofs. The Company is the only supplier of steel siding to the manufactured
housing industry that has metal coating capabilities. In addition to the raw
material cost benefit, the Company views itself as an innovator in the market
for colors and decorative coating. The Company can also meet the demands of the
industry's short lead time requirements and more easily supply national accounts
with its large network of facilities. The Company has significantly increased
its market share in steel siding in the manufactured housing industry over the
last three years.
In addition to steel siding, the Company also fabricates and supplies a variety
of steel and aluminum trim components for manufactured home exteriors. To a
lesser degree, the Company also distributes vinyl siding to certain customers in
the manufactured housing industry.
Distributors (11.1% of 1996 net sales)
The Company sells to distributors (and stockists) which perform as service
centers for the next tier of customers in both the U.S. and Europe. A
distributor will typically purchase coil which is later broken down or
fabricated prior to resale. The Company markets residential steel entry door
blanks through millwork distributors, which specialize in windows, doors and
associated building products. Other residential building products sold through
distributors include a wide range of metal roof flashing materials, painted
aluminum trim coil, rain gutter, fascia/soffit systems and drip edges.
-5-
Rural Contractors (10.2% of 1996 net sales)
The Company supplies aluminum and steel roofing and siding products to rural
contractors for use in agricultural and rural buildings such as sheds and animal
confinement buildings. The Company sells its products to traditional rural
contractors, including building supply dealers, building and agricultural
cooperatives, and animal confinement integrators. Building suppliers and
agricultural cooperatives typically purchase smaller quantities of product at
multiple locations whereas contractors and integrators generally purchase large
volumes for delivery to one site.
Home Improvement Contractors (3.3% of 1996 net sales)
The Company sells a variety of products to home improvement contractors, the
most significant of which are vinyl replacement windows. Other products sold to
home improvement contractors include awnings, lattice systems, metal roofing,
shower doors, patio and entrance doors, and insulated roofing panels. In the
U.S., the Company offers a full complement of vinyl replacement windows. In the
U.K., the Company produces patio, entrance, and shower doors, marketed primarily
to home improvement contractors. The Company is also one of the largest
suppliers of lattice and painted aluminum awnings to residential contractors in
the western U.S. In addition, the Company manufactures painted aluminum and
steel panels for residential roofing, which are distributed primarily in the
Pacific Northwest. Although metal roofing costs more than traditional asphalt
shingles, it is becoming more popular due to its fire resistance, aesthetic
appeal, low cost maintenance and longer life span.
Raw Materials
The Company's products are principally manufactured from aluminum coils and
extrusions and steel coils. During 1996, approximately 137.5 million pounds of
aluminum products and approximately 167.1 million pounds of steel were sold. The
proportion sold in 1996 by value is $308.1 million of aluminum and $115.9
million of steel. Steel weighs approximately three times as much as the same
volume of aluminum. In addition, the Company sold $64.8 million of products
manufactured from materials other than aluminum and steel in 1996.
All the Company's raw material inputs are sourced from external suppliers. The
Company purchases its steel and aluminum sheet requirements from several foreign
and domestic aluminum and steel mills. Management believes there is sufficient
supply in the marketplace to competitively source all of its requirements
without reliance on any particular supplier. The Company's large volume of
aluminum and steel purchases afford it competitive market pricing.
The steel coil used by the Company, light gauge galvanized steel sheet, has a
stable price history relative to aluminum and its price fluctuations have been
generally passed on to the Company's customers. Aluminum raw material cost
increases and decreases can temporarily affect the Company's margins. Supplier
price increases, of normal frequency and amount, can be passed on to customers
usually within two to four months. Conversely, as aluminum prices decline,
corresponding price reductions are typically passed on to customers.
The Company continually scrutinizes aluminum costs and adjusts its purchasing,
inventory and sales programs accordingly. At certain times, the Company adopts a
strategy of locking in margins on long-term, higher volume contracts by buying
aluminum at a fixed price in order to guarantee a margin on a specific customer
order. At times, high aluminum prices have led customers to use alternative
products, including steel, vinyl and fiberglass. The Company believes that its
ability to supply certain products manufactured from these alternatives,
provides it with a competitive advantage over competitors who do not offer these
choices.
Competition
In the U.S., competition comes largely from privately held companies that are
generally much smaller than the Company. In Europe, competitors of the Company
include three to four integrated companies in the specialty coil-coating
business. Other smaller companies compete with the Company in the building and
construction, RV and transportation markets in Europe, both on a regional basis
and some on a pan-European basis.
Environmental, Health and Safety Matters
The Company's manufacturing facilities are subject to a range of federal, state,
local and foreign environmental and occupational health and safety laws,
including those which relate to air emissions, wastewater discharges, the
handling and disposal of solid and
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hazardous waste, and the remediation of contamination associated with the
current and historic use of hazardous substances or materials (collectively,
"Environmental Laws"). If a release of hazardous substances or materials occurs
on or from the Company's properties or any offsite disposal location used by the
Company, or if contamination from prior activities is discovered at any of the
Company's properties, the Company may be held liable for the costs of
remediation (including any response costs), natural resource damages and
associated transaction costs. While the amount of such liability could be
material, the Company devotes resources to ensuring that its current operations
are conducted in a manner that intends to reduce such risks.
Based upon an environmental review conducted by outside consultants in
connection with the Acquisition and assuming compliance by Alumax with its
indemnification obligations under the Acquisition Agreement, the Company
believes that it is currently in compliance with, and not subject to liability
under, Environmental Laws except where such noncompliance or liability would not
reasonably be expected to have a material adverse effect on the consolidated
financial position or results of operations of the Company and its subsidiaries
taken as a whole. Pursuant to the terms of the Acquisition Agreement, Alumax has
agreed to correct and to bear substantially all costs with respect to certain
identified conditions of potential noncompliance and liability under
Environmental Laws, none of which costs are currently believed to be material.
Alumax's indemnification obligations under the Acquisition Agreement are not
subject to an aggregate dollar limitation with respect to specifically
identified environmental matters. However, with respect to all other
environmental matters, Alumax's obligations are limited to $125.0 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation- Environmental Matters."
Employees
As of December 27, 1996, the Company employed 2,233 people of which 828 were
employed in Europe and 1,405 were employed in the United States. Of these 2,233
employees, 28% were salaried and 72% were hourly employees. Manufacturing
employees at seven of the Company's manufacturing facilities are covered by
collective bargaining agreements. The Company and its subsidiaries are not party
to any pending labor proceedings and believe that employee relations are
satisfactory.
-7-
Risk Factors
Substantial Leverage
The Company incurred significant debt in connection with the Acquisition. As of
December 27, 1996, the Company had outstanding indebtedness of $211.7 million,
$35.2 million of Preference Shares (as defined) and $1.0 million of ordinary
shareholders' equity. For the year ended December 27, 1996, the Company's ratio
of earnings to fixed charges was 1.25 to 1. The Company's leveraged financial
position poses substantial consequences to holders of the subordinated notes,
including the risks that: (i) a substantial portion of the Company's cash flow
from operations is dedicated to the payment of interest on the subordinated
notes and the payment of principal and interest under the Credit Agreement and
other indebtedness; (ii) the Company's leveraged position may impede its ability
to obtain financing in the future for working capital, capital expenditures and
general corporate purposes, including acquisitions; and (iii) the Company's
highly leveraged financial position may make it more vulnerable to economic
downturns and may limit its ability to withstand competitive pressures. The
Company believes that, based on its current level of operations, it will have
sufficient capital to carry on its business and will be able to meet its
scheduled debt service requirements. However, there can be no assurance that the
future cash flow of the Company will be sufficient to meet the Company's
obligations and commitments. In addition, the Credit Agreement contemplates that
all borrowings thereunder will become due prior to 2003. If the Company is
unable to generate sufficient cash flow from operations in the future to service
its indebtedness and to meet its other commitments, the Company will be required
to adopt one or more alternatives, such as refinancing or restructuring its
indebtedness, selling material assets or operations or seeking to raise
additional debt or equity capital. There can be no assurance that any of these
actions could be effected on a timely basis or on satisfactory terms or that
these actions would enable the Company to continue to satisfy its capital
requirements. In addition, the terms of existing or future debt agreements,
including the Credit Agreement and related indenture, may prohibit the Company
from adopting any of these alternatives. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Customers in Cyclical Industries
Demand for most of the Company's products is cyclical in nature and subject to
changes in general economic conditions that affect market demand. Sales to the
building and construction markets are driven by trends in commercial and
residential construction, housing starts, residential repair and remodelings.
Transportation sales are also cyclical in nature and typically follow the trends
in the automotive, truck and recreational vehicle manufacturing industries.
Historically, lower demand has led to lower margins, lower production levels, or
both.
Dependence on Aluminum
The Company's primary raw material is aluminum coil. Because changes in aluminum
prices are generally passed through to the Company's customers, increases or
decreases in aluminum prices generally cause corresponding increases and
decreases in reported net sales, causing fluctuations in reported revenues that
are unrelated to the level of business activity. However, if the Company is
unable to pass through aluminum price changes to its customers in the future,
the Company could be materially adversely affected. Any major dislocation in the
supply and/or price of aluminum could have a material adverse effect on the
Company's business and financial condition. The Company is therefore subject to
the short-term commodity risk of carrying aluminum in its inventory. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Subordination of Notes; Holding Company Structure
The subordinated notes and a related guarantee (the "Guarantee") given by
Amerimax Holdings, Inc., the U.S. holding company subsidiary of Euramax, are
contractually subordinated to all Senior Debt including all obligations under
the Credit Agreement. In the event of a circumstance in which the contractual
subordination provisions apply, holders of the subordinated notes will not be
entitled to receive, and will have an obligation to pay over to holders of
Senior Debt, any payments they may receive in respect of such notes, including
any payments received in respect of any Claims (as defined in the related
indenture). At December 27, 1996, the aggregate amount of consolidated
indebtedness and other liabilities which the notes are effectively subordinated
to is approximately $151.6 million, of which approximately $76.7 million is
outstanding under the Credit Agreement. The indebtedness under the Credit
Agreement will become due prior to the time the principal obligations under the
Notes become due. The issuers of the subordinated notes, which are the Company
and two of its subsidiaries, Euramax European Holdings PLC and Euramax European
Holdings, B.V. (the "Issuer") and the Amerimax Holdings, Inc. (the "Guarantor")
are holding companies and do not have any independent operations. Accordingly,
the notes and the Guarantee are structurally subordinated to all existing and
future indebtedness of the subsidiaries of
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the Issuers and the Guarantor, through which the Company's operations are
conducted, including obligations under the Credit Agreement. Subject to certain
limitations, the Indenture will permit the Issuers and their subsidiaries to
incur additional indebtedness. See "The Transactions." The holders of any
indebtedness of the Issuers' subsidiaries are entitled to payment of their
indebtedness from the assets of such subsidiaries prior to the holders of any
general unsecured obligations of the Issuers, including the Notes. In addition,
substantially all of the assets of the Company and its subsidiaries are or may
in the future be pledged to secure other indebtedness of the Company.
Restrictions Imposed by the Credit Agreement and the Indenture
The Credit Agreement requires the Company to maintain specified financial ratios
and tests, among other obligations, including a minimum interest coverage ratio,
a minimum fixed charge coverage ratio, a maximum leverage ratio, a minimum
EBITDA requirement and maximum amounts of capital expenditures. In addition, the
Credit Agreement restricts, among other things, the Issuers' ability to incur
additional indebtedness and make acquisitions. A failure to comply with the
restrictions contained in the Credit Agreement could lead to an event of default
thereunder which could result in an acceleration of such indebtedness. Such an
acceleration would constitute an event of default under the Indenture relating
to the Notes. In addition, the Indenture restricts, among other things, the
Company's ability to incur additional indebtedness, sell assets, make certain
payments and dividends or merge or consolidate. A failure to comply with the
restrictions in the Indenture could result in an event of default under the
Indenture.
Acquisition Strategy
As part of the Company's strategy to enhance and maintain its competitive
position, the Company has entered into an agreement for the acquisition of the
Fabral building panel manufacturing operations ("Fabral") from Gentek Holdings,
Inc. There can be no assurance that the Fabral acquisition will be consummated
or that the Fabral acquisition or any future acquisitions will not have a
material adverse effect upon the Company, particularly in the fiscal quarters
immediately following the consummation of such transactions due to operational
disruptions, unexpected expenses and accounting charges which may be associated
with the integration of such acquisitions.
Although no additional agreements have been reached, the Company has engaged in
and continues to engage in evaluations of and discussions with potential
acquisition candidates. Any such transaction(s) may be financed by the incurring
of additional indebtedness which could be material. See "Risk Factors
Substantial Leverage." Any such transaction(s) would be subject to negotiations
of definitive agreements, satisfactory financing arrangements (including
compliance with the limitations on issuance of indebtedness in the Indenture and
in the Credit Agreement) and applicable governmental approvals and consents. No
such agreements have been reached to date, and there can be no assurance that
any additional acquisitions will be completed or that such acquired entities or
assets will be successfully integrated into the Company's operations, or will be
able to operate profitably.
Risk of Currency Exchange Rate Fluctuations and International Manufacturing
In 1996, approximately 38% of the Company's net sales were made outside the
United States. The U.S. dollar value of the Company's sales varies with currency
exchange rate fluctuations. Changes in currency exchange rates could have an
adverse effect on the Company's results of operations and its ability to meet
interest and principal obligations on the Notes. International manufacturing and
sales are subject to risks including labor unrest, potentially high costs of
terminating labor contracts, restrictions on transfers of funds, export duties
and quotas, domestic and international customs and tariffs, unexpected changes
in regulatory environments, difficulty in obtaining distribution and support,
potentially adverse tax consequences and changes in effective tax rates. There
can be no assurance that any of the foregoing factors will not have a material
adverse effect on the Company's ability to increase or maintain its
international sales or on the Company's results of operations. See "Business."
Impact of Environmental Regulation
The Company's U.S. and European facilities are subject to the requirements of
federal, state, local and foreign environmental and occupational health and
safety laws and regulations. There can be no assurance that Euramax is at all
times in compliance with all such requirements. Euramax has made and will
continue to make capital expenditures to comply with environmental requirements.
As is the case with manufacturers in general, if a release of hazardous
substances occurs on or from Euramax's properties or any offsite disposal
location used by Euramax, or if contamination from prior activities is
discovered at any of Euramax's properties, Euramax may be held liable for
cleanup costs, natural resource damages and associated transaction costs. The
amount of such liability
-9-
could be material. Euramax has been named a party potentially responsible for
the costs of investigating and remediating nine waste disposal sites, pursuant
to the federal Comprehensive Environmental Response, Compensation, and Liability
Act of 1990. In addition, Euramax is currently engaged in environmental
remediation or has reason to believe that remediation may be required at three
properties currently operated by the Company. See "Business - Environmental,
Health and Safety Matters."
Dependence on Key Personnel
The Company is dependent on the continued services of its senior management
team. Although the Company believes it could replace key employees in an orderly
fashion should the need arise, the loss of such key personnel could have a
material adverse effect on the Company. The Company does not maintain key-person
insurance for any of its officers, employees or directors. See "Management
Directors and Key Officers."
Competition
The markets in which the Company competes are highly competitive. In the United
States, competition comes largely from privately held companies that are
generally much smaller than the Company. In Europe, competitors of the Company
include three to four integrated companies in the specialty coil coating
business. Other smaller companies compete with the Company in the building and
construction, RV and transportation markets in Europe, both on a regional basis
and some on a pan-European basis. There can be no assurance that the Company
will be able to compete effectively in each of its markets in the future. See
"Business - Competition."
Controlling Shareholders
The Investor Group owns 79.2% of the outstanding ordinary shares of the Company
and collectively controls the affairs and policies of the Company. Circumstances
may occur in which the interests of the Investor Group, as shareholders of the
Company, could be in conflict with the interests of the holders of the Notes. In
addition, the Investor Group may have an interest in pursuing acquisitions,
divestitures or other transactions that, in their judgment, could enhance their
equity investment, even though such transactions might involve risks to the
holders of the Notes. See "Security Ownership."
Limitations on Change of Control
In the event of a Change of Control, the Issuers will be required to make an
offer for cash to repurchase the Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon to the repurchase date. A
Change of Control will result in an event of default under the Credit Agreement
and may result in a default under other indebtedness of the Company that may be
incurred in the future. The Credit Agreement will prohibit the purchase of
outstanding Notes prior to repayment of the borrowings under the Credit
Agreement and any exercise by the holders of the Notes of their right to require
the Company to repurchase the Notes will cause an event of default under the
Credit Agreement. Finally, there can be no assurance that the Company will have
the financial resources necessary to repurchase the Notes upon a Change of
Control.
Risk of Fraudulent Transfer
Amerimax, as Guarantor, has guaranteed the entire aggregate principal amount of
the subordinated notes. Amerimax has issued an intercompany note (the
"Intercompany Note") to the Company in the principal amount of approximately
$80.2 million. Under applicable provisions of the U.S. Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance laws, if
Amerimax, at the time it issued the Guarantee, (i) incurred such indebtedness
with intent to hinder, delay or defraud creditors, or (ii)(a) received less than
reasonably equivalent value or fair consideration for incurring such
indebtedness and (b)(1) was insolvent at the time of incurrence, (2) was
rendered insolvent by reason of such incurrence (and the application of the
proceeds thereof), (3) was engaged or was about to engage in a business or
transaction for which the assets remaining with the Company constituted
unreasonably small capital to carry on its businesses, or (4) intended to incur,
or believed that it would incur, debts beyond its ability to pay such debts as
they mature, then, in each case, a court of competent jurisdiction could void,
in whole or in part, the Notes, or, in the alternative, subordinate the
Guarantee to existing and future indebtedness of Amerimax. To the extent that
the Guarantee and/or the Intercompany Note were determined to be a fraudulent
conveyance or held unenforceable for any reason, the holders of the Notes would
cease to have a claim, or would have a limited claim, in respect to Amerimax. In
such event, the claims of the holders of the Notes would be subject to the prior
payment of all liabilities of Amerimax. The measure of insolvency for purposes
of the foregoing will vary depending upon the law applied in such case.
Generally, however, Amerimax would be considered insolvent if the sum of its
debts, including contingent liabilities, was greater than all of its assets at
fair valuation or if the present fair saleable
-10-
value of its assets was less than the amount that would be required to pay the
probable liability on its existing debts, including contingent liabilities, as
they become absolute and matured.
Each of Euramax, Euramax U.K. and Euramax B.V. are severally liable for the
entire aggregate principal amount of the Notes. To the extent that insolvency,
bankruptcy or fraudulent transfer laws, or their equivalents, in the
jurisdictions of incorporation of Euramax, Euramax U.K. or Euramax B.V. have
provisions similar to those described above and an administrator or a court of
competent jurisdiction were to make a finding of insolvency or a similar
holding, all or a portion of the claims with respect to that Issuer in respect
of the Notes could be avoided or subordinated to other debts of such Issuer. In
the event an administrator, a court, or other equivalent person were to avoid or
subordinate the Notes, holders of the Notes would cease to have a claim in
respect to such Issuer and would be solely creditors of the remaining Issuers
and the Guarantor.
Management believes that, for purposes of all such insolvency, bankruptcy and
fraudulent transfer or conveyance laws, the Notes and the Guarantee were issued
without the intent to hinder, delay or defraud creditors and for proper purposes
and in good faith and that the Issuers and the Guarantor, after the issuance of
the Notes and the Guarantee and the application of the proceeds thereof, will be
solvent, will have sufficient capital for carrying on their respective business
and will be able to pay their respective debts as they mature. There can be no
assurance, however, that a court passing on such questions would agree with
management's view.
-11-
Item 2. Properties
The Company's principal business office and headquarters are located in
Uxbridge, England, with executive offices located in Norcross (Atlanta),
Georgia. The principal facilities of the Company as of December 27, 1996 are
listed below:
Facility Function Square Feet
- - - --------------------------------------- --------------------------------------- ------------------------
U.S.
Anaheim, CA Manufacturing (Leased) 15,000
Bedford Park, IL Manufacturing (Leased) 70,000
Bloomsburg, PA Manufacturing (Leased) 96,000
Bristol, IN Manufacturing (Owned) 110,115
Bristol, IN Office (Leased) 3,454
Carrollton, KY Manufacturing (Owned) 127,000
Dallas, TX Office (Leased) 12,230
Elkhart, IN Manufacturing (Leased) 60,000
Grand Prairie, TX Manufacturing (Leased) 45,281
Lancaster, PA Manufacturing (Owned) 220,000
Loveland, CO Manufacturing (Leased) 20,133
Mansfield, TX Manufacturing (Owned) 55,280
Marshfield, Wl Manufacturing (Owned) 28,200
McPherson, KS Manufacturing (Owned) 35,000
Mesa, AZ Manufacturing (Leased) 30,200
Moulton, AL Manufacturing (Owned) 39,152
Norcross, GA Executive Offices (Leased) 3,627
Ocala, FL Manufacturing (Leased) 85,190
Reidsville, NC Manufacturing (Leased) 62,575
Richmond, IN Office and Manufacturing (Leased) 82,720
Romoland, CA Manufacturing (Owned) 65,500
Sacramento, CA Manufacturing (Leased) 40,800
Stayton, OR Manufacturing (Leased) 35,733
Tifton, GA Manufacturing (Leased) 55,600
Tucker, GA Manufacturing (Leased) 35,000
West Sacramento, CA Manufacturing (Leased) 70,000
West Helena, AR Manufacturing (Owned) 230,000
EUROPE
Corby, England Manufacturing (Owned) 171,000
Pudsey, England Manufacturing (Owned & Leased) 211,200
Uxbridge, England Headquarters (Leased) 1,400
Andrezieux-Boutheon, Manufacturing(Owned) 69,968
France
Montreuil-Bellay, France Manufacturing (Owned) 178,663
Roermond, The Netherlands Manufacturing (Owned) 208,216
Management believes that the Company's facilities, taken as a whole, have
adequate productive capacity and sufficient manufacturing equipment to conduct
business at levels meeting current demand.
-12-
Item 3. Legal Proceedings
The Company and its subsidiaries are not currently parties to any pending legal
proceedings other than such proceedings incident to its business. Management
believes that such proceedings would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the consolidated
financial position or results of operations of the Company and its subsidiaries
taken as a whole. See further information provided in Item 1. "Business" and
Item 7. "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Item 4. Submission of Matters to a Vote of Security Holders
There were no items submitted for vote of Security Holders.
Item 5. Market for Registrant's Common Equity and Related Stockholders Matters
The Company consummated an exchange offer of notes pursuant to a registration
statement filed under the Securities Act of 1933. There is no established public
trading market for any class of common ("ordinary") equity of the Company. As of
December 27, 1996 there are 13 holders of record of the Company's ordinary
shares.
In connection with the Transactions, the Company issued 34,000,000 shares of
redeemable preference shares. The preference shares accrue fixed, cumulative
dividends of 14% per annum compounded quarterly. These preference shares are
more fully described in Note 6 to the Financial Statements.
During the fourth quarter of fiscal 1996, no securities were issued by the
Company which were not registered under the Securities Act of 1933, except the
initial issuance of notes in connection with the Acquisition. These notes were
sold pursuant to Rule 144A, as previously described in the Company's
Registration Statement on Form S-4.
-13-
Item 6. Selected Historical Financial Data
Set forth below are selected historical financial data of the Company as of the
dates and for the periods presented. For purposes of this presentation, all
predecessor financial data represents such data for the Company when it was a
division of Alumax. The selected historical financial data as of and for each of
the three years in the period ended December 31, 1995, and the nine months ended
September 25, 1996, and the three months ended December 27, 1996, were derived
from the audited Financial Statements of the Company. The selected historical
financial data as of and for the year ended December 31, 1992 were derived from
the unaudited Financial Statements of the Company for such period which, in the
opinion of management of the Company, reflect all adjustments necessary to
present fairly the combined financial position and results of operations of the
unaudited period. Due to required purchase accounting adjustments relating to
the Transaction the consolidated financial and other data for the period
subsequent to the acquisition (the "Successor" period) is not comparable to such
data for the periods prior to the acquisition (the "Predecessor" periods). The
information contained in this table should be read in conjunction "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and accompanying notes thereto included herein.
------------------------------------------------------------------- ----------------- -----------
Predecessor Successor Combined
------------------------------------------------------------------- ----------------- -----------
Nine Three
months months Year
ended ended ended
Year ended December 31, September 25, December 27, December 27,
-------------------------------------------------
Thousands of U.S. Dollars 1992 1993 1994 1995 1996 1996 1996
----------- ---------- ----------- ----------- ---------------- ----------------- -----------
Statement of Earnings Data:
Net sales $ 392,781 $ 385,487 $ 446,572 $ 483,462 $ 363,308 $ 125,529 $ 488,837
----------- ---------- ----------- ----------- ---------------- ----------------- ---------
Costs and expenses:
Cost of goods sold 317,691 316,841 366,717 399,989 300,185 104,055 404,240
Selling and general 34,430 35,336 42,424 41,351 33,286 10,950 44,236
Depreciation and amortization 8,088 7,645 7,672 7,980 6,995 2,591 9,586
----------- ---------- ----------- ----------- ---------------- ----------------- ---------
360,209 359,822 416,813 449,320 340,466 117,596 458,062
----------- ---------- ----------- ----------- ---------------- ----------------- ---------
Earnings from operations 32,572 25,665 29,759 34,142 22,842 7,933 30,775
Interest expense (1,689) (1,950) (1,155) (4,089) ( 930) (6,235) (7,165)
Interest income 1,311 800 900 1,100 308 48 356
Other income (expense) (139) (348) (285) (96) (298) (235) (533)
----------- ---------- ----------- ----------- ---------------- ----------------- ---------
Earnings before income taxes 32,055 24,167 29,219 31,057 21,922 1,511 23,433
Provision for income taxes 15,135 8,708 12,038 11,399 8,342 505 8,847
----------- ---------- ----------- ----------- ---------------- ----------------- ---------
Net earnings 16,920 15,459 17,181 19,658 13,580 1,006 14,586
Dividends on redeemable
preference shares - - - - - 1,191 1,191
----------- ---------- ----------- ----------- ---------------- ----------------- ---------
Net earnings (loss) available
ordinary shareholders for $ 16,920 $ 15,459 $ 17,181 $ 19,658 $ 13,580 $ (185) $ 13,395
=========== ========== =========== =========== ================ ================= =========
Other Data:
Capital expenditures $ 8,879 $ 7,700 $ 9,595 $ 17,429 $ 11,518 $ 682 $ 12,200
Ratio of earnings to fixed charges(1) 12.45x 8.76x 13.04x 6.83x 12.63x 1.26x 3.78x
Balance Sheet Data (end of period):
Working capital $ 79,611 $ 102,707 $ 126,659 $ 127,380 $ 120,940 $ 97,619 $ 97,619
Total assets 170,372 196,541 236,771 236,649 335,766 327,293 327,293
Total long-term debt, including
current maturities _ _ _ _ 235,000 211,740 211,740
Redeemable preference shares _ _ _ _ 34,000 35,191 35,191
Total ordinary shareholders' equity 105,976 110,523 133,786 151,461 1,000 2,173 2,173
- - - ----------------------
(1) Earnings used in computing the ratio of earnings to fixed charges
consist of earnings before income taxes plus fixed charges. Fixed charges
consist of interest expense, including amortization of debt issuance costs
and the estimated interest component of rent expense.
-14-
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the "Selected
Historical Financial Data" and the Financial Statements of the Company and the
accompanying notes thereto included elsewhere herein. Certain risk factors,
among others, should be considered carefully in evaluating the Company and its
business. These risk factors include the following: (i) Substantial Leverage,
(ii) Customers in Cyclical Industries, (iii) Dependence on Aluminum, (iv)
Subordination on New Notes, (v) Restrictions imposed by the Credit Agreement and
Indenture, (vi) Acquisition Strategy, (vii) Risk of Currency Exchange Rate
Fluctuations and International Manufacturing, (viii) Impact of Environmental
Regulation, (ix) Dependence on Key Personnel, (x) Competition, (xi) Controlling
Shareholders, (xii) Limitations on Change of Control, and (xiii) Risk of
Fraudulent Transfer.
General
The Company is a leading international downstream producer of aluminum and steel
products with facilities in the U.S., the U.K., The Netherlands and France.
Euramax's products are produced primarily from light gauge aluminum and steel
coil and include painted sheet and coil, siding, roofing, raincarrying systems,
windows, doors and various trim parts and components. The Company's products are
sold primarily to manufacturers of RV's and manufactured housing, rural building
contractors, distributors and home centers. See "Business." The Company was
formed in 1996 by the Investor Group to acquire certain portions of Alumax's
fabricated products operations pursuant to the Acquisition.
Approximately 60% of the Company's 1996 net sales were derived from sales of
aluminum products. Unlike other raw materials used by the Company, the cost of
aluminum is subject to a high degree of volatility caused by the relationship of
world aluminum supply to world aluminum demand. Historically, prices at which
the Company sells aluminum products tend to fluctuate with corresponding changes
in the prices paid to suppliers for aluminum raw materials. Supplier price
increases of normal amount and frequency can generally be passed to customers
within two to four months. Accordingly, the Company's reported net sales of
aluminum products may fluctuate with little or no change in the volume of
aluminum shipments.
Historically, the Company has not engaged in hedging activities intended to
manage risks relating to fluctuations in foreign currency exchange rates or
movements in market prices of steel and aluminum raw materials. See Note 5 to
the Financial Statements included elsewhere herein for a description of currency
swaps entered into by the Company upon consummation of the Acquisition.
See Note 1 to the Financial Statements included elsewhere herein for a
description of the basis of presentation of financial information and the
Company's relationship with Alumax, its former parent. Alumax operated in a
decentralized manner; therefore, many corporate functions were performed
directly by the Company. However, Alumax provided the Company with certain
administrative services, including but not limited to tax compliance, treasury
services, human resource administration, legal services, and investor relations.
The financial statements included elsewhere herein, and other financial
information set forth herein, have been presented on a combined basis for
periods prior to the Acquisition (the "Predecessor periods"), giving effect to,
among other items, corporate expenses which anticipated requirements as a
stand-alone company.
For purposes of the discussion below, the results of operations for the year
ended December 27, 1996 represent the mathematical addition of the historical
amounts for the Predecessor period (January 1, 1996 through September 25, 1996)
and the Successor period (September 26, 1996 through December 27, 1996) and are
not indicative of the results that would actually have been obtained if the
Acquisition had occurred on December 31, 1995.
Net earnings for the year ended December 27, 1996 totaled $14.6 million as
compared to net earnings of $19.7 million and $17.2 million for the years ended
December 31, 1995 and 1994, respectively. The 1996 results reflect slow growth
in sales due to unfavorable economic conditions in Europe for the first four
months of the year, coupled with increased interest expense from the debt
incurred in connection with the Transactions.
-15-
Results of Operations
The following table sets forth the Company's Statement of Earnings Data
expressed as a percentage of net sales:
December 31, December 31, December 31, December 27,
1993 1994 1995 1996
----------------- ------------------ ----------------- ------------------
Statement of Earnings Data:
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of goods sold 82.2 82.1 82.7 82.7
Selling and general 9.1 9.5 8.5 9.0
Depreciation and amortization 2.0 1.7 1.7 2.0
----------------- ------------------ ----------------- ------------------
Earnings from operations 6.7 6.7 7.1 6.3
Interest expense, net 0.3 0.1 0.7 1.4
Other expense, net 0.1 0.1 0.0 0.1
----------------- ------------------ ----------------- ------------------
Earnings before income taxes 6.3 6.5 6.4 4.8
Provision for income taxes 2.3 2.7 2.3 1.8
----------------- ------------------ ----------------- ------------------
Net earnings 4.0% 3.8% 4.1% 3.0%
================= ================== ================= ==================
Year ended December 27, 1996 compared to the year ended December 31, 1995.
Net sales. Net sales increased 1.1% to $488.8 million for the year ended
December 27, 1996 from $483.5 million for the year ended December 31, 1995. This
increase is primarily attributable to (i) an increase of approximately $13.3
million in net sales in the U.S. due to increased demand in the manufactured
housing and home center markets and (ii) an increase in sales to the vehicular
sector in Europe of approximately $4.2 million, partially offset by (iii) a
decrease in demand in the U.K. industrial market of approximately $7.8 million,
(iv) a weakening of the Company's key foreign currencies totaling approximately
$4.9 million (particularly the Dutch Guilder) compared to the U.S. Dollar and
(v) approximately $500,000 of other individually insignificant occurrences. Net
sales in the U.S. increased 4.6% to $301.1 million in 1996 from $287.8 million
in 1995. Net sales in Europe decreased 4.0% to $187.8 million in the year ended
December 27, 1996 from $195.7 million in the year ended December 31, 1995.
Cost of goods sold. Cost of goods sold, as a percentage of net sales, of 82.7%
for the year ended December 27, 1996 approximated the 1995 cost of goods sold of
82.7%. The average cost of aluminum in 1996 was 18.6% lower than in 1995. Cost
of goods sold for 1996 remained virtually unchanged from 1995. After
consideration of non-recurring charges, cost of goods sold decreased from 82.7%
to 82.1%. This decrease is attributable to non-recurring charges in 1995 which
included $1.9 million paid to the parent company for the difference between
intergroup transfer prices and prices paid locally, $900,000 to outsource
painting costs while upgrading painting facilities and approximately $400,000 in
plant closing costs.
Selling and general. Selling and general expenses, as a percentage of net sales,
increased to 9.0% in the year ended December 27, 1996 from 8.5% in 1995. This
increase is attributable to increases of approximately $750,000 in advertising
and commissions in 1996, increases in corporate charges during 1996 of $567,000,
additional information system expenses incurred in 1996 of $388,000, reversal of
provision for doubtful accounts during 1995 of $264,000, and other individually
insignificant occurrences of approximately $916,000.
Depreciation and amortization. Depreciation and amortization increased by 20.1%
in the year ended December 27, 1996 as compared to 1995. This increase of $1.6
million was due to (i) the Company's investment in a roll coating facility
placed in service in the U.S. in 1996 and (ii) the increased amortization of
goodwill and revalued assets in 1996 resulting from purchase accounting
adjustments.
-16-
Earnings from operations. For reasons stated above, earnings from operations in
the U.S. increased 3.6% to $11.6 million in 1996 from $11.2 million in 1995.
Earnings from operations in Europe decreased 16.2% to $19.2 million in the year
ended December 27, 1996 from $22.9 million in the same period in 1995.
Interest expense, net. Net interest expense in the year ended December 27, 1996
increased substantially to $6.8 million from a 1995 level of $3.0 million. This
increase was due primarily to interest as a result of the Acquisition debt
incurred. Net interest expense in 1995 consisted primarily of interest charged
by Alumax for certain specific intercompany borrowings.
Other expenses, net. Other expense was not significant in either 1996 or 1995.
Provision for income taxes. The effective rate of the provision for income taxes
for the full year 1996 increased to 37.7% from 36.7% in 1995. The increase is
due primarily to a higher portion of earnings taxed in the U.S. in 1996 compared
to 1995. For the full year 1996, 37.8% of earnings from operations were
attributable to the U.S. operations, excluding corporate costs, compared to only
32.8% in 1995. In contrast, earnings in Europe comprised 62.2% in the full year
1996, a decrease from the 67.2% which was reported for the full year 1995, again
excluding any costs at the corporate level. Earnings in the U.S. are subject to
higher income tax rates than in Europe and are also subject to state income
taxes.
Year ended December 31, 1995 compared to year ended December 31, 1994
Net sales. Net sales increased 8.3% to $483.5 million for the year ended
December 31, 1995 from $446.6 million in 1994. The increase was attributable
primarily to (i) an increase of approximately $41.3 million due to higher
selling prices for aluminum products precipitated by a 36.6% increase in
aluminum costs from 1994 to 1995, (ii) an increase in steel shipments of
approximately $15.0 million to manufactured housing producers and (iii) a
strengthening of the Company's key foreign currencies of approximately $14.9
million (particularly the Dutch Guilder) compared to the U.S. Dollar. These
increases were partially offset by an approximate $20.0 million decline in
aluminum sales volume and approximately $14.3 million of other individually
insignificant occurrences. The Company's facilities in the U.S. and Europe both
experienced sales growth as prices increased due to declining world-wide
aluminum inventories brought on by an increase in demand. For these reasons, net
sales in the U.S. increased 0.3% to $287.8 million for the year ended December
31, 1995 from $286.8 million for the year ended December 31, 1994. Net sales in
Europe increased 22.4% to $195.7 million for the year ended December 31, 1995
from $159.8 million for the year ended December 31, 1994.
Cost of goods sold. Cost of goods sold, as a percentage of net sales, increased
to 82.7% in 1995 from 82.1% in 1994. This increase was due to higher average
aluminum costs which could not be immediately passed along to customers and
increased steel usage due to higher volumes sold. The average cost of aluminum
was approximately 36.6% higher in 1995 as compared to 1994. Aluminum costs
included non-recurring charges of approximately $1.9 million paid to the parent
company for the difference between intergroup transfer prices and prices paid
locally. Other non-recurring costs in 1995 included $900,000 to outsource
painting costs while upgrading painting facilities and approximately $400,000 in
plant closing costs.
Selling and general. Selling and general expenses, as a percentage of net sales,
decreased to 8.5% in 1995 from 9.5% in 1994. This decrease was due to (i)
approximately $.7 million of nonrecurring expenses incurred in 1994 related to
the closing of two facilities, (ii) a management information system conversion
which resulted in certain duplicate operating and maintenance costs during 1994
of approximately $600,000, and (iii) an increase in sales largely driven by
aluminum price increases.
Depreciation and amortization. Depreciation and amortization was 1.7% of net
sales in both 1995 and 1994. However, the actual charge increased by
approximately $300,000 due to depreciation expense related to a new coil coating
facility in Lancaster, PA, and the expansion of a European facility to
accommodate the relocation of a sheeting department.
Earnings from operations. For reasons stated above, earnings from operations in
the U.S. decreased 32.8% to $11.2 million for the year ended December 31, 1995
from $16.7 million for the year ended December 31, 1994. Earnings from
operations in Europe increased 75.2% to $22.9 million for the year ended
December 31, 1995 from $13.1 million for the year ended December 31, 1994.
Interest expense, net. Interest expense, net of incidental interest and finance
income, increased to $3.0 million in 1995 from approximately $300,000 in 1994.
This increase was due to discretionary charges of interest on net working
capital that were not charged in previous years by Alumax and its affiliates.
-17-
Other expense, net. Other expense was not significant for the years ended
December 31, 1995 and 1994.
Provision for income taxes. The effective rate for the provision for income
taxes decreased from 41.2% in 1994 to 36.7% in 1995. This decrease was due to a
decline in the earnings of the U.S. operations in 1995 compared to 1994 levels,
partially offset by higher earnings attributable to the European operations.
Earnings in the U.S. are subjected to slightly higher income tax rates than in
the European countries, and are also subject to state income taxes.
Liquidity and Capital Resources
Liquidity. The Company's primary liquidity needs arise from debt service on
indebtedness incurred in connection with the Transactions and the funding of
capital expenditures. As of December 27, 1996, the Company had outstanding
indebtedness for borrowed money of $211.7 million, $35.2 million of Preference
Shares and ordinary shareholders' equity of $2.2 million. Included in such
indebtedness was approximately $76.8 million under the Credit Agreement,
consisting of $40.4 million under the Term Loan and $36.4 million under the
Revolving Credit Facility. The undrawn amount of the Revolving Credit Facility
at year end was approximately $48.6 million which was available for working
capital and general corporate purposes, subject to borrowing base limitations.
As of December 27, 1996, this amount was fully available. The Company's
leveraged financial position requires that a substantial portion of the
Company's cash flow from operations be used to pay interest on the Notes,
principal and interest under the Credit Agreement and other indebtedness.
Further, the Company's leveraged position may impede its ability to obtain
financing in the future for working capital, capital expenditures and general
corporate purposes. In addition, the Company's leveraged position may make it
more vulnerable to economic downturns and may limit its ability to withstand
competitive pressures. The Company believes that cash generated from operations
and, subject to borrowing base limitations, borrowings under the Credit
Agreement will be adequate to meet its needs for the foreseeable future,
although no assurance to that effect can be given.
Principal and interest payments under the Credit Agreement and interest payments
on the Notes represent significant liquidity requirements for the Company. With
respect to the $40.4 million of Term Loans, the Company must make scheduled
quarterly principal payments totaling $2.0 million in 1997, $4.1 million in
1998, $5.1 million in 1999, $3.1 million in 2000, $7.1 million in 2001, $9.5
million in 2002, $9.5 million in 2003. Interest on the Term Loans and the
Revolving Credit Facility will bear interest at floating rates based upon the
interest option selected by the Company.
The Company's primary source of liquidity is funds generated from operations
which will be supplemented by borrowings under the Credit Agreement. Net cash
provided by operating activities increased from $6.0 million in 1995 to $48.6
million in 1996, reflecting an increase in accounts payable and a decrease in
inventories partially offset by a decrease in foreign taxes payable. Net cash
provided by operating activities decreased from $8.3 million in 1994 to $6.0
million in 1995, reflecting a decrease in accounts payable which was partially
offset by a decrease in foreign taxes paid. The 1996 increase in accounts
payable/accrued liabilities represents accrued interest on external debt of $4.7
million and accrued acquisition costs totaling $3.3 million. Decreases in
inventories were realized primarily due to lower aluminium prices and lower
levels of steel inventories. The 1995 decrease in accounts payable was
attributable to changes initiated by management in the timing of payments for
inventory and other services. The 1994 one-time increase in inventories was
attributable to the Company's termination of a steel consignment and inventory
program in the U.S. whereby title on certain steel coil did not pass to the
Company until the coil was opened and fabricated. The Company believes that the
termination of the consignment program, which was initiated by the Company, has
reduced the cost of obtaining and managing steel inventory.
Prior to the Acquisition, the Company met its requirement for capital through
Alumax's centralized cash management system. Under this system, cash received
from the Company's operations was transferred to Alumax's centralized cash
accounts and cash disbursements were funded from centralized cash accounts
rather than directly from operating sources. Cash provided by (used in)
financing activities, net of certain dividends paid by European operations to
Alumax and its affiliates, was ($11.5 million) and $5.6 million in 1995 and
1994, respectively.
Capital expenditures. The Company's capital expenditures were $12.2 million,
$17.4 million, and $9.6 million in 1996, 1995, and 1994, respectively. In 1995,
the Company completed construction of the coil coating facility in Helena,
Arkansas. Capital expenditures related to this project totaled $9.2 million and
$1.6 million in 1995 and 1994, respectively. The core operating equipment of the
Helena facility was obtained by the Company from its former affiliate Alumax
Mill Products, Inc. This equipment, originally located in Riverside, California,
was transferred to the Company at an approximate book value of $2.1 million. The
Company invested
-18-
approximately $8.7 million in additional capital, net of certain State of
Arkansas inducements, to relocate transferred equipment, construct the building
and offices, acquire new equipment, and ready the facility for use. The land on
which the facility is located was granted by the State of Arkansas with a three
year option to purchase up to ten adjacent acres at a cost estimated to be below
market. This facility represents the single largest capital investment made by
the Company in the last five years and provides the Company with a dedicated
operation for painting steel and aluminum coil for distribution to U.S.
fabrication facilities. The Company believes that distinct advantages in
marketing and producing products are derived from having the capabilities of the
Helena facility.
Excluding the Helena coating line, capital expenditures totaled $12.2 million,
$8.2 million, and $8.0 million in 1996, 1995, and 1994, respectively. These
included approximately $2.5 million to acquire a door fabrication facility in
Florida and to upgrade a coating facility in The Netherlands; $2.8 million to
relocate and upgrade a U.K. fabrication facility and to acquire a parcel of land
in 1994 and approximately $600,000 for certain improvements of an embossing
line. The balance of capital expenditures in each year, primarily relate to
purchases and upgrades of fabricating equipment, transportation and material
moving equipment, and information systems. Capital expenditures in the year
ended December 27, 1996 also include $1.9 million for the construction of a
fabrication plant adjacent to the Helena coating facility. This facility is
expected to be completed in mid-1997 at a cost of approximately $400,000.
Capital commitments for 1997 are expected to be $2.1 million to upgrade two
paintlines in Europe.
Working capital management. Working capital was $97.6 million as of December 27,
1996 compared to $127.4 million and $126.7 million as of December 31, 1995 and
1994, respectively. The Company believes that current levels of working capital
represent a liquid source of funds available for future cash flows. The Company
believes that reductions in inventory and accounts receivable can be achieved
upon completion of information systems implementations recently undertaken in
the U.S. The Company believes that these systems will offer distinct advantages
in monitoring credit, open receivables, and inventory levels, while enabling
centralized ordering and inventory management. However, there can be no
assurance that working capital reductions will be achieved.
On May 2, 1997, the Company announced that it has signed a definitive agreement
with Genstar Capital Corporation, Gentek Holdings, Inc. and Gentek Building
Products, Inc. to purchase its Fabral operations headquartered in Lancaster,
Pennsylvania. Closing on this transaction is anticipated to be in the latter
part of June. Fabral employs a total of approximately 200 people at seven
locations and is an industry leader in industrial, commercial, architectural and
agricultural building panels manufactured from aluminum and steel. Management
believes that Fabral will become a valuable addition to Euramax's North American
building products operations. The Fabral acquisition represents one more
significant step in enhancing the substantial building products business
position the Company has in North America.
Inflation and Foreign Currency Translation
In recent years, inflation has not had a significant effect on the Company's
results of operations or financial condition. The assets and liabilities of the
Company's non-U.S. subsidiaries are translated into U.S. dollars at current
exchange rates and revenues and expenses are translated at average exchange
rates. Currency translations on export sales could be adversely affected in the
future by the relationship of the U.S. Dollar with foreign currencies.
Recent Accounting Pronouncements
In June 1996, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. SFAS 125
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. Those standards are based
on consistent application of a financial-components approach that focuses on
control. Under this approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. Most provisions of SFAS 125 are
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996. The provisions of SFAS 125
related to collateral recognition provisions in secured borrowings and for the
provisions related to repurchase agreements, dollar rolls, securities lending,
and similar transactions, are effective for transactions occurring after
December 31, 1997. SFAS 125 is to be applied prospectively. Management is
currently reviewing the provisions of SFAS 125 and does not believe that the
Company's financial statements will be materially negatively impacted by the
adoption.
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In February 1997, the FASB issued SFAS No. 129, Disclosure of Information About
Capital Structure, which the Company is required to adopt in 1997. SFAS No. 129
requires more detailed disclosures about an entity's capital structure. As such,
SFAS No. 129 is a disclosure requirement only and will not have an impact on the
Company's financial position, annual operating results or cash flows.
Environmental Matters
The Company's U.S. and European facilities, like similar manufacturing
facilities, are subject to a range of federal, state, local and foreign
environmental laws and regulations ("Environmental Laws"), including those
relating to air emissions, wastewater discharges, the handling and disposal of
solid and hazardous waste, and the remediation of contamination associated with
the current and historic use of hazardous substances or materials. If a release
of hazardous substances or materials occurs on or from the Company's properties
or any offsite disposal location used by the Company, or if contamination from
prior activities is discovered at any of the Company's properties, the Company
may be held liable for the costs of remediation including response costs,
natural resource damage and associated transaction costs. While the amount of
such liability could be material, the Company devotes resources to ensuring that
its operations are conducted in a manner intended to reduce such risks.
Based upon an environmental review conducted by outside consultants in
connection with the Acquisition and assuming compliance by Alumax with its
indemnification obligations under the Acquisition Agreement, the Company
believes that it is currently in compliance with, and not subject to liability
under, Environmental Laws except where such noncompliance or liability would not
reasonably be expected to have a material adverse effect on the consolidated
financial position or results of operations of the Company and its subsidiaries
taken as a whole. Pursuant to the terms of the Acquisition Agreement, Alumax has
agreed to correct and to bear substantially all costs with respect to certain
identified conditions of potential noncompliance and liability under
Environmental Laws, none of which costs are currently believed to be material.
Alumax's indemnification obligations under the Acquisition Agreement are not
subject to an aggregate dollar limitation with respect to specifically
identified environmental matters. However, with respect to all other
environmental matters, Alumax's obligations are limited to $125.0 million.
Liability with respect to hazardous substance or material releases in the U.S.
arises principally under the federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended "CERCLA" and similar state
laws, which impose strict, and under certain circumstances, retroactive, joint
and several liability upon statutorily defined classes of potentially
responsible parties ("PRP's"). The Company has been identified as a PRP at nine
National Priorities List ("NPL") sites under CERCLA, although two of these nine
sites may relate to disposal by divisions of Alumax that have never been and are
not now part of the Company. Pursuant to the terms of the Acquisition Agreement,
Alumax has agreed to indemnify the Company for all of the costs associated with
each of these nine NPL sites. In addition, Alumax has agreed to indemnify the
Company for all of the costs associated with eleven additional sites listed on
state hazardous site cleanup lists, with respect to which the Company has not
received any notice of potential responsibility.
The Company is currently engaged in environmental remediation or has reason to
believe that remediation may be required at three properties currently operated
by the Company. The Company's Mesa, Arizona facility is currently listed on the
federal Comprehensive Environmental Response, Compensation, and Liability
Information System ("CERCLA") list of sites under review by U.S. Environmental
Protection Agency for inclusion on the NPL. In addition, the Mesa facility is
located within a state-designated groundwater contamination area and the Company
may consequently be identified as a PRP with respect to such contamination.
Although the Company believes that it is unlikely that its Mesa facility itself
will be designated as an independent NPL site, there can be no assurance that
the costs associated with further investigation and any cleanup at the site and
the Company's share of cleanup costs for the regional groundwater contamination
cleanup will not be material. Alumax has agreed to indemnify the Company for all
costs of required remediation including any required response costs at the Mesa
facility that may be incurred by the Company in excess of $500,000 (when
aggregated with all other environmental claims).
At the Company's Montreuil-Bellay, France facility, the Company has been
discharging wastewater potentially containing solvents to the ground at the
site. In addition, a spill from the facility's anodizing line may have resulted
in contamination of soil and groundwater. Because no subsurface investigation
has been conducted at the site, there can be no assurance that the costs
associated with each of these issues will not be material. As with the Mesa,
Arizona facility, however, Alumax has agreed to indemnify the
-20-
Company for any costs of required remediation including any required response
costs with respect to each of these issues that may be incurred by the Company
in excess of $500,000 (when aggregated with all other environmental claims).
At the Company's Corby, England facility, the Company has undertaken a
remediation of chromium-contaminated groundwater onsite, which remediation may
continue for a number of years. Although some upgrades to the groundwater
treatment system may be required within the next year to complete the
remediation, the costs associated with such an upgrade and with the completion
of remediation at the site are not expected to be material. Alumax Inc. has
agreed to indemnify the Company for all of the costs of required remediation at
this site in excess of $500,000 (when aggregated with all other environmental
claims).
The Company has made and will continue to make capital expenditures to comply
with Environmental Laws. The Company spent approximately $983,100 and $1.9
million in 1996 and 1995 respectively on environmental capital projects. These
expenditures were primarily related to environmental controls associated with a
paint line upgrade in Lancaster, Pennsylvania and a new coil coating facility in
Helena, Arkansas. The Company estimates that its environmental capital
expenditures will be approximately $125,000 in 1997.
Certain risk factors, among others, should be considered carefully in evaluating
the Company and its business. For additional detail, plese refer to
"Business-Risk Factors" contained in Part I, Item 1 of this Form 10-K. Also, see
the note preceding Part I of "Business" for additional information regarding the
Private Securities Litigation Reform Act.
-21-
Item 8. Financial Statements and Supplementary Data
-22-
Report of Independent Accountants
To the Board of Directors and Shareholders
Euramax International plc and Subsidiaries
We have audited the accompanying consolidated balance sheets of Euramax
International plc and Subsidiaries (the "Company" and see Note 1) as of December
31, 1995 and December 27, 1996, and the related consolidated statements of
earnings and cash flows for the years ended December 31, 1994 and 1995, the nine
months ended September 25, 1996 and the three months ended December 27, 1996.
These consolidated 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 generally accepted auditing
standards. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Euramax
International plc and Subsidiaries, as of December 31, 1995 and December 27,
1996, and the results of their operations and their cash flows for the years
ended December 31, 1994 and 1995, the nine months ended September 25, 1996 and
the three months ended December 27, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
April 4, 1997, except for Note 14, which is as of May 2, 1997
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
--------------------------------------------------------------- ---------------------
PREDECESSOR SUCCESSOR
--------------------------------------------------------------- ---------------------
FOR THE NINE FOR THE THREE
FOR THE YEARS ENDED DECEMBER 31, MONTHS ENDED MONTHS ENDED
----------------------------------------- SEPTEMBER 25, DECEMBER 27,
1994 1995 1996 1996
------------------- -------------------- --------------- ------------------
Thousands of U.S. Dollars
Net sales $ 446,571.8 $ 483,461.9 $ 363,307.6 $ 125,529.4
Cost and expenses:
Cost of goods sold 366,716.8 399,989.0 300,184.8 104,055.4
Selling and general 42,424.3 41,350.7 33,286.1 10,950.3
Depreciation and amortization 7,672.2 7,980.2 6,995.0 2,590.7
------------------- -------------------- --------------- ----------------
Earnings from operations 29,758.5 34,142.0 22,841.7 7,933.0
Interest expense, net (255.2) (2,988.4) (621.8) (6,186.4)
Other expense, net (284.2) (96.2) (297.7) (235.3)
------------------- -------------------- --------------- ----------------
Earnings before income taxes 29,219.1 31,057.4 21,922.2 1,511.3
Provision for income taxes 12,037.8 11,399.1 8,342.3 505.5
------------------- -------------------- --------------- ----------------
Net earnings 17,181.3 19,658.3 13,579.9 1,005.8
Dividends on redeemable preference shares - - - (1,191.0)
------------------- -------------------- --------------- ----------------
Net earnings (loss) available for
ordinary shareholders $ 17,181.3 $ 19,658.3 $ 13,579.9 $ (185.2)
=================== ==================== =============== ===============
The accompanying notes are an integral part of these consolidated
financial statements.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
PREDECESSOR SUCCESSOR
---------------------- ---------------------
Thousands of U.S. Dollars, except share data DECEMBER 31, 1995 DECEMBER 27, 1996
---------------------- ---------------------
ASSETS
Current assets:
Cash and cash equivalents $ 12,586.9 $ 12,515.7
Accounts receivable, less allowance for doubtful accounts
(1995 - $2,582.0; 1996 - $3,404.2) 60,006.4 60,766.7
Inventories 101,454.5 87,235.1
Deferred income taxes - 1,483.5
Other current asssets 1,340.3 1,349.9
---------------------- ---------------------
Total current assets 175,388.1 163,350.9
Property, plant and equipment, net 60,024.6 107,338.3
Goodwill, net of accumulated amortization (1995 - $0; 1996 - $328.4) - 40,925.8
Other assets 1,236.1 15,677.7
---------------------- ---------------------
$ 236,648.8 $ 327,292.7
====================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,409.1 $ 38,221.4
Accrued expenses 16,917.8 23,993.9
Income taxes payable 2,681.5 1,516.9
Current maturities of long-term debt - 2,000.0
---------------------- ---------------------
Total current liabilities 48,008.4 65,732.2
Long-term debt, less current maturities - 209,740.0
Other liabilities 2,392.2 4,721.7
Due to former parent 33,562.4 -
Deferred income taxes 1,225.0 9,735.2
---------------------- ---------------------
Total liabilities 85,188.0 289,929.1
---------------------- ---------------------
Commitments and contingencies
Redeemable preference shares:
Preference shares - 14% cumulative preferred, no par value; 33,925,000 shares
authorized, issued and outstanding, plus cumulative dividends of $1,188 - 35,113.4
Sterling preference shares - 14% cumulative preferred, no par value; 50,000 shares,
at 1 British Pound Sterling, authorized, issued and outstanding, plus cumulative
dividends of $3 - 77.6
---------------------- ---------------------
Total redeemable preference shares - 35,191.0
---------------------- ---------------------
Ordinary shareholders' equity:
Company equity 151,460.8 -
Ordinary shares - no par value; 911,520 shares authorized, issued and outstanding - 911.5
Non-voting shares - no par value; 88,420 shares authorized, issued and outstanding - 88.5
Sterling ordinary shares - no par value; 50,000 shares, at 1 British Pound Sterling,
authorized; no shares issued and outstanding - -
Accumulated deficit - (185.2)
Foreign currency translation adjustment - 1,357.8
---------------------- ---------------------
Total ordinary shareholders' equity 151,460.8 2,172.6
---------------------- ---------------------
$ 236,648.8 $ 327,292.7
====================== =====================
The accompanying notes are an integral part of these consolidated financial
statements.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Common
Stock and
Thousands of U.S. Dollars Paid-in Retained Translation
Predecessor Capital Earnings Adjustment Total
-------------------- ---------------------- ---------------- ----------------
Balance, December 31, 1993 $ 41,450.2 $ 79,723.9 $ (10,005.8) $ 111,168.3
Net earnings for 1994 - 17,181.3 - 17,181.3
Dividends declared/paid - (111.2) - (111.2)
Foreign currency adjustment - - 5,547.7 5,547.7
--------------------- ---------------------- ---------------- --------------
Balance, December 31, 1994 41,450.2 96,794.0 (4,458.1) 133,786.1
Net earnings for 1995 - 19,658.3 - 19,658.3
Dividends declared/paid - (4,037.3) - (4,037.3)
Foreign currency adjustment - - 2,053.7 2,053.7
--------------------- ---------------------- ---------------- --------------
Balance, December 31, 1995 41,450.2 112,415.0 (2,404.4) 151,460.8
Net earnings for the nine months ended
September 25, 1996 - 13,579.9 - 13,579.9
Foreign currency adjustment - - 3,142.4 3,142.4
---------------------- ---------------------- ---------------- -------------
Balance, September 25, 1996 $ 41,450.2 $ 125,994.9 $ 738.0 $ 168,183.1
==================== ====================== ================ ==============
Retained Foreign
Earnings Currency
Ordinary (Accumulated Translation
Shares Deficit) Adjustment Total
--------------- --------------- --------------- -------------
Successor
Balance, September 25, 1996 (reflects the
new basis of shares in connection
with the acquisition) $ 1,000.0 $ - $ - $ 1,000.0
Net earnings for the three months ended
December 27, 1996 - 1,005.8 - 1,005.8
Dividends accrued on redeemable
preference shares - (1,191.0) - (1,191.0)
Foreign currency adjustment - - 1,357.8 1,357.8
--------------- ----------- ----------- ---------
Balance, December 27, 1996 $ 1,000.0 $ (185.2) $ 1,357.8 $ 2,172.6
=============== =========== =========== ============
The accompanying notes are an integral part of these consolidated financial
statements.
EURAMAX INTERNATIONAL PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------- -----------------
Predecessor Successor
-------------------------------------------------- -----------------
Thousands of U.S. Dollars For the year For the year For the nine For the three
ended ended months ended months ended
December 31, December 31, September 25, December 27,
1994 1995 1996 1996
--------------- -------------- --------------- -------------------
Cash flows from oeprating activities:
Net earnings $ 17,181.3 $ 19,658.3 $ 13,579.9 $ 1,005.8
Reconciliation of net earnings to net cash provided by
operating activities:
Depreciation and amortization 7,672.2 7,980.2 6,995.0 2,590.7
Provision for doubtful accounts 1,451.4 388.2 827.2 221.3
(Gain) loss on sales of assets 142.6 146.7 (168.3) (7.4)
Deferred income taxes 603.7 (526.0) (338.7) (760.5)
Changes in operating assets and liabilities:
Accounts receivable (9,574.3) (2,019.3) (9,176.0) 11,962.1
Inventories (24,855.0) (9,196.5) 4,437.5 7,001.1
Other current asssets 722.6 929.9 193.3 (129.9)
Accounts payable and other current liabilities 19,712.8 (17,727.7) 5,851.5 4,427.3
Income taxes payable (4,607.9) 6,073.7 (1,787.7) 1,378.0
Net change in other noncurrent assets and
liabilities (127.8) 258.6 (172.9) 688.2
----------------- ----------------- --------------- -------------
Net cash provided by operating activities 8,321.6 5,966.1 20,240.8 28,376.7
----------------- ----------------- --------------- -------------
Cash flows from investing activities:
Purchase of Fabricated Products - - - (251,213.0)
Proceeds from sale of assets 1,465.3 177.0 233.0 91.6
Capital expe