UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

(Mark One)

For the fiscal year ended December 31, 2004

Commission File No. 333-46607-12

(724) 588-2550
(Co-registrant’s telephone number including area code)

Commission File No. 333-46607

(302) 478-5723
(Co-registrant’s telephone number including area code)

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

Indicate by check mark whether each of the co-registrants (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. o Yes o 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 each of the co-registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether each of the co-registrants is an accelerated filer (as defined in Rule 12b-2 of the Act). o Yes
þ No

State the aggregate market value of the voting stock held by non-affiliates of each of the co-registrants. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing.

Indicate the number of shares outstanding of each of the co-registrants’ classes of common stock, as of December 31, 2004:

DOCUMENTS INCORPORATED BY REFERENCE
None

Index to Annual Report on Form 10-K
Year Ended December 31, 2004

FORWARD-LOOKING STATEMENTS

     This Annual Report on Form 10-K contains certain forward-looking statements which include, among other things, discussions of the Company’s (as defined) business and results of operations, position in its industries, future operations, liquidity and capital resources. These forward-looking statements are based upon estimates and assumptions made by management of the Company that, although believed to be reasonable, are inherently uncertain. Therefore, undue reliance should not be placed upon such statements and estimates. No assurance can be given that any of such statements or estimates will be realized and it is likely that actual results will differ materially from those contemplated by such forward-looking statements.

     The information presented in this Annual Report on Form 10-K relates to Werner Holding Co. (PA), Inc., a Pennsylvania corporation (“Holding (PA)”), its wholly-owned subsidiary, Werner Holding Co. (DE), Inc. (“Holding (DE)”) and Werner Co., a Pennsylvania corporation and Holding (DE)’s wholly-owned subsidiary (“Werner”). Holding (PA) has no substantial operations or assets other than its investment in Holding (DE) and Holding (DE) has no substantial operations or assets other than its investments in its subsidiaries. As used herein and except as the context otherwise may require, the “Company” means Holding (PA), Holding (DE), Werner and all of their consolidated subsidiaries.

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PART I

Item 1. Business.

Overview

     Holding (PA), incorporated in 1945, and Holding (DE), incorporated in 1988, are the holding companies of Werner Co., a corporation engaged in the manufacture and sale of climbing products and aluminum extruded products. According to management’s estimates, Werner is the nation’s largest manufacturer and marketer of ladders and other climbing products. Werner’s climbing products include aluminum, fiberglass and wood ladders, scaffolding, stages and planks. The Werner brand name has over a 50 year history and Werner is the most recognized name by professional end-users of climbing products in the United States. In addition to climbing products, Werner manufactures and sells aluminum extruded products and more complex fabricated components to a number of industries, including the automotive, electronics, and architectural and construction industries.

Description of the Business

     The Company operates in two business segments, Climbing Products and Extruded Products.

     Climbing Products

     Werner manufactures approximately 1,100 stock keeping units of fiberglass, aluminum, and wood climbing products and accessories primarily under the Werner brand and selectively under the Keller and Stanley brands. The Company produces five principal categories of climbing equipment: (i) single and twin stepladders; (ii) extension, fixed, and multipurpose ladders; (iii) attic ladders; (iv) stages, planks, work platforms, and scaffolds; and (v) assorted ladder accessories. The majority of the Company’s climbing products sales are of either aluminum or fiberglass ladders. Through its development of proprietary aluminum extrusion and fiberglass pultrusion technology, and its broad sales and distribution system, the Company is a leader in the climbing products industry.

     The Company’s sales and marketing network is directed by an experienced in-house sales team of national and regional sales managers. The Company’s climbing products are sold directly and through approximately 45 independent, commissioned manufacturer’s representative organizations, which sell to four major distribution channels: (i) home improvement, (ii) hardware, (iii) professional and (iv) other retail. The Company’s sales organization is further supported by field merchandisers who assist customers with product merchandising, point-of-purchase signage and sales techniques.

     Extruded Products

     The Company is also a manufacturer of lineal extruded products and highly-engineered fabricated parts. The Company targets extruded products customers who require special metallurgy, tight tolerances, unusual shapes, painting, finishing and fabrication requirements. Werner has implemented sophisticated quality systems, and has been awarded ISO-9002, QS-9000 and TS 16949 certifications.

     Werner sells aluminum extrusions to customers in the automotive, electronics, architectural and construction industries who use them in a broad range of products including cellular phone panels, garage door lift systems, material handling and factory automation equipment, electrical connectors, recreational vehicle accessories, and commercial lighting and window wall systems.

     The Company’s extruded products sales organization is supplemented by approximately nine independent manufacturer’s representative organizations. The Company operates on a “make-to-order” basis with most extruded products customers.

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Segments

     See Note O entitled “Segment Information” included in the notes to consolidated financial statements for financial information for each of the Company’s business segments.

Raw Materials and Suppliers

     The Company is a major consumer of aluminum and has contracts to provide most of its estimated aluminum requirements with three principal suppliers. These contracts include stipulated prices with provisions for price adjustments based on market prices. Two of these contracts will be renegotiable in 2005 and one will be renegotiable in 2007. The Company has several alternative sources for its aluminum requirements and does not believe that any one of these contracts is material to the Company’s operations.

     The Company follows various hedging strategies intended to mitigate the impact of raw material price fluctuations. From time to time, the Company has utilized futures and option contracts to hedge the risk associated with price fluctuations for a certain percentage of its forecasted aluminum raw material requirements. The Company’s practice is not to hold derivative commodity instruments, including aluminum futures and option contracts, for trading purposes. These futures and option contracts are placed with established metal brokers and can range up to two years in duration. The Company has several alternative brokers and does not believe that any one of these contracts is material to the operations of the Company.

     The Company also has contracts to purchase the basic materials required for fiberglass pultrusion with its principal suppliers. These contracts are typically one to three years in length. The Company has several alternative sources for these basic materials and does not believe that any one of these contracts is material to the operations of the Company.

Patents, Trademarks and Licenses

     No business segment is dependent, to any significant degree, on patents, licenses, franchises or concessions and the loss of these patents, licenses, franchises or concessions would not have a material adverse effect on any business segment. The Company owns numerous patents worldwide, none of which are material to the Company’s operations as a whole. These patents expire from time to time over the next 20 years. The Company holds licenses, franchises and concessions, none of which individually or in the aggregate is material to the Company’s operations as a whole. These licenses, franchises and concessions vary in duration from one to 15 years.

     The Company has numerous trademarks that are utilized in its businesses worldwide. The Werner logo trademark is material to both of the Company’s business segments. This well-known trademark enjoys a reputation for quality and value and, in the climbing products industry, is among the world’s most trusted brand names. While the Company believes its other trademarks are important to its business operations, the loss of any of these other trademarks would not have a material adverse effect on the Company’s operations as a whole.

Sensitivity to Economic Cycles and Weather Conditions

     A significant percentage of the Company’s sales of climbing products is attributable to new residential and nonresidential construction in the United States, which are affected by such cyclical factors as interest rates, inflation, consumer spending habits and employment. Similarly, a significant percentage of the Company’s sales of extruded products is attributable to the new and used automobile and automotive parts markets, which are also affected by such cyclical factors. Sales of climbing equipment are also sensitive to prevailing weather conditions. Unusually severe weather can reduce or defer sales of climbing products by delaying home construction and elective home maintenance and discouraging do-it-yourself projects, which account for a growing portion of the Company’s sales.

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Backlog

     Due to the Company’s ability to quickly meet production orders and its production forecasting systems, the Company has no significant backlog in climbing products. Most extruded products are produced on a make-to-order basis.

Competition

     Management estimates that, while it is the largest U.S. producer of climbing products, there were approximately 12 principal foreign and domestic competitors in 2004. Foreign manufacturers compete in U.S. markets primarily on the basis of price. The Company competes in its climbing products segment on the basis of its reputation for product quality, its well-known brands, its emphasis on customer service, the breadth of its product lines and its commitment to product innovation.

     In its extruded products business, the Company competes with integrated primary aluminum producers, large independent producers and numerous small independent producers located throughout the United States. The Company competes in its extruded products segment on the basis of its specialized extrusion capabilities, customer service and price.

     Some of the Company’s competitors in the climbing products and the extruded products markets have greater financial resources and are less leveraged than the Company. Some of the Company’s extruded products competitors are larger than the Company.

Employees

     The Company had approximately 1,800 salaried and hourly employees as of December 31, 2004. Of the 1,300 hourly employees, approximately 1,200 are covered by seven collective bargaining agreements which expire in 2005 through 2008. The Company plans to renegotiate and renew union contracts as they expire. The Company believes that its labor relations are satisfactory at all of its facilities. Additionally, the Juarez, Mexico facility utilized approximately 300 individuals on a contract basis to operate as of December 31, 2004.

Dependence on Key Customers

     During December 2003, the Company announced that it had entered into a long term strategic alliance with Lowe’s Companies, Inc. (“Lowe’s”). Under this arrangement, Lowe’s is the exclusive source for Werner® branded climbing equipment in the warehouse home center channel. Werner supplies all of Lowe’s climbing equipment requirements and with Lowe’s, jointly promotes and markets Werner® branded products. In addition, Werner has the opportunity to enter into new climbing equipment categories at Lowe’s. Lowe’s and Werner have jointly committed to developing strategic plans to increase ladder sales. Other than its alliance with Lowe’s, the Company does not have contractual agreements for the supply of products with most of its other climbing products customers. Sales to Lowe’s accounted for 32%, 22% and 18% of the Company’s net sales in 2004, 2003 and 2002, respectively.

     During October 2003, the Company announced that its then largest customer, Home Depot, would no longer purchase aluminum and fiberglass stepladders from the Company but would instead source these products directly from China. Werner was also included in an extension ladder supplier line review at Home Depot that began in October 2003. After careful consideration and extensive analyses, taking into account the Company’s long-term interests, value and brand equity of Werner, the Company announced in December 2003 that it had decided to discontinue supplying Werner® branded products to Home Depot. In order to provide for an orderly transition, the Company continued supplying Werner® branded climbing equipment to Home Depot into the first quarter of 2004. The financial impact of no longer supplying Home Depot is significant (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Executive Summary and Current Developments”). The loss of certain other key climbing products customers or a significant decrease in the volume of products supplied to any of such customers could have a material adverse effect on the Company. Sales to Home Depot accounted for 27% and 31% of the Company’s net sales in 2003 and 2002, respectively.

     No extruded products customer accounted for more than 10% of the Company’s 2004 total net sales.

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Environmental Regulation

     The Company’s operations are subject to a wide variety of federal, state and local laws and regulations governing, among other things, emissions to air, discharge to waters, the generation, handling, storage, transportation, treatment and disposal of hazardous substances and other materials, and employee health and safety matters. Also, as an owner and/or operator of real property or a generator of hazardous substances, the Company may be subject to environmental cleanup liability, regardless of fault, pursuant to the Comprehensive Environmental Response Compensation and Liability Act or analogous state laws. The Company believes that its operations and facilities have been and are being operated in compliance in all material respects with applicable environmental and health and safety laws and regulations. However, the operation of manufacturing plants entails risks of financial exposure for environmental noncompliance and cleanup liabilities. Capital and operating expenditures for environmental compliance in 2004 were not material. There can be no assurance that the Company will not incur costs in the future for cleanup and other remedial activities that will have a material adverse effect on the Company. In addition, potentially significant expenditures could be required in order to comply with evolving environmental and health and safety laws, regulations or requirements that may be adopted or imposed in the future.

Previous Transactions

     The Recapitalization. On June 11, 2003, a recapitalization of the Company (the “Recapitalization”) was completed. On May 7, 2003, the Company entered into a Recapitalization and Stock Purchase Agreement (the “Recapitalization Agreement”) with Green Equity Investors III, L.P. (“GEI”), an affiliate of Leonard Green & Partners L.P. (“Leonard Green”), and certain shareholders of the Company. Pursuant to the Recapitalization Agreement (i) GEI invested $65.0 million in the Company in exchange for 65,000 shares of Series A Preferred Stock (see Note G to the Company’s consolidated financial statements included herein), (ii) the Company redeemed 39.66% of its outstanding shares of capital stock for payments totaling $147.0 million and (iii) the Company made certain other payments including $3.0 million to the holders of options to purchase the Company’s Class C Common Stock in consideration for the cancellation of certain of their vested options (collectively, the “Recapitalization”). The Series A Preferred Stock represented approximately 22% of the outstanding voting shares of capital stock as of the date of the Recapitalization. The Recapitalization was accounted for as a leveraged recapitalization at historical cost principally due to the fact that less than 80% of the voting securities were acquired. As part of the Recapitalization, the Company entered into a $230 million credit facility (see Note E to the Company’s consolidated financial statements included herein) with a syndicate of banks consisting of a $180 million Term Loan and a $50 million Revolving Credit Facility. The Company used $115.4 million to repay in full its existing senior credit facility which was terminated as of the date of the Recapitalization.

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Item 2. Properties.

     The Company believes its manufacturing, warehouse and office facilities are suitable and adequate. The Company also believes that its facilities are being utilized consistently with the Company’s plans. The Company’s principal facilities consist of the:

     As of December 31, 2004, the Company’s facility at Greenville, Pennsylvania primarily serves the extruded products segment of the Company’s business. All other facilities serve the climbing products segment of the Company’s business.

Item 3. Legal Proceedings.

     The Company is involved from time to time in various legal proceedings and claims incident to the normal conduct of its business. Although it is impossible to predict the outcome of any pending legal proceeding, the Company believes that such legal proceedings and claims, individually and in the aggregate, are either without merit, covered by insurance or adequately reserved for, and will not have a material adverse effect on its results of operations, financial position or cash flows.

Item 4. Submission of Matters to a Vote of Security Holders.

     None.

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Part II

Item 5. Market for Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

     There is no established public trading market for the common stock of either Holding (PA) or Holding (DE). As of December 31, 2004, all of the issued and outstanding shares of Holding (DE)’s common stock were held by Holding (PA). The number of shareholders of record of each class of common stock of Holding (PA) as of December 31, 2004 is as follows:

Class A Common Stock: 26 holders Class B Common Stock: 109 holders Class C Common Stock: 28 holders Class D Common Stock: 11 holders Class E Common Stock: 12 holders

     No dividends have been paid to common shareholders of Holding (PA) in the last two years and no dividends are expected to be declared in the near future. Holding (DE) declares and pays from time to time, certain cash dividends to its sole shareholder, Holding (PA), in order to allow Holding (PA) to pay certain obligations such as taxes and ordinary course operating expenses not exceeding $2,000,000 in any fiscal year. The Senior Credit Facility and the Indenture governing the Notes limit the Company’s ability to pay dividends on its capital stock.

     Holding (DE) has not issued or sold any equity securities within the past three years that were not registered under the Securities Act of 1933, as amended (the “Securities Act”). Holding (PA) has not issued or sold any equity securities within the past three years that were not registered under the Securities Act, except as follows:

     (a) On various dates from November 24, 1997 through December 31, 2004, pursuant to Holding (PA)’s Stock Option Plan, Holding (PA) has granted to key employees of Werner non-qualified incentive stock options, exercisable at prices ranging from $500.00 to $3,100.00 per share, to purchase up to an aggregate of 4,359 shares of Class C Common Stock as of December 31, 2004. See Note I entitled “Stock Incentive Plans” in the notes to consolidated financial statements included herein for additional information.

     (b) On various dates from January 1, 1999 to October 14, 2002, certain members of Werner’s management purchased shares of Holding (PA)’s Class C Common Stock at purchase prices ranging from $2,421.29 to $3,100.00 per share, or an aggregate of approximately $5,878,000 pursuant to Management Stock Purchase Agreements. Certain of these individuals received secured loans from the Company pursuant to its Stock Loan Plan to finance a portion of the purchase price paid for the shares of Class C Common Stock in an aggregate amount of approximately $3,726,000. The balance of such loans, excluding interest thereon, is $610,000 at December 31, 2004. See Note I entitled “Stock Incentive Plans” in the notes to consolidated financial statements included herein for additional information.

     (c) On June 11, 2003, as part of the Recapitalization, Holding (PA) sold to GEI 65,000 shares of Series A Participating Convertible Preferred Stock at an aggregate offering price of $65,000,000. See Note G entitled “Convertible Preferred Stock” in the notes to consolidated financial statements included herein for additional information.

     (d) On November 10, 2003, as part of the settlement of a shareholders derivative action entitled Elizabeth Werner, et al v. Eric J. Werner, et al (Civil Action 98-503), Holding (PA) issued 100 shares of Class B Common Stock to the plaintiffs in exchange for the dismissal with prejudice of the lawsuit and the full release of claims.

     The transactions set forth in paragraph (a) above were undertaken in reliance upon the exemption from the registration requirements of the Securities Act afforded by Rule 701 promulgated thereunder, as sales by an issuer to employees, directors or officers pursuant to written compensatory benefit plans or written contracts relating to the compensation of such persons. The transactions set forth in paragraphs (b), (c) and (d) above were undertaken in reliance upon the exemption from the registration requirements of the Securities Act afforded by Section 4(2) thereof and/or Regulation D promulgated thereunder, as sales not involving a public offering. The Company believes that exemptions other than those specified above may exist with respect to the transactions set forth above.

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Item 6. Selected Financial Data.

     The following selected consolidated financial data is that of Holding (PA). Holding (PA) is a guarantor of the 10% Senior Subordinated Notes due 2007 issued by Holding (DE) in 1997 (the “Notes”) and has no substantial operations or assets other than its investment in Holding (DE). As a result, the consolidated financial condition and results of operations of Holding (PA) are substantially the same as those of Holding (DE). This table contains selected financial data and is qualified by the more detailed Consolidated Financial Statements and Notes thereto of Holding (PA). The selected financial data should be read in conjunction with the Consolidated Financial Statements and Notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein.

See Notes to Selected Consolidated Historical Financial Data.

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Notes to Selected Consolidated Historical Financial Data
(Dollars in Millions)

(a)	Recapitalization expense reflects costs incurred in connection with a recapitalization that occurred in 2003. See Note C to the consolidated financial statements included herein for additional information.
(b)	As further described in Note P included in the notes to the financial statements, the Company implemented restructuring and other cost reduction initiatives beginning in 2003. Costs related to such activities totaled $24.3 in 2004 and $6.4 in 2003. The total costs incurred during 2004 includes $9.0 recorded in “Restructuring and other cost reduction initiatives”, $8.8 recorded in “Cost of sales” and $6.5 recorded in “Selling and distribution expenses.” The total costs incurred during 2003 includes $2.9 recorded in “Restructuring and other cost reduction initiatives”, $2.0 recorded in “Cost of sales” and $1.5 recorded in “Selling and distribution expenses.”
(c)	Other income (expense), net for 2004, 2003, 2002, 2001 and 2000 includes $1.3, $0.7, $0.6, $1.3 and $1.9, respectively, of accounts receivable securitization expense.
(d)	The shareholders’ deficit occurred as a result of a redemption of common stock of $332.9 in connection with a recapitalization that occurred in 1997. The shareholders’ deficit increased in 2003 by $147.0 as a result of redemption of common stock that occurred in connection with the recapitalization that occurred in 2003. See Note C to the consolidated financial statements included herein for additional information.
(e)	Depreciation and amortization is comprised of the following components in 2004, 2003, 2002, 2001 and 2000: depreciation of property, plant and equipment, $16.6, $12.9, $12.1, $10.4 and $9.1, respectively; and amortization, $5.0, $4.8, $3.8, $4.2 and $3.7, respectively. Depreciation and amortization excludes amortization of deferred financing fees and original issue discount.

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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 Consolidated Historical Financial Data,” and the Consolidated Financial Statements of the Company and the Notes thereto included elsewhere in this Annual Report on Form 10-K. In the text below, financial statement amounts have been rounded and the percentage changes are based on the financial statements.

Executive Summary

     Operations

     Werner is the largest U.S. manufacturer and marketer of ladders and other climbing products. Werner also manufactures and sells aluminum extruded products and more complex fabricated components. Werner’s climbing products are sold to four major distribution channels which include home improvement, other retail, hardware and professional. The Company’s climbing products segment generated 84% of the Company’s consolidated net sales during 2004. The extruded products business primarily involves “make-to-order” products for the automotive, electronics, architectural and construction industries. Extruded products generated 16% of consolidated net sales during 2004.

     Net sales recorded in 2004 totaled $446.2 million which is a decline of $54.9 million, or 11.0%, from net sales recorded in 2003. As previously disclosed, the Company discontinued supplying its then largest customer, Home Depot, during the first quarter of 2004. The decline in net sales was due to lower sales to Home Depot which was partially offset by increased sales to other customers. As also previously disclosed, the Company entered into a long term strategic alliance with Lowe’s which began in the first quarter of 2004. Under the arrangement, Lowe’s is the exclusive source for Werner® branded climbing equipment in the warehouse home center channel and Werner supplies all of Lowe’s climbing equipment requirements.

     Operating profit in 2004 was $8.9 million which is $39.1 million lower than 2003 operating profit of $48.0 million. The major factors negatively impacting profitability are rising raw material and freight costs, higher restructuring and related costs, lower unit sales volumes for climbing products, a less profitable product mix for climbing products, and increased costs for climbing products sales incentives, promotions and advertising initiated in response to competitive pricing pressures.

     Sales volumes in 2004 are significantly less than 2003. In order to better align the Company’s cost structure with the reduction in sales volumes, a restructuring and downsizing program was initiated in early 2004 which, in part, accelerated and expanded certain manufacturing and distribution optimization activities initiated in 2003. A summary of these initiatives include:

	•	In February 2004, the Company announced that it planned to gradually phase-out production at its Anniston, Alabama manufacturing and distribution facility. Manufacturing operations at this facility ceased effective November 1, 2004 and the distribution center is expected to cease operations during the second half of 2005. The Company intends to sell this facility. An active program to locate a buyer was initiated during the first quarter of 2005.
	•	During the third quarter of 2003, the Company began manufacturing ladder components and accessories at a leased facility located in Mexico. In early 2004, the Company began construction of a large manufacturing and ladder assembly plant in Juarez, Mexico. Construction was completed and production commenced during the third quarter of 2004. Production is expected to ramp-up until full capacity is achieved during 2006.
	•	In early 2004, the Company initiated a program to reduce costs by re-engineering its selling, general and administrative functions. This program will be continued through 2005.

     The manufacturing and distribution optimization activities initiated during 2003 included the transfer of all ladder fabrication and assembly operations in Greenville, Pennsylvania to other lower cost Company facilities. Substantially all production related to climbing products at the Greenville facility was discontinued during 2003 and the remaining operations related to climbing products are expected to cease during 2005. The Company also began an initiative that was completed in 2004 to focus the Greenville facility on the Extruded Products segment of the Company’s business. During 2004 the Company also ceased production of wood stepladders at its Carrollton, Kentucky manufacturing facility. Wood stepladder customers are being served by outsourcing

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production to a third party. Wood attic ladder production continues at the Carrollton facility. In October 2004 the Company announced that it intended to build an addition to the Carrollton facility for use as a regional distribution center. This decision was re-evaluated during the first quarter of 2005 and an alternative regional distribution center was selected which will be leased under an operating lease beginning in 2005.

     Cumulative costs associated with the above-described activities through 2008, including costs associated with completing the initiatives begun in 2003, are expected to range from $55 million to $60 million. Aggregate costs of $30.7 million have been incurred for these activities through the end of 2004, including the $24.3 million incurred in 2004. The annual benefits expected to be realized upon implementation of the restructuring initiatives through 2008 are estimated to approximate $40 million. The restructuring program is expected to continue through 2008 although initiatives beyond those expected to be implemented during 2005 have not yet been finalized. Although management believes that these estimates are reasonable, no assurances can be given that the estimated costs will ultimately be incurred or that the estimated benefits will be realized. Accordingly, these estimates are forward-looking and may ultimately be materially different than currently estimated due to the uncertainty of the underlying estimates and assumptions. The estimated costs include facility exit costs, employee severance and related benefit costs, employee and equipment relocation costs, costs associated with disposal of fixed assets, duplicate freight and handling costs during transition and wind-down and start-up costs associated with manufacturing facilities.

     Financing Occurring Subsequent to December 31, 2004

     During May 2005 the Company successfully closed a $100 million Senior Secured Second Lien Term Loan. Net proceeds of $91.7 million were used to repay amounts outstanding under the Company’s existing Senior Credit Facility including prepayment of $65.0 million of the Senior Credit Term Loan and the repayment of the total amount outstanding of $26.7 million under the Senior Credit Revolving Facility.

     Effective as of March 31, 2005 an agreement related to the Senior Credit Facility was executed to, among other things, waive the requirement to comply with the debt leverage and interest coverage ratios as of March 31, 2005 and to defer the requirement to provide audited financial statements for the year ended December 31, 2004 until May 10, 2005. Effective May 10, 2005 the Senior Credit Facility was amended in conjunction with the repayments described above to, among other things, initiate new financial covenant requirements beginning June 30, 2005 through December 31, 2007.

     The purpose of the Second Lien Term Loan and the amendment to the Senior Credit Facility was to provide the Company the liquidity and the covenant relief necessary to successfully complete the restructuring program.

Critical Accounting Policies and Estimates

     The Consolidated Financial Statements and Notes to Consolidated Financial Statements contain information that is pertinent to management’s discussion and analysis. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment based on various assumptions and other factors such as historical experience, current and expected economic conditions, and in some cases, actuarial techniques. The Company constantly re-evaluates these significant factors and makes adjustments where facts and circumstances dictate. Historically, actual results have not significantly deviated from those determined using the estimates described above. The Company believes that the following accounting policies are critical due to the degree of estimation required.

     The Company provides credit to its customers in the normal course of business, performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. The allowance for doubtful accounts related to trade receivables is determined based on two methods. The amounts calculated from each of these methods are combined to determine the total amount reserved. First, an evaluation of specific accounts is conducted when information is available indicating a customer may not be able to meet its financial obligations. Judgments are made in these specific cases based on available facts and circumstances, and a specific reserve for that customer may be recorded to reduce the receivable to the amount that is expected to be collected. These specific reserves are re-evaluated and adjusted as additional information is received that impacts the amount reserved. Second, a reserve is established for all customers based on historical collection and write-off

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experience. The collectibility of trade receivables could be significantly reduced if default rates are greater than expected or if an unexpected material adverse change occurs in a major customer’s ability to meet its financial obligations.

     The Company must generate sufficient taxable income in future periods to realize the total value of its deferred tax assets. A valuation allowance that reduces deferred tax assets to the amount expected to be realized is determined based on projections of taxable income. If the level of projected taxable income used to determine the valuation allowance is not achieved, the carrying value of the deferred tax assets will not be realized.

     The Company maintains third party insurance coverage, subject to certain deductible provisions, for product liability and workers’ compensation claims which occur on or after March 31, 1998 and maintains a reserve for the insurance deductibles related to such claims. The reserve for product liability and workers’ compensation claims is determined on an undiscounted actuarial basis. The reserve includes an amount determined from loss reports for individual cases and an amount, based on past experience, for losses incurred but not reported. The determination of the reserve is primarily predicated on the assumption that selected claims reporting and payment patterns, and frequency and severity trends, will continue to apply. The methods and assumptions used to estimate the resulting reserve are continually reviewed, and any adjustments are reflected in earnings currently. Actual claims experience will affect the amount of expense ultimately recognized.

     Pension assets and liabilities are determined on an actuarial basis and are primarily affected by the market value of plan assets, estimates of the expected return on plan assets and the discount rate used to determine the present value of pension liabilities. Actual changes in the fair market value of plan assets and differences between the actual return on plan assets, the expected return on plan assets and changes in the selected discount rate will affect the amount of pension expense ultimately recognized.

The Recapitalization

     In June 2003, the Company completed a recapitalization with GEI, an affiliate of Leonard Green, and certain shareholders of the Company. Pursuant to the Recapitalization Agreement (i) GEI invested $65.0 million in the Company in exchange for 65,000 shares of newly issued convertible preferred stock, (ii) the Company redeemed 39.66% of its outstanding shares of capital stock for payments totaling $147.0 million and (iii) the Company made certain other payments including $3.0 million to the holders of options to purchase the Company’s capital stock in consideration for the cancellation of certain of their vested options (collectively, the “Recapitalization”). The convertible preferred shares represented approximately 22% of the outstanding voting shares of capital stock as of the date of the Recapitalization.

     As part of the Recapitalization, the Company entered into a $230 million senior credit facility with a syndicate of banks consisting of a $180 million Term Loan and a $50 million Revolving Credit Facility. The Company paid $115.4 million to repay in full its previous senior credit facility which was then terminated as of the date of the Recapitalization.

     The Recapitalization was accounted for as a leveraged recapitalization at historical cost principally due to the fact that less than 80% of the voting securities were acquired.

Results of Operations

     Year Ended December 31, 2004 as Compared to Year Ended December 31, 2003

     Net Sales. Net sales were down $54.9 million, or 11.0%, to $446.2 million for the year 2004 from $501.1 million for 2003.

     Net sales of climbing products decreased by $59.3 million, or 13.7%, to $373.5 million for 2004 from $432.8 million for 2003. The decline is due to lower sales to Home Depot partially offset by increased sales to other customers. The increase in sales to other customers is due to higher unit sales volumes in each of the Company’s distribution channels. This was due, in part, to sales to Lowe’s under the strategic alliance which began in the first quarter of 2004.

     Net sales of extruded products of $72.7 million for 2004 increased by $4.3 million, or 6.4% compared to net sales of $68.3 million recorded in 2003. The increase primarily reflects the impact of higher aluminum prices. Unit sales volumes in 2004 for extruded products were approximately equal to 2003 volumes.

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     Gross Profit. Gross profit declined by $48.0 million, or 26.6%, to $132.8 million for 2004 from $180.8 million for 2003. Gross profit as a percentage of net sales in 2004 declined to 29.8% from 36.1% for 2003. The lower gross profit is largely due to lower climbing products sales volumes, higher raw material costs, a less profitable product mix for climbing products, increased costs for climbing products sales incentives and promotions in response to competitive pricing pressures, increased costs related to new product development and introductions, and higher start-up and realignment costs. The decline in gross profit was partially offset by a decline in the provision for product liability and workers’ compensation claims of $4.6 million primarily due to favorable product liability claims experience. However, these expenses are expected to increase in 2005 due to the likelihood that claims experience will be less favorable than in 2004 and also due to the increased cost of providing insurance coverage in excess of deductible provisions. Previously, the Company has benefited from lower costs related to a five-year insurance program that ended on December 31, 2004. Cost of sales for 2004 and 2003 include costs of $8.8 million and $2.0 million, respectively, related to manufacturing inefficiencies associated with winding-down, starting-up and realigning facilities in connection with the Company’s restructuring and other cost reduction initiatives.

     General and Administrative Expenses. General and administrative expenses were $27.4 million in 2004 compared to $28.6 million for 2003, a decline of $1.2 million or 4.4%. The decline in 2004 reflects the absence of all accruals for performance based incentive compensation and lower legal and professional fees. The decline was partially offset by severance and related costs of $1.3 million recorded in 2004 related to the separation of the chief executive officer, and higher depreciation related to capitalized computer hardware and software costs.

     Selling and Distribution Expenses. Selling and distribution expenses of $87.5 million in 2004 are $2.3 million, or 2.6%, less than expenses recorded in 2003. The decline in current year expense due to the impact of lower sales volumes and changes in customer mix was mostly offset by rising freight costs, higher advertising costs and costs totaling $6.5 million related to distribution inefficiencies associated with the Company’s restructuring and other cost reduction activities.

     Restructuring and other Cost Reduction Initiatives. The total costs incurred during 2004 and 2003 relating to the previously described restructuring and other cost reduction activities totals $24.3 million and $6.4 million, respectively. Costs in 2004 include $9.0 million of costs related to employee severance and equipment relocation and disposal costs in addition to $8.8 million recorded in Cost of sales and $6.5 million in Selling and distribution expenses for costs relating to winding down and starting up manufacturing facilities.

     Operating Profit. Operating profit declined by $39.1 million to $8.9 million for 2004. The decline primarily reflects the decline in net sales, a decline in profitability of the Climbing Products segment and an increase in costs of $17.9 million for restructuring and related activities recorded in 2004 compared to 2003. The reduction in operating profit due to these factors was partially offset by the absence of costs totaling $11.5 million that were expensed in 2003 related to the recapitalization of the Company that occurred on June 11, 2003.

     Operating profit of the Climbing Products segment decreased by $48.6 million to $12.7 million in 2004. The decline in profitability primarily reflects the decline in net sales of climbing products due mostly to lower unit sales volumes, rising raw material costs, a less profitable sales mix, increased costs for sales incentives, promotions and advertising, increased costs related to new product development and introductions, a charge for an allocated portion of severance costs related to separation of the chief executive officer, and higher restructuring and related costs. Operating costs for 2004 include $22.7 million for restructuring and related costs which were $16.9 million greater than similar costs incurred in 2003. The decline in profitability was partially offset by a lower provision for product liability and workers’ compensation claims in 2004.

     The Extruded Products segment incurred an operating loss of $1.0 million for 2004 compared to an operating profit of $2.1 million for 2003. The decline in operating profit of $3.1 million is primarily due to higher workers’ compensation costs and costs of $1.6 million for restructuring and related activities recorded in 2004 which were $1.0 million greater than similar costs incurred in 2003.

     Corporate and Other expenses decreased by $12.6 million for 2004 compared to 2003 primarily due to the absence of costs totaling $11.5 million that were expensed in connection with a recapitalization of the Company that occurred in 2003. In addition, expense is lower in 2004 due to the absence of legal and professional fees associated with shareholders’ litigation that was settled in 2003.

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     Other Income (Expense), Net. Other income (expense), net was net expense of $1.4 million for 2004, an increase in expense of $1.4 million compared to 2003. The increase in expense is primarily due to higher costs associated with increased utilization of the accounts receivable securitization agreement and higher letter of credit fees during 2004.

     Interest Expense. Interest expense increased by $0.8 million to $25.2 million for 2004 from $24.4 million for 2003. The increase is due to higher average levels of debt outstanding and higher average interest rates in 2004 partially offset by the absence of a charge totaling $2.4 million related to the write-off of unamortized deferred financing fees recorded in 2003 that was associated with the senior credit facility that was repaid and terminated in connection with a recapitalization of the Company.

     Income Taxes (Benefit). As a result of the 2004 pre-tax loss, an income tax benefit of $5.9 million was recorded which is $13.3 million less than the tax expense recorded in 2003. An effective tax rate of 33% was applied to the 2004 pre-tax loss, compared to an effective tax rate of 31% that was applied to 2003 pre-tax income. The increase in the effective tax rate is primarily due to an increase in the valuation allowance related to certain deferred tax assets.

     Net Income (Loss). Net income declined by $28.1 million to a net loss $11.9 million for 2004 compared to net income of $16.2 million for 2003 as a result of all the above factors.

     Year Ended December 31, 2003 as Compared to Year Ended December 31, 2002

     Net Sales. Net sales were down $19.3 million, or 3.7%, to $501.1 million for 2003 from $520.4 million for 2002. Net sales of climbing products decreased by $11.5 million, or 2.6%, to $432.8 million for 2003 from $444.3 million in 2002. The sales decline primarily reflects lower unit sales volumes of aluminum and wood stepladders partially offset by higher sales of fiberglass extension ladders. Net sales of extruded products of $68.3 million for 2003 declined by $7.7 million, or 10.2%, compared to 2002 primarily reflecting lower unit sales volumes due to the continued softness in the markets served by this segment of the Company’s business and the restructuring of certain low margin accounts to improve profitability.

     Gross Profit. Despite lower sales, gross profit improved by $4.2 million, or 2.4%, to $180.8 million for 2003 from $176.6 million for 2002. Gross profit as a percentage of net sales in 2003 improved to 36.1% from 33.9% for 2002. The higher gross profit margin is largely due to the realignment of ladder fabrication and assembly operations in Greenville, Pennsylvania to lower cost facilities as well as on-going manufacturing productivity improvements and other manufacturing cost reduction initiatives. An improvement in the profitability of the product mix also contributed to the higher gross profit margin. These improvements more than offset the effects of lower aluminum extrusion production volumes. Cost of sales for 2003 includes costs of $2.0 million primarily related to manufacturing inefficiencies associated with the start-up and realignment of ladder fabrication and assembly operations that was initiated in the second quarter of 2003.

     General and Administrative Expenses. General and administrative expenses were $28.6 million for 2003 compared to $30.0 million for 2002, a decrease of $1.4 million or 4.5%. Expenses for 2002 include severance cost of $1.6 million associated with the separation of a former executive officer. Excluding this one-time severance cost, general and administrative expenses were $0.2 million higher in 2003 than 2002 due to higher management advisory and consulting fees, higher pension expense, higher legal and professional expenses (related, in part, to new product development) and higher depreciation related to capitalized computer hardware and software costs all of which were largely offset by a lower provision for performance based incentive compensation. Pension expense increased in 2003 due to lower than expected returns on plan investments during the years 2000 through 2002 and a decrease in the discount rate used to value pension liabilities which reflects the general decline in interest rates.

     Selling and Distribution Expenses. Selling and distribution expenses increased by $7.8 million, or 9.5%, to $89.8 million for 2003 compared to $82.0 million in 2002 which reflects higher shipping and handling expenses to support supply chain initiatives to continue reducing cycle times and improving order fill rates. These cost increases more than offset the impact of lower unit sales volumes.

     Recapitalization Expense. Recapitalization expense recorded in 2003 totals $11.5 million and includes a noncash compensation charge of $4.6 million associated with modifying stock options in connection with the Recapitalization. Recapitalization expense also includes a compensation charge of $3.0 million related to cancellation payments for certain vested options, transaction bonus payments totaling $1.7 million paid to certain

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officers and employees of the Company, a noncash charge of $1.3 million related to the deferred stock plan and, other professional fees and miscellaneous expenses totaling $0.9 million.

     Restructuring and Other Cost Reduction Initiatives. The Company transferred all ladder fabrication and assembly operations in Greenville, Pennsylvania to other lower cost Company facilities beginning in the second quarter of 2003. The Company also began an initiative to focus the Greenville facility on the Extruded Products segment of the Company’s business which will be completed in 2004. During the third quarter of 2003 the Company began manufacturing component parts and accessories at a leased facility in Mexico. The total costs incurred during 2003 relating to the optimization of the Company’s manufacturing and distribution operations were $6.4 million which includes $2.0 million recorded in Cost of sales and $1.5 million in Selling and distribution expenses.

     Operating Profit. Operating profit declined by $16.6 million to $48.0 million for 2003 from $64.6 million for 2002 primarily due to the recognition of $11.5 million of Recapitalization expense and $6.4 million of costs related to optimization of the Company’s manufacturing and distribution operations. If the impact of the Recapitalization expense and optimization costs is removed, in addition to removal of the prior year impact of the one-time severance cost of $1.6 million associated with the separation of a former executive officer, operating profit would have been $65.9 million in the current year which is $0.3 million, or 0.5%, less than 2002. Operating profit, as adjusted, was essentially equal to 2002 despite a decline in net sales of $19.3 million which reflects the positive impact of on-going manufacturing productivity improvements and other manufacturing cost reduction initiatives in addition to an improvement in the profitability of the product mix.

     Operating profit of the Climbing Products segment decreased $4.6 million to $61.3 million in 2003. If the impact of optimization costs totaling $5.8 million is removed, in addition to removal of the prior year impact of a one-time severance cost allocation of $1.3 million, operating profit of the Climbing Products segment would have declined by $0.1 million to $67.1 million in 2003 compared to 2002. The decrease primarily reflects the negative impact of lower sales and higher selling and distribution expenses which more than offset the operational improvements.

     Operating profit of the Extruded Products segment was $2.1 million for 2003 compared to $0.4 million for 2002. If the impact of optimization costs totaling $0.6 million is removed, operating profit would have been $2.7 million which is $2.3 million more than operating profit for 2002. The improvement in operating profit is primarily due to improvements in the profitability of the segment’s sales mix, improved manufacturing performance and lower allocated severance costs more than offsetting the effects of lower aluminum extrusion production volumes.

     Corporate and Other expenses increased by $13.8 million for 2003 compared to 2002 primarily due to Recapitalization expense of $11.5 million recorded in 2003 in addition to higher legal and professional expenses associated with shareholders’ litigation that was settled on November 2003, and higher management advisory and consulting fees.

     Other Income (Expense), Net. Other income (expense), net declined by $0.3 million from $0.3 million of other income recorded in 2002. During 2003 costs associated with the receivables purchase agreement, letter of credit fees and certain other costs were higher than in 2002.

     Interest Expense. Interest expense increased by $2.9 million to $24.4 million for 2003 from $21.5 million for 2002. The increase is primarily due to the recognition of $2.4 million of unamortized deferred financing fees in 2003 which was associated with the senior credit facility that was repaid and terminated effective on the date of the Recapitalization. In addition, the first quarter of 2002 included a charge of $0.4 million related to the accelerated amortization of deferred financing fees as a result of a voluntary repayment of debt that occurred in March 2002. After removing the impact of accelerating the recognition of unamortized deferred financing fees, interest expense is $0.9 million greater in 2003 primarily due to the higher average debt levels in 2003 resulting from the Recapitalization.

     Income Taxes. Income taxes declined by $8.6 million to $7.4 million for 2003 reflecting lower pre-tax income in 2003 and a decrease in the effective tax rate to 31% from 37% in 2002. The decrease in the effective tax rate is primarily due to lower estimated income tax accruals in 2003.

     Net Income. Net income declined by $11.2 million to $16.2 million in 2003 from net income of $27.4 million for 2002 as a result of all the above factors.

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Liquidity and Capital Resources

     Debt and Other Contractual Obligations

     The following table provides a summary of the Company’s contractual obligations by due date as of December 31, 2004.