Euramax Holdings, Inc. - FORM 10-Q

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - Euramax Holdings, Inc.	Financial_Report.xls
EX-31.2 - EX 31.2 - Euramax Holdings, Inc.	exhibit312certificationoft.htm
EX-32.1 - EX 32.1 - Euramax Holdings, Inc.	exhibit321certofthepeoandc.htm
EX-3.1 - EX 3.1 - Euramax Holdings, Inc.	exhibit31performanceincent.htm
EX-3.2 - EX 3.2 - Euramax Holdings, Inc.	exhibit32timmermanemployme.htm
EX-31.1 - EX 31.1 - Euramax Holdings, Inc.	exhibit311certificationoft.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 26, 2014

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 333-05978

EURAMAX HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)



Delaware (State or other jurisdiction of incorporation or organization)		58-2502320 (I.R.S. Employer Identification Number)
303 Research Drive, Suite 400, Norcross, GA (Address of principal executive offices)		30092 (Zip Code)

Registrant’s Telephone Number, Including Area Code: (770) 449-7066

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 ¨ No x*

* The registrant is a voluntary filer of reports required to be filed by certain companies under Sections 13 or 15(d) of the Securities Exchange Act of 1934 and has filed all reports that would have been required during the preceding 12 months, had it been subject to such filing requirements.

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer o	Accelerated filer o	Non-accelerated filer x (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

There were 195,502 shares of the registrant’s common stock, par value $1.00 per share, issued and outstanding as of November 7, 2014, none of which are publicly traded.

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets as of September 26, 2014 and December 31, 2013	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 26, 2014 and September 27, 2013	2
	Condensed Consolidated Statements of Comprehensive Operations for the Three and Nine Months Ended September 26, 2014 and September 27, 2013	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 26, 2014 and September 27, 2013	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 6.	Exhibits	43

Part I. Financial Information

Item 1. Financial Statements (unaudited)

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)



	September 26, 2014			December 31, 2013
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	3,235		$	8,977
Accounts receivable, less allowances of $1,541 and $2,235, respectively	111,167			73,996
Inventories, net	120,178			89,760
Income taxes receivable	542			982
Deferred income taxes	575			580
Other current assets	8,120			7,008
Total current assets	243,817			181,303
Property, plant and equipment, net	116,351			130,114
Goodwill	195,342			204,053
Customer relationships, net	29,942			40,631
Other intangible assets, net	6,599			7,073
Deferred income taxes	419			87
Other assets	6,464			8,712
Total assets	$	598,934		$	571,973
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	94,686		$	57,262
Accrued expenses and other current liabilities	30,558			26,366
Accrued interest payable	21,770			9,020
Current portion of long-term debt	8,253			—
Deferred income taxes	559			605
Total current liabilities	155,826			93,253
Long-term debt	540,812			535,396
Deferred income taxes	18,159			18,980
Other liabilities	31,310			32,907
Total liabilities	746,107			680,536
Shareholders’ deficit:
Common stock	195			195
Additional paid-in capital	724,443			724,071
Accumulated loss	(882,544		)	(843,750		)
Accumulated other comprehensive income	10,733			10,921
Total shareholders’ deficit	(147,173		)	(108,563		)
Total liabilities and shareholders’ deficit	$	598,934		$	571,973

See the accompanying notes to these condensed consolidated financial statements.

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

(unaudited)



	Three months ended						Nine months ended
	September 26, 2014			September 27, 2013			September 26, 2014			September 27, 2013
Net sales	$	239,942		$	227,835		$	642,836		$	630,241
Costs and expenses:
Cost of goods sold (excluding depreciation and amortization)	202,160			188,792			542,208			528,423
Selling and general (excluding depreciation and amortization)	17,413			20,387			55,379			59,767
Depreciation and amortization	8,142			8,514			24,595			25,557
Other operating charges	1,051			1,455			4,357			5,355
Income from operations	11,176			8,687			16,297			11,139
Interest expense	(13,895		)	(13,805		)	(41,574		)	(41,257		)
Other (loss) income, net	(14,056		)	8,295			(14,376		)	4,061
(Loss) income before income taxes	(16,775		)	3,177			(39,653		)	(26,057		)
Benefit from income taxes	(369		)	(13,082		)	(859		)	(12,644		)
Net (loss) income	$	(16,406	)	$	16,259		$	(38,794	)	$	(13,413	)

See the accompanying notes to these condensed consolidated financial statements.

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

(in thousands)

(unaudited)



	Three months ended						Nine months ended
	September 26, 2014			September 27, 2013			September 26, 2014			September 27, 2013
Net loss	$	(16,406	)	$	16,259		$	(38,794	)	$	(13,413	)
Other comprehensive (loss) income:
Foreign currency translation adjustment	204			(89		)	(250		)	(431		)
Defined benefit pension plan adjustments	21			81			62			246
Total comprehensive (loss) income	$	(16,181	)	$	16,251		$	(38,982	)	$	(13,598	)

See the accompanying notes to these condensed consolidated financial statements.

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



	Nine months ended
	September 26, 2014			September 27, 2013
Cash flows from operating activities:
Net loss	$	(38,794	)	$	(13,413	)
Reconciliation of net loss to net cash provided by operating activities:
Depreciation and amortization	24,595			25,557
Amortization of deferred financing fees	1,804			1,621
Amortization of debt discount	435			336
Share-based compensation	372			2,246
Provision for doubtful accounts	85			570
Foreign exchange loss (gain)	15,081			(4,478		)
(Gain) loss on sale or disposal of assets	(125		)	1,531
Deferred income taxes	(800		)	336
Changes in operating assets and liabilities, net of acquisitions
Accounts receivable	(39,555		)	(27,514		)
Inventories	(32,061		)	(17,188		)
Other current assets	(1,266		)	(1,393		)
Accounts payable and other current liabilities	56,472			26,150
Income taxes payable	279			(12,984		)
Other noncurrent assets and liabilities	(837		)	1,887
Net cash used in operating activities	(14,315		)	(16,736		)
Cash flows from investing activities:
Proceeds from sales of assets	777			2,288
Capital expenditures	(5,233		)	(7,355		)
Net cash used in investing activities	(4,456		)	(5,067		)
Cash flows from financing activities:
Net borrowings on ABL Credit Facility	4,981			19,514
Net borrowings on Dutch Revolving Credit Facility	8,253			1,836
Changes in cash overdrafts	215			—
Debt issuance costs	(88		)	(175		)
Net cash provided by financing activities	13,361			21,175
Effect of exchange rate changes on cash	(332		)	64
Net decrease in cash and cash equivalents	(5,742		)	(564		)
Cash and cash equivalents at beginning of period	8,977			10,024
Cash and cash equivalents at end of period	$	3,235		$	9,460

See the accompanying notes to these condensed consolidated financial statements.

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation and Principles of Consolidation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Euramax Holdings, Inc. and its subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, these statements include all adjustments considered necessary for the fair presentation of all interim periods reported herein. All adjustments are of a normal recurring nature unless otherwise disclosed.

The Company’s sales volumes have historically been higher in the second and third quarters due to the seasonal demand of the building products markets served. Accordingly, results for the three and nine months ended September 26, 2014 are not necessarily indicative of the results that may be expected for the full year. Management believes that the disclosures made are adequate for a fair presentation of the Company’s results of operations, financial position and cash flows. These condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Assets and liabilities of non-U.S. subsidiaries are translated to U.S. Dollars at the rate of exchange in effect on the balance sheet date. Income and expenses are translated to U.S. Dollars at the weighted average rates of exchange prevailing during the period. Foreign currency gains and losses resulting from the remeasurement of inter-company amounts that are not of a long-term investment nature into local currencies and certain indebtedness of foreign subsidiaries denominated in U.S. dollars are included in other (loss) income, net. Other (loss) income, net includes losses of $14.8 million and income of $8.9 million for the three months ended September 26, 2014 and September 27, 2013, respectively. Other (loss) income, net includes losses of $15.1 million and income of $4.1 million for the nine months ended September 26, 2014 and September 27, 2013, respectively. Foreign currency gains and losses resulting from transactions in the ordinary course of business are recorded in selling and general expenses. Foreign currency transaction gains and losses recorded in selling and general expenses were not significant for any period presented.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the Company’s accounts and the accounts of its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to current period presentation. Each of our interim reporting periods, other than the fourth interim reporting period, ends on the Friday closest to the last day of the corresponding quarterly calendar period. The third quarter of 2014 and 2013 ended on September 26 and September 27, respectively. Our fourth interim reporting period and our fiscal year end on December 31 regardless of the day of the week on which it falls.

Recent Accounting Pronouncements

In May 2014, the FASB issued new revenue recognition guidance, which supersedes most current revenue recognition guidance, including industry-specific guidance, and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted. The Company is currently assessing the impact of implementing this guidance on the Company's financial position, results of operations, and cash flows.

2. Inventories

Inventories were comprised of:



	September 26, 2014		December 31, 2013
	(in thousands)
Aluminum and steel coil	$	80,783	$	58,153
Raw materials	17,782		15,291
Work in process	3,283		1,936
Finished products	18,330		14,380
Total inventories, net	$	120,178	$	89,760

The Company has disclosed aluminum and steel coil inventory separately, as it represents inventory that can be classified as raw material, work in process or finished product. Aluminum and steel coil includes both painted and bare coil. Inventories are net of related reserves totaling $3.1 million and $2.4 million as of September 26, 2014 and December 31, 2013, respectively.

3. Indebtedness

Indebtedness consisted of the following:



	September 26, 2014		December 31, 2013
	(in thousands)
Senior Secured Notes (9.50%)	$	375,000	$	375,000
Senior Unsecured Loan Facility (12.25%)	124,075		123,640
ABL Credit Facility	41,737		36,756
Dutch Revolving Credit Facility	8,253		—
Total debt	549,065		535,396
Less: current portion	8,253		—
Total long term debt	$	540,812	$	535,396

Senior Secured Notes

The Senior Secured Notes (the "Notes") consist of an aggregate principal amount of $375 million, which were issued pursuant to an indenture (the "Indenture"), dated March 18, 2011, among Euramax International, Inc. ("Euramax International"), Euramax Holdings, Inc. ("Euramax Holdings"), and certain of its domestic subsidiaries as guarantors, and Wells Fargo Bank, National Association, the Trustee. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Euramax Holdings, Euramax International, and Amerimax Richmond Company, a 100% owned domestic subsidiary of Euramax International. The Notes bear interest at 9.50% per year and mature on April 1, 2016, unless earlier redeemed or repurchased by Euramax International. Interest is payable semi-annually on April 1 and October 1 of each year.

The Notes are secured by a first priority security interest in (i) substantially all of the assets of Euramax International and the guarantors (other than inventory and accounts receivable and related assets, which assets secure the ABL Credit Facility on a first priority basis) and (ii) all of Euramax International's capital stock and the capital stock of each material domestic restricted subsidiary owned by Euramax International or a guarantor and 65% of the voting capital stock and 100% of any nonvoting capital stock of foreign restricted subsidiaries directly owned by the Company or a guarantor, and a second priority security interest in the inventory, receivables and related assets.

The Notes may be redeemed at the option of Euramax International, in whole or in part, under the conditions specified in the Indenture, at the following redemption prices plus accrued and unpaid interest to the redemption date if redeemed during the twelve-month period beginning on April 1 of the years indicated:



Year	Percentage
2013	107.125	%
2014	104.750	%
2015 and thereafter	100.000	%

The Indenture contains restrictive covenants that limit, among other things, the ability of Euramax International and certain of its subsidiaries to incur additional indebtedness, pay dividends and make certain distributions, make other restricted payments, make investments, incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets and enter into certain transactions with affiliates, in each case, subject to exclusions, and other customary covenants. These limitations also limit Euramax International's ability to transfer cash or assets to Euramax Holdings, whether by dividend, loan or otherwise. The Indenture also contains customary events of default. If Euramax International undergoes a change of control (as defined in the Indenture), Euramax International will be required to make an offer to repurchase the Notes at 101% of the principal amount of the Notes redeemed plus accrued and unpaid interest, if any, to the date of redemption.

Senior Unsecured Loan Facility

On March 3, 2011, Euramax Holdings, Euramax International, and certain of its domestic subsidiaries entered into a credit and guaranty agreement for a senior unsecured loan facility (the "Senior Unsecured Loan Facility") in the aggregate principal amount of $125 million. The Senior Unsecured Loan Facility was issued at 98% of par on March 18, 2011 and matures on October 1, 2016. The difference between the consideration received and the aggregate face amount ($0.9 million) is being amortized and recorded in interest expense using the effective interest rate method over the term. The Senior Unsecured Loan Facility bears interest at 12.25% per year in the event no election is made to pay interest in kind (PIK), and 14.25% (7.875% cash pay and 6.375% PIK) per annum in the event a PIK election is made. Euramax International may make a PIK election for up to six quarters during the term of the Senior Unsecured Loan Facility. The interest rate on outstanding borrowings at September 26, 2014 was 12.25%, as Euramax International has not made a PIK election.

Euramax International may prepay outstanding amounts under the Senior Unsecured Loan Facility, in whole or in part, at the prices (expressed as percentages of the loans) set forth below:



Prepayment Date	Percentage
On or after the second anniversary of the closing but prior to the third anniversary thereof	103	%
On or after the third anniversary of the closing but prior to the fourth anniversary thereof	102	%
On or after the fourth anniversary of the closing	100	%

Upon a change of control, Euramax International may be required to prepay all or a portion of the Senior Unsecured Loan Facility at a price equal to 101% of the principal amount plus accrued and unpaid interest. All obligations under the Senior Unsecured Loan Facility are unconditionally guaranteed by Euramax Holdings, Euramax International, and substantially all of Euramax International's existing and future direct and indirect 100% owned domestic material restricted subsidiaries.

The Senior Unsecured Loan Facility contains restrictive covenants that limit, among other things, the ability of Euramax International and certain of its subsidiaries to incur additional indebtedness, pay dividends and make certain distributions, make other restricted payments, make investments, incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets and enter into certain transactions with affiliates, in each case, subject to exclusions, and other customary covenants.

The Senior Unsecured Loan Facility contains certain customary representations and warranties, affirmative covenants and events of default, including among other things, payment defaults, covenant defaults, cross‑defaults to certain indebtedness, certain events of bankruptcy, material judgments, and failure of any guaranty supporting the Senior Unsecured Loan Facility to be in force and effect in any material respect. If such an event of default occurs, the administrative agent would be entitled to take various actions, including the acceleration of amounts due under the Senior Unsecured Loan Facility and all actions permitted to be taken by an unsecured creditor.

ABL Credit Facility

On March 18, 2011, Euramax Holdings, Euramax International, and certain of its domestic subsidiaries, entered into the ABL Credit Facility with Regions Bank, as Collateral and Administrative Agent, Wells Fargo Capital Finance, LLC, as Co-Collateral Agent, and Regions Business Capital, as Sole Lead Arranger and Bookrunner. The ABL Credit Facility provides for revolving credit financing of up to $70 million, subject to borrowing base availability and matures on March 1, 2018. However, if the Agent has not received on or before December 31, 2015, evidence satisfactory to Agent that the scheduled maturity dates of the indebtedness arising under the Indenture and the Senior Unsecured Loan Facility, in each case, have been extended to a date that is 90 or more days following March 1, 2018, then the maturity date for the ABL Credit facility shall be January 1, 2016. In March 2014, Wells Fargo Capital Finance, LLC ceased to be Co-Collateral Agent and a Lender under the ABL Credit Facility. At September 26, 2014, $28.3 million was available to be drawn on the ABL Credit Facility.

On March 21, 2014 and May 8, 2014, the ABL Credit Facility was amended to, among other items, (i) reduce the applicable margin rate for LIBOR borrowings from a range of 2.00% to 2.75% to a range of 1.75% to 2.25% and reduce the applicable margin rate for Base Rate borrowings from a range of 1.00% to 1.75% to a range of 1.00% to 1.25%, in each case, based on average excess availability rather than corporate credit ratings of the Company, (ii) reduce the minimum excess availability threshold to $1.0 million, (iii) reduce the fixed charge coverage ratio from 1.15 to 1.00, (iv) suspend the testing of the fixed charge coverage ratio (A) during fiscal year 2014, unless a Seasonal Overadvance A is then in effect, (B) at all other times including during fiscal year 2014 during the occurrence of a Seasonal Overadvance B or (C) during the occurrence of a Seasonal Overadvance C, (v) suspend the testing of the minimum consolidated EBITDA test except (A) during fiscal year 2014 if a Seasonal Overadvance A is then in effect, (B) at any time during the life of the ABL Credit Facility, during the occurrence of a Seasonal Overadvance B or (C) at any time during the life of the ABL Credit Facility during the occurrence of a Seasonal Overadvance C, and (vi) provide for the three mutually exclusive overadvance facilities as described below.

"Seasonal Overadvance A", in the amount of $15.0 million, is available to the Company from February 1 of each year through May 31 of each such year, subject to the Company demonstrating compliance with the fixed charge coverage ratio of 1.00:1.00, payment of a fee in the amount of 0.20% of the amount of such facility (the "Seasonal Overadvance Fee") and other customary conditions.

"Seasonal Overadvance B", in the amount of $9.0 million, is available to the Company from February 1 of each year through November 30 of each such year, subject to the Company demonstrating compliance with a U.S. fixed charge coverage ratio of 1.00:1.00, payment of the Seasonal Overadvance Fee (except to the extent already paid during such calendar year), maintenance of a U.S. fixed charge coverage ratio of 1.00:1.00 and other customary conditions.

"Seasonal Overadvance C", in the amount of the lesser of (i) $6.0 million and (ii) the sum of (a) 10% of the first component of the borrowing base and (b) 10% of the second component of the borrowing base, is available to the Company from February 1 of each year through August 22 of each such year, subject to the payment of the Seasonal Overadvance Fee (except to the extent already paid during such calendar year), maintenance of a minimum consolidated EBITDA over the trailing twelve months of $52.0 million ($50.0 million for fiscal 2014) and other customary conditions.

Borrowings under the ABL Credit Facility bear interest at a rate per annum equal to either (a) LIBOR plus an applicable margin or (b) a base rate determined by reference to the highest of (1) the prime commercial lending rate published by Regions Bank as its “prime rate” for commercial loans, (2) the federal funds effective rate plus 0.50% and (3) the one-month LIBOR plus 1.00%, plus an applicable margin. The applicable margin is dependent upon the type of borrowings Euramax International has made under the ABL Credit Facility. At September 26, 2014, the applicable margins are subject to Euramax International’s Average Excess Availability Percentage for the most recently ended fiscal quarter and range from 1.75% to 2.25% for LIBOR borrowings and 1.00% to 1.25% for Base Rate borrowings. The weighted average interest rate at September 26, 2014, including the applicable margin payable on outstanding borrowings under the ABL Credit Facility, was 2.41%. The ABL Credit Facility requires Euramax International to pay a commitment fee ranging from 0.375% to 0.5%, based on the unutilized commitments. Euramax International is also required to pay customary letter of credit fees, including, without limitation, a letter of credit fee equal to the applicable margin on revolving credit LIBOR loans and fronting fees.

All obligations under the ABL Credit Facility are unconditionally guaranteed by Euramax Holdings, Euramax International, and Amerimax Richmond Company, a 100% owned domestic subsidiary of Euramax International, and any future direct and indirect 100% owned domestic restricted subsidiaries which are not borrowers. All obligations under the ABL Credit Facility are secured, subject to certain exceptions, by a first‑priority security interest in Euramax International’s and the Guarantors’ inventory and accounts receivable and related assets, referred to as the ABL Collateral, and a junior‑priority security interest in (i) substantially all of Euramax International’s and the Guarantors’ assets (other than inventory and accounts receivable and related assets, which assets secure the ABL Credit Facility on a first priority basis) and (ii) all of Euramax International’s capital stock and the capital stock of each material domestic restricted subsidiary owned by Euramax International or a Guarantor and 65% of the voting capital stock and 100% of any non-voting capital stock of foreign restricted subsidiaries directly owned by Euramax International or a Guarantor, which we refer to collectively as the Notes Collateral.

The ABL Credit Facility contains affirmative and negative covenants customary for this type of financing, including, but not limited to certain financial covenants in the event excess availability is less than 12.5% of the lesser of the aggregate amount of commitments outstanding at such time and the borrowing base. As of September 26, 2014, excess availability exceeded 12.5% of the borrowing base; therefore, Euramax International was not required to meet the Minimum Consolidated Adjusted EBITDA or Minimum Consolidated Fixed Charge Coverage Ratio. Additionally, restrictive covenants limit the ability of Euramax International and certain of its subsidiaries to incur liens, incur, assume or permit to exist additional indebtedness, guarantees and other contingent obligations, consolidate, merge or sell all or substantially all of their assets, pay dividends or make other distributions, make certain loans and investments, amend or otherwise alter the terms of documents related to certain of their indebtedness, enter into transactions with affiliates and prepay certain indebtedness, in each case, subject to exclusions, and other customary covenants.

Dutch Revolving Credit Facility

In February 2012, the Company's 100% owned subsidiary Euramax Coated Products, BV entered into a revolving credit facility with Rabobank Roermond (the "Dutch Revolving Credit Facility"). The Dutch Revolving Credit Facility provides revolving credit financing of up to EUR 15 million and matures on April 1, 2016. Borrowings under the Dutch Revolving Credit Facility bear interest at a rate per annum which is the aggregate of the average one month Euribor rate over a calendar month plus a margin of 2% and requires payment of a commitment fee of 0.35% per annum on the nominal amount of the credit facility. The weighted average interest rate at September 26, 2014, including the margin payable on outstanding borrowings under the Dutch Revolving Credit Facility, was 2.32%. All obligations under the Dutch Revolving Credit Facility are secured by a mortgage on the real estate of Euramax Coated Products, BV and a pledge on present and future machinery and present and future accounts receivable balances of Euramax Coated Products, BV. At September 26, 2014, $10.8 million (EUR 8.5 million) was available to be drawn on the Dutch Revolving Credit Facility.

The Dutch Revolving Credit Facility contains financial and non-financial covenants customary for this type of financing. Financial covenants include, but are not limited to, a minimum annual EBITDA target and a minimum amount of risk-bearing capital for Euramax Coated Products, BV, both measured at the Company's fiscal year-end. The Dutch Revolving Credit Facility also contains a clause limiting further indebtedness. As of September 26, 2014, Euramax Coated Products, BV is in compliance with all covenants.

4. Commitments and Contingencies

Raw Material Commitments

The Company’s primary raw materials are aluminum and steel coil. Because changes in aluminum and steel prices are generally passed through to customers, increases or decreases in aluminum and steel 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 and steel price increases to customers in the future, its business and results of operations could be materially adversely affected. Although the Company believes there is sufficient supply in the marketplace to competitively source all of its aluminum and steel needs without reliance on any particular supplier, any major disruption in the supply and/or price of aluminum and steel could have a material adverse effect on the Company’s business and financial condition.

To ensure a margin on specific customer orders, the Company may commit to purchase aluminum ingot or coil at a fixed market price for future delivery. These contracts are for normal purchases and sales, and therefore, are not required to be accounted for as derivatives.

Litigation

The Company is currently party to legal proceedings that have arisen in the ordinary course of business. The Company has and will continue to vigorously defend itself in these matters. It is the opinion of the Company’s management, based upon information available at this time, that the expected outcome of all matters to which the Company is currently a party would not reasonably be expected to have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

Environmental Matters

The Company’s operations are subject to U.S., Canadian, and European federal, state, and local environmental laws and regulations, including those concerning the management of pollution and hazardous substances.

In connection with the acquisition of the Company from Alumax Inc. (which was acquired by Aluminum Company of America in May 1998, and hereafter referred to as Alumax) on September 25, 1996, the Company was indemnified by Alumax for substantially all of its costs, if any, related to specifically identified environmental matters arising prior to the closing date of the acquisition during the period of time it was owned directly or indirectly by Alumax. Such indemnification includes costs that may ultimately be incurred to contribute to the remediation of eleven specified existing National Priorities List (NPL) sites for which the Company had been named a potentially responsible party under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) as of the closing date of the acquisition from Alumax, as well as certain potential costs for nine sites to which the Company may have sent waste for disposal. The Company does not believe that it has any significant probable liability for environmental claims. Further, the Company believes it to be unlikely that the Company would be required to bear environmental costs in excess of its pro rata share of such costs as a potentially responsible party at any site. Any receivable for recoveries under the indemnification would be recorded separately from the corresponding liability when the environmental claim and related recovery is determined to be probable. In addition, the Company establishes reserves for remedial measures required from time to time at its facilities. Management believes that the reasonably probable outcomes of these matters will not be material. The Company’s reserves, expenditures, and expenses for all environmental exposures were not significant as of any of the dates or for any of the periods presented.

Product Warranties

The Company provides warranties on certain products. The warranty periods differ depending on the product, but generally range from one year to limited lifetime warranties. The Company provides for warranties based on historical experience and expectations of future occurrence. Changes in the product warranty accrual are summarized as follows:



	Three months ended						Nine months ended
	September 26, 2014			September 27, 2013			September 26, 2014			September 27, 2013
	(in thousands)
Balance, beginning of period	$	4,946		$	5,047		$	5,326		5,098
Payments made or service provided	(754		)	(734		)	(2,309		)	(2,565		)
Warranty expense	692			997			1,867			2,838
Foreign currency translation	(88		)	93			(88		)	32
Balance, end of period	$	4,796		$	5,403		$	4,796		$	5,403

5. Income Taxes

The benefit from income taxes for 2014 and 2013 is computed at the effective rate expected to be applicable in each respective full year using the statutory rates on a country by country basis, adjusted for changes in valuation allowances relating to the Company’s net operating loss and capital loss carryforwards and changes in tax uncertainties. The effective rates for the three month periods ended September 26, 2014 and September 27, 2013 were a benefit of 2.2% and 411.8%, respectively.

The effective rate for the three months ended September 26, 2014 differed from the U.S. statutory rate primarily due to state income taxes, lower tax rates of our foreign operations compared to the U.S. federal rates, and recognition of valuation allowances related to net losses in the UK and in U.S. federal and state jurisdictions.

The effective rate for the three months ended September 27, 2013 differed from the U.S. statutory rate primarily due to the reversal of an uncertain tax position as a result of the expiration of statute of limitations. During the three months ended September 27, 2013, the statute of limitations expired for an uncertain tax position taken in a prior year. As a result, the Company recognized $9.0 million in previously unrecognized tax benefit and an additional $3.4 million related to the reversal of accrued interest and penalties associated with the position during the quarter. Other factors impacting the effective rate include state income taxes, lower tax rates of our foreign operations as compared to the U.S. federal rates, and recognition of valuation allowances related to current year losses in the UK and in U.S. federal and state jurisdictions.

The effective tax rates for the nine month periods ended September 26, 2014 and September 27, 2013 were a benefit of 2.2% and 48.5%, respectively.

The effective rate for the nine months ended September 26, 2014 differed from the U.S. statutory rate primarily due to state income taxes, lower tax rates of our foreign operations compared to the U.S. federal rates, and recognition of valuation allowances related to net losses in the UK and in U.S. federal and state jurisdictions.

The effective rate for the nine months ended September 27, 2013 differed from the U.S. statutory rate due to the reversal of various uncertain tax positions, primarily relating to the expiration of certain statutes of limitations. During the nine months months ended September 27, 2013, the statute of limitations expired for an uncertain tax position taken in a prior year. As a result, the Company recognized $9.0 million in previously unrecognized tax benefit and an additional $3.4 million related to the reversal of accrued interest and penalties associated with the position. Other factors impacting the effective rate include state income taxes, lower tax rates of our foreign operations as compared to the U.S. federal rates, and valuation allowances related to current year losses in the UK and in U.S. federal and state jurisdictions.

6. Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income (loss) by component for the nine month period ended September 26, 2014 were as follows:



	Foreign Currency Translation Adjustments			Defined Benefit Pension Plan Adjustments			Total
	(in thousands)
Balance, beginning of period	$	19,281		$	(8,360	)	$	10,921
Other comprehensive (loss) income before reclassifications	(250		)	—			(250		)
Amounts reclassified from accumulated other comprehensive income (loss)	—			62			62
Net other comprehensive (loss) income	(250		)	62			(188		)
Balance, end of period	$	19,031		$	(8,298	)	$	10,733

Amounts reclassified from the defined benefit pension plan adjustments component of accumulated other comprehensive income (loss) were recorded in selling and general expenses within the condensed consolidated statement of operations. There were no net tax effects related to the reclassification as a result of the full valuation allowances in the U.S. and UK in the current year. The accumulated tax effect related to the defined benefit pension plan adjustments component of accumulated other comprehensive income (loss) was a provision of $0.3 million as of September 26, 2014 and December 31, 2013. There are no tax impacts related to the foreign currency translation adjustment component of accumulated other comprehensive income (loss) as the earnings of subsidiaries are considered to be permanently invested.

7. Employee Benefit Plans

Retirement Plans

The Company maintains a non-contributory defined benefit pension plan covering substantially all U.S. hourly employees (the "U.S. Plan"). In addition, the employees at Euramax Coated Products Limited and Ellbee Limited participate in a single employer pension plan (the "UK Plan"). The measurement date for the U.S. and UK plans is the last day of the fiscal year. The Company curtailed the accrual of participant benefits provided under the UK Plan effective March 31, 2009. This curtailment did not affect the timing for the payment of benefits earned under the UK Plan through the curtailment date. In January 2010, the Company's board of directors approved a motion to freeze future benefit accruals under the U.S. Plan. The impact on the Company's projected benefit obligation was not significant. Components of net periodic pension cost for the Company’s defined and multiemployer pension plans were as follows:



	Three months ended												Nine months ended
	September 26, 2014						September 27, 2013						September 26, 2014						September 27, 2013
	U.S. Plan			UK Plan			U.S. Plan			UK Plan			U.S. Plan			UK Plan			U.S. Plan			UK Plan
	(in thousands)
Service cost	$	14		$	—		$	16		$	—		$	42		$	—		$	48		$	—
Interest cost	141			559			130			527			421			1,673			390			1,582
Expected return on assets	(185		)	(472		)	(156		)	(411		)	(557		)	(1,412		)	(468		)	(1,233		)
Recognized actuarial net loss	3			18			73			8			7			55			217			29
Total defined benefit net periodic pension cost	(27		)	105			63			124			(87		)	316			187			378
Multiemployer benefit expense	324			—			313			—			893			—			860			—
Net periodic pension cost	$	297		$	105		$	376		$	124		$	806		$	316		$	1,047		$	378

8. Fair Value Measurements

Recurring Fair Value Measurements

In accordance with accounting principles generally accepted in the U.S., certain assets and liabilities are required to be recorded at fair value on a recurring basis. For the Company, the only assets and liabilities that are adjusted to fair value on a recurring basis are derivative financial instruments.

Derivative Financial Instruments

The Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company's financial performance and are referred to as "market risks." The Company, when deemed appropriate, uses derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risk managed by the Company through the use of derivative instruments is foreign currency exchange rate risk related to intercompany interest payments. The Company does not enter into derivative contracts for trading purposes.

The Company has entered into forward contracts to buy or sell a quantity of a currency at a predetermined future date, and at a predetermined rate or price to mitigate uncertainty and volatility, and to cover underlying exposures to certain payments in currencies other than the functional currency. The Company has not designated these contracts for hedge accounting treatment and, therefore, the gains and losses on these contracts are recorded in other income (loss), net in the condensed consolidated statement of operations. For the three months ended September 26, 2014 and September 27, 2013, the Company recognized gains of $0.7 million and losses of $0.3 million, respectively, related to these forward contracts. For the nine months ended September 26, 2014 and September 27, 2013, the Company recognized gains of $0.7 million and losses of $0.2 million, respectively, related to these forward contracts.

Derivatives are carried at fair value in the condensed consolidated balance sheet in the line item other current assets or accrued liabilities, as applicable. As of September 26, 2014 and December 31, 2013, the fair value of outstanding derivatives totaled assets of $0.5 million and liabilities of $0.2 million, respectively. The fair value of foreign exchange contracts is determined using quoted prices for similar contracts obtained from financial institutions and is classified as a Level 2 measurement in the fair value hierarchy.

Nonrecurring Fair Value Measurements

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records assets and liabilities at fair value on a nonrecurring basis as required by accounting principles generally accepted in the U.S. Generally, adjustments made to record assets at fair value on a nonrecurring basis are the result of impairment charges.

The Company did not record any impairment charges related to assets measured at fair value on a nonrecurring basis during the three or nine months ended September 26, 2014. During the first quarter of 2013, the Company recorded losses of approximately $1.6 million in other operating charges related to the reclassification of land and buildings to assets held for sale. These losses, incurred as part of the Company's restructuring activities in the European Engineered Products segment, represented the difference between the carrying value prior to the reclassification and the fair value. The fair value was determined based on the selling price less costs incurred to sell and was classified as Level 1 in the fair value hierarchy. The assets were sold during the second quarter of 2013 and no additional losses were recorded from the sale of the assets.

Other Fair Value Disclosures

The carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued expenses, and loans and notes payable approximate their fair values because of the relatively short-term maturities of these instruments.

The fair value of our long-term debt is estimated using Level 2 inputs based on dealer quoted prices for our debt instruments based on recent transactions obtained from various sources. As of September 26, 2014, the carrying amount and fair value of our Senior Secured Notes, were $375.0 million and $363.8 million, respectively. As of December 31, 2013, the carrying amount and fair value of our Senior Secured Notes, were $375.0 million and $375.0 million, respectively.

9. Other Operating Charges

Other operating charges incurred by operating segment were as follows:



	Three months ended				Nine months ended
	September 26, 2014		September 27, 2013		September 26, 2014		September 27, 2013
	(in thousands)
U.S. Residential Products	$	83	$	57	$	591	$	214
U.S. Commercial Products	177		69		646		364
European Roll Coated Aluminum	26		305		26		495
European Engineered Products	148		995		1,218		4,039
Other non-allocated	617		29		1,876		243
Total other operating charges	$	1,051	$	1,455	$	4,357	$	5,355

Other operating charges are comprised of restructuring initiatives, facility closures, and other operational initiatives. In the second quarter of 2014, after an ongoing review of its North American operations, the Company took steps to rationalize its workforce and to invest in select value-creating officer roles. These actions led to the elimination of certain non-essential salaried positions in the Company's North America business segments and at its Corporate Headquarters in Norcross, GA. The Company believes the elimination of certain non-essential salaried positions in the Company's North American business will result in a more competitive platform that provides both meaningful operational and cost benefits. Total severance and related costs incurred in the nine months ended September 26, 2014 related to the work force rationalization totaled approximately $1.0 million and are recorded within other operating charges in the Company’s condensed consolidated statement of operations. Total severance on a segment basis is disclosed in the following paragraphs.

For the three months ended September 26, 2014, other operating charges of $1.1 million were primarily comprised of severance costs and legal and professional fees. Other non-allocated charges of $0.6 million were primarily related to professional fees for consulting services during the executive transition period. The remaining $0.5 million was related to severance and relocation costs for various organizational initiatives in the U.S. and Europe to reduce operating costs and improve efficiencies.

For the three months ended September 27, 2013, other operating charges of $1.5 million were primarily comprised of ongoing restructuring and relocation initiatives in the European Engineered Products segment including approximately $0.8 million of severance and relocation costs associated with the relocation from multiple plant facilities in the UK into one operating location and $0.2 million of severance costs for various social programs in France. The remaining $0.5 million of other operating costs in the third quarter of 2013 were comprised primarily of severance and relocation costs related to various organizational initiatives in the European Roll Coated Aluminum segment and in the U.S. to reduce operating costs and improve efficiencies.

For the nine months ended September 26, 2014, other operating charges of $4.4 million were primarily comprised of severance costs and legal and professional fees. Other non-allocated charges of $1.9 million were made up of severance and professional fees for consulting services during the executive transition period. Ongoing restructuring initiatives in the European Engineered Products segment totaled $1.3 million, including approximately $0.8 million of severance costs for various social programs in France and $0.5 million of severance in the UK. The remaining other operating charges in the first nine months of 2014 were comprised of $1.2 million in severance and relocation costs in the U.S. primarily related to the workforce rationalization and organizational initiatives to reduce operating costs and improve efficiencies. Total costs related to the workforce rationalization for the nine months ended September 26, 2014 include $0.4 million in the Residential Products segment, $0.4 million in the Commercial Products segment, and $0.2 million in other non-allocated charges for corporate employees.

For the nine months ended September 27, 2013, other operating charges of $5.4 million were primarily comprised of restructuring and relocation initiatives in the European Engineered Products segment, including a $1.6 million loss related to the sale of land and buildings, $2.0 million of severance, relocation, and other restructuring charges related to the relocation from multiple plant facilities in the UK into one operating location, and $0.5 million of severance costs for various social programs in France. The remaining other operating charges in the first nine months of 2013 were comprised of $1.3 million in severance and relocation costs in both the U.S. and Europe related to various organizational initiatives to reduce operating costs and improve efficiencies.

10. Segment Information

The Company manages its business and serves its customers through reportable segments differentiated by product type, end market, and geography. The Company's four reportable segments are described below:

U.S. Residential Products—The U.S. Residential Products segment utilizes aluminum, steel, copper and vinyl to produce residential roof drainage products, including preformed gutters, downspouts, elbows, soffit, drip edge, fascia, flashing, snow guards and related accessories. These products are used primarily for the repair, replacement or enhancement of residential roof drainage systems. The Company sells these products to home improvement retailers, lumber yards, distributors and contractors from manufacturing and distribution facilities throughout North America. The Company also produces specialty made-to-order vinyl replacement windows and aluminum patio and awning components sold primarily to home improvement contractors in the western U.S.

U.S. Commercial Products—The U.S. Commercial Products segment utilizes various materials including steel coil, aluminum coil and fiberglass to create various products with commercial applications, including roofing and siding panels, ridge caps, flashing, trim, soffit and other accessories as well as sidewall components, siding and other exterior components for the towable RV, cargo and manufactured housing markets. The Company sells these products to builders, contractors, lumber yards, home improvement retailers, OEMs, and RV manufacturers from manufacturing and distribution facilities located throughout the U.S. These products are used in the construction of a wide variety of small scale commercial, agricultural and industrial building types on either wood or metal frames, manufactured homes, and towable RVs.

European Roll Coated Aluminum—The European Roll Coated Aluminum segment uses a roll coating process to apply paint to bare aluminum coil and, to a lesser extent, bare steel coil in order to produce specialty coated coil, which the Company also processes into specialty coated sheets and panels. The Company sells these products to building panel manufacturers, contractors and UK “holiday home,” RV and transportation OEMs throughout Europe and in parts of Asia. The Company’s customers use its specialty coated metal products to manufacture, among other things, RV sidewalls, commercial roofing panels, interior ceiling panels, and liner panels for shipping containers. The Company produces and distributes these roll coated products from facilities located in the Netherlands and the UK.

European Engineered Products—The European Engineered Products segment utilizes aluminum and vinyl extrusions to produce residential windows, doors and shower enclosures. These products are sold to home improvement retailers, distributors and factory‑built “holiday home” builders in the UK. The Company also produces windows used in the operator compartments of heavy equipment, components sold to suppliers of automotive OEMs in Western Europe and RV doors. The Company produces and distributes these engineered products from facilities in France and the UK and has developed extensive in-house manufacturing capabilities, including powder coating, glass cutting, anodizing and glass toughening.

The Company evaluates the performance of its segments and allocates resources to them based primarily on segment income (loss) from operations. Expenses, income and assets that are not segment specific relate to the holding company and business activities conducted for the overall benefit of the Company, and accordingly, are not attributable to the Company’s segments.

The following table presents information about reported segments for the three months ended September 26, 2014:



	U.S. Residential Products		U.S. Commercial Products		European Roll Coated Aluminum		European Engineered Products		Other Non- Allocated			Eliminations			Consolidated
Three months ended September 26, 2014	(in thousands)
Net sales:
Third party	$	94,126	$	85,633	$	44,710	$	15,473	$	—		$	—		$	239,942
Intersegment	218		40		176		—		—			(434		)	—
Total net sales	$	94,344	$	85,673	$	44,886	$	15,473	$	—		$	(434	)	$	239,942
Income (loss) from operations	$	9,660	$	2,213	$	1,979	$	325	$	(3,001	)	$	—		$	11,176
Depreciation and amortization	$	2,790	$	2,707	$	2,299	$	398	$	(52	)	$	—		$	8,142
Capital expenditures	$	301	$	641	$	415	$	248	$	667		$	—		$	2,272

The following table presents information about reported segments for the three months ended September 27, 2013:



	U.S. Residential Products		U.S. Commercial Products		European Roll Coated Aluminum		European Engineered Products			Other Non- Allocated			Eliminations			Consolidated
Three months ended September 27, 2013	(in thousands)
Net sales:
Third party	$	87,518	$	80,717	$	45,660	$	13,940		$	—		$	—		$	227,835
Intersegment	188		58		87		—			—			(333		)	—
Total net sales	$	87,706	$	80,775	$	45,747	$	13,940		$	—		$	(333	)	$	227,835
Income (loss) from operations	$	9,281	$	2,251	$	1,782	$	(1,612	)	$	(3,015	)	$	—		$	8,687
Depreciation and amortization	$	2,891	$	2,628	$	2,435	$	401		$	159		$	—		$	8,514
Capital expenditures	$	873	$	361	$	717	$	180		$	266		$	—		$	2,397

The following table presents information about reported segments for the nine months ended September 26, 2014:



	U.S. Residential Products		U.S. Commercial Products			European Roll Coated Aluminum		European Engineered Products			Other Non- Allocated			Eliminations			Consolidated
Nine months ended September 26, 2014	(in thousands)
Net sales:
Third party	$	230,235	$	216,699		$	146,258	$	49,644		$	—		$	—		$	642,836
Intersegment	614		100			472		—			—			(1,186		)	—
Total net sales	$	230,849	$	216,799		$	146,730	$	49,644		$	—		$	(1,186	)	$	642,836
Income (loss) from operations	$	17,938	$	(1,003	)	$	9,297	$	(619	)	$	(9,316	)	$	—		$	16,297
Depreciation and amortization	$	8,246	$	7,564		$	7,010	$	1,261		$	514		$	—		$	24,595
Capital expenditures	$	961	$	1,344		$	1,220	$	730		$	978		$	—		$	5,233

The following table presents information about reported segments for the nine months ended September 27, 2013:



	U.S. Residential Products		U.S. Commercial Products			European Roll Coated Aluminum		European Engineered Products			Other Non- Allocated			Eliminations			Consolidated
Nine months ended September 27, 2013	(in thousands)
Net sales:
Third party	$	226,203	$	209,217		$	145,238	$	49,583		$	—		$	—		$	630,241
Intersegment	522		356			192		—			—			(1,070		)	—
Total net sales	$	226,725	$	209,573		$	145,430	$	49,583		$	—		$	(1,070	)	$	630,241
Income (loss) from operations	$	18,857	$	(1,830	)	$	7,422	$	(5,144	)	$	(8,166	)	$	—		$	11,139
Depreciation and amortization	$	8,721	$	7,866		$	7,149	$	1,397		$	424		$	—		$	25,557
Capital expenditures	$	2,076	$	1,367		$	2,527	$	396		$	989		$	—		$	7,355

It is impractical for the Company to provide revenues from external customers by groups of similar products. Accordingly, the following table reflects revenues from external customers by markets for the periods indicated:



		Three months ended				Nine months ended
Customers/Markets	Primary Products	September 26, 2014		September 27, 2013		September 26, 2014		September 27, 2013
		(in thousands)
Home Improvement Retailers	Rain carrying systems, metal panels, roofing accessories, windows, doors and shower enclosures	$	54,934	$	57,449	$	135,000	$	145,995
Rural Contractors	Steel and aluminum roofing and siding	46,974		44,029		103,001		97,932
Original Equipment Manufacturers (“OEMs”)	Painted aluminum sheet and coil; fabricated painted aluminum, laminated and fiberglass panels; windows and roofing; and composite building panels	46,033		45,474		158,330		149,791
Industrial and Architectural Contractors	Metal panels and siding and roofing accessories	38,168		37,926		110,410		112,721
Distributors	Metal coils, rain carrying systems and roofing accessories	31,043		25,096		73,296		67,121
Home Improvement Contractors	Vinyl replacement windows; metal coils, rain carrying systems; metal roofing and insulated roofing panels; shower, patio and entrance doors; and awnings	13,918		11,546		37,275		31,971
Manufactured Housing	Steel siding and trim components	8,872		6,315		25,524		24,710
		$	239,942	$	227,835	$	642,836	$	630,241

11. Supplemental Guarantor Condensed Financial Information

On March 18, 2011, Euramax Holdings (presented as Parent in the following schedules), through its 100% owned subsidiary, Euramax International (presented as Issuer in the following schedules), issued the Notes. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Euramax Holdings, Euramax International, and Amerimax Richmond Company, a 100% owned domestic subsidiary of Euramax International. No other subsidiaries of Euramax International, whether direct or indirect, guarantee the Notes (the "Non-Guarantor Subsidiaries").

Additionally, the Notes are secured on a second priority basis by liens on all of the collateral (subject to certain exceptions) securing the ABL Credit Facility. In the event that secured creditors exercise remedies with respect to Euramax International's pledged assets, the proceeds of the liquidation of those assets will first be applied to repay obligations secured by the first priority liens under the senior secured credit facilities and any other first priority obligations.

The following supplemental condensed consolidating financial statements present the results of operations, comprehensive operations, financial position and cash flows of (1) the Parent, (2) the Issuer, (3) the Non-Guarantor Subsidiaries, and (4) eliminations to arrive at the information for Euramax Holdings on a consolidated basis.

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS

SEPTEMBER 26, 2014

(in thousands)

(unaudited)



	Parent			Issuer			Non-Guarantor			Eliminations			Total
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	907		$	2,328		$	—		$	3,235
Accounts receivable, less allowance for doubtful accounts	—			69,856			41,311			—			111,167
Inventories, net	—			92,459			27,719			—			120,178
Income taxes receivable	—			542			—			—			542
Deferred income taxes	—			556			19			—			575
Other current assets	—			5,603			2,517			—			8,120
Total current assets	—			169,923			73,894			—			243,817
Property, plant and equipment, net	—			55,054			61,297			—			116,351
Amounts due from affiliates	—			207,556			18,594			(226,150		)	—
Goodwill	—			81,359			113,983			—			195,342
Customer relationships, net	—			18,776			11,166			—			29,942
Other intangible assets, net	—			6,599			—			—			6,599
Investment in consolidated subsidiaries	(141,507		)	(2,243		)	—			143,750			—
Deferred income taxes	—			—			419			—			419
Other assets	—			2,765			3,699			—			6,464
Total assets	$	(141,507	)	$	539,789		$	283,052		$	(82,400	)	$	598,934
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	—		$	71,145		$	23,541		$	—		$	94,686
Accrued expenses and other current liabilities	41			19,289			11,228			—			30,558
Accrued interest payable	—			21,736			34			—			21,770
Current portion of long-term debt	—			—			8,253			—			8,253
Deferred income taxes	—			—			559			—			559
Total current liabilities	41			112,170			43,615			—			155,826
Long-term debt	—			540,812			—			—			540,812
Amounts due to affiliates	5,625			11,403			209,122			(226,150		)	—
Deferred income taxes	—			10,450			7,709			—			18,159
Other liabilities	—			6,461			24,849			—			31,310
Total liabilities	5,666			681,296			285,295			(226,150		)	746,107
Shareholders’ (deficit) equity:
Common stock	195			—			21			(21		)	195
Additional paid-in capital	724,443			661,550			199,452			(861,002		)	724,443
Accumulated loss	(882,544		)	(813,790		)	(214,697		)	1,028,487			(882,544		)
Accumulated other comprehensive income	10,733			10,733			12,981			(23,714		)	10,733
Total shareholders’ (deficit) equity	(147,173		)	(141,507		)	(2,243		)	143,750			(147,173		)
Total liabilities and shareholders’ (deficit) equity	$	(141,507	)	$	539,789		$	283,052		$	(82,400	)	$	598,934

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS

DECEMBER 31, 2013
(in thousands)



	Parent			Issuer			Non-Guarantor			Eliminations			Total
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	1,700		$	7,277		$	—		$	8,977
Accounts receivable, less allowance for doubtful accounts	—			35,012			38,984			—			73,996
Inventories, net	—			62,270			27,490			—			89,760
Income taxes receivable	—			341			641			—			982
Deferred income taxes	—			559			21			—			580
Other current assets	—			5,462			1,546			—			7,008
Total current assets	—			105,344			75,959			—			181,303
Property, plant and equipment, net	—			62,185			67,929			—			130,114
Amounts due from affiliates	—			229,101			18,828			(247,929		)	—
Goodwill	—			81,359			122,694			—			204,053
Customer relationships, net	—			24,626			16,005			—			40,631
Other intangible assets, net	—			7,073			—			—			7,073
Investment in consolidated subsidiaries	(103,217		)	2,407			—			100,810			—
Deferred income taxes	—			—			87			—			87
Other assets	—			4,185			4,527			—			8,712
Total assets	$	(103,217	)	$	516,280		$	306,029		$	(147,119	)	$	571,973
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	—		$	30,312		$	26,950		$	—		$	57,262
Accrued expenses and other current liabilities	14			16,133			10,219			—			26,366
Accrued interest payable	—			8,973			47			—			9,020
Deferred income taxes	—			—			605			—			605
Total current liabilities	14			55,418			37,821			—			93,253
Long-term debt	—			535,396			—			—			535,396
Amounts due to affiliates	5,332			12,086			230,511			(247,929		)	—
Deferred income taxes	—			9,561			9,419			—			18,980
Other liabilities	—			7,036			25,871			—			32,907
Total liabilities	5,346			619,497			303,622			(247,929		)	680,536
Shareholders’ (deficit) equity:
Common stock	195			—			21			(21		)	195
Additional paid-in capital	724,071			661,180			199,452			(860,632		)	724,071
Accumulated loss	(843,750		)	(775,318		)	(210,242		)	985,560			(843,750		)
Accumulated other comprehensive income	10,921			10,921			13,176			(24,097		)	10,921
Total shareholders’ (deficit) equity	(108,563		)	(103,217		)	2,407			100,810			(108,563		)
Total liabilities and shareholders’ (deficit) equity	$	(103,217	)	$	516,280		$	306,029		$	(147,119	)	$	571,973

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 26, 2014
(in thousands)

(unaudited)



	Parent			Issuer			Non-Guarantor			Eliminations			Total
Net sales	$	—		$	177,682		$	64,674		$	(2,414	)	$	239,942
Costs and expenses:
Cost of goods sold (excluding depreciation and amortization)	—			150,361			54,213			(2,414		)	202,160
Selling and general (excluding depreciation and amortization)	102			11,722			5,589			—			17,413
Depreciation and amortization	—			5,406			2,736			—			8,142
Other operating charges	—			795			256			—			1,051
Income (loss) from operations	(102		)	9,398			1,880			—			11,176
Equity in earnings (losses) of subsidiaries	(16,304		)	(1,471		)	—			17,775			—
Interest expense	—			(13,571		)	(324		)	—			(13,895		)
Intercompany income (loss), net	—			4,486			(4,486		)	—			—
Other (loss) income, net	—			(15,023		)	967			—			(14,056		)
Loss before income taxes	(16,406		)	(16,181		)	(1,963		)	17,775			(16,775		)
(Benefit from) provision for income taxes	—			123			(492		)	—			(369		)
Net loss	$	(16,406	)	$	(16,304	)	$	(1,471	)	$	17,775		$	(16,406	)

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 26, 2014
(in thousands)

(unaudited)



	Parent			Issuer			Non-Guarantor			Eliminations			Total
Net loss	$	(16,406	)	$	(16,304	)	$	(1,471	)	$	17,775		$	(16,406	)
Other comprehensive income:
Foreign currency translation adjustment	204			204			204			(408		)	204
Defined benefit pension plan adjustments, net of tax	21			21			18			(39		)	21
Total comprehensive loss	$	(16,181	)	$	(16,079	)	$	(1,249	)	$	17,328		$	(16,181	)

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 27, 2013
(in thousands)

(unaudited)



	Parent			Issuer			Non-Guarantor			Eliminations			Total
Net sales	$	—		$	165,866		$	64,365		$	(2,396	)	$	227,835
Costs and expenses:
Cost of goods sold (excluding depreciation and amortization)	—			137,171			54,017			(2,396		)	188,792
Selling and general (excluding depreciation and amortization)	325			13,686			6,376			—			20,387
Depreciation and amortization	—			5,579			2,935			—			8,514
Other operating charges	—			155			1,300			—			1,455
Income (loss) from operations	(325		)	9,275			(263		)	—			8,687
Equity in earnings (losses) of subsidiaries	16,584			(4,171		)	—			(12,413		)	—
Interest expense	—			(13,528		)	(277		)	—			(13,805		)
Intercompany income (loss), net	—			4,478			(4,478		)	—			—
Other income (loss), net	—			8,313			(18		)	—			8,295
Income (loss) before income taxes	16,259			4,367			(5,036		)	(12,413		)	3,177
Benefit from income taxes	—			(12,217		)	(865		)	—			(13,082		)
Net income (loss)	$	16,259		$	16,584		$	(4,171	)	$	(12,413	)	$	16,259

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 27, 2013

(in thousands)

(unaudited)



	Parent			Issuer			Non-Guarantor			Eliminations			Total
Net income (loss)	$	16,259		$	16,584		$	(4,171	)	$	(12,413	)	$	16,259
Other comprehensive income (loss):
Foreign currency translation adjustment	(89		)	(89		)	(89		)	178			(89		)
Defined benefit pension plan adjustments, net of tax	81			81			8			(89		)	81
Total comprehensive income (loss)	$	16,251		$	16,576		$	(4,252	)	$	(12,324	)	$	16,251

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 26, 2014
(in thousands)

(unaudited)



	Parent			Issuer			Non-Guarantor			Eliminations			Total
Net sales	$	—		$	441,341		$	207,434		$	(5,939	)	$	642,836
Costs and expenses:
Cost of goods sold (excluding depreciation and amortization)	—			376,504			171,643			(5,939		)	542,208
Selling and general (excluding depreciation and amortization)	322			36,200			18,857			—			55,379
Depreciation and amortization	—			16,198			8,397			—			24,595
Other operating charges	—			3,031			1,326			—			4,357
Income (loss) from operations	(322		)	9,408			7,211			—			16,297
Equity in earnings (losses) of subsidiaries	(38,472		)	(4,455		)	—			42,927			—
Interest expense	—			(40,520		)	(1,054		)	—			(41,574		)
Intercompany income (loss), net	—			13,825			(13,825		)	—			—
Other (loss) income, net	—			(15,876		)	1,500			—			(14,376		)
Loss before income taxes	(38,794		)	(37,618		)	(6,168		)	42,927			(39,653		)
(Benefit from) provision for income taxes	—			854			(1,713		)	—			(859		)
Net loss	$	(38,794	)	$	(38,472	)	$	(4,455	)	$	42,927		$	(38,794	)

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 26, 2014
(in thousands)

(unaudited)



	Parent			Issuer			Non-Guarantor			Eliminations			Total
Net loss	$	(38,794	)	$	(38,472	)	$	(4,455	)	$	42,927		$	(38,794	)
Other comprehensive (loss) income:
Foreign currency translation adjustment	(250		)	(250		)	(250		)	500			(250		)
Defined benefit pension plan adjustments, net of tax	62			62			55			(117		)	62
Total comprehensive loss	$	(38,982	)	$	(38,660	)	$	(4,650	)	$	43,310		$	(38,982	)

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 27, 2013
(in thousands)

(unaudited)



	Parent			Issuer			Non-Guarantor			Eliminations			Total
Net sales	$	—		$	429,300		$	206,908		$	(5,967	)	$	630,241
Costs and expenses:
Cost of goods sold (excluding depreciation and amortization)	—			361,266			173,124			(5,967		)	528,423
Selling and general (excluding depreciation and amortization)	513			40,416			18,838			—			59,767
Depreciation and amortization	—			16,712			8,845			—			25,557
Other operating charges	—			821			4,534			—			5,355
Income (loss) from operations	(513		)	10,085			1,567			—			11,139
Equity in earnings (losses) of subsidiaries	(12,900		)	(11,619		)	—			24,519			—
Interest expense	—			(40,384		)	(873		)	—			(41,257		)
Intercompany income (loss), net	—			13,158			(13,158		)	—			—
Other income (loss), net	—			4,891			(830		)	—			4,061
Loss before income taxes	(13,413		)	(23,869		)	(13,294		)	24,519			(26,057		)
Benefit from income taxes	—			(10,969		)	(1,675		)	—			(12,644		)
Net loss	$	(13,413	)	$	(12,900	)	$	(11,619	)	$	24,519		$	(13,413	)

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 27, 2013

(in thousands)

(unaudited)



	Parent			Issuer			Non-Guarantor			Eliminations			Total
Net loss	$	(13,413	)	$	(12,900	)	$	(11,619	)	$	24,519		$	(13,413	)
Other comprehensive (loss) income:
Foreign currency translation adjustment	(431		)	(431		)	(431		)	862			(431		)
Defined benefit pension plan adjustments, net of tax	246			246			29			(275		)	246
Total comprehensive loss	$	(13,598	)	$	(13,085	)	$	(12,021	)	$	25,106		$	(13,598	)

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 26, 2014
(in thousands)

(unaudited)



	Parent		Issuer			Non-Guarantor			Eliminations			Total
Net cash used in operating activities	$	—	$	(8,172	)	$	(6,143	)	$	—		$	(14,315	)
Cash flows from investing activities:
Proceeds from sale of assets	—		776			1			—			777
Capital expenditures	—		(3,239		)	(1,994		)	—			(5,233		)
Due from (to) affiliates	—		4,949			—			(4,949		)	—
Net cash (used in) provided by investing activities	—		2,486			(1,993		)	(4,949		)	(4,456		)
Cash flows from financing activities:
Net borrowings on Dutch Revolving Credit Facility	—		—			8,253			—			8,253
Net borrowings on ABL Credit Facility	—		4,981			—			—			4,981
Change in cash overdrafts	—		—			215			—			215
Debt issuance costs	—		(88		)	—			—			(88		)
Due (to) from affiliates	—		—			(4,949		)	4,949			—
Net cash provided by financing activities	—		4,893			3,519			4,949			13,361
Effect of exchange rate changes on cash	—		—			(332		)	—			(332		)
Net decrease in cash and cash equivalents	—		(793		)	(4,949		)	—			(5,742		)
Cash and cash equivalents at beginning of period	—		1,700			7,277			—			8,977
Cash and cash equivalents at end of period	$	—	$	907		$	2,328		$	—		$	3,235

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 27, 2013
(in thousands)

(unaudited)



	Parent		Issuer			Non-Guarantor			Eliminations			Total
Net cash used in operating activities	$	—	$	(10,148	)	$	(6,588	)	$	—		$	(16,736	)
Cash flows from investing activities:
Proceeds from sale of assets	—		266			2,022			—			2,288
Capital expenditures	—		(4,379		)	(2,976		)	—			(7,355		)
Due from (to) affiliates	—		—			2,209			(2,209		)	—
Net cash (used in) provided by investing activities	—		(4,113		)	1,255			(2,209		)	(5,067		)
Cash flows from financing activities:
Net borrowings on ABL Credit Facility	—		19,514			—			—			19,514
Net borrowings on Dutch Revolving Credit Facility	—		—			1,836			—			1,836
Debt issuance costs	—		(175		)	—			—			(175		)
Due (to) from affiliates	—		(2,209		)	—			2,209			—
Net cash provided by financing activities	—		17,130			1,836			2,209			21,175
Effect of exchange rate changes on cash	—		—			64			—			64
Net (decrease) increase in cash and cash equivalents	—		2,869			(3,433		)	—			(564		)
Cash and cash equivalents at beginning of period	—		1,574			8,450			—			10,024
Cash and cash equivalents at end of period	$	—	$	4,443		$	5,017		$	—		$	9,460

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words "believe," "expect," "anticipate," "intend," "estimate" and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. Our forward-looking statements include, among others, statements about our business strategy, our industry, our future profitability, our expected capital expenditures and the impact of such expenditures on our performance, the costs of operating as a public company, our capital programs and environmental expenditures. Forward-looking statements involve known and unknown risks, uncertainties and other factors, including the factors described under "Item 1A. Risk Factors," that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. Such risks and uncertainties include, among other things:


•	the cyclical nature of the markets we serve;


•	the general level of economic activity both in North America and International markets;


•	the loss or reduction of purchases by key customers;


•	external factors which impact our key retail customers and reduce purchases of our products;


•	changes in strategic direction by our key retail customers;


•	the effect of price competition in key markets and product lines;


•	margin compression associated with higher operating costs which may not be recovered through increased customer pricing;


•	consolidation of purchasing power among our customers;


•	the supply and price levels of essential raw materials, particularly aluminum and steel;


•	risks associated with the manufacturing process due to operating hazards and interruptions, including unscheduled maintenance or downtime;


•	risks associated with revenue concentration at our key home improvement retail customers;


•	risks associated with higher energy costs and the risk of disruptions in energy suppliers;


•	the adequacy of our insurance coverage;


•	our ability to effectively compete in the markets we serve;


•	increased fuel costs which could adversely impact the RV industry;


•	higher interest rates which could adversely impact the RV industry;


•	the integrity of our information systems;


•	seasonal effects on our customers' purchasing activity;


•	adverse weather conditions;


•	disruption in our supply chain or distribution of finished product;


•	our ability to adequately protect our intellectual property rights and successfully defend against third-party claims of intellectual property infringement;


•	higher fuel costs leading to increased transportation and distribution costs;


•	the effect of product liability or warranty claims against us;


•	the proliferation of low-cost competition, particularly in our core North American markets;


•	environmental, health and safety laws and regulations;


•	changes in commercial or residential building codes;


•	our significant indebtedness and our ability to incur additional debt in the future;


•	our ability to remain compliant under the agreements governing our indebtedness;


•	our ability to refinance our indebtedness or generate sufficient cash to service all of our indebtedness;


•	restrictions under our existing or future debt agreements that limit our operations;


•	exposure to adjustments in interest rates;


•	declines in our credit and debt ratings;


•	instability in the capital and credit markets;


•	the risks of doing business in foreign countries;


•	fluctuations in foreign currency exchange rates;


•	inability to effectively reinvest in our plants, technology, equipment and new product development due to our indebtedness;


•	exposure to U.S. and foreign anti-corruption laws and economic sanctions programs;


•	state, local and non-U.S. taxes and fluctuations in our tax obligations and effective tax rate;


•	adverse effects of foreign taxation;


•	adverse changes to accounting rules or regulations;


•	the success of our acquisitions or divestitures;


•	our ability to attract and retain qualified management and key personnel, including hourly personnel;


•	labor and work stoppages;


•	the effects of inflation on our business;


•	the effects of government or regulatory activity and the costs of compliance with environmental and occupational health and safety laws and regulations;


•	the potential for future impairment of our goodwill or other intangible assets; and


•	global or regional catastrophic events.

You should not place undue reliance on our forward-looking statements. Although forward-looking statements reflect our good faith beliefs, forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. We caution you that the important factors referenced above may not contain all of the factors that could impair our results or that may be important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except to the extent required by law, rule or regulation.

Business Overview

We are a leading producer of metal and vinyl products sold to the residential repair and remodel, commercial construction and recreational vehicle (RV) markets primarily in North America and Europe. We are a leader in several niche product categories, including preformed roof-drainage products sold in the U.S., metal roofing and siding for post frame construction in the U.S., and aluminum siding for towable RVs in the U.S. and Europe.

Our customers are located predominantly throughout North America and Europe and include distributors, contractors and home improvement retailers, as well as RV, transportation and other original equipment manufacturers, or OEMs. We have extensive in-house manufacturing and distribution capabilities for our more than 10,000 unique products and operate through a network consisting of 35 facilities, including 29 located in the United States, one in Canada and five located in Europe. We have over 50 years of experience manufacturing building products and RV exterior components, including our time as a division of our former parent, Alumax Inc., or Alumax, a fully integrated aluminum producer acquired by Alcoa Inc. in 1998. We have operated as an independent company since 1996 when our division was acquired in a management-led buyout.

Results of Operations

Our financial performance is affected by, among other factors, underlying trends in the United States and Europe that influence demand for products sold to residential repair and remodeling, commercial construction and RV markets:

•

Our building products sold for residential repair and remodeling activities include roof drainage products, vinyl windows, patios and awnings, and doors. Projects that utilize many of our roof drainage repair and remodeling products are often low cost activities that are necessary to prevent home damage as a result of wear and tear or weather damage. Roof drainage repair projects are often low cost and non‑discretionary in nature. Repair and remodeling activity related to products other than roof drainage are typically higher cost and driven by turnover and aging of housing stock, consumer sentiment, availability of home equity and consumer financing and, in the case of our vinyl window products, consumer interest in energy efficiency.

•

Our building products sold for commercial construction include, in the United States, light gauge steel and aluminum roofing and siding panels, trim and hardware and, in Europe, the Middle East and Asia, roll coated aluminum coil and sheet. Demand for these products is driven by consumer confidence, interest rates, consumer disposable income, the strength of agricultural markets, consumer access to affordable financing and commercial construction trends.

•

Our commercial products sold to the RV market include siding and roofing. Demand for these RV products is driven by trends in disposable income, interest rates and general economic conditions, as well as similar demographic trends relating to the increased proportion of the United States and European population in the 55 through 74 year old age group, who serve as an important source of demand for our RV products.

Our sales volumes have historically been higher in the second and third quarters due to the seasonal demand of the building products markets served. Our working capital needs have been at their highest during these periods as well.

Three months ended September 26, 2014 Compared to the Three months ended September 27, 2013.

The following table sets forth net sales and income (loss) from operations data by segment for the three months ended September 26, 2014 and September 27, 2013:



	Net Sales					Income (Loss) from Operations
	Three Months Ended					Three Months Ended
	September 26, 2014		September 27, 2013		Increase (Decrease)	September 26, 2014			September 27, 2013			Increase (Decrease)
	(in millions)
U.S. Residential Products	$	94.1	$	87.5	7.5%	$	9.7		$	9.3		4.3%
U.S. Commercial Products	85.6		80.7		6.1%	2.2			2.3			(4.3)%
European Roll Coated Aluminum	44.7		45.7		(2.2)%	2.0			1.8			11.1%
European Engineered Products	15.5		13.9		11.5%	0.3			(1.6		)	118.8%
Other Non-Allocated	—		—		—	(3.0		)	(3.1		)	3.2%
Totals	$	239.9	$	227.8	5.3%	$	11.2		$	8.7		28.7%

Net Sales. Net sales include revenue recognized from the sales of our products less provisions for returns, allowances, rebates and discounts. Our net sales increased $12.1 million, or 5.3%, to $239.9 million in the third quarter of 2014 compared to $227.8 million in the third quarter of 2013. Net sales growth for the third quarter of 2014 was primarily driven by our U.S. Residential and Commercial Products segments. Foreign currency translation also resulted in an approximate $1.4 million increase in net sales during the quarter primarily as a result of the strengthening of the British pound sterling and the euro against the U.S. dollar.

Total net sales for our U.S. segments increased $11.5 million, or 6.8%, to $179.7 million in the third quarter of 2014 compared to $168.2 million in the third quarter of 2013.

Net sales of our U.S. Residential Products segment increased $6.6 million, or 7.5%, to $94.1 million in the third quarter of 2014 compared to $87.5 million in the third quarter of 2013. Demand for our roof drainage and roofing accessory products in the distribution market improved during the third quarter of 2014 compared to the third quarter of 2013. Demand from contractors for our vinyl window and patio offerings also increased during the third quarter of 2014. These improvements were partially offset by a decline in home center demand during the third quarter of 2014 compared to the third quarter of 2013.

Net sales of our U.S. Commercial Products segment increased $4.9 million, or 6.1%, to $85.6 million in the third quarter of 2014 compared to $80.7 million in the third quarter of 2013. Higher net sales resulted primarily from an increase in demand in the post frame construction market and higher demand from OEMs in the RV and transportation markets compared to the third quarter of 2013. These increases were partially offset by a decline in demand from OEMs for specialty coated aluminum coils and in architectural projects over the prior year quarter.

Total net sales for our European segments increased $0.6 million, or 1.0%, to $60.2 million in the third quarter of 2014 compared to $59.6 million in the third quarter of 2013. Foreign currency translation resulted in an approximate $1.4 million increase in net sales during the quarter primarily as a result of the strengthening of the British pound sterling and euro against the U.S. dollar.

Net sales of our European Roll Coated Aluminum segment declined $1.0 million, or 2.2%, to $44.7 million in the third quarter of 2014 compared to $45.7 million in the third quarter of 2013. Foreign currency translation resulted in higher net sales of approximately $0.8 million compared to the third quarter of 2013 primarily as a result of the strengthening of the British pound sterling and euro against the U.S. dollar. Excluding the impact of foreign currency, sales declined $1.8 million primarily due to lower demand from OEMs in the transportation market partially offset by improvement in demand for specialty coated coil and panels used in architectural and industrial projects. Demand in this segment has been negatively impacted by continuing economic uncertainty and reduced consumer confidence.

Net sales of our European Engineered Products segment increased $1.6 million, or 11.5%, to $15.5 million in the third quarter of 2014 compared to $13.9 million in the third quarter of 2013. Strengthening of foreign currencies, primarily the British pound sterling and euro against the U.S. dollar, resulted in higher net sales of approximately $0.6 million compared to the third quarter of 2013. Excluding the impact of foreign currency, sales increased $1.0 million. This increase is primarily due to higher demand for factory built holiday homes in the UK in the third quarter of 2014.

Cost of Goods Sold. Cost of goods sold includes the cost of raw materials, manufacturing labor, packaging, utilities, freight, maintenance and other elements of manufacturing overhead. Cost of goods sold increased $13.4 million, or 7.1%, to $202.2 million in the third quarter of 2014 compared to $188.8 million in the third quarter of 2013. Foreign currency translation resulted in higher cost of goods sold of approximately $1.2 million as a result of the strengthening of the euro and British pound sterling against the U.S. dollar. Excluding the impact of foreign currency, cost of goods sold increased $12.2 million. The increase in cost of goods sold is primarily related to volume increases and higher raw material costs in our North America segments.

Selling and General. Selling and general expenses include salaries, benefits, incentive compensation, insurance, travel and entertainment and other administrative costs. Selling and general expenses declined $3.0 million, or 14.7%, to $17.4 million in the third quarter of 2014 compared to $20.4 million in the third quarter of 2013. Foreign currency translation resulted in higher selling and general costs of approximately $0.2 million as a result of the strengthening of the euro and British pound sterling against the U.S. dollar. Excluding the impact of foreign exchange, selling and general expenses declined $3.2 million. This decrease is primarily due to ongoing organizational initiatives to improve efficiency and streamline operations in both North America and Europe. Additionally, stock compensation expense declined $0.6 million due to the full vesting of the Company's 2009 restricted stock grant.

Depreciation and Amortization. Depreciation and amortization declined $0.4 million, or 4.7%, to $8.1 million in the third quarter of 2014 compared to $8.5 million in the third quarter of 2013.

In the third quarter of 2014, other operating charges of $1.1 million were primarily comprised of severance costs and legal and professional fees. Other non-allocated charges of $0.6 million were primarily related to professional fees for consulting services during the executive transition period. The remaining $0.5 million related to severance and relocation costs for various organizational initiatives in the U.S. and Europe to reduce operating costs and improve efficiencies.

In the third quarter of 2013, other operating charges of approximately $1.5 million were primarily comprised of ongoing restructuring and relocation initiatives in the European Engineered Products segment, including approximately $0.8 million of severance and relocation costs associated with the relocation from multiple plant facilities in the UK into one operating location and $0.2 million of severance costs for various social programs in France. The remaining $0.5 million of other operating charges were comprised primarily of severance and relocation costs related to various organizational initiatives in our European Roll Coated Aluminum segment and in the U.S. to reduce operating costs and improve efficiencies.

Income (Loss) from Operations. As a result of the aforementioned items, our income from operations increased $2.5 million, to $11.2 million in the third quarter of 2014 compared to $8.7 million for the third quarter of 2013.

Income from operations of our U.S. Residential Products segment increased $0.4 million to $9.7 million for the third quarter of 2014 compared to $9.3 million for the third quarter of 2013. This increase is primarily related to higher sales and lower selling and general expenses as a result of the operational initiatives undertaken in North America.

Income from operations of our U.S. Commercial Products segment declined $0.1 million to $2.2 million for the third quarter of 2014 compared to $2.3 million in the third quarter of 2013. Excluding the impact of other operating charges, which increased $0.1 million, income from operations remained flat compared to the third quarter of 2013. Higher cost of goods sold as a result of increased raw material costs were generally offset by cost savings as a result of operational initiatives undertaken in North America.

Income from operations of our European Roll Coated Aluminum segment increased $0.2 million to $2.0 million in the third quarter of 2014 compared to $1.8 million in the third quarter of 2013. The improvement in income from operations was primarily the result of the $0.3 million reduction in other operating charges and impact of cost saving initiatives, which offset the overall decline in sales volume quarter over quarter.

Income (loss) from operations of our European Engineered Products segment improved $1.9 million to income of $0.3 million for the third quarter of 2014 compared to a loss of $1.6 million in the third quarter of 2013. This improvement was primarily due to a $0.9 million decline in other operating charges which totaled $0.1 million in the current quarter related to relocation and severance costs compared to approximately $1.0 million of other operating charges in the third quarter of 2013. Excluding the impact of these other operating charges, loss from operations improved $1.0 million. This improvement is due to the increase in sales volume, as well as the successful organizational initiatives initiated in 2013 to combine multiple plant facilities and reduce operating costs in the UK.

Interest Expense. Interest expense for the third quarter of 2014 and for the third quarter of 2013 totaled approximately $13.9 million and $13.8 million, respectively. Interest expense is primarily comprised of interest on our Senior Secured Notes, Senior Unsecured Loan Facility, ABL Credit Facility, and Dutch Revolving Credit Facility.

Other Income (Loss), Net. Other income (loss), net includes translation gains and losses on intercompany obligations, gains and losses on asset disposals, interest income and other income or expense items of a non-operating nature.

Other loss, net in the third quarter of 2014 of $14.1 million consisted primarily of translation losses on intercompany obligations due to the weakening of the euro compared to the U.S. dollar totaling $14.8 million, which were offset by gains of approximately $0.7 million on forward foreign currency contracts.

Other income, net in the third quarter of 2013 of $8.3 million consisted primarily of translation gains on intercompany obligations due to the strengthening of the euro compared to the U.S. dollar totaling $8.9 million, which were offset by losses of approximately $0.3 million on forward foreign currency contracts and $0.2 million in various legal settlements.

Benefit from Income Taxes. We reported an income tax benefit of $0.4 million for the third quarter of 2014 compared to a benefit of $13.1 million for the third quarter of 2013. Benefit from income taxes during the third quarter of 2013 included income of approximately $12.4 million related to the reversal of a reserve for an uncertain tax position taken in a prior period as a result of the expiration of the statute of limitations. The income recognized in the quarter included recognition of approximately $9.0 million in previously unrecognized tax benefits and an additional $3.4 million related to the reversal of accrued interest and penalties associated with the position. Our effective tax rates were a benefit of 2.2% and 411.8% for the three months ended September 26, 2014 and September 27, 2013, respectively.

The effective rate for the third quarter of 2014 differed from the U.S. statutory rate primarily due to state income taxes, lower tax rates of our foreign operations compared to the U.S. federal rates, and recognition of valuation allowances related to net losses in the UK and in U.S. federal and state jurisdictions.

The effective rate for the third quarter of 2013 differed from the U.S. statutory rate primarily due to the reversal of an uncertain tax position in the U.S. as a result of the expiration of the statute of limitations. Other factors impacting the effective rate include lower tax rates of our foreign operations as compared to the U.S. federal rates, and recognition of valuation allowances related to net losses in the UK and for U.S. federal and state net operating losses.

Our effective tax rate reflects a full valuation allowance on losses in the United States. Without a valuation allowance, earnings from the United States are generally taxed at rates higher than the foreign statutory tax rates. The effective tax rate also reflects a full valuation allowance on losses in the UK. A change in the mix of pretax income from the various tax jurisdictions can have a significant impact on our periodic effective tax rate.

Net Income (Loss). Our net loss was $16.4 million for the third quarter of 2014 compared to net income of $16.3 million for the third quarter of 2013. Net income (loss) was negatively impacted by non-cash losses totaling $14.1 million as a result of foreign currency fluctuations compared to income of $8.3 million in Q3 2013. Additionally, in the third quarter of 2013, we recognized an income tax benefit of $13.1 million related to the reversal of a reserve for an uncertain tax position. The negative impact of these non-operating items was offset by the overall improvement in income from operations compared to the third quarter of 2013.

Nine months ended September 26, 2014 Compared to the Nine months ended September 27, 2013.

The following table sets forth net sales and income (loss) from operations data by segment for the nine months ended September 26, 2014 and September 27, 2013:



	Net Sales					Income (Loss) from Operations
	Nine months ended					Nine months ended
	September 26, 2014		September 27, 2013		Increase (Decrease)	September 26, 2014			September 27, 2013			Increase (Decrease)
	(in millions)
U.S. Residential Products	$	230.2	$	226.2	1.8%	$	17.9		$	18.9		(5.3)%
U.S. Commercial Products	216.7		209.2		3.6%	(1.0		)	(1.8		)	44.4%
European Roll Coated Aluminum	146.3		145.2		0.8%	9.3			7.4			25.7%
European Engineered Products	49.6		49.6		—%	(0.6		)	(5.1		)	88.2%
Other Non-Allocated	—		—		—%	(9.3		)	(8.3		)	(12.0)%
Totals	$	642.8	$	630.2	2.0%	$	16.3		$	11.1		46.8%

Net Sales. Net sales include revenue recognized from the sales of our products less provisions for returns, allowances, rebates and discounts. Our net sales increased $12.6 million, or 2.0%, to $642.8 million in the first nine months of 2014 compared to $630.2 million in the first nine months of 2013. Foreign currency translation resulted in an approximate $8.4 million increase in net sales during the first nine months of 2014 primarily as a result of the strengthening of the euro and British pound sterling against the U.S. dollar. Excluding the impact of foreign exchange, net sales increased $4.2 million.

Total net sales for our U.S. segments increased $11.5 million, or 2.6%, to $446.9 million in the first nine months of 2014 compared to $435.4 million in the first nine months of 2013.

Net sales of our U.S. Residential Products segment increased $4.0 million, or 1.8%, to $230.2 million in the first nine months of 2014 compared to $226.2 million in the first nine months of 2013. The increase in net sales was primarily the result of higher demand for our roof drainage and roofing accessory products in the distribution market and from contractors for our vinyl window and patio offerings. These increases were partially offset by declines in our home center market during the first nine months of 2014 compared to 2013.

Net sales of our U.S. Commercial Products segment increased $7.5 million, or 3.6%, to $216.7 million in the first nine months of 2014 compared to $209.2 million in the first nine months of 2013. Higher net sales resulted from higher demand in the post frame construction markets and from OEMs in both the RV and transportation markets. Net sales increases were offset by a decline in demand in the architectural construction markets.

Total net sales for our European segments increased $1.1 million, or 0.6%, to $195.9 million in the first nine months of 2014 compared to $194.8 million in the first nine months of 2013. Foreign currency translation resulted in an approximate $8.4 million increase in net sales during the first nine months of 2014 as a result of the strengthening of the euro and British pound sterling against the U.S. dollar.

Net sales of our European Roll Coated Aluminum segment increased $1.1 million, or 0.8%, to $146.3 million in the first nine months of 2014 compared to $145.2 million in the first nine months of 2013. Foreign currency translation resulted in higher net sales of approximately $5.8 million compared to the prior year period as a result of the strengthening of the euro and British pound sterling against the U.S. dollar. Excluding the impact of foreign currency, sales declined $4.7 million. Net sales declines resulted primarily from lower demand from OEMs in the transportation market and aluminum coils sold in the architectural and industrial markets. These losses were partially offset by ongoing business development initiatives in emerging markets.

Net sales of our European Engineered Products segment remained flat at $49.6 million in the first nine months of 2014 compared to $49.6 million in the first nine months of 2013. Strengthening of foreign currencies, primarily the euro and British pound sterling against the U.S. dollar, resulted in higher net sales of approximately $2.6 million compared to the first nine months of 2013. Excluding the impact of foreign currency, net sales declined $2.6 million. This decline is primarily due to lower demand in the industrial and architectural markets in the UK for the first nine months of 2014.

Cost of Goods Sold. Cost of goods sold includes the cost of raw materials, manufacturing labor, packaging, utilities, freight, maintenance and other elements of manufacturing overhead. Cost of goods sold increased $13.8 million, or 2.6%, to $542.2 million in the first nine months of 2014 compared to $528.4 million in the first nine months of 2013. Foreign currency translation resulted in higher cost of goods sold of approximately $7.1 million as a result of the strengthening of the euro against the U.S. dollar. Excluding the impact of foreign currency, cost of goods sold increased $6.7 million. The increase in cost of goods sold is primarily related to volume increases and higher raw material costs in our North America segments, partially offset by lower variable labor costs as a result of efficiency improvements and cost reducing initiatives across the Company.

Selling and General. Selling and general expenses include salaries, benefits, incentive compensation, insurance, travel and entertainment and other administrative costs. Selling and general expenses declined $4.4 million, or 7.4%, to $55.4 million in the first nine months of 2014 compared to $59.8 million in the first nine months of 2013. Foreign currency translation resulted in higher selling and general costs of approximately $0.9 million as a result of the strengthening of the euro and British pound sterling against the U.S. dollar. Excluding the impact of foreign exchange, selling and general expenses declined $5.3 million. The decrease is primarily due to organizational initiatives to improve efficiency and streamline operations across the Company and a decline in stock compensation expense due to the full vesting of the Company's 2009 restricted stock grant.

Depreciation and Amortization. Depreciation and amortization declined $1.0 million, or 3.9%, to $24.6 million in the first nine months of 2014 compared to $25.6 million in the first nine months of 2013.

Other Operating Charges. Other operating charges are comprised of restructuring initiatives, facility closures, and other operational initiatives. Other operating charges of $4.4 million in the first nine months of 2014 declined $1.0 million compared to $5.4 million in the first nine months of 2013. In the second quarter of 2014, after an ongoing review of its North American operations, the Company took steps to rationalize its workforce and to invest in select value-creating officer roles. These actions led to the elimination of certain non-essential salaried positions in the Company's North America business segments and at its Corporate Headquarters in Norcross, GA. The Company believes these steps will result in a more competitive platform that provides both meaningful operational and cost benefits.

In the first nine months of 2014, other operating charges of approximately $4.4 million were primarily comprised of severance costs and legal and professional fees. Other non-allocated charges of $1.9 million were made up of severance and professional fees for consulting services during the executive transition period. Ongoing restructuring initiatives in the European Engineered Products segment totaled $1.3 million, including approximately $0.8 million of severance costs for various social programs in France and $0.5 million of severance in the UK. The remaining other operating charges in the first nine months of 2014 were comprised of $1.2 million in severance and relocation costs in the U.S. primarily related to the workforce rationalization and organizational initiatives to reduce operating costs and improve efficiencies. Total costs related to the North America workforce rationalization include $0.4 million in the Residential Products segment, $0.4 million in the Commercial Products segment, and $0.2 million in other non-allocated charges for corporate employees.

In the first nine months of 2013, other operating charges of approximately $5.4 million were primarily comprised of restructuring and relocation initiatives in the European Engineered Products segment including a $1.6 million loss related to the sale of land and buildings and $2.0 million of severance, relocation, and other restructuring charges related to the relocation from multiple plant facilities in the UK into one operating location and $0.5 million of severance costs for various social programs in France. The remaining other operating charges in the first nine months of 2013 were comprised of $1.3 million in severance and relocation costs in both the U.S. and Europe related to various organizational initiatives to reduce operating costs and improve efficiencies.

Income (Loss) from Operations. As a result of the aforementioned items, our income from operations increased $5.2 million, to $16.3 million in the first nine months of 2014 compared to $11.1 million for the first nine months of 2013.

Income from operations of our U.S. Residential Products segment declined $1.0 million to $17.9 million for the first nine months of 2014 compared to $18.9 million for the first nine months of 2013. Excluding the increase in other operating charges of $0.4 million, income from operations declined $0.6 million. This decrease is primarily related to higher raw material costs and changes in product mix during the first nine months of 2014 compared to the first nine months of 2013. These declines were partially offset by organizational initiatives and higher selling prices during the third quarter of 2014.

Loss from operations of our U.S. Commercial Products segment improved $0.8 million to a loss of $1.0 million for the first nine months of 2014 compared to a loss of $1.8 million in the first nine months of 2013. Excluding the increase in other operating charges of $0.3 million, income from operations improved $1.1 million. This improvement is primarily the result of higher sales volumes compared to the first nine months of 2013 and operational initiatives during the third quarter of 2014.

Income from operations of our European Roll Coated Aluminum segment increased $1.9 million to $9.3 million in the first nine months of 2014 compared to $7.4 million in the first nine months of 2013. The improvement in operating income was primarily due to lower other operating charges of $0.5 million and higher gross margins as a result of higher net sales in the RV market combined with business development initiatives during the first nine months of 2014.

Loss from operations of our European Engineered Products segment improved $4.5 million to a loss of $0.6 million for the first nine months of 2014 compared to a loss of $5.1 million in the first nine months of 2013. This improvement was primarily due to a $2.8 million decline in other operating charges from approximately $4.0 million in the first nine months of 2013 compared to $1.2 million in the first nine months of 2014. Other operating charges in the first nine months of 2013 related primarily to the relocation and consolidation of multiple plant facilities into one location in the UK. Excluding the impact of other operating charges, loss from operations improved $1.7 million over the prior year despite flat net sales. This improvement in income from operations reflects organizational initiatives to streamline operations and improve efficiency and reflects a focus on customer and product profitability initiatives.

Interest Expense. Interest expense for the first nine months of 2014 and for the first nine months of 2013 totaled approximately $41.6 million and $41.3 million, respectively. Interest expense is primarily comprised of interest on our Senior Secured Notes, Senior Unsecured Loan Facility, ABL Credit Facility, and Dutch Revolving Credit Facility.

Other loss, net in the first nine months of 2014 of $14.4 million consisted primarily of translation losses on intercompany obligations due to the weakening of the euro compared to the U.S. dollar totaling $15.1 million, which were offset by gains on forward foreign currency contracts of $0.7 million.

Other income, net in the first nine months of 2013 of $4.1 million consisted primarily of translation gains on intercompany obligations due to the strengthening of the euro compared to the U.S. dollar totaling $4.1 million. Additionally, net gains of $0.2 million as a result of favorable legal settlements were offset by losses on forward foreign currency contracts of $0.2 million.

Benefit from Income Taxes. We reported an income tax benefit of $0.9 million for the first nine months of 2014 compared to a benefit of $12.6 million for the first nine months of 2013. Benefit from income taxes during the first nine months of 2013 included income of approximately $12.4 million related to the reversal of a reserve for an uncertain tax position taken in a prior period as a result of the expiration of the statute of limitations. The income recognized in the quarter included recognition of approximately $9.0 million in previously unrecognized tax benefits and an additional $3.4 million related to the reversal of accrued interest and penalties associated with the position. Our effective tax rates were a benefit of 2.2% and 48.5% for the nine months ended September 27, 2013.

The effective rate for the first nine months of 2014 differed from the U.S. statutory rate primarily due to state income taxes, lower tax rates of our foreign operations compared to the U.S. federal rates, and recognition of valuation allowances related to net losses in the UK and in U.S. federal and state jurisdictions.

The effective rate for the first nine months of 2013 differed from the U.S. statutory rate primarily due to the reversal of an uncertain tax position in the U.S. as a result of the expiration of statute of limitations. Other factors impacting the effective rate include state income taxes, lower tax rates of our foreign operations as compared to the U.S. federal rates, and recognition of valuation allowances related to net losses in the UK and for U.S. federal and state net operating losses.

Our effective tax rate reflects a full valuation allowance on losses in the U.S. Without a valuation allowance, earnings from the United States are generally taxed at rates higher than the foreign statutory tax rates. The effective tax rate also reflects a full valuation allowance on losses in the UK. A change in the mix of pretax income from the various tax jurisdictions can have a significant impact on our periodic effective tax rate.

Net Loss. Our net loss was $38.8 million for the first nine months of 2014 compared to a net loss of $13.4 million for the first nine months of 2013. Net income (loss) was negatively impacted by non-cash losses totaling $14.4 million as a result of foreign currency fluctuations compared to income of $4.1 million in 2013. Additionally, in the third quarter of 2013, we recognized an income tax benefit of $13.1 million related to the reversal of a reserve for an uncertain tax position. The negative impact of these non-operating items was offset by the overall improvement in income from operations compared to the first nine months of 2013.

Liquidity and Capital Resources

Our principal sources of liquidity are from cash and cash equivalents, cash from operations and borrowings under our ABL Credit Facility and Dutch Revolving Credit Facility. As of September 26, 2014, we had cash and cash equivalents of $3.2 million. Net cash used in operating activities was $14.3 million for the nine months ended September 26, 2014 compared to net cash used in operating activities of $16.7 million for the nine months ended September 27, 2013. As of September 26, 2014, we had $41.7 million outstanding and availability of $28.3 million under our ABL Credit Facility and $8.3 million outstanding and availability of $10.8 million on our Dutch Revolving Credit Facility.

Our ability to make debt service payments, refinance our indebtedness, maintain capital assets and satisfy our other capital and commercial commitments will depend on our ability to generate cash flow in the future. This ability, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors. While these factors are beyond our control, we frequently invest in sources of liquidity with the intent of improving our ability to generate future cash flow. Such investments have, and may in the future, include product development initiatives, restructuring and growth oriented capital expenditures, and business acquisitions. We believe our September 26, 2014 cash levels, together with our cash from operations and borrowings under our revolving credit facilities will be adequate to fund our cash requirements based on our current level of operations for at least the next twelve months.

Debt

Notes

Our Notes consist of an aggregate principal amount of $375 million, which were issued pursuant to an indenture (the "Indenture"), dated March 18, 2011, among Euramax Holdings, Inc. ("Euramax Holdings"), Euramax International, Inc. ("Euramax International"), and certain of its domestic subsidiaries as guarantors, and Wells Fargo Bank, National Association, the Trustee. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Euramax Holdings and Amerimax Richmond Company, a 100% owned domestic subsidiary of Euramax International. The Notes bear interest at 9.50% per year and mature on April 1, 2016, unless earlier redeemed or repurchased by Euramax International. Interest is payable semi-annually on April 1 and October 1 of each year.

The Notes are secured by a first priority security interest in (i) substantially all of the assets of Euramax International and the guarantors (other than inventory and accounts receivable and related assets, which assets secure the ABL Credit Facility on a first priority basis) and (ii) all of Euramax International's capital stock and the capital stock of each material domestic restricted subsidiary owned by Euramax International or a guarantor and 65% of the voting capital stock and 100% of any non-voting capital stock of foreign restricted subsidiaries directly owned by us or a guarantor, and a second priority security interest in our inventory, receivables and related assets.

The Notes may be redeemed at Euramax International's option, in whole or in part, under the conditions specified in the Indenture, at the following redemption prices plus accrued and unpaid interest to the redemption date, if redeemed during the twelve month period beginning on April 1 of the years indicated:



Year	Percentage
2013	107.125	%
2014	104.750	%
2015 and thereafter	100.000	%

The Indenture governing the Notes contains restrictive covenants that limit, among other things, the ability of Euramax International and certain of its subsidiaries to incur additional indebtedness, pay dividends and make certain distributions, make other restricted payments, make investments, incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets and enter into certain transactions with affiliates, in each case, subject to exclusions, and other customary covenants. These limitations also limit Euramax International's ability to transfer cash or assets to Euramax Holdings, whether by dividend, loan, or otherwise. The Indenture also contains customary events of default. If Euramax International undergoes a change of control (as defined in the Indenture), Euramax International will be required to make an offer to repurchase the notes at 101% of the principal amount of the Notes redeemed plus accrued and unpaid interest, if any, to the date of redemption.

Senior Unsecured Loan Facility

In March 2011, Euramax Holdings, Euramax International, and certain of its domestic subsidiaries entered into the Senior Unsecured Loan Facility with investment funds affiliated with Highland Capital Management, L.P. and Levine Leichtman Capital Partners, as lenders in the aggregate principal amount of $125.0 million. The indebtedness incurred under the Senior Unsecured Loan Facility was issued at 98% of par on March 18, 2011 and matures on October 1, 2016. The difference between the consideration received and the aggregate face amount of the Senior Unsecured Loan Facility ($0.9 million) is being amortized and recorded in interest expense using the effective interest rate method over the term. The Senior Unsecured Loan Facility bears interest at 12.25% per year in the event no election is made to pay interest in kind (PIK), and 14.25% (7.875% cash pay and 6.375% PIK) per annum in the event a PIK election is made. Euramax International may make a PIK election for up to six quarters during the term of the Senior Unsecured Loan Facility. The interest rate on outstanding borrowings at September 26, 2014 was 12.25%, as the Company has not made a PIK election. During the second quarter of 2014, Levine Leichtman Capital Partners assigned its holdings in the Senior Unsecured Loan Facility to Credit Suisse Loan Funding LLC.

Euramax International may prepay outstanding amounts under the Senior Unsecured Loan Facility, in whole or in part, at the prices (expressed as a percentage of the loans) set forth below:



Prepayment Date	Percentage
On or after the second anniversary of the closing but prior to the third anniversary thereof	103	%
On or after the third anniversary of the closing but prior to the fourth anniversary thereof	102	%
On or after the fourth anniversary of the closing	100	%

The Senior Unsecured Loan Facility contains restrictive covenants that limit, among other things, the ability of Euramax International and certain of its subsidiaries to incur additional indebtedness, pay dividends and make certain distributions, make other restricted payments, make investments, incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of our assets and enter into certain transactions with affiliates, in each case, subject to exclusions, and other customary covenants.

ABL Credit Facility

On March 18, 2011, Euramax Holdings, Euramax International, and certain of its domestic subsidiaries entered into the ABL Credit Facility with various lenders, Regions Bank, as Collateral and Administrative Agent, Wells Fargo Capital Finance, LLC, as Co-Collateral Agent, and Regions Business Capital, as Sole Lead Arranger and Bookrunner. The ABL Credit Facility provides for revolving credit financing of up to $70 million, subject to a borrowing base, and matures on March 1, 2018. However, if the Agent has not received on or before December 31, 2015, evidence satisfactory to Agent that the scheduled maturity dates of the indebtedness arising under the Indenture and the Senior Unsecured Loan Facility, in each case, have been extended to a date that is 90 or more days following March 1, 2018, then the maturity date for the ABL Credit facility shall be January 1, 2016. In March 2014, Wells Fargo Capital Finance, LLC ceased to be Co-Collateral Agent and a Lender under the ABL Credit Facility.

Dutch Revolving Credit Facility

In February 2012, our 100% owned subsidiary in the Netherlands, Euramax Coated Products, BV entered into the Dutch Revolving Credit Facility with Rabobank Roermond (Rabobank). The Dutch Revolving Credit Facility provides revolving credit financing of up to EUR 15 million and matures on April 1, 2016. Borrowings under the Dutch Revolving Credit Facility bear interest at a rate per annum which is the aggregate of the average one month Euribor rate over a calendar month plus a margin of 2% and requires payment of a Credit Fee of 0.35% per annum on the nominal amount of the credit facility. All obligations under the Dutch Revolver are secured by a mortgage on the real estate of Euramax Coated Products, BV, a pledge on present and future machinery and present and future accounts receivable balances of Euramax Coated Products, BV.

The Dutch Revolving Credit Facility contains financial and non-financial covenants customary for this type of financing. Financial covenants include, but are not limited to a minimum annual EBITDA target and a minimum requirement for risk-bearing capital, for Euramax Coated Products, BV, both measured at the Company's fiscal year end. The Dutch Revolving Credit Facility also contains a clause limiting further indebtedness.

Covenant Ratios Contained in the Indenture, the ABL Credit Facility and the Senior Unsecured Loan Facility.

The Indenture governing the Notes and the Senior Unsecured Loan Facility contain two material covenants which utilize financial ratios. These covenants do not require Euramax International to maintain specified ratio levels at all times or at regular intervals. However, if Euramax International elected to incur additional indebtedness under the ratio test without having availability under other debt baskets, or make restricted payments under the restricted payment covenant without having availability under our restricted payment baskets, non-compliance with these covenants could result in an event of default under the Indenture and, under certain circumstances, a requirement to immediately repay all amounts outstanding under the Notes and could trigger a cross-default under our credit facilities or other indebtedness Euramax International may incur in the future. Euramax International is permitted to incur indebtedness under the Indenture and the Senior Unsecured Loan Facility if the ratio of Consolidated Cash Flow to Fixed Charges on a pro forma basis (referred to in the Indenture and the Senior Unsecured Loan Facility as the "Fixed Charge Coverage Ratio") is greater than 2:1 or, if the ratio is less, only if the indebtedness falls into specified debt baskets, including, for example, a credit agreement debt basket, an existing debt basket, a capital lease and purchase money debt basket, an intercompany debt basket, a permitted guarantee debt basket, a hedging debt basket, a receivables transaction debt basket and a general debt basket. In addition, under the Indenture and Senior Unsecured Loan Facility, Euramax International is permitted to incur secured debt only if the ratio of Consolidated Secured Indebtedness to Consolidated Cash Flow on a pro forma basis (referred to in the Indenture and the Senior Unsecured Loan Facility as the "Secured Debt Ratio") is equal to or less than 3.75:1.00. Second, the restricted payment covenant provides that Euramax International may declare certain dividends, or repurchase equity securities, in certain circumstances only if the Fixed Charge Coverage Ratio is greater than 2:1. In addition, under the ABL Credit Facility, Euramax International is required to meet either a minimum consolidated Fixed Charge Coverage Ratio or a minimum consolidated EBITDA, in each case under certain circumstances, when excess availability is less than 12.5% of the lesser of the aggregate amount of commitments outstanding at such time and the borrowing base.

The Fixed Charge Coverage Ratio and the Secured Debt Ratio under the Indenture only limit the ability of Euramax International to incur additional indebtedness and the failure of the Company to be within these ratios would not be an event of default under the Indenture or Senior Unsecured Loan Facility. Euramax has not incurred any additional indebtedness or made any restricted payments pursuant to the provisions in the Indenture and the Senior Unsecured Loan Facility that rely on such ratios.

The provisions of the ABL Credit Facility only require Euramax International to meet the Minimum Consolidated Adjusted EBITDA or Minimum Fixed Charge Coverage Ratio under the ABL Credit Facility when excess availability is less than 12.5%. As of September 26, 2014, because excess availability under the ABL Credit Facility exceeded 12.5% of the borrowing base, Euramax International was not required to meet the Minimum Consolidated Adjusted EBITDA or Minimum Consolidated Fixed Charge Coverage Ratio under the ABL Credit Facility. The Company does not expect excess availability to fall below 12.5% on any testing date during the next twelve months.

Cash Flows

The following table summarizes our cash flows for the nine months ended September 26, 2014 and September 27, 2013:



	Nine months ended
	September 26, 2014			September 27, 2013
	(in thousands)
Net cash used in operating activities	$	(14,315	)	$	(16,736	)
Net cash used in investing activities	(4,456		)	(5,067		)
Net cash provided by financing activities	13,361			21,175
Effect of exchange rate changes on cash	(332		)	64
Net decrease in cash and cash equivalents	$	(5,742	)	$	(564	)

Nine months ended September 26, 2014 Compared to the Nine months ended September 27, 2013.

Operating Activities. Cash used in operating activities in the first nine months of 2014 was approximately $14.3 million compared to cash used in operating activities of $16.7 million for the first nine months of 2013, an increase in cash flow of $2.4 million. Cash flow from operations included interest payments totaling $26.3 million and $26.4 million for the nine month periods ended September 26, 2014 and September 27, 2013, respectively. This improvement in operating cash flow is primarily related to the improvement in operating income during the first nine months of 2014 and as a result of working capital initiatives in 2014.

Investing Activities. Cash used in investing activities in the first nine months of 2014 was $4.5 million. Capital expenditures of $5.2 million were offset by proceeds from asset sales of approximately $0.8 million in the first nine months of 2014.

Cash used in investing activities in the first nine months of 2013 was $5.1 million. Capital expenditures of $7.4 million were offset by $2.3 million of proceeds from the sale of assets in the first nine months of 2013. The proceeds from the sale of assets included $2.0 million related to the sale of assets held for sale in our European Engineered Products segment.

Financing Activities. Cash provided by financing activities during the first nine months of 2014 was $13.4 million and consisted primarily of net borrowings on our ABL Credit Facility totaling $5.0 million and net borrowings on our Dutch Revolving Credit Facility totaling $8.3 million, and an increase in cash overdrafts of $0.2 million. Net cash provided by these borrowings was partially offset by $0.1 million of debt issuance costs related to the amendment of the ABL Credit Facility.

Cash provided by financing activities during the first nine months of 2013 was $21.2 million and consisted primarily of net borrowings under the ABL Credit Facility of $19.5 million and net borrowings on our Dutch Revolving Credit Facility totaling $1.8 million. Net cash provided by these borrowings were partially offset by $0.2 million of debt issuance costs related to the amendment of the ABL Credit Facility.

Capital Expenditures

Our capital expenditures for the first nine months of 2014 and the first nine months of 2013 were $5.2 million and $7.4 million, respectively. Capital expenditures in each period relate primarily to purchases and upgrades of coil coating, fabricating, transportation and material moving and handling equipment.

Seasonality; Inflation

Our sales have historically been seasonal, with the second and third quarters typically accounting for our highest sales volumes. First and fourth quarter sales volumes are generally lower primarily due to reduced repair and remodel activity and reduced activity in the building and construction industry as a result of colder and more inclement weather in our geographic end markets, as well as customer plant shutdowns in the RV and automotive industries during holidays and model changeovers.

Our cost of goods sold is subject to inflationary pressures and price fluctuations of the raw materials we use, particularly the cost of aluminum and steel. In addition, we are party to certain leases that contain escalator clauses contingent on increases based on changes in the Consumer Price Index. We believe that inflation and deflation had a minimal impact on our overall results of operations during the nine months ended September 26, 2014 and September 27, 2013.

Working Capital Management

Working capital decreased $0.1 million, or 0.1%, to $88.0 million as of September 26, 2014 from $88.1 million as of December 31, 2013. The decrease in working capital is primarily attributable to seasonal increases in accounts receivable and inventory partially offset by increases in accounts payable and current borrowings on our Dutch Revolving Credit Facility. We historically experience an increase in inventory and accounts receivable during the first half of the year as many customers in our markets increase purchases in the spring and gradually decline throughout the second half of the year.

Accounts receivable of $111.2 million as of September 26, 2014 increased $37.2 million, or 50.3%, from $74.0 million as of December 31, 2013. The primary reason for the increase in accounts receivable was a 34.0% increase in net sales for the two months ended September 26, 2014 compared to the two months ended December 31, 2013. Typically the majority of outstanding receivables are generated from net sales in the preceding two months. As of September 26, 2014, days sales outstanding in accounts receivable were 42.2 days, compared to 35.8 days as of December 31, 2013.

Inventories of $120.2 million as of September 26, 2014 increased $30.4 million, or 33.9%, from $89.8 million as of December 31, 2013, primarily as a result of seasonal increases in demand. As of September 26, 2014, days sales in inventories were 54.1 days, compared to 49.7 days as of December 31, 2013.

Accounts payable of $94.7 million as of September 26, 2014 increased $37.4 million, or 65.3%, from $57.3 million as of December 31, 2013. Higher accounts payable balances reflect increasing inventory levels throughout the year to support higher demand in peak seasons.

Current portion of long-term debt increased $8.3 million as of September 26, 2014. The current portion of long-term debt consisted of outstanding borrowings on the Dutch Revolving Credit Facility totaling $8.3 million as of September 26, 2014 compared to no outstanding borrowings as of December 31, 2013.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles. In order to apply these principles, management must make judgments, assumptions and estimates based on the best available information at the time. Management bases these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. For the three months ended September 26, 2014, there were no significant changes to our critical accounting policies and estimates from those disclosed in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2013.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 26, 2014.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in currency exchange rates (primarily the euro and British pound sterling), interest rates and commodity prices (primarily aluminum and steel). The Company has entered into forward contracts to buy or sell a quantity of currency at a predetermined price or quantity to mitigate uncertainty and volatility, and cover underlying exposure to certain payments in currencies other than the functional currency.

Foreign Currency Exchange Risk

Approximately 30.5% of our net sales for the nine months ended September 26, 2014 originated in Europe. Although our sales outside the United States are subject to exchange rate fluctuations, we do not use derivatives to manage our foreign currency exchange risks resulting from foreign sales. Changes in foreign exchange rates affect other income recorded in relation to translation gains and losses on intercompany obligations denominated in a foreign currency.

Interest Rate Risk

We manage interest rate risk through the use of fixed rate debt and may in the future utilize interest rate swap contracts. We have fixed rate debt from our Notes and our Senior Unsecured Loan Facility. Our floating rate exposure is related to our ABL and Dutch Revolving Credit Facilities, which are tied to changes in the LIBOR and Euribor rates, respectively.

We had no interest rate swap contracts outstanding during the nine months ended September 26, 2014 or September 27, 2013.

Commodity Price Risk

From time to time we enter into contracts for the purchase of aluminum and steel at market values in an attempt to assure a margin on specific customer orders. We may also choose to commit to purchase a specific quantity of aluminum over a specified time period at a fixed price, exposing us to the difference between the fixed price and the market price of aluminum during that time period. We do not use hedges to manage our long-term risks relating to market prices of steel and aluminum raw materials because we are generally able to pass on changes in market prices to customers.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company under the supervision and with the participation of the Company’s management, including the President (its principal executive officer) and the Chief Financial Officer (its principal financial officer), evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d- 15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, our management, including our President and our Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of September 26, 2014.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended September 26, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

From time to time, we are party to various legal proceedings arising in the ordinary course of business. The Company is not currently a party to any legal proceeding the result of which it believes could have a material adverse impact upon its business, financial position or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2013, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. There have been no material changes in the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2013.

Item 6. Exhibits

EXHIBIT INDEX




Number	Exhibit Title
3.1	Euramax Holdings, Inc. Performance Incentive Plan.
3.2	Employment Agreement dated September 14, 2014 between Euramax BV and Jan Timmerman.
31.1	Rule 13a-14(a)/15d-14(a) Certification of Euramax Holdings, Inc.'s President.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Euramax Holding's Inc.’s Chief Financial Officer.
32.1	Certification of the PEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.





		EURAMAX HOLDINGS, INC.


Date: November 10, 2014		/s/ Mary S. Cullin
		Mary S. Cullin
		Senior Vice President, Chief Financial Officer & Treasurer

Euramax Holdings, Inc. - FORM 10-Q - November 10, 2014

Attached files

Euramax Holdings, Inc. Reports