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| 8-K - 8-K AMI SEPTEMBER 2016 INVESTOR PRESENTATION - ASSOCIATED MATERIALS, LLC | a8-kinvestorpresentationse.htm |
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INVESTOR PRESENTATION
September, 2016
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Associated Materials – Confidential Material 1
Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements
All statements (other than statements of historical facts) included in this document regarding the prospects of the industry and our prospects, plans, financial position and
business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking
terminology such as “may,” “will,” “should,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “predict,” “potential” or “continue” or the negatives of these terms or
variations of them or similar terminology. Although we believe that the expectations reflected in these forward-looking statements are reasonable, there cannot be
assurance that these expectations will prove to be correct. Such statements reflect the current views of our management with respect to our operations, results of
operations and future financial performance. The following factors are among those that may cause actual results to differ materially from the forward-looking statements:
declines in remodeling and home building industries, economic conditions and changes in interest rates, foreign currency exchange rates and other conditions;
deteriorations in availability of consumer credit, employment trends, levels of consumer confidence and spending and consumer preferences; increases in competition
from other manufacturers of vinyl and metal exterior residential building products as well as alternative building products; our substantial fixed costs; delays in the
development of new or improved products or our inability to successfully develop new or improved products; changes in raw material costs and availability of raw materials
and finished goods; consolidation of our customers; our substantial level of indebtedness; increases in union organizing activity; our ability to continuously improve
organizational productivity and global supply chain efficiency and flexibility; changes in weather conditions; our history of operating losses; limitations on our NOLs and
payments under the tax receivable agreement to our current stockholders; our ability to attract and retain qualified personnel; increases in our indebtedness; our ability to
comply with certain financial covenants in the Indenture and ABL facilities and the restrictions such indentures impose on our ability to operate our business; any
impairment of goodwill or other intangible assets; future recognition of our deferred tax assets; increases in mortgage rates, changes in mortgage interest deductions and
the reduced availability of financing; our exposure to foreign currency exchange risk; our control by the H&F Investors; and the other factors discussed under the “Risk
Factors” in our 2015 Form 10-K, filed with the SEC on March 22, 2016 (our “Annual Report”). All forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by the cautionary statements included in this document. These forward-looking statements speak only as of the date of this
document. We do not intend to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, unless the
securities laws require us to do so.
Use of Non-GAAP Financial Measures
We have included non-GAAP financial measures in this document, including, for example, EBITDA and Adjusted EBITDA, that may not comply with the SEC rules governing
the presentation of non-GAAP financial measures. For example, some of the adjustments to EBITDA that comprise Adjusted EBITDA as included in this document may not
be permitted under the SEC’s rules. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” and “—Liquidity
and Capital Resources—Covenant Compliance” in our Annual Report for a description of the calculation of EBITDA and Adjusted EBITDA, as well as a presentation of net loss
as calculated under GAAP and a reconciliation to our EBITDA and Adjusted EBITDA. Our measurements of EBITDA and Adjusted EBITDA are based on definitions of EBITDA
included in our debt agreements and may not be comparable to those of other companies.
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HIGHLIGHTS
Leading manufacturer and distributor of exterior building
products in North America
Integrated manufactured products include vinyl windows,
vinyl siding, aluminum and steel siding and related
accessories
• Third-party manufactured products include roofing, insulation
and other products
Primarily focused on repair and remodel market, with
targeted focus on select new construction markets
Dual-distribution network
• 124 company-operated supply centers (74% of net sales)
• Direct: >260 dealers and independent distributors (26% of net
sales)
• Serving over 60,000 customers across the U.S. and Canada
• Highly fragmented market; targeting market share growth
Full-service product installation services primarily for
vinyl siding and vinyl window products through our
Installed Sales Solutions (“ISS”) group
AMI Is A Leading, Vertically Integrated Manufacturer & Distributor Of Exterior Residential Building Products In The U.S.
& Canada
Company Overview
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A Complete Focus On The External Residential & Multi-Residential Building Envelope
Comprehensive Product & Service Offering
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Diversified Across Products, Channels, & End Markets
Product & Market Overview
SALES BY PRODUCT END MARKET (management estimates)
SALES BY PRODUCT CHANNEL BREAKDOWN
65%
35% Manufactured Products
Outside Purchased
Products
35%
17% 24%
11%
13%
Vinyl Windows
Vinyl Siding
Outside Purchased
Products
Other Products &
Services
Metal Products
70%
30%
Repair & Remodel
New Construction
74%
26%
Company Operated
Supply Centers
Direct
Note: All data for 2015 fiscal year.
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ENTRENCHED CUSTOMER RELATIONSHIPS
DIFFERENTIATED DUAL-DISTRIBUTION
NETWORK
COMPREHENSIVE PRODUCT & SERVICE
OFFERING
PROVEN MANAGEMENT TEAM
LEADING MARKET POSITION
Leading market positions within the North American
exterior residential building products market
Top 5 positions in the vinyl windows and vinyl
siding segments
Utilize our scale to service larger regional and national
accounts that many of our competitors cannot cover
Our distribution strategy successfully combines a
network of 124 company-operated supply centers with a
complementary network of 260 independent distributors
Offer a superior distribution channel compared to
tradition third party providers
Our direct distribution provides us operational flexibility
to further penetrate markets and expand our geographic
reach
Deeply integrated partner to our customers
Provide marketing support, sales training, fulfillment,
lead generation and, for larger customers, private label
marketing services
Long standing relationships and strong customer
retention
One stop solution for our contractor customers
Manufacture a diverse mix of vinyl windows, vinyl siding,
aluminum trim coil and aluminum and steel siding and
accessories
Utilize our supply centers to sell third-party
manufactured products that compliment our core
window and siding product offerings
Competitive Strengths
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Differentiated Dual-Distribution Network
OVERVIEW OF AMI DUAL-
DISTRIBUTION
124 company-operated supply centers
(~74% sales)
– 102 locations in U.S., 22 in Canada
– Cover 30+% of Metropolitan Statistical
Areas (MSAs)
– 7 Regions ~160 sales territories
– ~27,000 sq. ft. average store size
– Modern fleet of last mile delivery
equipment
Over 260 independent distributors
(~26% sales)
Network services over 60,000 customers
– Owner/Operator
– Showroom Dealer
– Builder
Over 1,000 ship-to locations
DISTRIBUTION MODEL
Our Distribution Strategy Successfully Combines A Network Of Company-operated Supply Centers With A
Complementary Network Of Independent Distributors And Dealers
Third Party
Manufactured
Products
Independent
Distributor
AMI
Supply
Center
Showroom Dealer
Owner/Operator
Builder
Showroom Dealer
Owner/Operator
Builder
Repair/Remodel
Homeowner
New Home
Buyer
New Construction
Home
AMI
Manufactured
Products
Homeowner
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Comprehensive Product & Service Offering
BROAD PRODUCT LINE, RANGING FROM ENTRY-LEVEL ECONOMY TO PREMIUM PRODUCTS,
INCLUDING MANY THAT HAVE EARNED THE ENERGY STAR® RATING
Category
2015
Sales (%) Description/Comments Strong Brand Portfolio
Vinyl
Windows
35%
R&R/RNC vinyl windows in Good, Better, and Best categories
Premium products generally target R&R
Economy products generally target new construction
Vinyl
Siding
17%
Vinyl siding and related accessories in the Good, Better, and Best categories
Vinyl siding commands the largest exterior cladding market share
Recent trends include insulated siding, darker colors, and special shapes
(shakes/scallops) and mixed material usage
Metal
Products
13%
Aluminum trim coil and flatstock, as well as aluminum and steel siding and
accessories
Aluminum soffit, trim coil, and accessories are used in vinyl installations
Aluminum siding is used in niche Canadian markets, while steel siding is used
more in the “hail belt” regions
OPP 24%
Outside purchased products include roofing materials, insulation, exterior
doors, installation equipment, and vinyl siding in a shake and scallop designs
Complementary products to deliver “one-stop” shopping and increased share
of wallet
Other 11%
Full-service product installation of our vinyl siding and vinyl window products
and select third party manufactured products
Available through the supply centers
Offering installation services, which strengthens customer relationships and
allows easier expansion for regional accounts
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Differentiated Dual-Distribution Network
Geographic Coverage
Significant Market Penetration Throughout The U.S. & Canada With Market Capacity To Add Between 50-100 Locations
To Existing Supply Center Network Over Time
U.S. Supply Centers
Canadian Supply Centers
Independent Distribution Network
Manufacturing Facilities
124 COMPANY OWNED SUPPLY CENTERS…..
…..DUAL-DISTRIBUTION NETWORK SERVICING
60,000+ CUSTOMER LOCATIONS
U.S. Supply Centers
Canadian Supply Centers
Manufacturing Facilities
AMI’s supply centers cover an estimated 30+% of Metropolitan
Statistical Areas (MSAs)
Independent distributors complement AMI’s geographic
footprint and enhance access to additional key markets
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Proven Management Team
Upgrading Talent
PRIOR MANAGEMENT EXPERIENCE
Scott Stephens
EVP & CFO
(2 years with AMI)
Bill Topper
EVP, Operations
(2 years with AMI)
Curtis Dobler
EVP, Human Resources
(1 year with AMI)
Stephan Demay
SVP, US Distribution
(1 year with AMI)
David King
SVP & Chief Commercial Officer
(19 years with AMI)
Bill Horvath
Treasurer
(4 years with AMI)
Ken James
General Counsel
(3 years with AMI)
Dana Schindler
SVP & Chief Marketing Officer
(16 years with AMI)
Adam Casebere
SVP, US Supply Center
Operations
(17 years with AMI)
Phillippe Bourbonniere
SVP, Canadian Distribution
Segment
(3 years with AMI)
New Since 2014
Brian Strauss
CEO
(2 years with AMI)
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$0
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Fundamental Markets Trends & Outlook Are Positive
NEW HOUSING STARTS¹
NATIONAL LONG-RUN HOUSE PRICE
FORECAST²
R&R SPEND OVER TIME¹
0
50
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19
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Actual Est. Equilibrium Projected
2015Q3
Forecast
¹ National Association of Home Builders.
² Moody’s Analytics, Goldman Sachs Investment Research.
Housing Starts Remain Below Historical
Levels
R&R Spend Has Grown At A 5% CAGR
Over The Last Two Decades
National Long-Run House Price Forecasts
Supports Long-term Appreciation, Which
Supports Growth In R&R Spend1
1,001
1,108
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2,750
3,000
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Average Historical
Starts = 1,443
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Historical Financials
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Summary of Historical Financial Performance
$1,142.5 $1,169.6 $1,187.0 $1,185.0
$1,193.4
2012 2013 2014 2015 TTM Q216
$282.9 $281.8
$243.6
$276.2
$292.3
24.8% 24.1%
20.5%
23.3% 24.5%
2012 2013 2014 2015 TTM Q216
Gross Profit Margin
$5.4
$11.7
$12.8
$16.6
$10.6
2012 2013 2014 2015 TTM Q216
$107.1 $109.4
$58.6
$90.3
$106.4
9.4% 9.4%
4.9%
7.6%
8.9%
2012 2013 2014 2015 TTM Q216
Adjusted EBITDA Adjusted EBITDA Margin
¹ Adjusted EBITDA is calculated as net loss before interest, tax, depreciation and amortization and certain other items and includes pro forma cost savings permitted in AMI’s debt instruments.
Adjusted EBITDA excluding pro forma cost savings were: $96.4m, $98.5m, 52.8m, $85.3m and $99.9m respectively for the periods listed above. See Appendix for a reconciliation of net loss to adjusted EBITDA.
In
m
ill
io
n
s
In
m
ill
io
n
s
In
m
ill
io
n
s
In
m
ill
io
n
s
NET SALES GROSS PROFIT
ADJUSTED EBITDA1 & MARGIN CAPITAL EXPENDITURES
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2014 Recap
¹ Adjusted EBITDA calculations include pro forma cost savings permitted in AMI’s debt instruments the Credit Agreement of $10.9m in 2013 and $5.9m in 2014.
See Appendix for a reconciliation of Net Loss to Adjusted EBITDA.
Began 2014 with the Company’s most significant product launch in history – Mezzo / Fusion window platform,
representing approximately 50% of the Company’s annual window units sold
Launch was commercially successful but caused significant operational issues
New management brought in to stabilize the operations and drive change
• CEO Brian Strauss (former CEO of Henry Group and Tyco plastics) joined in May 2014
• Hired Bill Topper (former SVP of Operations at Goodman Global) as EVP of Operations in July 2014
• Hired new EVP and CFO, Scott Stephens (former CFO of AM Castle and Lawson Products), in October 2014
Back half of 2014 priorities:
• Built out operations and remainder of broader management team
• Met demand for the new window platform and restored customer service levels during the busy selling season – at
significant cost to the business
• Positioned the operations to take cost out of the platform in 2015 during the slow winter selling season
• Restored top-line growth
However, the financial performance suffered as a result of the incremental costs of the product launch, in addition to
raw material cost increases and foreign exchange
• Revenue up 1.5% (Windows + 8.6%) but Adjusted EBITDA¹ down from $109.4mm in 2013 to $58.6mm in 2014
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$109.4
$66.1
$58.6
$1.7 $2.4
$4.4
($12.1)
($17.0)
($14.2)
($8.5)
($7.5)
2013 Adjusted
EBITDA¹
Volume Price Mix Materials Operational
Inefficiencies
SG&A Other² 2014 Adjusted
EBITDA
(Pre-FX)¹
F/X 2014 Adjusted
EBITDA¹
2014 Recap (Cont’d)
¹ Adjusted EBITDA is calculated as net loss before interest, tax, depreciation and amortization and certain other items and includes pro forma cost savings permitted in AMI’s debt instruments. of $10.9mm in 2013 and
$5.9mm in 2014. See Appendix for a reconciliation of Net Loss to Adjusted EBITDA.
² Other includes reduction in pro-forma cost savings addback of $5mm.
2014A net sales of $1.2bn (up 1.5% vs 2013) while Adjusted EBITDA decreased to $59mm
• Commercially successful new window platform launch experienced operational issues, including ramp up
operational costs, inefficient material yields, and overtime
• ~$23mm increase material yield and operational issues primarily related to window platform launch
• Operations performance in windows plants improved throughout the second half of 2014, with backorders and
on-time delivery performance approaching normal levels by the end of 2014
• SG&A expenses increased in 2014 primarily due to personnel added in the Supply Centers and the ISS sales
function in order to improve service levels
• Unfavorable FX negatively impacted Adjusted EBITDA
Reflects New Window Platform
Launch Impacts
(U
SD
in
m
ill
ion
s)
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2015 Performance
¹ Adjusted EBITDA is calculated as net loss before interest, tax, depreciation and amortization and certain other items and includes pro forma cost savings permitted in AMI’s debt instruments
of $5.9m in 2014 and $4.9m in 2015. See Appendix for a reconciliation of Net Loss to Adjusted EBITDA.
Net sales excluding the impact of foreign exchange
increased 2.7% as compared to prior year
Price/mix execution on plan
Operational efficiencies on a run-rate basis on plan
Q3 2015 restructuring plan focused on US distribution
business and select corporate functions to yield $7.5
million in annualized cost savings
Foreign currency exchange and roofing de-emphasis
represented headwinds in 2015
($ in millions) 2014 2015 % Change
Net Sales 1,187.0$ 1,185.0$ -0.2%
Cost of Sales 943.4 908.8
Gross Profit 243.6$ 276.2$ 13.4%
Gross Margin % 20.5% 23.3%
SG&A 247.6 239.8 -3.2%
Foreign Currency Loss 0.8 1.9
Restructuring Costs (0.3) 1.8
EBIT (4.5)$ 32.7$
Depreciation and Am rtization 42.7 39.9
EBITDA 38.2$ 72.6$
Adjustments 14.53 12.75
EBITDA excl. Run-r te Cost Savings 52.8$ 85.3$
Run-rate Cost Savings 5.9 4.9
Adjusted EBITDA 58.6$ 90.3$ 54.0%
Adjusted EBITDA Margin % 4.9% 7.6%
$58.6
$110.6
$90.3
$1.3
$27.9
$7.1
$5.7
$11.8
($2.2)
$0.4
($20.3)
2014 Adjusted
EBITDA¹
Volume Price Mix Materials Operational
Efficiencies
SG&A (excluding
F/X)
Other 2015 Adjusted
EBITDA
(Pre-FX)¹
F/X 2015 Adjusted
EBITDA¹
(U
SD
in
m
ill
ion
s)
Excludes the one-
time launch costs of
Mezzo and Fusion
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$24.1
$41.7 $38.7
$90.3
($0.3)
$10.7
($2.0)
$10.3
$4.6
($2.3)
($3.4)
($3.0)
YTD Q2 2015
Adjusted
EBITDA¹
Volume Price Mix² Materials Operational
Efficiencies
Higher Plant
Fixed Costs
Other² YTD Q2 2016
Adjusted
EBITDA
(Pre-FX)¹
F/X YTD Q2 2016
Adjusted
EBITDA¹
2015A
Adjusted
EBITDA¹
TTM Q2 2016
Adjusted
EBITDA¹
YTD 2016 Performance
¹ Adjusted EBITDA calculations do not include pro forma cost savings, which are calculated on an annual basis. See Appendix for a reconciliation of Net Loss to Adjusted EBITDA.
² Mix includes a ($2.3mm) impact for residential new construction mix shift
Sales growth reflects higher sales YOY in Windows 2.6%,
Vinyl, 0.7%, OPP 4.0% and ISS 6.3%
Strong execution in market pricing and manufacturing
efficiencies, as well as favorable raw material input costs
driving 250 bp gross margin expansion YOY
Adjusted EBITDA YOY growth of 36.5% and 240 bp
improvement of Adjusted EBITDA margin
Total liquidity at the end of Q2 was $58.2mm
• $50.4mm of availability on the revolving credit facility
• $7.9mm of cash
(U
SD
in
m
ill
ion
s)
($ in millions) Q2 2015 YTD Q2 2016 YTD % Change
Net Sales 551.6$ 560.1$ 1.5%
Cost of Sales 428.7 421.0
Gross Profit 122.9$ 139.1$ 13.1%
Gross Margin % 22.3% 24.8%
SG&A 120.6 120.6 0.0%
Foreign Currency Loss 1.1 0.2
Restructuring Costs - 0.1
G in on sale of a sets - (0.7)
EBIT 1.2$ 19.0$
Depreciation and Amortization 19.9 19.7
EBITDA 21.1$ 38.6$
Adjustments 3.0 0.1
Adjusted EBITDA 24.1$ 38.7$ 60.3%
Adjusted EBITDA Margi % 4.4% 6.9%
$11.8mm and $4.6mm in operational
efficiencies achieved in 2015 and YTD
2016, offsetting the -$17mm
operational efficiencies of the 2014
Mezzo launch
$106.4
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Execution Oriented – Prepared to Transition to Next Phase
$ 109
$ 59
$ 90
$ 106
2013 2014 2015 2016 TTM
Adjusted EBITDA1 (millions)
Source: AMI Management
Adjusted EBITDA is calculated as net loss before interest, tax, depreciation and amortization and certain other items and includes pro forma cost savings permitted in AMI’s debt instruments.
See Appendix for a reconciliation of Net Loss to Adjusted EBITDA.
KEY MANAGEMENT ACTIONS SINCE 2014….. SIGNIFICANT IMPROVEMENT IN PERFORMANCE
Prioritized the customer: corrected/minimized
customer disruption during the 2014 Mezzo &
Fusion roll-out to maintain relationships and
market share
Enhanced operational efficiencies
Modernized manufacturing processes and capital
equipment
Achieved ISO-9001 in central windows plant;
balance of plants to be certified over next year
Addressed workforce inefficiencies
Prepared to transition to next phase
∆ of
~$45mm
Management
Change mid-
late 2014
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Appendix
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Summary Income Statement
($ in millions) 2012 2013 2014 2015 Q2 2015 YTD Q2 2016 YTD
Net Sales 1,142.5$ 1,169.6$ 1,187.0$ 1,185.0$ 551.6$ 560.1$
Cost of Sales 859.6 887.8 943.4 908.8 428.7 421.0
Gross Profit 282.9$ 281.8$ 243.6$ 276.2$ 122.9$ 139.1$
Gross Margin % 24.8% 24.1% 20.5% 23.3% 22.3% 24.8%
SG&A 240.0 232.3 247.6 239.8 120.6 120.6
Impairment of Goodwill and Intangibles - - 233.8 - - -
Restructuring Costs - - (0.3) 1.8 - 0.1
Other Operating Income - - - - - (0.7)
EBIT 42.9$ 49.5$ (237.6)$ 34.6$ 2.3$ 19.1$
Interest Expense 75.5 79.8 82.5 83.5 41.9 42.5
Foreign Currency Loss 0.1 0.8 0.8 1.9 1.1 0.2
Loss before Income Taxes (32.8) (31.0) (320.9) (50.8) (40.7) (23.5)
Income Tax Expense (Benefit) 5.6 2.5 (27.2) (0.7) 2.8 2.8
Net Loss (38.4)$ (33.5)$ (293.7)$ (50.1)$ (43.5)$ (26.3)$
EBITDA Reconciliation
Net Loss (38.4)$ (33.5)$ (293.7)$ (50.1)$ (43.5)$ (26.3)$
Interest Expense 75.5 79.8 82.5 83.5 41.9 42.5
Income Tax Expense (Benefit) 5.6 2.5 (27.2) (0.7) 2.8 2.8
Depreciation and Amortization 50.7 43.0 42.7 39.9 19.9 19.7
Impairment of Goodwill and Intangibles - - 233.8 - - -
Foreign Currency Loss - - - -
EBITDA 93.4$ 91.8$ 38.2$ 72.6$ 21.1$ 38.6$
Adjustments 3.0 6.7 14.5 12.8 3.0 0.1
EBITDA excl. Run-rate Cost Savings 96.4$ 98.5$ 52.8$ 85.3$ 24.1$ 38.7$
Run-rate Cost Savings 10.7 10.9 5.9 4.9 - -
Adjusted EBITDA 107.1$ 109.4$ 58.6$ 90.3$ 24.1$ 38.7$
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Summary Balance Sheet
($ in millions) 2012 2013 2014 2015 Q2 2015 Q2 2016
Cash & Cash Equivalents 9.6$ 20.8$ 6.0$ 9.4$ 4.0$ 7.9$
Accounts Receivable 121.4 125.3 125.1 127.0 163.9 160.4
Inventory 118.0 133.5 145.5 123.4 164.6 143.6
Income Tax Receivable 2.7 0.8 0.1 1.6 0.1 1.8
Deferred Income Taxes 8.7 4.7 2.4 1.5 2.4 1.5
Prepaid Expenses & Other Current Assets 8.8 10.8 15.9 14.2 11.8 12.1
Total Current Assets 269.1 295.9 295.1 277.1 346.9 327.2
Property, Plant and Equipment 108.5 100.9 93.9 90.8 94.8 88.4
Goodwill & Other Intangible Assets 1,082.3 1,035.0 754.6 700.9 729.7 700.1
Other Assets 22.4 24.8 18.7 13.3 15.9 4.4
Total Assets 1,482.3$ 1,456.6$ 1,162.2$ 1,082.0$ 1,187.3$ 1,120.1$
Accounts Payable 74.31$ 96.97$ 94.77$ 91.56$ 140.42$ 123.46$
Accrued Liabilities 63.6 65.3 68.3 83.6 63.4 60.2
Accrued Interest 11.7 12.9 13.4 13.3 13.7 13.8
Deferred Tax Liability 3.5 2.4 1.3 0.4 2.1 1.1
Income Taxes Payable 5.7 2.1 1.8 0.0 1.8 2.2
Total Current Liabilities 158.8 179.7 179.6 188.9 221.3 200.8
Deferred Taxes 130.8 126.2 88.3 82.1 86.9 83.6
Other Liabilities 153.5 117.7 129.0 113.1 123.8 112.7
Long-term Debt 808.2 835.2 903.4 925.5 949.5 951.1
Total Liabilities 1,251.2 1,258.8 1,300.3 1,309.6 1,381.5 1,348.2
Equity 231.1 197.8 (138.1) (214.4) (194.2) (228.1)
Total Liabilities and Equity 1,482.3$ 1,456.6$ 1,162.2$ 1,095.3$ 1,187.3$ 1,120.1$
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Summary Cash Flow Statement
($ in millions) 2012 2013 2014 2015 Q2 YTD 2015 Q2 YTD 2016
Operating Activities
Net loss (38.4)$ (33.5)$ (293.7)$ (50.1)$ (43.5)$ (26.3)$
Depreciation & amortization 50.7 43.0 42.7 39.9 19.9 19.7
Deferred income taxes (2.1) (1.5) (31.2) (2.2) 0.9 0.7
Impairment of goodwill and other intangible assets - - 233.8 - - -
Non-cash portion of restructuring costs - - - 3.5 - -
Provision for losses on accounts receivable 2.4 1.1 2.1 1.0 1.2 1.0
Amortization of deferred financing costs and premium on senior notes 4.5 4.5 3.7 3.6 1.8 1.9
Other 0.1 0.3 0.4 0.1 0.1 (0.6)
Changes in operating assets and liabilities: - - - - - -
Accounts receivable (1.3) (7.1) (4.9) (7.2) (41.5) (33.1)
Inventories (1.6) (17.7) (15.3) 14.2 (21.3) (17.9)
Accounts payable and accrued liabilities (3.7) 27.8 5.1 3.6 42.7 20.3
Income taxes receivable/payable (4.2) (1.7) 0.6 (2.9) 0.2 2.1
Other assets and liabilities (6.9) (14.9) (14.5) (6.9) 0.8 0.5
Net cash (used in) provided by operating activities (0.6) 0.3 (71.0) (3.4) (38.7) (31.8)
Investing Activities
Capital expenditures (5.4) (11.7) (12.9) (16.6) (9.9) (4.0)
Proceeds from the sale of assets 0.1 0.1 0.0 0.2 0.0 1.8
Other - (0.3) - - - -
Net cash used in investing activities (5.3) (12.0) (12.8) (16.4) (9.9) (2.2)
Financing Activities
Borrowings (payments) under ABL facilities 4.3 (78.0) 69.4 23.4 46.7 7.1
Issuance of senior secured notes - 106.0 - - - -
Proceeds of promissory note - - - - - 27.5
Financing costs (0.2) (5.5) - - - (2.2)
Other 0.1 0.7 - - - -
N cash provided by financing activities 4.2 23.2 69.4 23.4 46.7 32.4
Effect of exchange rate on cash & cash equivalents (0.1) (0.2) (0.5) (0.1) (0.0) 0.0
(Decrease) increase in cash & cash equivalents (1.8) 11.2 (14.9) 3.4 (1.9) (1.5)
Cash and cash equivalents at beginning of the year 11.4 9.6 20.8 6.0 6.0 9.4
Cash and cash equivalents at end of the year 9.6$ 20.8$ 6.0$ 9.4$ 4.0$ 7.9$
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Reconciliation of Non-GAAP Items
($ in millions) 2012 2013 2014 2015 Q2 2015 YTD Q2 2016 YTD
Net Loss (38.4)$ (33.5)$ (293.7)$ (50.1)$ (43.4)$ (26.3)$
Interest Expense 75.5 79.8 82.5 83.5 41.9 42.5
Income Tax Expense (Benefit) 5.6 2.5 (27.2) (0.7) 2.8 2.8
Depreciation and Amortization 50.7 43.0 42.7 39.9 19.9 19.7
Impairment of Goodwill and Intangibles - - 233.8 - - -
EBITDA 93.4$ 91.8$ 38.2$ 72.6$ 21.1$ 38.6$
Adjustments 3.0 6.7 14.5 12.8 3.0 0.1
EBITDA excl. Run-rate Cost Savings 96.4$ 98.5$ 52.8$ 85.3$ 24.1$ 38.7$
Run-rate Cost Savings 10.7 10.9 5.9 4.9 - -
Adjusted EBITDA 107.1$ 109.4$ 58.6$ 90.3$ 24.1$ 38.7$
Adjustments
Purchase Accounting Related Adjustments (3.9) (3.9) (3.7) (3.5) (1.8) (1.7)
Executive Officer Separation and Hiring Costs 3.4 1.4 3.8 1.0 0.2 0.2
Non-cash (benefit) Expense Adjustments (3.3) (2.6) (1.4) - - -
Restructuring costs - - (0.3) 4.1 - 0.1
(Gain) Loss on Disposal or Write-off of Assets (0.0) 0.1 (0.0) (0.0) 0.0 (0.0)
Bank Audit/Management Fees 0.1 0.1 0.1 0.2 0.1 0.1
Stock-based Compensation Expense 0.1 0.2 0.5 0.2 0.1 0.1
Foreign Currency Loss 0.1 0.8 0.8 1.9 1.1 0.2
Other Normalizing and Unusual Items
Professional Fees 1.3 8.6 11.7 7.0 1.9 0.3
Accretion on Lease Liability 0.5 0.5 0.5 0.4 0.2 0.2
Excess Severance Cost 0.2 0.6 0.5 0.2 0.1 0.3
Excess legal Expense 4.0 0.2 0.1 0.1 1.2 0.3
Enviro me tal Liability - 0.3 0.7 - - -
Payroll costs due to change of employment classification - - 1.1 - - -
Other 0.3 0.4 0.3 1.4 - -
Total Other Normalizing and Unusual Items 6.4 10.6 14.9 9.0 3.4 1.2
Run-rate cost savings 10.7 10.9 5.9 4.9 - -
Total Adjustments 13.7$ 17.6$ 20.4$ 17.7$ 3.0$ 0.1$
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Q2'16 x LTM Adj. Next Call
CCR: Caa3 / B- Amount EBITDA Coupon Maturity Ratings
Cash & Cash Equivalents $ 8
ABL Revolver ($213mm Capacity)
1 $ 100 0.9 x L + 175 - 225 Aug-17 NR
9.125% Senior Secured Notes
2 830 8.7 9.125 % Nov-17 Caa3 / B-
Promissory Note
3 28 9.0 L (1.0%) + 425 Oct-17 NR
Total Secured Debt $ 958 9.0 x
Net Secured Debt $ 950 8.9 x
Key Metrics Credit Metrics (Q2 '16)
LTM 7/2/16 Adj. EBITDA $ 106 Adj. EBITDA / Interest Expense 1.3 x
Interest Expense 84 (Adj. EBITDA - CapEx) / Interest Expense 1.1 x
LTM 7/2/16 CapEx 11
Liquidity
(i) Revolver Capacity $ 213
(ii) Borrowing Base 173
Less of (i) and (ii) 173
(-) Amount Drawn (100)
(-) L/Cs (12)
(-) Availability Block (10)
Revolver Availability $ 50
(+) Cash & Cash Equivalents 8
Total Liquidity $ 58
(US$ in millions)
1 Matures at the earlier of (i) April 18, 2018 and (ii) 90 days prior to the maturity date of the existing notes.
2 Currently callable at 102.281%. Call protection steps down to par on 01-Nov-2016.
3 Matures at the earlier of (i) June 18, 2018 and (ii) 30 days prior to the maturity date of the existing notes.
Current Capitalization