##### 



EXHIBIT 3
 Amended Managements Discussion and Analysis of Financial Conditions and Results of
Operations for the year ended December 31, 2005
  Review and Approval by the Board of Directors
  Company Information
 www.royalgrouptech.com www.sedar.com www.sec.gov service@computershare.com investorrelations@royalgrouptech.com
 Accounting Estimates and Assumptions
  Caution Regarding Forward-Looking Statements
  1




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##### 



A. Corporate Overview
    
    Pages 3 to 11Business OverviewLate Filing of 2005 Annual ReportSummary of Significant EventsFinancial Impact of Write-downs and Unusual ChargesDetails of Write-downs and Unusual ChargesSubsequent EventsB. Consolidated Financial and Operating Results
    
    Pages 12 to 21Change in Year-EndConsolidated Financial ResultsSelected Annual InformationFinancial Results AnalysisC. Financing and Risk Management
    
    Pages 22 to 25Liquidity and Capital ResourcesCommitments and Other Contractual ObligationsLong Term Debt and Financial InstrumentsOutstanding Share DataD. Operating Environment
    
    Pages 26 to 33CompetitionInvestigationsClass Action LawsuitsCriminal Investigation by the Antitrust Division of the United States Department of JusticeSpecial Investigative CommitteeFinancial Reporting and DisclosureRisks and UncertaintiesE. Accounting Policies and Non GAAP Measures
    
    Pages 34 to 39Critical Accounting EstimatesNew Accounting StandardsFuture Income Tax Asset and LiabilitiesRelated Party TransactionsNon GAAP Financial MeasuresF. Additional Financial Information
    
    Pages 40 to 41Supplementary Information: 2005 and 2004 Quarterly InformationSupplementary Information: Non GAAP Calculations
 2




---



##### 



A. Corporate Overview
 Business Overview
    Late Filing of 2005 Annual Report
   3




---



##### 



Summary of Significant Events
  Appointment of New Directors
  Conversion of Multiple Voting Shares
  Strengthened Management Team
  Sale Process
  4




---



##### 



Management Improvement Plan
   I.
    
    Business unit portfolio restructuringII.
    
    Pursuit of cost and margin opportunitiesIII.
    
    Development of strategies to deliver full potential of core businessesIV.
    
    Refinancing the Company on the strength of its balance sheetI.
    
    Business Unit Portfolio Restructuring
   II.
    
    Pursuit of Cost and Margin Opportunities
  Ø
    
    Improving manufacturing efficiencies through the use of high speed tooling,
enhanced downstream cooling, statistical process control, quicker die changes and
other advanced manufacturing techniques
 5




---



##### 



Ø
    
    Rationalizing approximately 2 million square feet of excess manufacturing spaceØ
    
    Enhancing procurement capability by developing formalized strategic sourcing
processes, and leveraging the Companys enterprise spendØ
    
    Analyzing profit by product and customer in all divisions in order to optimize
profit improvement actions
 III.
    
    Development of Strategies to Deliver Full Potential of Core
Businesses
  Ø
    
    A focus on cellular and composite technologyØ
    
    Accelerated development of the Royal brand supported by enhanced strategic
marketing capabilityØ
    
    Cross marketing and product bundling
  IV.
    
    Refinance the Company on the Strength of its Balance Sheet
  6




---



##### 



Financial Impact of Write-downs and Unusual Charges
   Normalized twelve-months ended December 31, 2005 and twelve-months ended December 31, 2004
 Consolidated Statement of Earnings
 Reported
    
    
    
    
    
    
    
    
    
    
    
    
    Normalized
    
    
    Reported
    
    
    
    
    
    
    
    Normalized
    
    
    Normalized 12 months ended12 months
    
    
    
    
    
    
    
    Other
    
    
    12 months
    
    
    12 months
    
    
    Other
    
    
    12 months
    
    
    Dec. 31/05 vs. Dec. 31/04ended
    
    
    Adjustments for
    
    
    Unusual
    
    
    ended
    
    
    ended
    
    
    Unusual
    
    
    ended
    
    
    Dollar
    
    
    PercentageDec. 31/05
    
    
    Write-downs
    
    
    Charges
    
    
    Dec. 31/05
    
    
    Dec. 31/04
    
    
    Charges
    
    
    Dec. 31/04
    
    
    Change
    
    
    Change(audited)
    
    
    
    
    
    
    
    
    
    
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    
    
    
    
    
    (unaudited)(A)
    
    
    
    
    
    
    
    
    
    
    
    
    (B)
    
    
    (A) - (B)Net sales
    
    
    $
    1,696,353
    
    
    
    $
    
    
    
    
    $
    
    
    
    
    $
    1,696,353
    
    
    
    $
    1,664,661
    
    
    
    $
    
    
    
    
    $
    1,664,661
    
    
    
    $
    31,692
    
    
    
    
    1.9
    %Cost of sales
    
    
    
    1,298,090
    
    
    
    
    (12,023
    ) (1)
    
    
    
    
    
    
    
    
    1,286,067
    
    
    
    
    1,207,710
    
    
    
    
    (12,936
    ) (7)
    
    
    
    1,194,774
    
    
    
    
    91,293
    
    
    
    
    7.6
    %Gross profit
    
    
    
    398,263
    
    
    
    
    12,023
    
    
    
    
    
    
    
    
    
    410,286
    
    
    
    
    456,951
    
    
    
    
    12,936
    
    
    
    
    469,887
    
    
    
    
    (59,601
    )
    
    
    
    -12.7
    %Operating expenses
    
    
    
    444,202
    
    
    
    
    (52,266
    ) (2)
    
    
    
    (33,558
    ) (7)
    
    
    
    358,378
    
    
    
    
    339,252
    
    
    
    
    1,762
    (7)
    
    
    
    341,014
    
    
    
    
    17,364
    
    
    
    
    5.1
    %Other costs
    
    
    
    29,589
    
    
    
    
    (29,589
    ) (3)
    
    
    


    
    
    

    

    
    
    
Operating earnings (loss)
    
    
    
    (75,528
    )
    
    
    
    93,878
    
    
    
    
    33,558
    
    
    
    
    51,908
    
    
    
    
    117,699
    
    
    
    
    11,174
    
    
    
    
    128,873
    
    
    
    
    (76,965
    )
    
    
    
    -59.7
    %Interest and financing charges
    
    
    
    25,441
    
    
    
    
    
    
    
    
    
    1,076
    (7)
    
    
    
    26,517
    
    
    
    
    26,150
    
    
    
    
    
    
    
    
    
    26,150
    
    
    
    
    367
    
    
    
    
    1.4
    %Earnings (loss) from continuing operations before income taxes and minority interest
    
    
    
    (100,969
    )
    
    
    
    93,878
    
    
    
    
    32,482
    
    
    
    
    25,391
    
    
    
    
    91,549
    
    
    
    
    11,174
    
    
    
    
    102,723
    
    
    
    
    (77,332
    )
    
    
    
    -75.3
    %Income taxes (recovery)
    
    
    
    8,461
    
    
    
    
    19,462
    (4)
    
    
    
    (19,756
    ) (6)
    
    
    
    8,167
    
    
    
    
    17,576
    
    
    
    
    4,080
    (7)
    
    
    
    21,656
    
    
    
    
    (13,489
    )
    
    
    
    -62.3
    %Earnings (loss) from continuing operations before minority interest
    
    
    
    (109,430
    )
    
    
    
    74,416
    
    
    
    
    52,238
    
    
    
    
    17,224
    
    
    
    
    73,973
    
    
    
    
    7,094
    
    
    
    
    81,067
    
    
    
    
    (63,843
    )
    
    
    
    -78.8
    %Minority interest
    
    
    
    584
    
    
    
    
    161
    
    
    
    
    
    
    
    
    
    745
    
    
    
    
    (285
    )
    
    
    
    
    
    
    
    
    (285
    )
    
    
    
    1,030
    
    
    
    
    -361.4
    %Earnings (loss) from continuing operations
    
    
    
    (108,846
    )
    
    
    
    74,577
    
    
    
    
    52,238
    
    
    
    
    17,969
    
    
    
    
    73,688
    
    
    
    
    7,094
    
    
    
    
    80,782
    
    
    
    
    (62,813
    )
    
    
    
    -77.8
    %Discontinued operations, net of income taxLoss from discontinued operations
    
    
    
    (9,740
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,740
    )
    
    
    
    (40,565
    )
    
    
    
    17,523
    (7)
    
    
    
    (23,042
    )
    
    
    
    13,302
    
    
    
    
    -57.7
    %Loss from write-down of businesses
    
    
    
    (151,856
    )
    
    
    
    151,856
    (5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss from discontinued operations
    
    
    
    (161,596
    )
    
    
    
    151,856
    
    
    
    
    
    
    
    
    
    (9,740
    )
    
    
    
    (40,565
    )
    
    
    
    17,523
    
    
    
    
    (23,042
    )
    
    
    
    13,302
    
    
    
    
    -57.7
    %Net earnings (loss)
    
    
    $
    (270,442
    )
    
    
    $
    226,433
    (8)
    
    
    $
    52,238
    (8)
    
    
    $
    8,229
    
    
    
    $
    33,123
    
    
    
    $
    24,617
    
    
    
    $
    57,740
    
    
    
    $
    (49,511
    )
    
    
    
    -85.7
    %
 
 (1)
    
    Cost of Sales predominately relates to a write-down for inventory to net realized value
relating to discontinued operations and restructuring activities.(2)
    
    Operating expenses includes a write-down for redundant fixed assets.(3)
    
    Other cost includes a write-down primarily related to the Companys equity investments
including Royal Building Systems Philippines, Royal Building Systems Hawaii and Aristoea.(4)
    
    There was a net income tax recovery as a result of the above mentioned transactions.(5)
    
    Loss from write-down of businesses reflects a net after tax write-down
of the Companys investment in its non-core and non-performing
operations. These businesses are identified
in Note 4 of the audited Consolidated Financial Statements.(6)
    
    The tax adjustment includes a future tax valuation allowance
of $26,002 booked in Q4 of 2005.(7)
    
    For further detail on the remaining items see the Details of Write-downs and Unusual Charges
section of this MD&A.(8)
    
    Adjustments for Write-downs and Unusual Charges totals $278.7 million after tax, comprised of
write-downs of $226.4 million and unusual charges of $52.2 million.   7




---



##### 



8




---



##### 



Normalized three-months ended December 31, 2005 and three-months ended December 31, 2004
 Consolidated Statement of Earnings
 Reported
    
    
    
    
    
    
    
    
    
    
    
    
    Normalized
    
    
    Reported
    
    
    
    
    
    
    
    Normalized
    
    
    Normalized 3 months ended3 months
    
    
    
    
    
    
    
    Other
    
    
    3 months
    
    

3 months
    
    
    Other
    
    
    3 months
    
    
    Dec. 31/05vs.Dec. 31/04ended
    
    
    Adjustments for
    
    
    Unusual
    
    
    ended
    
    
    ended
    
    
    Unusual
    
    
    ended
    
    
    Dollar
    
    
    PercentageDec. 31/05
    
    
    Write-downs
    
    
    Charges
    
    
    Dec. 31/05
    
    
    Dec. 31/04
    
    
    Charges
    
    
    Dec. 31/04
    
    
    Change
    
    
    Change(unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    
    
    
    
    
    (unaudited)(A)
    
    
    
    
    
    
    
    
    
    
    
    
    (B)
    
    
    (A) - (B)Net sales
    
    
    $
    404,408
    
    
    
    $
    
    
    
    
    $
    
    
    
    
    $
    404,408
    
    
    
    $
    359,035
    
    
    
    $
    
    
    
    
    $
    359,035
    
    
    
    $
    45,373
    
    
    
    
    12.6
    %Cost of sales
    
    
    
    323,018
    
    
    
    
    (12,023
    ) (1)
    
    
    
    
    
    
    
    
    310,995
    
    
    
    
    290,860
    
    
    
    
    (12,936
    ) (7)
    
    
    
    277,924
    
    
    
    
    33,071
    
    
    
    
    11.9
    %Gross profit
    
    
    
    81,390
    
    
    
    
    12,023
    
    
    
    
    
    
    
    
    
    93,413
    
    
    
    
    68,175
    
    
    
    
    12,936
    
    
    
    
    81,111
    
    
    
    
    12,302
    
    
    
    
    15.2
    %Operating expenses
    
    
    
    160,705
    
    
    
    
    (52,266
    ) (2)
    
    
    
    (18,921
    ) (7)
    
    
    
    89,518
    
    
    
    
    81,613
    
    
    
    
    5,125
    (7)
    
    
    
    86,738
    
    
    
    
    2,780
    
    
    
    
    3.2
    %Other costs
    
    
    
    29,589
    
    
    
    
    (29,589
    ) (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating earnings (loss)
    
    
    
    (108,904
    )
    
    
    
    93,878
    
    
    
    
    18,921
    
    
    
    
    3,895
    
    
    
    
    (13,438
    )
    
    
    
    7,811
    
    
    
    
    (5,627
    )
    
    
    
    9,522
    
    
    
    
    -169.2
    %Interest and financing charges
    
    
    
    3,183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,183
    
    
    
    
    5,328
    
    
    
    
    
    
    
    
    
    5,328
    
    
    
    
    (2,145
    )
    
    
    
    - 40.3
    %Earnings (loss) from continuing operations before income taxes and minority interest
    
    
    
    (112,087
    )
    
    
    
    93,878
    
    
    
    
    18,921
    
    
    
    
    712
    
    
    
    
    (18,766
    )
    
    
    
    7,811
    
    
    
    
    (10,955
    )
    
    
    
    11,667
    
    
    
    
    -106.5
    %Income taxes (recovery)
    
    
    
    5,680
    
    
    
    
    19,462
    (4)
    
    
    
    (29,678
    ) (6)
    
    
    
    (4,536
    )
    
    
    
    (9,862
    )
    
    
    
    3,107
    (7)
    
    
    
    (6,755
    )
    
    
    
    2,219
    
    
    
    
    -32.8
    %Earnings (loss) from continuing operations before minority interest
    
    
    
    (117,767
    )
    
    
    
    74,416
    
    
    
    
    48,599
    
    
    
    
    5,248
    
    
    
    
    (8,904
    )
    
    
    
    4,704
    
    
    
    
    (4,200
    )
    
    
    
    9,448
    
    
    
    
    -224.9
    %Minority interest
    
    
    
    1,084
    
    
    
    
    161
    
    
    
    
    
    
    
    
    
    1,245
    
    
    
    
    (370
    )
    
    
    
    
    
    
    
    
    (370
    )
    
    
    
    1,615
    
    
    
    
    -436.5
    %Earnings (loss) from continuing operations
    
    
    
    (116,683
    )
    
    
    
    74,577
    
    
    
    
    48,599
    
    
    
    
    6,493
    
    
    
    
    (9,274
    )
    
    
    
    4,704
    
    
    
    
    (4,570
    )
    
    
    
    11,063
    
    
    
    
    -242.1
    %Discontinued
operations, net of income taxLoss from discontinued, operations
    
    
    
    (2,588
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,588
    )
    
    
    
    (26,916
    )
    
    
    
    17,523
    (7)
    
    
    
    (9,393
    )
    
    
    
    6,805
    
    
    
    
    -72.4
    %Loss from write-down of businesses
    
    
    
    (151,856
    )
    
    
    
    151,856
    (5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss from discontinued operations
    
    
    
    (154,444
    )
    
    
    
    151,856
    
    
    
    
    
    
    
    
    
    (2,588
    )
    
    
    
    (26,916
    )
    
    
    
    17,523
    
    
    
    
    (9,393
    )
    
    
    
    6,805
    
    
    
    
    -72.4
    %Net earnings (loss)
    
    
    $
    (271,127
    )
    
    
    $
    226,433
    (8)
    
    
    $
    48,599
    (8)
    
    
    $
    3,905
    
    
    
    $
    (36,190
    )
    
    
    $
    22,227
    
    
    
    $
    (13,963
    )
    
    
    $
    17,868
    
    
    
    
    -128.0
    %
 (1)
    
    Cost of Sales predominately relates to a write-down for inventory to net realized value
relating to discontinued operations and restructuring activities.(2)
    
    Operating expenses includes a write-down for redundant fixed assets.(3)
    
    Other cost includes a write-down primarily related to the Companys equity investments
including Royal Building Systems Philippines, Royal Building Systems Hawaii and Aristoea.(4)
    
    There was a net income tax recovery as a result of the above mentioned transactions.(5)
    
    Loss from write-down of businesses reflects a net after tax write-down
of the Companys investment in its non-core and non-performing
operations. These businesses are identified
in Note 4 of the audited Consolidated Financial Statements.(6)
    
    The tax adjustment includes a future tax valuation allowance of $26,002 booked in Q4 of 2005.(7)
    
    For further detail on the remaining items see the Details of Write-downs and Unusual Charges
section of this MD&A.(8)
    
    Adjustments for Write-downs and Unusual Charges totals $275.0 million after tax, comprised of
write-downs of $226.4 million and unusual charges of $48.6 million.  9




---



##### 



Details of Write-downs and Unusual Charges
  Unusual charges reported in earnings (loss) from continued operations
 3 months
    
    3 months
    
    
    12 months
    
    12 monthsended
    
    ended
    
    
    ended
    
    ended(in thousands of Canadian dollars)
    
    
    Dec. 31/05
    
    Dec. 31/04
    
    
    Dec. 31/05
    
    Dec. 31/04Adjustments for Restructuring, Divestitures and Write-downsSeverance
    
    
    $
    719
    
    
    $
    
    
    
    
    $
    719
    
    
    $
    Inventory write-down to net realizable value
    
    
    
    9,677
    
    
    
    
    
    
    
    
    9,677
    
    
    
    Adjustments to accruals & other
    
    
    
    1,627
    
    
    
    
    
    
    
    
    1,627
    
    
    
    Total adjustments to Cost of sales
    
    
    
    12,023
    
    
    
    
    
    
    
    
    12,023
    
    
    
    Impairment on redundant fixed assets
    
    
    
    50,268
    
    
    
    
    
    
    
    
    50,268
    
    
    
    Provision for litigation
    
    
    
    1,024
    
    
    
    
    
    
    
    
    1,024
    
    
    
    Severance
    
    
    
    374
    
    
    
    
    
    
    
    
    374
    
    
    
    Adjustment to accruals & other
    
    
    
    600
    
    
    
    
    
    
    
    
    600
    
    
    
    Total adjustments to Operating expenses
    
    
    
    52,266
    
    
    
    
    
    
    
    
    52,266
    
    
    
    Loss on divestiture of wood blind business in Mexico
    
    
    
    (1,335
    )
    
    
    
    
    
    
    
    (1,335
    )
    
    
    Writedown of investments to estimated net realizable value
    
    
    
    30,924
    
    
    
    
    
    
    
    
    30,924
    
    
    
    Total adjustments to Other costs
    
    
    
    29,589
    
    
    
    
    
    
    
    
    29,589
    
    
    
    Adjustments to Minority interest
    
    
    
    161
    
    
    
    
    
    
    
    
    161
    
    
    
    Tax effect
    
    
    
    (19,462
    )
    
    
    
    
    
    
    
    (19,462
    )
    
    
    Total
    
    
    $
    74,577
    
    
    $
    
    
    
    
    $
    74,577
    
    
    $
    Other Unusual ChargesInventory write-down to net realizable value
    
    
    $
    
    
    
    $
    12,936
    
    
    
    $
    
    
    
    $
    12,936Reversal of bonus accrual - 2004
    
    
    
    1,500
    
    
    
    
    
    
    
    
    (4,500
    )
    
    
    Gain on sale of land related to settlement with controlling shareholder
    
    
    
    
    
    
    
    
    
    
    
    
    (1,300
    )
    
    
    Investigation costs
    
    
    
    3,311
    
    
    
    1,020
    
    
    
    
    6,478
    
    
    
    3,586Sale process and strategic planning costs
    
    
    
    8,509
    
    
    
    
    
    
    
    
    19,663
    
    
    
    Provision for litigation
    
    
    
    5,601
    
    
    
    
    
    
    
    
    8,050
    
    
    
    Gain on the sale of real estate
    
    
    
    
    
    
    
    (1,551
    )
    
    
    
    (760
    )
    
    
    (2,549
    )Gain on buyback of medium term notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (813
    )Pension curtailment gain
    
    
    
    
    
    
    
    (3,906
    )
    
    
    
    
    
    
    
    (3,906
    )Severances
    
    
    
    
    
    
    
    (688
    )
    
    
    
    
    
    
    
    1,920Loss on divestiture of wood blind business in Mexico
    
    
    
    
    
    
    
    
    
    
    
    
    5,927Total adjustments to Operating expenses
    
    
    $
    18,921
    
    
    $
    (5,125
    )
    
    
    $
    33,558
    
    
    $
    (1,762
    )Interest income on settlement with controlling shareholder
    
    
    
    
    
    
    
    
    
    
    
    
    (2,200
    )
    
    
    Write-off of credit facility fees on financing not pursued
    
    
    
    
    
    
    
    
    
    
    
    
    1,124
    
    
    
    Total adjustments to Interest and financing charges
    
    
    $
    
    
    
    $
    
    
    
    
    $
    (1,076
    )
    
    $
    Tax effect
    
    
    
    29,678
    
    
    
    (3,107
    )
    
    
    
    19,756
    
    
    
    (4,080
    )Total
    
    
    $
    48,599
    
    
    $
    4,704
    
    
    
    $
    52,238
    
    
    $
    7,094Unusual charges reported in earnings (loss) from discontinuing operationsWritedown of investments to estimated net realisable value
    
    
    $
    167,566
    
    
    $
    
    
    
    
    $
    167,566
    
    
    $
    Impairment charge in Mexican operations
    
    
    
    
    
    
    
    17,523
    
    
    
    
    
    
    
    
    17,523Tax effect
    
    
    
    (15,710
    )
    
    
    
    
    
    
    
    (15,710
    )Total
    
    
    $
    151,856
    
    
    $
    17,523
    
    
    
    $
    151,856
    
    
    $
    17,523Total
    
    
    $
    275,032
    
    
    $
    22,227
    
    
    
    $
    278,671
    
    
    $
    24,617SummaryAdjustments for Restructuring, Divestitures and Write-downs
    
    
    $
    74,577
    
    
    $
    
    
    
    
    $
    74,577
    
    
    $
    Unusual charges reported in earnings (loss) from discontinuing operations
    
    
    
    151,856
    
    
    
    
    
    
    
    
    151,856
    
    
    
    Sub Total
    
    
    $
    226,433
    
    
    $
    
    
    
    
    $
    226,433
    
    
    $
    Other Unusual Charges
    
    
    $
    48,599
    
    
    $
    4,704
    
    
    
    $
    52,238
    
    
    $
    7,094Unusual charges reported in earnings (loss) from discontinuing operations
    
    
    
    
    
    
    
    17,523
    
    
    
    
    
    
    
    
    17,523Sub Total
    
    
    $
    48,599
    
    
    $
    22,227
    
    
    
    $
    52,238
    
    
    $
    24,617TOTAL
    
    
    $
    275,032
    
    
    $
    22,227
    
    
    
    $
    278,671
    
    
    $
    24,617
 10




---



##### 



Subsequent Events
 Sale of Non-Core Businesses and Non-Core Assets
     Other




---



##### 



B. Consolidated Financial and Operating Results
 Change in Year-End
  Consolidated Financial Results
  Statement of Earnings
 (Restated)
    
    
    
    
    
    
    
    (Restated)
    
    
    (Restated)3 months
    
    
    3 months
    
    
    
    12 months
    
    
    15 months
    
    
    12 months
    
    
    12 monthsended
    
    
    ended
    
    
    
    ended
    
    
    ended
    
    
    ended
    
    
    endedDec. 31/05
    
    
    Dec. 31/04
    
    
    
    Dec. 31/05
    
    
    Dec. 31/04
    
    
    Dec. 31/04
    
    
    Sept. 30/03(audited)
    
    
    (audited)
    
    
    (unaudited)
    
    
    (audited)Net sales
    
    
    $
    404,408
    
    
    $
    359,035
    
    
    
    $
    1,696,353
    
    
    $
    2,026,396
    
    
    $
    1,664,661
    
    
    $
    1,885,397Cost of sales
    
    
    
    323,018
    
    
    
    290,860
    
    
    
    
    1,298,090
    
    
    
    1,457,881
    
    
    
    1,207,710
    
    
    
    1,497,277Gross profit
    
    
    
    81,390
    
    
    
    68,175
    
    
    
    
    398,263
    
    
    
    568,515
    
    
    
    456,951
    
    
    
    388,120Operating expenses
    
    
    
    160,705
    
    
    
    81,613
    
    
    
    
    444,202
    
    
    
    413,445
    
    
    
    339,252
    
    
    
    402,127Other costs
    
    
    
    29,589
    
    
    
    
    
    
    
    
    29,589
    
    
    
    
    
    
    
    
    
    
    
    Operating earnings (loss)
    
    
    
    (108,904
    )
    
    
    (13,438
    )
    
    
    
    (75,528
    )
    
    
    155,070
    
    
    
    117,699
    
    
    
    (14,007
    )Interest and financing charges
    
    
    
    3,183
    
    
    
    5,328
    
    
    
    
    25,441
    
    
    
    34,837
    
    
    
    26,150
    
    
    
    50,712Earnings (loss) from continuing operations before
income taxes and minority interest
    
    
    
    (112,087
    )
    
    
    (18,766
    )
    
    
    
    (100,969
    )
    
    
    120,233
    
    
    
    91,549
    
    
    
    (64,719
    )Income taxes (recovery)
    
    
    
    5,680
    
    
    
    (9,862
    )
    
    
    
    8,461
    
    
    
    37,164
    
    
    
    17,576
    
    
    
    (4,483
    )Earnings (loss) from continuing operations before
minority interest
    
    
    
    (117,767
    )
    
    
    (8,904
    )
    
    
    
    (109,430
    )
    
    
    83,069
    
    
    
    73,973
    
    
    
    (60,236
    )Minority interests
    
    
    
    1,084
    
    
    
    (370
    )
    
    
    
    584
    
    
    
    (295
    )
    
    
    (285
    )
    
    
    2,025Earnings (loss) from continuing operations
    
    
    
    (116,683
    )
    
    
    (9,274
    )
    
    
    
    (108,846
    )
    
    
    82,774
    
    
    
    73,688
    
    
    
    (58,211
    )Discontinued operations, net of income taxLoss from discontinued operations
    
    
    
    (2,588
    )
    
    
    (26,916
    )
    
    
    
    (9,740
    )
    
    
    (45,925
    )
    
    
    (40,565
    )Loss from write-down of businesses
    
    
    
    (151,856
    )
    
    
    
    
    
    
    
    (151,856
    )Loss from discontinued operations
    
    
    
    (154,444
    )
    
    
    (26,916
    )
    
    
    
    (161,596
    )
    
    
    (45,925
    )
    
    
    (40,565
    )
    
    
    Net earnings (loss)
    
    
    $
    (271,127
    )
    
    $
    (36,190
    )
    
    
    $
    (270,442
    )
    
    $
    36,849
    
    
    $
    33,123
    
    
    $
    (58,211
    )
  12




---



##### 



Supplementary Information
  Adjusted Consolidated Statement of Earnings
 Reported
    
    
    Reversal of
    
    
    Adjusted
    
    
    
    
    
    
    
    Reported
    
    Reported12 months
    
    
    Discontinued
    
    
    12 months
    
    
    
    
    
    
    
    15 months
    
    12 monthsended
    
    
    Operations
    
    
    ended
    
    
    
    
    
    
    
    ended
    
    endedDec. 31/05
    
    
    Reclassification
    
    
    Dec. 31/05
    
    
    
    
    
    
    
    Dec. 31/04
    
    Dec. 31/04(audited)
    
    
    
    
    
    (unaudited)
    
    
    
    
    
    
    
    (audited)
    
    (unaudited)Net sales
    
    
    $
    1,696,353
    
    
    
    $
    221,303
    
    
    
    $
    1,917,656
    
    
    
    
    
    
    
    
    $
    2,335,131
    
    
    $
    1,920,749Cost of sales
    
    
    
    1,298,090
    
    
    
    
    175,010
    
    
    
    
    1,473,100
    
    
    
    
    
    
    
    
    
    1,735,389
    
    
    
    1,439,576Gross profit
    
    
    
    398,263
    
    
    
    
    46,293
    
    
    
    
    444,556
    
    
    
    
    
    
    
    
    
    599,742
    
    
    
    481,173Operating expenses
    
    
    
    444,202
    
    
    
    
    47,955
    
    
    
    
    492,157
    
    
    
    
    
    
    
    
    
    472,964
    
    
    
    388,526Other costs
    
    
    
    29,589
    
    
    
    
    167,565
    
    
    
    
    197,154
    
    
    
    
    
    
    
    
    
    
    
        
    Operating earnings (loss)
    
    
    
    (75,528
    )
    
    
    
    (169,227
    )
    
    
    
    (244,755
    )
    
    
    
    
    
    
    
    
    126,778
    
    
    
    92,647Interest and financing charges
    
    
    
    25,441
    
    
    
    
    15,347
    
    
    
    
    40,788
    
    
    
    
    
    
    
    
    
    50,651
    
    
    
    39,329Earnings (loss) from continuing operations before
income taxes and minority interest
    
    
    
    (100,969
    )
    
    
    
    (184,574
    )
    
    
    
    (285,543
    )
    
    
    
    
    
    
    
    
    76,127
    
    
    
    53,318Income taxes (recovery)
    
    
    
    8,461
    
    
    
    
    (21,606
    )
    
    
    
    (13,145
    )
    
    
    
    
    
    
    
    
    38,960
    
    
    
    19,123Earnings (loss) from continuing operations before
minority interest
    
    
    
    (109,430
    )
    
    
    
    (162,968
    )
    
    
    
    (272,398
    )
    
    
    
    
    
    
    
    
    37,167
    
    
    
    34,195Minority interests
    
    
    
    584
    
    
    
    
    1,372
    
    
    
    
    1,956
    
    
    
    
    
    
    
    
    
    (318
    )
    
    
    (1,072
    )Earnings (loss) from continuing operations
    
    
    
    (108,846
    )
    
    
    
    (161,596
    )
    
    
    
    (270,442
    )
    
    
    
    
    
    
    
    
    36,849
    
    
    
    33,123Discontinued operations, net of income taxLoss from discontinued operations
    
    
    
    (9,740
    )
    
    
    
    9,740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss from write-down of businesses
    
    
    
    (151,856
    )
    
    
    
    151,856
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss from discontinued operations
    
    
    
    (161,596
    )
    
    
    
    161,596
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net earnings (loss)
    
    
    $
    (270,442
    )
    
    
    $
    
    
    
    
    $
    (270,442
    )
    
    
    
    
    
    
    
    $
    36,849
    
    
    $
    33,123
 13




---



##### 



Selected Annual Information
  12 months
    
    
    15 months
    
    
    12 months
    
    
    
    12 months(in thousands of Canadian dollars,
    
    
    ended
    
    
    ended
    
    
    ended
    
    
    
    endedexcept per share amounts)
    
    
    Dec. 31/05
    
    
    Dec. 31/04
    
    
    Sep. 30/03
    
    
    
    Dec. 31/04(audited)
    
    
    (audited)
    
    
    (audited)
    
    
    
    (audited)Net sales
    
    
    $
    1,696,353
    
    
    $
    2,026,396
    
    
    $
    1,885,397
    
    
    
    $
    1,664,661Earnings (loss) from continuing operations
    
    
    
    (108,846
    )
    
    
    82,774
    
    
    
    
    
    
    
    
    73,688Net earnings (loss)
    
    
    
    (270,442
    )
    
    
    36,849
    
    
    
    (58,211
    )
    
    
    
    33,123Basic earnings (loss) per share from
continuing operations
    
    
    
    (1.16
    )
    
    
    089
    
    
    
    
    
    
    
    
    0.79Diluted earnings (loss) per share from
continuing operations
    
    
    
    (1.16
    )
    
    
    0.87
    
    
    
    
    
    
    
    
    0.78Basic earnings (loss) per share
    
    
    
    (2.89
    )
    
    
    0.39
    
    
    
    (0.62
    )
    
    
    
    0.35Diluted earnings (loss) per share
    
    
    
    (2.89
    )
    
    
    0.38
    
    
    
    (0.62
    )
    
    
    
    0.34Weighted average number of shares (Basic)
    
    
    
    93,437,705
    
    
    
    93,342,490
    
    
    
    93,219,925
    
    
    
    
    93,352,973Weighted average number of shares (Diluted)
    
    
    
    93,437,705
    
    
    
    94,763,312
    
    
    
    93,219,925
    
    
    
    
    94,773,795Total assets
    
    
    
    2,036,253
    
    
    
    2,444,972
    
    
    
    2,530,454
    
    
    
    
    2,444,972Long-term debt
    
    
    
    250,721
    
    
    
    303,214
    
    
    
    383,332
    
    
    
    
    303,214
 
 (1)
    
    With the exception of the twelve months ended September 30,2003, the financial information for
all prior periods have been restated from that previously reported in accordance with required
accounting policies for discontinued operations. 14




---



##### 



Financial Results Analysis
 Net Sales
  Reportable Segments
    
    Key Core Product DivisionsCustom Profiles &Mouldings
    
    Custom Window Profiles and Interior & Exterior
MouldingsBuilding Products
    
    Exterior CladdingConstruction Products
    
    Pipe and Fittings and Building SystemsHome Improvement Products
    
    Deck, Fence and Railing and Outdoor StorageWindow Covering Products
    
    Windows CoveringsMaterials
    
    Materials (Resins, Additives, PVC and Recycling)Support
    
    Real Estate
  3 months
    
    
    3 months
    
    
    Percentage
    
    
    
    12 months
    
    
    15 months
    
    
    Percentage
    
    
    
    12 months
    
    
    Percentage(in thousands of Canadian dollars,
    
    
    ended
    
    
    ended
    
    
    Change
    
    
    
    ended
    
    
    ended
    
    
    Change
    
    
    
    ended
    
    
    Changepercentages)
    
    
    Dec. 31/05
    
    
    Dec. 31/04
    
    
    05 vs. 04
    
    
    
    Dec. 31/05
    
    
    Dec. 31/04
    
    
    05 vs 04
    
    
    
    Dec. 31/04
    
    
    05 vs 04(unaudited)
    
    
    (unaudited)
    
    
    
    
    
    
    
    (audited)
    
    
    (audited)
    
    
    
    
    
    
    
    (unaudited)Custom Profiles & Mouldings
    
    
    $
    181,935
    
    
    $
    164,812
    
    
    
    10
    %
    
    
    $
    727,248
    
    
    $
    920,399
    
    
    
    -21
    %
    
    
    $
    743,990
    
    
    
    -2
    %Building Products
    
    
    
    78,655
    
    
    
    67,280
    
    
    
    17
    %
    
    
    
    324,948
    
    
    
    385,254
    
    
    
    -16
    %
    
    
    
    314,966
    
    
    
    3
    %Construction Products
    
    
    
    87,328
    
    
    
    66,918
    
    
    
    31
    %
    
    
    
    332,627
    
    
    
    344,568
    
    
    
    -3
    %
    
    
    
    287,722
    
    
    
    16
    %Home Improvement Products
    
    
    
    21,933
    
    
    
    21,782
    
    
    
    1
    %
    
    
    
    155,791
    
    
    
    168,413
    
    
    
    -7
    %
    
    
    
    148,957
    
    
    
    5
    %Window Covering Products
    
    
    
    30,226
    
    
    
    33,630
    
    
    
    -10
    %
    
    
    
    136,078
    
    
    
    183,969
    
    
    
    -26
    %
    
    
    
    149.256
    
    
    
    -9
    %Materials
    
    
    
    4,120
    
    
    
    4,102
    
    
    
    0
    %
    
    
    
    16,345
    
    
    
    21,413
    
    
    
    -24
    %
    
    
    
    17,643
    
    
    
    -7
    %Support
    
    
    
    211
    
    
    
    511
    
    
    
    -59
    %
    
    
    
    3,316
    
    
    
    1,880
    
    
    
    76
    %
    
    
    
    2,127
    
    
    
    56
    %Net sales
    
    
    $
    404,408
    
    
    $
    359,035
    
    
    
    13
    %
    
    
    $
    1,696,353
    
    
    $
    2,026,396
    
    
    
    -16
    %
    
    
    $
    1,664,661
    
    
    
    2
    %
  15




---



##### 



Custom Profiles & Mouldings
   Building Products
   Construction Products
   16




---



##### 



Home Improvement Products
   Window Covering Products
   Materials
   17




---



##### 



Support
   Geographic Sales Distribution
   Cost of Sales
   18




---



##### 



Operating Expenses
 Selling and Delivery Expenses
   General and Administration Expenses
  19




---



##### 



Other Costs
  EBITDA
   Amortization Expense
  Interest and Financing Charges
  20




---



##### 



Income Taxes
   Net Loss
  21




---



##### 



C. Financing and Risk Management
 Liquidity and Capital Resources
 Cash Flow
  Working Capital
   22




---



##### 



Capital Spending
   Commitments and Other Contractual Obligations
  
 2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    Thereafter
    
    TotalLong-term debt  principal repayments
    
    $
    46,902
    
    
    $
    134,189
    
    
    $
    
    
    
    $
    
    
    
    $
    116,532
    
    
    $
    
    
    
    $
    297,623Long-term debt  interest payments
    
    
    19,826
    
    
    
    16,371
    
    
    
    8,041
    
    
    
    8,041
    
    
    
    2,345
    
    
    
    
    
    
    
    54,624Capital lease obligations
    
    
    684
    
    
    
    600
    
    
    
    448
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,732Operating leases
    
    
    13,718
    
    
    
    10,316
    
    
    
    8,285
    
    
    
    5,728
    
    
    
    2,358
    
    
    
    191
    
    
    
    40,596Purchase obligations
    
    
    190,264
    
    
    
    180,293
    
    
    
    180,293
    
    
    
    180,293
    
    
    
    180,293
    
    
    
    179,800
    
    
    
    1,091,236Other long term obligations
    
    
    1,756
    
    
    
    705
    
    
    
    611
    
    
    
    546
    
    
    
    505
    
    
    
    1,913
    
    
    
    6,036Total contractual obligations
    
    $
    273,150
    
    
    $
    342,474
    
    
    $
    197,678
    
    
    $
    194,608
    
    
    $
    302,033
    
    
    $
    181,904
    
    
    $
    1,491,847
  23




---



##### 



Long Term Debt and Financial Instruments
 1
     
 1
    
    Debt and net debt as a percentage of capital
are non-GAAP measures which are defined in more detail in the section titled
Non GAAP Financial Measures 24




---



##### 



Outstanding Share Data
   25




---



##### 



D. Operating Environment
 Competition
    Investigations
  26




---



##### 



Class Action Lawsuits
      27




---



##### 



Criminal Investigation by the Antitrust Division of the United States Department of Justice
  Special Investigative Committee
       28




---



##### 



Financial Reporting and Disclosure
    Risks and Uncertainties
  29




---



##### 




 
 
 30




---



##### 




 
  
 
 
 31




---



##### 




 
 
 
 32




---



##### 



33




---



##### 



E. Accounting Policies and Non GAAP Measures
 Critical Accounting Estimates
  Allowance for Doubtful Accounts
  Inventory Obsolescence
  Income Taxes
  Asset Impairment
  34




---



##### 



Goodwill Impairment
   Custom
    
    
    
    
    
    
    
    
    
    Home
    
    
    Window(in thousands of
    
    Profiles &
    
    Building
    
    Construction
    
    
    Improvement
    
    
    CoveringCanadian dollars)
    
    Mouldings
    
    Products
    
    Products
    
    
    Products
    
    
    Products
    
    Materials
    
    Support
    
    TotalCarry value of
Goodwill
    
    
    109,328
    
    
    
    20,248
    
    
    
    20,342
    
    
    
    13,887
    
    
    
    11,824
    
    
    
    9,400
    
    
    
    9,326
    
    
    
    194,355Total Assets
    
    
    552,165
    
    
    
    170,032
    
    
    
    259,655
    
    
    
    99,083
    
    
    
    109,322
    
    
    
    195,595
    
    
    
    391,820
    
    
    
    1,777,672
   
  35




---



##### 



Carrying
    
    
    Estimated(in thousands of Canadian dollars)
    
    Value
    
    
    Fair ValueHome Improvement Products
    
    $
    88,000
    
    
    
    $
    156,000Windows Covering Products
    
    
    121,000
    
    
    
    
    133,000
  Ø
 Ø
  Assets Held for Sale  Valuation of Expected Proceeds
  New Accounting Standards
  Emerging Issues Committee 156, Accounting by a Vendor for Consideration Given to a Customer
(including a Reseller of the Vendors Products)
 36




---



##### 



CICA Handbook Section 1530, Comprehensive Income
  CICA Handbook Section 3855, Financial Instruments  Recognition and Measurement
  CICA Handbook Section 3865, Hedges
   Future Income Tax Assets and Liabilities
   37




---



##### 



Related Party Transactions
     Non GAAP Financial Measures
 Earnings Before Interest, Taxes, Depreciation and Amortization
  38




---



##### 



Free Cash Flow
  Net Funded Debt
  39




---



##### 



F. Additional Financial Information
 Supplementary Information: 2005 and 2004 Quarterly Information
  (unaudited)(in thousands of Canadian
    
    3 months
    
    
    3 months
    
    
    3 months
    
    
    3 months
    
    
    3 months
    
    
    3 months
    
    
    3 months
    
    
    3 monthsdollars, except per
    
    ended
    
    
    ended
    
    
    ended
    
    
    ended
    
    
    ended
    
    
    ended
    
    
    ended
    
    
    endedshare amounts)
    
    Dec.30/05
    
    
    Sept.30/05
    
    
    Jun.30/05
    
    
    Mar.31/05
    
    
    Dec.31/04
    
    
    Sep.30/04
    
    
    Jun.30/04
    
    
    Mar.31/04Net sales
    
    $
    404,408
    
    
    $
    468,615
    
    
    $
    486,680
    
    
    $
    336,650
    
    
    $
    359,035
    
    
    $
    475,911
    
    
    $
    488,034
    
    
    $
    341,681Earnings (loss) from
continuing operations
    
    
    (116,683
    )
    
    
    (5,384
    )
    
    
    23,286
    
    
    
    (10,065
    )
    
    
    (9,274
    )
    
    
    31,443
    
    
    
    38,389
    
    
    
    12,130Loss from discontinued
operations
    
    
    (154,444
    )
    
    
    (1,119
    )
    
    
    (4,703
    )
    
    
    (1,330
    )
    
    
    (26,916
    )
    
    
    (7,033
    )
    
    
    (3,901
    )
    
    
    (2,715
    )Net earnings (loss)
    
    
    (271,127
    )
    
    
    (6,503
    )
    
    
    18,583
    
    
    
    (11,395
    )
    
    
    (36,190
    )
    
    
    24,410
    
    
    
    35,488
    
    
    
    9,415Basic earnings (loss)per share from continuing operations
    
    
    (1.25
    )
    
    
    (0.06
    )
    
    
    0.25
    
    
    
    (0.11
    )
    
    
    (0.10
    )
    
    
    0.34
    
    
    
    0.42
    
    
    
    0.13Diluted earnings (loss)
per share from
continuing operations
    
    
    (1.25
    )
    
    
    (0.06
    )
    
    
    0.25
    
    
    
    (0.11
    )
    
    
    (0.10
    )
    
    
    0.34
    
    
    
    0.42
    
    
    
    0.13Basic net earnings
(loss) per share
    
    
    (2.90
    )
    
    
    (0.07
    )
    
    
    0.20
    
    
    
    (0.12
    )
    
    
    (0.39
    )
    
    
    0.26
    
    
    
    0.38
    
    
    
    0.10Diluted net earnings
(loss) per share
    
    
    (2.90
    )
    
    
    (0.07
    )
    
    
    0.20
    
    
    
    (0.12
    )
    
    
    (0.39
    )
    
    
    0.26
    
    
    
    0.38
    
    
    
    0.10
  40




---



##### 



Supplementary Information: Non GAAP Calculations
  (Restated)
    
    
    
    
    
    
    (Restated)12 months
    
    
    15 months
    
    
    12 months
    
    
    12 monthsended
    
    
    ended
    
    
    ended
    
    
    ended(in thousands of Canadian dollars, except percentages)
    
    Dec. 31/05
    
    
    Dec. 31/04
    
    
    Sep. 30/03
    
    
    Dec. 31/04(audited)
    
    
    (audited)
    
    
    (audited)
    
    
    (unaudited)Earnings from continuing operations before interest, taxes,
minority interest and other
    
    $
    (75,528
    )
    
    $
    155,070
    
    
    $
    (14,007
    )
    
    $
    117,699Other costs
    
    $
    29,589Amortization
    
    
    119,231
    
    
    
    146,125
    
    
    
    126,363
    
    
    
    118,404EBITDA
    
    $
    73,292
    
    
    
    301,195
    
    
    $
    112,356
    
    
    $
    236,103EBITDA as a percentage of Net Sales
    
    
    4.3
    %
    
    
    14.9
    %
    
    
    6.0
    %
    
    
    14.2
    %(not restated)
    
    
    (not restated)
    
    
    (not restated)12 months
    
    
    15 months
    
    
    12 months
    
    
    12 monthsended
    
    
    ended
    
    
    ended
    
    
    ended(in thousands of Canadian dollars)
    
    Dec. 31/05
    
    
    Dec. 31/04
    
    
    Sep. 30/03
    
    
    Dec. 31/04(audited)
    
    
    (audited)
    
    
    (audited)
    
    
    (unaudited)Net earnings (loss) from continuing operations
    
    $
    (108,846
    )
    
    $
    36,849
    
    
    $
    (58,211
    )
    
    $
    33,123Items not affecting cash
    
    
    189,661
    
    
    
    208,377
    
    
    
    247,188
    
    
    
    147,601Change in non-cash working capital
    
    
    31,332
    
    
    
    25,436
    
    
    
    45,944
    
    
    
    15,426Cash flow from operating activities
    
    
    112,147
    
    
    
    270,662
    
    
    
    234,921
    
    
    
    196,150Acquisition of property, plant and equipment
    
    
    (66,440
    )
    
    
    (99,725
    )
    
    
    (93,533
    )
    
    
    (83,673
    )Change in investments
    
    
    (272
    )
    
    
    (2,014
    )
    
    
    
    
    
    
    (2,014
    )Minority interest
    
    
    (584
    )
    
    
    318
    
    
    
    (2,025
    )
    
    
    1,072Free cash flow
    
    $
    44,851
    
    
    $
    169,241
    
    
    $
    139,363
    
    
    $
    111,535(in thousands of Canadian dollars, except percentages)
    
    Dec. 31/05
    
    
    Dec. 31/04
    
    
    Sep. 30/03(audited)
    
    
    (audited)
    
    
    (audited)Bank indebtedness
    
    $
    158,789
    
    
    $
    
    
    
    $
    355,080Term bank loan
    
    
    
    
    
    
    324,836
    
    
    
    Term debt
    
    
    297,623
    
    
    
    321,517
    
    
    
    404,598Cash
    
    
    
    
    
    
    (112,088
    )
    
    
    Net funded debt
    
    
    456,412
    
    
    
    534,265
    
    
    
    759,678Minority interest
    
    
    856
    
    
    
    15,761
    
    
    
    15,603Shareholders equity
    
    
    1,110,303
    
    
    
    1,365,461
    
    
    
    1,365,412Total capitalization
    
    $
    1,567,571
    
    
    
    1,915,487
    
    
    $
    2,140,693Net funded debt to total capitalization
    
    
    29.1
    %
    
    
    27.9
    %
    
    
    35.5
    %
 41