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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-K [X]
    
    ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2003OR[  ]
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTFor the Transition period from
 to
 Commission file number 0-20328 AMTROL Inc. (Exact Name of Registrant as Specified in Its Charter)
 Rhode Island
    
    05-0246955(State or Other Jurisdiction of
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)
 1400 Division Road, West Warwick, RI
    
    02893(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (401) 884-6300 None
 None
 Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [  ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X] Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [  ] No [X]. State the aggregate market value of the Registrants voting and non-voting
common equity held by non-affiliates as of the last business day of the
Registrants most recently completed second fiscal quarter: $0 Indicate the number of shares outstanding of each of the Registrants classes
of common stock, as of the latest practicable date: $0.01 Par Value: 100
shares outstanding as of March 29, 2004. Documents Incorporated by Reference: None




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TABLE OF CONTENTS PagePART IItem 1    BusinessBackground
    
    
    3Operations
    
    
    3Products and Markets
    
    
    4Distribution and Marketing
    
    
    7Manufacturing, Raw Materials and Suppliers
    
    
    7Seasonality and Backlog
    
    
    8Patents, Trademarks and Licenses
    
    
    8Competition
    
    
    8Employees
    
    
    8Environmental Matters
    
    
    9Item 2  -  Properties
    
    
    9Item 3  -  Legal Proceedings
    
    
    10Item 4  -  Submission of Matters to a Vote of Security Holders
    
    
    10PART IIItem 5  -  Market for Registrants Common Equity and Related Stockholder Matters
    
    
    10Item 6  -  Selected Financial Data
    
    
    11Item 7  -  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 7A- Quantitative and Qualitative Disclosures of Market Risk
    
    
    24Item 8  -  Financial Statements and Supplementary Data
    
    
    25Item 9  -  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    25Item 9A- Controls and Procedures
    
    
    25PART IIIItem 10 - Directors and Executive Officers of the Registrant
    
    
    26Item 11 - Executive Compensation
    
    
    28Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    31Item 13 - Certain Relationships and Related Transactions
    
    
    32Item 14 - Principal Accountant Fees and Services
    
    
    32Item 15 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K
    
    
    33Report of Independent Auditors
    
    
    34Schedule II - Valuation and Qualifying Accounts and Reserves
    
    
    56Signatures
    
    
    57Exhibit Index
    
    
    58Subsidiaries of RegistrantCertificationsEX-14 BUSINESS CONDUCT POLICYEX-21 SUBSIDIARIESEX-31.1 CERTIFICATION OF CEOEX-31.2 CERTIFICATION OF CFOEX-32.1 CERTIFICATION OF CEOEX-32.2 CERTIFICATION OF CFO
  2




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PART I 
 ITEM 1. BUSINESS 
 Background AMTROL Inc., together with its subsidiaries (AMTROL or the Company),
is a leading international designer, manufacturer and marketer of
expansion and pressure control products used in water systems
applications and selected sectors of the Heating, Ventilation and Air
Conditioning (HVAC) market. The Companys principal products include
well water accumulators, hot water expansion controls, water treatment
products, indirect-fired water heaters and returnable and non-returnable
pressure-rated cylinders used primarily to store, transport and dispense
refrigerant, heating and cooking gases. Many of these products are based
on a technology originated and developed by the Company, involving a
pre-pressurized vessel with an internal diaphragm to handle fluids under
pressure. The Company was incorporated in Rhode Island in 1973, and is the
successor of a Rhode Island corporation which was incorporated in 1946.
On November 12, 1996, as a result of a merger agreement with AMTROL
Holdings Inc. (Holdings Inc.) and its wholly owned subsidiary, AMTROL
Acquisition Inc., the Company became a wholly-owned subsidiary of
Holdings Inc., a Delaware corporation controlled by The Cypress Group
L.L.C. (Cypress). The Companys principal executive offices are located
at 1400 Division Road, West Warwick, Rhode Island 02893 (telephone
number: (401) 884-6300). 
 Operations AMTROL is the market leader in the manufacture of its principal products.
The Companys prominence is attributable to the strength of its brand
names, product breadth, quality and innovation, as well as its marketing,
distribution and manufacturing expertise. In addition, AMTROLs principal
markets are highly replacement oriented, with more than 50% of the
Companys core business coming from replacement sales. Sales can be
affected by extreme weather conditions, as well as significant changes in
economic circumstances. One of the Companys strengths is its brand names, which are among the
most widely recognized in its markets. For example, the Companys
EXTROL® brand is widely recognized by customers as the leading hot water
expansion control tank. Other well-known brand names of the Company
include Well-X-Trol®, Therm-X-Trol®, BoilerMate, CHAMPION® and Water
Worker®. The Company is a recognized technology leader in virtually all
of its core product lines. In fact, many of the Companys major product
lines are considered the industry benchmark, a key strategic marketing
advantage. During its 58-year history, AMTROL has established a strong
partnership with wholesalers, supporting a broad distribution network
serving approximately 1,800 customers throughout North America. The
Companys strong brand recognition and reputation for quality ensure that
nearly every significant plumbing, pump specialty and HVAC wholesaler
carries at least one line of its products. This facilitates new product
introduction, effectively pulling the Companys new products through
its distribution system. The Company also offers a broad range of products, which
allows the 3




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Companys customers to consolidate their purchases with the
Company and manage inventory more
efficiently. These factors have established AMTROLs products as
preferred brands and allow the Company to realize premium pricing on most
of its premium branded products. AMTROL ALFA Metalomecânica, S.A. (AMTROL ALFA), located in Guimaraes,
Portugal, is Europes largest manufacturer of reusable steel gas
cylinders, distributed worldwide and used principally for the storage of
cooking and heating gases. AMTROL ALFA also produces non-returnable gas
cylinders supplied to European and Asian customers which are used
principally for the storage of refrigerant gases. AMTROL ALFA provides
the Company with the potential for a low-cost international manufacturing
base for all of the Companys cylinder products and is an important
source of supply for the Companys international customers. AMTROL NOVA GmbH & Co. K.G. (AMTROL NOVA), located in Donaueschingen,
Germany, manufactures high-end residential and commercial water heaters
which are marketed primarily in Germany, Switzerland and Austria. On
February 27, 2004 AMTROL NOVA was sold to DTT NOVA Beteiligungen GmbH &
Co. KG. See Footnote 12 in the Companys Notes to Consolidated Financial
Statements for further discussion. AMTROL Poland Sp z.o.o. (AMTROL Poland), located in Swarzedz, Poland
refurbishes returnable gas cylinders, primarily for the Polish market.
AMTROL Poland also sells new gas cylinders that are fabricated by AMTROL
ALFA and shipped in an unfinished condition to AMTROL Poland for
finishing and distribution. AMTROL Poland provides the Company with both
a favorable manufacturing cost structure and close proximity to the gas
cylinder markets in Central and Eastern Europe. Net sales in geographic regions outside of the United States and Canada,
primarily Europe, the Middle East, Africa and the Far East, accounted
for 32.0%, 29.0% and 38.2% of the Companys total net sales in fiscal
years 2001, 2002 and 2003, respectively. The Company continues to review potential acquisitions that may represent
good strategic fits with the Companys lines of business. 
 Products And Markets HVAC Products The Companys sales to selected sectors of the HVAC market include
products such as expansion accumulators, water heaters and pressure-rated
cylinders for heating and refrigerant gases. The Companys residential
HVAC products include expansion vessels for heated water, potable water
heaters and other accessories used in residential HVAC systems. The
Companys commercial HVAC products are substantially identical in
function to those used in residential applications, but may be modified
for design codes and the higher operating pressures of larger systems.
The Companys pressure-rated cylinders for refrigerant gases are used
mainly in the storage, transportation and dispensing of gases used
principally in air conditioning and refrigeration systems. In addition,
the AMTROL-ALFA facility produces returnable pressure-rated cylinders for
storing gas used in residential and commercial heating and cooking
applications. 4




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EXTROLs®.The EXTROL® expansion accumulator, the first of the Companys
products for handling fluid under pressure, redefined the standards for
controlling the expansion of water in hydronic heating systems. Earlier
systems consisted simply of a vessel containing air, resulting in
excessive pressure and corrosion. The Company developed a technology
which uses a flexible diaphragm inside a pre-pressurized vessel to
maintain the separation of air and water and has applied this technology
in other HVAC and water system products. This technology controls
pressure in the heating system and minimizes problems related to hot
water expansion by allowing the volume of water to increase as the
temperature of the water increases within a closed system, thereby
substantially reducing operating problems. Therm-X-Trols®.Therm-X-Trols® accumulate expanded hot water from
potable water heaters where flow back into the public water supply is
prohibited due to the presence of backflow prevention devices. In
response to the Clean Water Act of 1984, certain jurisdictions
established local codes to require owners of commercial and residential
buildings to install backflow prevention devices in order to prevent the
contamination of the public water supply. Codes adopted by organizations
that set standards for most of the United States also require a separate
device to handle the expanded water and prevent it from flowing back into
the public water supply. The principal alternatives are relief valves,
which permit water to drain inside the building, and thermal expansion
accumulators, such as the Therm-X-Trol®, which capture the water.
Therm-X-Trol® satisfies these code requirements, as well as the codes of
certain localities that specifically require a thermal expansion
accumulator. Additionally, certain domestic water heater manufacturers
specify that their warranties are void if thermal expansion accumulators
are not used in conjunction with their products where backflow prevention
devices are installed. Indirect-Fired Water Heaters.In response to market demands for both an
abundant supply of hot water and energy conservation, the Company offers
a line of indirect-fired residential and commercial water heaters, which
it manufactures and distributes under the brand name Boiler Mate. Used
in conjunction with a new or existing boiler installed to heat living and
work areas, these water heaters offer an alternative to conventional gas
and electric potable water heaters and tankless coils. Hot water is
generated through the use of heat exchangers and circulators which
circulate heated water from the boiler through a coil in the core of the
water heaters reservoir. The Boiler Mate Classic Series, available in
26 and 41 gallon models, is sold primarily for residential applications.
The Boiler Mate Premier Series, a line of stainless steel models,
offers sizes ranging from 60 to 120 gallons for light commercial
applications and residential customers who require large amounts of hot
water and rapid recovery time. A recent addition to the Companys
offerings, The Boiler Mate Top Down Series, was the direct result of
continuing communication with key customers and installers. These 41
gallon models have the heat exchanger and all piping connections placed
at the top for fast installation and easy maintenance. 5




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Pressure-Rated Cylinders The AMTROL ALFA subsidiary produces and distributes reusable liquid
propane gas (LPG) cylinders and reusable and non-returnable refrigerant
cylinders. AMTROL ALFA is the largest producer of reusable steel gas
cylinders in Europe.

Reusable LPG cylinders are typically purchased by major gas companies or
their distributors who fill the cylinders for customers who use the
gas for heating and cooking in residential and commercial applications.
In 1998, the Company transferred to AMTROL ALFA a non-returnable
refrigerant cylinder production line previously located in



Singapore and began supplying its European and Asian non-returnable
refrigerant cylinder customers from AMTROL ALFA. The transfer of this
production line enhanced the Companys worldwide presence in
non-returnable cylinder markets and its ability to provide optimum
production and delivery solutions to its major multi-national customers.
The Company is also one of the worlds two largest manufacturers of
non-returnable pressure-rated cylinders used in the storage, transport
and dispensing of refrigerant gases for air conditioning and
refrigeration systems. In 1999, the Company established AMTROL Poland which refurbishes
returnable gas cylinders, primarily for the Polish market. AMTROL Poland
also sells new gas cylinders that are fabricated by AMTROL ALFA and
shipped in an unfinished condition to AMTROL Poland for finishing and
distribution. AMTROL Poland provides the Company with both a favorable
manufacturing cost structure and close proximity to the gas cylinder
markets in Central and Eastern Europe. Water Systems Products AMTROLs sales of its water systems products consist primarily of water
accumulators for residential and commercial well water systems and
products for residential water softening and purification. Well Water Systems.The Company produces and sells well water
accumulators for both residential and commercial applications under the
brand names Well-X-Trol®, CHAMPION® and VALUE-WELL, as well as under
several other brand and private label programs. Virtually all of the
well water accumulators sold by the Company incorporate an internally
mounted rubber diaphragm that seals an air charge and allows pressure to
increase as water fills the plastic-lined vessel. This design serves to
control pressure while maintaining the separation of air and water in the
vessel, thereby eliminating water logging (absorption of air into water)
as well as reducing wear on switches, pump motors and other system
components caused by more frequent on/off cycling. A typical well water
system consists of a submersible or jet pump located in the well that
pumps water to an AMTROL
well water accumulator. The well water accumulator is connected to the plumbing system in order
to provide water on demand within a specific range of pressure as
controlled by a pressure switch. As the water level and pressure in the
vessel decreases, the diaphragm relaxes and the pressure switch causes
the pump to cycle until a certain pressure is achieved in the system. Water Treatment/Filtration Products.The Company offers a range of
products to meet increasing global demand for improved water quality and
water pressure. The Company manufactures and markets water softeners
under the Water Soft brand. Other products such as reverse osmosis
accumulators and related systems distributed by the Company can improve
the quality of both municipal-supplied water and well water. A recent
supplement to this product line is the Odor Oxidizer hydrogen sulfide
removal system. This patented system removes offensive sulfur odor from
potable water systems via a proprietary method that uses no chemicals or
media. The Company also manufactures and markets products under the
brand name AMTROL Pressuriser® that boosts water pressure where available
pressure is not adequate. 6




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Distribution and Marketing The Companys principal channel of distribution is plumbing, heating and
pump specialty wholesalers. The Company maintains its presence in the
United States and Canadian wholesale markets through a network of
approximately 45 independent manufacturers representatives arranging sales on a commission basis, as well as
eight salaried direct sales professionals. To service its customers with
greater efficiency, the Company has streamlined its representative
network and, through consolidation of multiple lines of business, has
brought a broader range of products to its wholesalers. The Company also
provides certain of its products to the retail channel through its
salaried direct sales force. At its Education Center, which is an integral part of the Companys
marketing organization, and at Company sponsored seminars throughout the
United States and selected international locations, the Company provides
education and training to wholesalers, contractors and engineers,
independent sales representatives and their employees to assist them in
understanding the technical aspects of their respective customers
requirements and the Companys product lines. As the Company educates
contractors and engineers about the benefits of the Companys products,
its products are more effectively pulled through its distribution
system. Non-returnable refrigerant pressure-rated cylinders are sold to major
chemical companies, which produce and package refrigerant gases, and to
independent contractors that purchase bulk refrigerants and fill the
cylinders. The Companys major customers for reusable refrigerant gas
cylinders are wholesale distributors who sell the products to service
providers and refrigerant recovery equipment manufacturers. AMTROL ALFAs
major customers for reusable cylinders are major European gas companies
or their distributors. With the exception of one cylinder customer to whom global sales were
approximately 6.2% of total consolidated net sales, no individual
customer represented more than five percent of the Companys net sales in
2003. 
 Manufacturing, Raw Materials and Suppliers The Company manufactures its products primarily at its own facilities,
many of which depend on the Companys expertise in pressure vessel
construction. The Company takes advantage of the material economies and
precision inherent in deep-draw stamping technology to manufacture
products of superior performance and life. During the second half of 2003, the Company experienced increasing costs
for several key raw materials (steel, copper, brass and rubber), energy
and freight. The Company acted aggressively to mitigate cost increases
whenever possible by developing new sources and through contracted
purchases. The Company anticipates that mitigating the impact of rising steel prices and steel availability issues will require active management
in 2004. Emphasis on productivity improvements continued in 2003 via capital
expenditures and continuous improvement activities such as Kaizen, Visual
Control and One-Piece Flow Initiatives. These techniques allow the
Company to identify and eliminate waste in its cost structure. 7




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Quality levels at the Company improved in 2003. Field failures and sales
returns experienced notable reductions attributable to the revision of
rework policies, stringent enforcement of supplier quality protocols and
continuous improvement programs. In 2003, the Company achieved ISO 9000-2000 certification. This revision
to the 1994 ISO standard places heavy emphasis on customer feedback.
Many of the new products introduced in 2003 and planned for introduction
in 2004 have been derived from the Companys heightened emphasis on
reacting to customer feedback and building customer loyalty. Emphasis on safety continues to be a primary focus of the Companys
management. In 2003, OSHA Frequency and Severity rates remained stable
with three of the four facilities in the Companys North America segment
reporting zero lost time injuries. The condition at the Companys facilities and capital equipment are
considered good. Capital expenditures in 2003 are anticipated to yield
further productivity improvement. As a result, the Company does not
anticipate any capacity restraints. 
 Seasonality and Backlog Although the Companys sales fluctuate with general economic activity,
the effect of significant economic volatility is mitigated by the fact
that many of the Companys markets are highly replacement oriented.
While sales of certain of its products are seasonal in nature, the
Companys overall business is not highly seasonal. Due to the generally
short lead time of its orders, the Company historically has not carried
any material backlog. 
 Patents, Trademarks And Licenses While the Company owns a number of patents, the Company believes that its
position in its markets depends primarily on factors such as
manufacturing expertise, technological leadership, superior service and
quality and strong brand name recognition, rather than on patent
protection. The Company believes that foreign and domestic competitors
have been unable to match the quality of the Companys branded products. The Company also holds a number of registered and unregistered trademarks
for its products. The Company believes the following registered
trademarks, which appear on its products and are widely recognized in its
markets, are among those of strategic importance to its business:
Well-X-Trol®, Therm-X-Trol®, EXTROL®, Boiler Mate, CHAMPION® and Water
Worker®. 
 Competition The Company experiences competition from a number of foreign and U.S.
competitors in each of its markets. AMTROL and its competitors in the
water systems products and HVAC markets compete principally on the basis
of technology, quality, service and price. 
 Employees As of December 31, 2003, the Company had 550 employees in the United
States, none of who were represented by collective bargaining units. In
addition, the Company had 1,172 employees in its international
operations. Some of the Companys international employees are represented
by unions. The Company considers relations with its employees to be
good. 8




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Environmental Matters Some of the Companys operations generate or have in the past generated
waste materials that are regulated under environmental laws. In the
past, certain of the Companys operations have been named parties in
litigation associated with off-site hazardous

waste treatment and disposal. Based upon the Companys experience
in matters that have been resolved and the amount of hazardous waste
shipped to off-site disposal facilities, the Company believes that any
share of costs attributable to it will not be material should any
litigation arise or any claims be made in the future. However, there can
be no assurance that any liability arising from, for example,
contamination at facilities the Company owns or operates or formerly
owned or operated (or an entity or business the Company has

acquired or disposed of), or locations at which waste or contaminants
generated by the Company have been deposited (or deposited by an entity
or business the Company has acquired or disposed of) will not arise or be
asserted against the Company or entities for which the Company may be
responsible in a manner that could materially and adversely affect the
Company. The Company monitors and reviews its procedures and policies for
compliance with environmental laws. Based upon the Companys experience
to date, the Company operates in substantial compliance with
environmental laws, and the cost of compliance with existing regulations
is not expected to have a material adverse effect on the Companys
results of operations, financial condition or competitive position.
However, future events, including changes in existing laws and
regulations or enforcement policies, may give rise to additional
compliance costs which could have a material adverse effect on the
Companys results of operations, financial condition or competitive
position. 
 ITEM 2. PROPERTIES The following table sets forth information regarding the Companys
principal properties each of which is owned by the Company unless
otherwise indicated: Location
    
    Square Footage
    
    Principal Use(approximate)West Warwick, RI
    
    
    270,000
    
    
    Corporate Headquarters, Manufacturing, and Education CenterGuimaraes, Portugal
    
    
    196,000
    
    
    ManufacturingNorth Kingstown, RI (a)
    
    
    206,000
    
    
    Distribution CenterDonaueschingen, Germany (b)
    
    
    70,000
    
    
    Manufacturing and DistributionPaducah, KY
    
    
    46,300
    
    
    ManufacturingMansfield, OH (a)
    
    
    45,000
    
    
    Manufacturing and Distribution CenterBaltimore, MD
    
    
    37,000
    
    
    ManufacturingSwarzedz, Poland (a)
    
    
    29,000
    
    
    ManufacturingKitchener, Ontario(a)
    
    
    18,400
    
    
    Sales Office and DistributionTotal
    
    
    917,700
  (a)
    
    Leased facilities(b)
    
    Sold as of February 27, 2004 9




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The Company believes that its properties and equipment generally are well
maintained, in good operating condition and adequate for its present
needs. The Company regularly evaluates its manufacturing requirements
and believes that it has sufficient capacity to meet its current and
anticipated future needs. The inability to renew any short-term real
property lease would not have a material adverse effect on the Companys
results of operations, financial condition or competitive position. 
 ITEM 3. LEGAL PROCEEDINGS From time to time, the Company is named as a defendant in legal
actions. These legal actions include commercial disputes, agency
proceedings and product liability, personal injury and other claims.
However, management believes, after review of insurance coverage and
consultation with legal counsel, that the ultimate resolution of the
current pending legal actions to which it is a party will not likely have
a material adverse effect on the Companys results of operations or
financial condition. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 
 PART II 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS All of the common stock of the Company is owned by Holdings Inc.
and no trading market exists for the stock. All of the
common stock of Holdings Inc. is held by affiliates of Cypress
Merchant Banking Partners, L.P. and certain officers, directors and
employees of the Company, and likewise there is no trading market
for Holdings stock. For more information, see Item 12, Security
Ownership of Certain Beneficial Owners and Management. 10




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ITEM 6. SELECTED FINANCIAL DATA The selected consolidated financial data presented below for and as of each of
the years in the five-calendar-year period ended December 31, 2003 have been
derived from the Consolidated Financial Statements of the Company, including
the related notes thereto. The information set forth below should be read in
conjunction with Managements Discussion and Analysis of Financial Condition
and Results of Operations and with the Consolidated Financial Statements of
the Company, including the related notes thereto, appearing elsewhere in this
Form 10-K. Year Ended December 31,1999
    
    2000
    
    2001
    
    2002
    
    2003(in thousands)Statement of Operations Data:Net sales
    
    $
    222,053
    
    
    $
    197,472
    
    
    $
    182,325
    
    
    $
    186,803
    
    
    $
    196,157Cost of goods sold
    
    
    164,617
    
    
    
    151,483
    
    
    
    141,278
    
    
    
    144,217
    
    
    
    156,124Gross profit
    
    
    57,436
    
    
    
    45,989
    
    
    
    41,047
    
    
    
    42,586
    
    
    
    40,033Selling, general and
administrative expenses
    
    
    28,492
    
    
    
    25,821
    
    
    
    27,878
    
    
    
    28,646
    
    
    
    28,271Amortization of goodwill
    
    
    4,463
    
    
    
    4,463
    
    
    
    4,451
    
    
    
    
    
    
    
    Income from operations
    
    
    24,481
    
    
    
    15,705
    
    
    
    8,718
    
    
    
    13,940
    
    
    
    11,762Interest (expense), net
    
    
    (19,083
    )
    
    
    (19,070
    )
    
    
    (19,685
    )
    
    
    (20,009
    )
    
    
    (19,952
    )License and distributorship fees
    
    
    234
    
    
    
    210
    
    
    
    291
    
    
    
    40
    
    
    
    Other income (expense), net
    
    
    353
    
    
    
    1,713
    
    
    
    95
    
    
    
    (374
    )
    
    
    7,639Income (loss) before provision
(benefit) for income taxes and
cumulative effect of change in
accounting principle
    
    
    5,985
    
    
    
    (1,442
    )
    
    
    (10,581
    )
    
    
    (6,403
    )
    
    
    (551
    )Provision (benefit) for income taxes
    
    
    4,125
    
    
    
    2,704
    
    
    
    (1,166
    )
    
    
    839
    
    
    
    1,181Income (loss) before cumulative effect
of change in accounting principle
    
    
    1,860
    
    
    
    (4,146
    )
    
    
    (9,415
    )
    
    
    (7,242
    )
    
    
    (1,732
    )Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,087
    )
    
    
    Net income (loss)
    
    $
    1,860
    
    
    $
    (4,146
    )
    
    $
    (9,415
    )
    
    $
    (45,329
    )
    
    $
    (1,732
    )Other Data:Depreciation and amortization
    
    $
    14,003
    
    
    $
    14,005
    
    
    $
    13,298
    
    
    $
    9,093
    
    
    $
    9,842Capital expenditures
    
    
    5,798
    
    
    
    8,375
    
    
    
    4,199
    
    
    
    3,321
    
    
    
    3,417Balance Sheet Data (at period end):Working capital (current assets less current liabilities)
    
    $
    9,001
    
    
    $
    5,101
    
    
    $
    8,602
    
    
    $
    7,877
    
    
    $
    23,296Total assets
    
    
    281,745
    
    
    
    271,104
    
    
    
    264,455
    
    
    
    226,873
    
    
    
    237,023Long-term debt, less current maturities
    
    
    163,385
    
    
    
    159,469
    
    
    
    157,511
    
    
    
    158,391
    
    
    
    167,022Shareholders equity
    
    
    65,303
    
    
    
    59,872
    
    
    
    58,219
    
    
    
    15,849
    
    
    
    17,211
 11




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section should be read in conjunction with the Consolidated Financial
Statements of the Company and related thereto included elsewhere herein. Business Overview AMTROL Inc., together with its subsidiaries (AMTROL or the Company),
is a leading international designer, manufacturer and marketer of
expansion and pressure control products used in water systems
applications and selected sectors of the Heating, Ventilation and Air
Conditioning (HVAC) market. The Company is the market leader in the
manufacture of its principal products. The Companys prominence is
attributable to the strength of its brand names, product breadth, quality
and innovation, as well as its marketing, distribution and manufacturing
expertise. The Companys two business segments include North America and
Europe. In the North America segment, the Companys principal markets are highly
replacement oriented, with more than 50% of the Companys core business
coming from replacement sales. Sales can be affected by extreme weather
conditions, as well as significant changes in economic circumstances.
During 2003, the Company experienced a decline in net sales due to the
reduced well drilling activity as a result of above average rainfall and
flooding in the mid-Atlantic and Midwestern regions and a temporary
customer facility shutdown. Competitive pricing pressures within the
Companys principal markets and the increased cost of key raw materials
have also caused gross profit to decline. During the second half of 2003, the Company experienced increasing costs
for several key raw materials (steel, copper, brass and rubber), energy
and freight. The Company acted aggressively to mitigate cost increases
whenever possible by developing new sources and through contracted
purchases. The Company anticipates that mitigating the impact of rising steel prices and steel availability issues will require active management
in 2004. Emphasis on productivity improvements continued in 2003 via capital
expenditures and continuous improvement activities such as Kaizen, Visual
Control and One-Piece Flow Initiatives. These techniques allow the
Company to identify and eliminate waste in its cost structure. In
addition, management continues to explore and implement strategies in
order to reduce its selling, general and administrative expenses. The Companys liquidity position improved during
2003 through the proceeds of an additional $15 million in Term B Loans. The proceeds will be used
for capital investment programs and general working capital purposes. In
addition, the Company was able to extend the maturity date on the Term B
Loan by one year to December 2005, and revise certain covenants to be
more consistent with the Companys business plans. Forward Looking Statements The Company and its representatives may from time to time make written or
oral statements, including statements contained in AMTROLs filings with
the Securities and Exchange Commission (SEC) and in its reporting to
customers, which constitute or contain forward-looking statements as
that term is defined in the Private Securities Litigation Reform Act of
1995 or the SEC in its rules, regulations and releases. 12




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##### Table of Contents



All statements other than statements of historical fact included in this
Form 10-K and elsewhere relating to the Companys financial position,
strategic initiatives and statements addressing industry developments are
forward-looking statements. When incorporated in this discussion, the
words expect(s), feel(s), believe(s), anticipate(s) and similar
expressions are intended to identify some of these forward-looking
statements. Forward looking statements include those containing these
phrases but also any other statements that are not references to
historical fact. Although the Company believes that the expectations
reflected in such forward-looking statements are expressed in good faith
and are believed to have a reasonable basis, there can be no assurance
that such expectations or beliefs will result or be achieved or
accomplished. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof. The
following are some of the important factors that can vary or change or
involve substantial risk and cause actual results to differ materially
from such expectations: the Companys ability to successfully implement
its business strategy; the availability and cost of raw materials;
changes in domestic or foreign government regulation or enforcement
policies, particularly related to refrigerant gases or cylinders and
building and energy efficiency requirements or restrictions or
limitations or general reduction in the use of domestic wells;
significant weather conditions adverse to the Companys business;
development of competing technologies; acceptance of the Companys
existing and planned new products in international markets; competition
in the Companys markets, particularly price competition; the rate of
growth of developing economies and demand for the Companys products; the
ultimate cost of future warranty and other claims relating to the
Companys products and business; whether the Company succeeds in
acquiring new businesses; availability of capital; foreign exchange
rates; increases in interest rates; the business abilities and judgment
of personnel; and general economic, financial and business conditions,
both domestically and internationally. Results of Operations The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items included in the Companys
statement of operations: 13




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##### Table of Contents



Year Ended December 312001
    
    2002
    
    2003Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    77.5
    
    
    
    77.2
    
    
    
    79.6Gross profit
    
    
    22.5
    
    
    
    22.8
    
    
    
    20.4Selling, general and administrative expenses
    
    
    15.3
    
    
    
    15.3
    
    
    
    14.4Amortization of goodwill
    
    
    2.4
    
    
    
    
    
    
    
    Income from operations
    
    
    4.8
    
    
    
    7.5
    
    
    
    6.0Interest expense, net
    
    
    (10.5
    )
    
    
    (10.7
    )
    
    
    (9.9
    )Gain (loss) on extinguishment of debt, net
    
    
    (0.3
    )
    
    
    
    
    
    
    3.4Other income (expense), net
    
    
    0.2
    
    
    
    (0.2
    )
    
    
    0.2Loss before income taxes and cumulative
effect of change in accounting principle
    
    
    (5.8
    )
    
    
    (3.4
    )
    
    
    (0.3
    )Provision (benefit) for income taxes
    
    
    (0.6
    )
    
    
    0.5
    
    
    
    0.6Loss before cumulative effect of a change
in accounting principle
    
    
    (5.2
    )
    
    
    (3.9
    )
    
    
    (0.9
    )Cumulative effect of a change in accounting
principle
    
    
    
    
    
    
    (20.4
    )
    
    
    Net loss
    
    
    (5.2
    )
    
    
    (24.3
    )
    
    
    (0.9
    )
 Fiscal Year Ended December 31, 2003 Compared to Fiscal Year Ended December 31,
2002. Net Sales.Net sales in 2003 increased $9.4 million or 5.0% to $196.2
million from $186.8 million in 2002. In North America, net sales
decreased $5.2 million or 4.2% as compared to 2002 due principally to a
decline in well drilling caused by above average rainfall and flooding in
the mid-Atlantic and Midwestern regions of the U.S., and a decline in
cylinder sales as a result of a temporary shut-down at a major customers
facility. Net sales in Europe increased $14.6 million or 22.5% as
compared to 2002 due principally to the strengthening of the Euro against
the U.S. dollar and stronger sales performance. If the value of the Euro
had remained at the average level of 2002, reported net sales in Europe
for 2003 would have increased $2.2 million or 3.3% from 2002. Gross Profit.Gross profit decreased approximately $2.6 million in 2003
to $40.0 million from $42.6 million in 2002. As a percentage of net
sales, gross profit in 2003 decreased to 20.4% from 22.8% in 2002. This
decrease was due principally to the higher proportion of net sales from
the Companys European operations which have lower gross profit margins
and increased steel costs in North America and Europe. Selling, General and Administrative Expenses.Selling, general and
administrative expenses decreased $0.4 million or 1.3% in 2003 to $28.2
million from $28.6 million in 2002. The strengthening of the Euro
versus the U.S. dollar in 2003 largely offset a decline in expense
attributable to certain one-time compensation costs incurred during the
second quarter of 2002. Gain
(loss) on Extinguishment of Debt, Net.The increase
of $6.8 million was principally the result of a gain of $7.2 million
recorded on the purchase of $17.2 million of the Companys
outstanding Senior Subordinated Notes offset by a loss of $0.5
million on the extinguishment of debt for unamortized financing costs
associated with the execution of the First and Second Amendments to
the Loan and Security Agreement and Cypress Agreement. Other Income (Expense), Net.Other income (expense), net for 2003 was
$0.4 million as compared to 2002 of $(0.4) million. The increase of $0.8
million was principally attributable to the reduction in currency
exchange losses of $0.7 million in 2003 versus 2002. 14




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Income Taxes.Income tax expense increased $0.3 million in 2003 as
compared to 2002 reflecting increased withholding taxes paid by AMTROL
ALFA. During 2002, management decided to discontinue the recognition of
tax benefits associated with pre-tax losses from the Companys U.S.
operations. Net deferred tax assets recognized on the Companys balance
sheet continue to require managements evaluation as to their
realization. Although realization is not assured, management believes it
is more likely than not that the net deferred tax assets will be
realized. The amount expected to be realized is based upon estimates
derived from tax planning strategies which the Company believes are
currently prudent and feasible. A valuation allowance has been provided
for certain net operating loss carryforwards as it is more likely than
not that the related deferred tax assets for these carryforwards will not
be realized. Additions to the valuation allowance may be required in the
event that estimates are changed. The total change in valuation
allowance was a $3.6 million increase for the year
December 31, 2002, and
a $1.0 million increase for the year December 31, 2003. Net Income (Loss).The net loss in 2003 of $1.7 million compares to a
net loss in 2002 of $45.3 million. The reduction was principally due to
the goodwill impairment charge of $38.1 million recorded in 2002 combined
with a gain of $7.2 million recorded in 2003 on the extinguishment of a
portion of the Companys senior subordinated notes. Fiscal Year Ended December 31, 2002 Compared to Fiscal Year Ended December 31,
2001. Net Sales.Net sales in 2002 increased $4.5 million or 2.5% to $186.8
million from $182.3 million in 2001. In North America, net sales
decreased $1.3 million or 1.0% as compared to 2001 due principally to the
continuing weakness of the North American economy. Net sales in Europe
increased $5.8 million or 9.8% as compared to 2001 due principally to the
addition of significant new business and the strengthening of the Euro
against the U.S. dollar. If the value of the Euro had remained at the
average level of 2001, reported net sales in Europe for 2002 would have
increased $2.2 million or 3.7% from 2001. Gross Profit.Gross profit increased approximately $1.6 million in 2002
to $42.6 million from $41.0 million in 2001. As a percentage of net
sales, gross profit in 2002 increased to 22.8% from 22.5% in 2001.
Several factors contributed to the margin increase including price
increases in certain product lines and shifts in product mix. In Europe,
new business combined with a stronger Euro also contributed to the
increase. In addition, favorable results from continuing cost reduction
efforts and improvements in labor productivity were realized at all of
the Companys manufacturing locations. Selling, General and Administrative Expenses.Selling, general and
administrative expenses increased $0.7 million or 2.8% in 2002 to $28.6
million from $27.9 million in 2001. The increase was principally due to
new marketing initiatives of $0.2 million and increased compensation
costs of $1.2 million offset by cost cutting initiatives implemented at
all the Companys operating units. Gain
(loss) on Extinguishment of Debt, Net.The increase of
$0.6 million was principally the result of a loss of $0.6 million
associated with unamortized financing costs due to the refinancing of
its Senior debt in 2001. Other Income (Expense), Net.Other income (expense), net for 2002 was
$(0.4) million as compared to 2001 of $0.1 million. The decrease of $0.5
million was principally 15




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attributable to currency exchange losses of $1.3
million recorded by the Companys European operations as a result of the
strengthening of the Euro versus the U.S. Dollar, partially offset by
government grants of $0.6 million awarded to the Companys Portuguese
subsidiary. Income Taxes.Income tax expense increased $1.9 million in 2002 as
compared to 2001 reflecting managements decision to discontinue the
recognition of tax benefits associated with pre-tax losses from the
Companys U.S. operations. Net deferred tax assets recognized on the
Companys balance sheet continue to require managements evaluation as to
their realization. Although realization is not assured, management
believes it is more likely than not that the net deferred tax assets will
be realized. The amount expected to be realized is based upon estimates
derived from tax planning strategies which the Company believes are
currently prudent and feasible. A valuation allowance has been provided
for certain net operating loss carryforwards as it is more likely than
not that the related deferred tax assets for these carryforwards will not
be realized. Net Income (Loss).The net loss in 2002 of $45.3 million compares to a
net loss in 2001 of $9.4 million. The change was principally due to the
goodwill impairment charge of $38.1 million (see Note 4 to the
accompanying Consolidated Financial Statements). Liquidity and Capital Resources The Company is a party to two credit facilities: a $52.5 million ($42.5
million prior to the November 18, 2003 amendments discussed below) senior
first-priority secured credit facility arranged by Foothill Capital
Corporation (the Foothill Facility) and a $35.0 million
($25.0 million prior to the November 18, 2003 amendments discussed
below) senior
second-priority secured credit facility with affiliates of The Cypress
Group L.L.C. (the Cypress Facility). The Foothill Facility provides the Company (i) a term loan facility
consisting of a five-year Term A Loan, $7.3 million outstanding at
December 31, 2003, bearing cash interest at LIBOR plus 3.5%
(4.75%), and a
four-year Term B Loan, $20.3 million outstanding as of December 31, 2003,
bearing cash interest at the Wells Fargo Reference Rate (approximating
the prime rate) plus 3.5%, and Paid-In-Kind (PIK)
interest at 3.5% (11.0%) (collectively the Term Loans) and (ii) a five-year Revolving Credit
Facility, bearing interest at LIBOR plus 2.5% (4.50%) or the Wells Fargo
Reference Rate plus 0.5%, providing the lesser of (a) $30.0 million less
the aggregate outstanding principal amount of the Term A Loan less letter
of credit usage and (b) borrowing base less letter of credit
usage. At December 31, 2003, total availability and aggregate borrowings under the
Revolving Credit Facility were $7.3 million and $4.7 million,
respectively. On November 18, 2003, the Company amended its Foothill Facility by
entering into the First Amendment and Waiver to Loan and Security
Agreement (the First Amendment) and also amended its Cypress Facility
by entering into the Second Amendment to Loan and Security Agreement (the
Second Amendment). The First Amendment increased the Term B Loan by
$15.0 million to $20.3 million and extended the maturity date of the Term
B Loan to December 26, 2005. Commitments under the Revolving Credit
Facility and Term A Loan were reduced in the aggregate from $35.0 million
to $30.0 million. The additional funds provided by the First Amendment
will be used for capital investment programs, general working capital
purposes and may also be used to purchase the Companys Senior
Subordinated Notes. The First Amendment also revised certain covenants
to be more consistent with the Companys business plans. The amendments
did not effect the maturity date (December 26, 2006) of the Revolving
Credit Facility, Term A Loan and the Cypress Facility. 16




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The Cypress Facility consists of
term loans totalling $35.0 million (the Term C Loan). The Term C Loan, $39.8 million
outstanding as of December 31, 2003, has a five-year maturity, December
26, 2006, and bears PIK interest fixed at 12% per annum paid quarterly,
which at the lenders option can be paid in common stock of the Company.
In addition, 60,000 warrants with an exercise price of $0.01 were issued
under the Cypress Facility. The Company expects that the effective
interest rate will be greater than 12% given the additional interest
expense associated with the warrants. The Foothill Facility and Cypress Facility contain certain affirmative
and negative covenants and restrictions. As of December 31, 2003, the
Company was in compliance with all of these covenants and restrictions. As of December 31, 2003, the Companys operating capital (defined as
accounts receivable and inventory, less accounts payable) increased $6.6
million from $23.3 million at December 31, 2002 to $29.9 million.
Accounts receivable and inventories increased $0.7 million and $3.5
million, respectively while accounts payable decreased $2.4 million. Accounts receivable increased $0.7 million in 2003. The increase was due
principally to the impact of the strengthening Euro on the translation of
the Companys European operations offset by improved collections at all
operating units. The Company did not experience any significant changes
in credit terms, credit utilization or delinquency in accounts receivable
in 2003 as compared to 2002. The Companys inventories increased $3.5 million. The increase was due
principally to the impact of the strengthening Euro on the translation of
the Companys European operations. Accounts payable decreased $2.4 million. The decrease in accounts
payable was due principally to the timing of vendor payments offset by
the impact of the strengthening Euro on the translation of the Companys
European operations. Net cash used in operating activities in 2003 of $1.2 million contrasts
with net cash provided by operations in 2002 of $5.1 million. The change
was due principally to increased losses (income from operations less
interest expense and other income/(expense), and working capital
requirements partially offset by lower cash interest. Cash provided by
financing activities increased $17.2 million principally due to the
additional Term B Loan issuance. Capital expenditures were $4.2 million, $3.3 million and $3.4 million for
the years ended December 31, 2001, 2002 and 2003, respectively.
Substantially all of the expenditures in 2001, 2002 and 2003 related to
ongoing maintenance and upgrading of the Companys manufacturing
technology at all of its production facilities. In November 1996, the Company issued, under a Note Indenture Agreement
(the Agreement), $115.0 million of Senior Subordinated Notes due 2006
(the Notes) of which $97.8 million was outstanding as of December 31,
2003. The Notes are unsecured obligations of the Company. The Notes bear
interest at the rate of 10.625% per annum payable semi-annually on each
June 30 and December 31. The Notes are redeemable at the option of the
Company on or after December 31, 2003, in whole or in part, at par. Upon
a Change of Control (as defined in the Indenture), each Note holder has 17




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##### Table of Contents



the right to require the Company to repurchase such holders Notes at a
purchase price of 101% of the principal amount plus accrued interest.
The Notes Indenture contains certain affirmative and negative covenants
and restrictions. As of December 31, 2003, the Company is in compliance
with the various covenants. During 2003, the Company purchased a portion of the Notes with a face
value of $17.2 million from The Cypress Group, LLC (Cypress). The
purchase was facilitated by Cypress and financed through the issuance of
additional Term C debt of $10.0 million. The extinguishment resulted in
a gain of $7.2 million that was included in Gain (loss)
on extinguishment of debt, net in
the Companys Consolidated Statement of Operations. The Company and/or
affiliates of the Company, including entities related to Cypress may
continue, from time to time, to purchase the Notes previously issued by
the Company in the open market or by other means. The following table represents the Companys contractual obligations for
future payments: (in thousands) Payments due by period as of December 31, 2003Less than
    
    
    
    
    
    
    
    
    
    OverTotal
    
    1 Year
    
    1 - 3 Years
    
    4 - 5 Years
    
    5 YearsShort-term debt
    
    $
    9,283
    
    
    $
    9,283
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term debt
    
    
    169,979
    
    
    
    2,957
    
    
    
    167,022
    
    
    
    
    
    
    
    Operating leases
    
    
    1,916
    
    
    
    684
    
    
    
    1,232
    
    
    
    
    
    
    
    Deferred pension
    
    
    1,895
    
    
    
    229
    
    
    
    689
    
    
    
    459
    
    
    
    518Forward contracts
    
    
    1,063
    
    
    
    1,063
    
    
    
    
    
    
    
    
    
    
    
    Raw materials
    
    
    614
    
    
    
    614
    
    
    
    
    
    
    
    
    
    
    
    $
    184,750
    
    
    $
    14,830
    
    
    $
    168,943
    
    
    $
    459
    
    
    $
    518
 The Company intends to fund its future working capital, capital
expenditures and debt service requirements with cash flow from
operations, cash and cash equivalents
on hand and borrowings under the Foothill Facility. Management believes that
cash generated from the above resources will be sufficient to meet the Companys working
capital and capital expenditure needs in the foreseeable future. In
addition, the cash flow position of the Company is anticipated to improve
given the sale of its German subsidiary which hampered cash flow as a
result of its continued operating losses (see Footnote 12 to the
Consolidated Financial Statements). Finally, the Company may consider
other options available to it in connection with funding future working
capital and capital expenditure needs, including the issuance of
additional debt and equity securities. The Company anticipates being able to refinance its senior secured debt
and senior subordinated notes which mature in 2006. When appropriate,
the Company currently anticipates refinancing the senior secured debt
with its existing lenders or other sources and expects to seek additional unsecured debt to
cover the maturing Senior Subordinated Notes. However, there can be
no assurance that the Company will be able to refinance the maturing
debt. The Company will continue to selectively pursue strategic acquisitions.
The Company believes that strategic acquisitions, both domestic and
international, provide an effective means of increasing or establishing a
market presence in targeted markets and a means of identifying and
introducing new products and technologies in markets where it 18




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already has
a strong presence. The Company also believes that establishing local
manufacturing and distribution facilities in international markets
significantly enhances its ability to build strong customer
relationships, understand local product preferences and be price
competitive. The Company believes that anticipated inflation rates will not have a
material adverse effect on its results of operations or financial
condition. However, there can be no assurance that sharply increasing
raw material or fuel costs will not adversely affect the Companys
financial condition or results of operations. In January
2003, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation 46, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51 (Interpretation 46).
In December 2003, the FASB issued a revision to Interpretation 46 to
make certain technical corrections and address certain implementation
issues that had arisen. Interpretation 46, as revised, provides a new
framework for identifying variable interest entities (VIEs) and
determining when a company should include the assets, liabilities,
noncontrolling interests and results of activities of a VIE in its
consolidated financial statements. Interpretation 46 was effective
immediately for VIEs created after January 31, 2003. The provisions
of Interpretation 46, as revised, will be adopted by the Company
during 2004. It is expected that the adoption of this Interpretation
will have no impact on the Companys overall financial position and
results of operations. SFAS No. 145 Rescission of FASB Statements No. 4, 44 and 64, Amendment
of FASB Statement No. 13 and Technical Corrections(SFAS No. 145), was
issued in April 2002 and addresses the reporting of gains and losses
resulting from the extinguishment of debt, accounting for sale-leaseback
transactions and rescinds or amends other existing authoritative
pronouncements. SFAS No. 145 requires that any gain or loss on
extinguishment of debt that does not meet the criteria of APB 30 for
classification as an extraordinary item shall not be classified as
extraordinary and shall be included in earnings from continuing
operations. The provisions of this statement related to the
extinguishment of debt are effective for financial statements issued in
fiscal years beginning after May 15, 2002 with early application
encouraged. The Company adopted SFAS No. 145 on January 1, 2003.
Accordingly, the Companys $0.4 million loss from debt
retirement recorded in 2001 (net of tax effect of $0.2 million) was
reclassified from extraordinary to earnings from continuing
operations in the Companys Consolidated Statements of Operations. In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The provisions of SFAS No. 146 are effective for exit
or disposal activities that are initiated after December 31, 2002, with
earlier application encouraged. Adoption of SFAS 146 did not have an
effect on the Companys Consolidated Financial Statements. In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others(FIN 45). Along with new
disclosure requirements, FIN 45 requires guarantors to recognize, at the
inception of certain guarantees, a liability for the fair value of the
obligation undertaken in issuing the guarantee. This differs from the
prior practice to record a liability only when a loss is probable and
reasonably estimable. The recognition and measurement provisions of FIN
45 are applicable on a prospective basis to guarantees issued or modified
after December 31, 2002. The Company adopted the disclosure provisions
of FIN 45 as of December 31, 2002 and adopted the entire 19




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interpretation on January 1, 2003. Adoption of FIN 45 was not material to the Companys
Consolidated Financial Statements (see Note 2 of the Notes to the
Consolidated Financial Statements). In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities (SFAS No. 149), which
clarifies the financial accounting and reporting proscribed by SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities
(SFAS No. 133) for derivative instruments, including certain derivative
instruments embedded in other contracts. Certain provisions of SFAS No.
149 related to implementation issues of SFAS No. 133 are already
effective and other provisions related to forward purchases or sales are
effective for both existing contracts and new contracts entered into
after June 30, 2003. The Company has previously adopted SFAS No. 133,
including the implementation issues addressed in SFAS No. 149, and the
adoption of the new provisions of SFAS No. 149 on July 1, 2003 did not
have an impact on the Companys Consolidated Financial
Statements. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and
Equity(SFAS No. 150), which addresses the accounting and reporting
for the classification and measurement of certain financial instruments
with characteristics of both liabilities and equity. SFAS No. 150 is
effective for all financial instruments entered into or modified after
May 31, 2003 and for all existing financial instruments beginning in the
first interim period after June 15, 2003, except for mandatorily
redeemable financial instruments of nonpublic entities, which are subject
to the provisions for the first fiscal period beginning after December
15, 2004. The Company adopted SFAS No. 150 on July 1, 2003. Adoption of
this accounting standard did not have an impact on the Companys
Consolidated Financial Statements. Critical Accounting Policies Certain of the Companys accounting policies require the application of
judgment in selecting the appropriate assumptions for calculating
financial estimates. By their nature, these judgments are subject to an
inherent degree of uncertainty. The Company periodically evaluates the
judgments and estimates used for its critical accounting policies to
ensure that such judgments and estimates are reasonable for its interim
and year-end reporting requirements. These judgments and estimates are
based on the Companys historical experience, current trends and
information available from other sources, as appropriate. If different
conditions result from those assumptions used in the Companys judgments,
the results could be materially different from the Companys estimates.
The Companys critical accounting policies include: Goodwill and Other Long-Lived Assets On January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets(SFAS No. 142). As a result, the Company accounts
for acquired goodwill and goodwill impairment in accordance with SFAS No.
142. This pronouncement requires considerable judgment and, where
necessary, the Company utilizes appraisals to assist in the Companys
valuation of acquired goodwill and evaluation of goodwill impairment.
The Company primarily utilizes a discounted cash flow approach in order
to value the Companys operating segments required to be tested for
impairment by SFAS No. 142, which requires that the Company forecast 20




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##### Table of Contents



future cash flows of the operating segments and discount the cash flow
stream based upon a weighted average cost of capital that is derived from
comparable companies within similar industries. The discounted cash flow
calculations also include a terminal value calculation that is based upon
an expected long-term growth rate for the applicable operating segment.
The Company believes that its procedures for applying the discounted cash
flow methodology, including the estimates of future cash flows, the
weighted average cost of capital and the long-term growth rate, are
reasonable and consistent with market conditions at the time of the
valuation. The Company has evaluated the carrying value of goodwill and
determined that an impairment existed at the date of adoption of the
standard, January 1, 2002. Accordingly, the Company recorded a goodwill
impairment charge for the cumulative effect of a change in accounting
principle of $38.1 million in 2002, as further described in Footnote 4 to
the Companys Notes to Consolidated Financial Statements. The Company performs an annual evaluation for the impairment of
long-lived assets, other than goodwill, based on expectations of
non-discounted future cash flows compared to the carrying value of the
subsidiary in accordance with SFAS No. 144. The Companys cash flow
estimates are based upon historical cash flows, as well as future
projected cash flows received from subsidiary management in connection
with the annual Company wide planning process, and include a terminal
valuation for the applicable subsidiary based upon a multiple of earnings
before interest expense, net, depreciation and amortization expense and
income taxes (EBITDA). The Company estimates the EBITDA multiple by
reviewing comparable company information and other industry data. The
Company believes that its procedures for estimating gross future cash
flows, including the terminal valuation, are reasonable and consistent
with current market conditions. The Company historically has not had any
material impairment adjustments for long-lived assets other than
goodwill. Revenue Recognition In accordance with SEC Staff Accounting Bulletin (SAB) No. 104, the
Company recognizes revenue only when there is a valid contract or
purchase order which includes a fixed price, the goods have been
delivered in accordance with the shipping terms; and there is an
expectation that the collection of the revenue is reasonably assured.
Determination of the criteria is based upon managements judgments
regarding the fixed nature of the price and the ability to collect
revenue. Allowances for cash discounts, volume rebates, and other customer
incentive programs, as well as gross customer returns, among others, are
recorded as a reduction of sales at the time of sale based upon the
estimated future outcome. Cash discounts, volume rebates and other
customer incentive programs are based upon certain percentages agreed to
with the Companys various customers, which are typically earned by the
customer over an annual period. The Company records periodic estimates
for these amounts based upon the historical results to date, estimated
future results through the end of the contract 21




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##### Table of Contents



period and the contractual
provisions of the customer agreements. For calendar year customer
agreements, the Company is able to adjust its periodic estimates to
actual amounts as of December 31 each year based upon the contractual
provisions of the customer agreements. As a result, at the end of any
given reporting period, the amounts recorded for these allowances are
based upon estimates of the likely outcome of future sales with the
applicable customers and may require adjustment in the future if the
actual outcome differs. The Company believes that its procedures for
estimating such amounts are reasonable and historically have not resulted
in material adjustments in subsequent periods when the estimates are
adjusted to the actual amounts. Provisions for the estimated costs for future product warranty claims and
bad debts are recorded in cost of sales and selling, general and
administrative expense, respectively, at the time a sale is recorded.
The amounts recorded are generally based upon historically derived
percentages while also factoring in any new business conditions that
might impact the historical analysis such as new product introduction for
warranty and bankruptcies of particular customers for bad debts. The
Company also periodically evaluates the adequacy of its reserves for
warranty and bad debts recorded in its consolidated balance sheet as a
further test to ensure the adequacy of the recorded provisions. Warranty
claims can extend far into the future and bad debt analysis often
involves subjective analysis of a particular customers ability to pay.
As a result, significant judgment is required by the Company in
determining the appropriate amounts to record and such judgments may
prove to be incorrect in the future. The Company believes that its
procedures for estimating such amounts are reasonable and historically
have not resulted in material adjustments in subsequent periods when the
estimates are adjusted to the actual amounts. Inventory Valuation The Companys inventories are stated at the lower of cost or market
including material, labor and manufacturing overhead. The Company
records provisions, as appropriate, to write-down obsolete and excess
inventory to estimated net realizable value. The process for evaluating
obsolete and excess inventory often requires the Company to make
subjective judgments and estimates concerning future sales levels,
quantities and prices at which such inventory will be able to be sold in
the normal course of business. Accelerating the disposal process or
incorrect estimates of future sales potential may cause the actual
results to differ from the estimates at the time such inventory is
disposed or sold. The Company believes that its procedures for
estimating such amounts are reasonable and historically have not resulted
in material adjustments in subsequent periods when the estimates are
adjusted to the actual amounts. Income
Taxes The Company accounts for income taxes using the liability method in
accordance with SFAS No. 109 Accounting for Income
Taxes (SFAS No.
109), which requires that the deferred tax consequences of temporary
differences between the amounts recorded in the Companys Consolidated
Financial Statements and the amounts included in the Companys federal
and state income tax returns be recognized in the balance sheet. As the
Company generally does not file their income tax returns until well after
the closing process for the December 31 financial statements is complete,
the amounts recorded at December 31 reflect estimates of what the final
amounts will be when the actual income tax returns are filed for that
fiscal year. In addition, estimates are often required with respect to,
among other things, the appropriate state income tax rates to use in the
various states that the Company and its subsidiaries are required to
file, the potential 22




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##### Table of Contents



utilization of operating and capital loss
carry-forwards for both federal and state income tax purposes and
valuation allowances required, if any, for tax assets that may not be
realizable in the future. SFAS No. 109 requires balance sheet
classification of current and long-term deferred income tax assets and
liabilities based upon the classification of the underlying asset or
liability that gives rise to a temporary difference. Net deferred tax
assets recognized on the Companys balance sheet continue to require
managements evaluation as to their realization. Although realization is
not assured, management believes it is more likely than not that the net
deferred tax assets will be realized. The amount expected to be realized
is based upon estimates derived from tax planning strategies which the
Company believes are currently prudent and feasible. A valuation
allowance has been provided for certain net operating loss carryforwards,
as it is more likely than not that the related deferred tax assets for
these carryforwards will not be realized. Additions to the valuation
allowance may be required in the event that estimates are changed. The
Company believes the procedures and estimates used in its accounting for
income taxes are reasonable and in accordance with established tax law.
The income tax estimates used have historically not resulted in material
adjustments to income tax expense in subsequent periods when the
estimates are adjusted to the actual filed tax return amounts, although
there may be reclassifications between the current and long-term portion
of the deferred tax accounts. The Company
is subject to the examinations of its income tax returns by the
Internal Revenue Service and other tax authorities. The Company
evaluates the likelihood of unfavorable adjustments arising from the
examinations and believes adequate provisions have been made in the
income tax provision. Contingencies The Company is subject to contingencies, including legal proceedings and
claims arising out of its businesses that cover a wide range of matters,
including, among others, environmental matters, contract and employment
claims, workers compensation claims, product liability, and warranty. The Company provides accruals for direct costs associated with the
estimated resolution of contingencies at the earliest date at which it is
deemed probable that a liability has been incurred and the amount of such
liability can be reasonably estimated. Costs accrued have been estimated
and are based upon an analysis of potential results. While it is impossible to ascertain the ultimate legal and financial
liability with respect to contingent liabilities, including lawsuits, the
Company believes that the aggregate amount of such liabilities, if any,
in excess of amounts provided or covered by insurance, will not have a
material adverse effect on the consolidated financial position or results
of operations of the Company. It is possible, however, that future
results of operations for any particular future period could be
materially affected by changes in our assumptions or strategies related
to these contingencies or changes out of the Companys control. 23




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK Foreign Currency Risk The Company is exposed to market risk related to foreign currency
exchange rates. A portion of revenues in 2003 from the Companys
Portuguese operations were denominated in U.S. dollars and British
Pounds. As a result of the strengthening of the Euro versus the U.S.
dollar by 19.8% in 2003, the Company recorded approximately $0.6 million
in foreign exchange losses in 2003 as the corresponding receivables lost
value. During 2003, the Company did use forward contracts, which are
generally three months in duration, to hedge its foreign currency
exposures.
At December 31, 2003, the Companys Portuguese operations had forward
contracts for the purchase of $200,000 and £600,000 with maturity dates
through February 2004. The value of these forward contracts was
immaterial to the balance sheet of AMTROL. The Company believes that by
the continued use of forward contracts in 2004, no material foreign
currency exchange losses will be incurred. Interest Rate Market Risk With respect
to fluctuating interest rates, the impact on 2003 operating results was
not material and the expected impact on 2004 operating results is not
anticipated to be material. The Company has an interest rate swap contract and an interest rate cap
(the Contract) outstanding as of December 31, 2003, with an initial
notional amount of $15 million, decreasing on a consistent basis with
repayment terms of the underlying debt. Under this arrangement, which
will mature on June 30, 2004, the Company receives the 90-day LIBOR rate
and pays a fixed rate of 4.6% through maturity, unless LIBOR increases to
7.1%. If LIBOR increases to 7.1%, then the Company continues to receive
the 90-day LIBOR rate but would pay the 90-day LIBOR rate for all
subsequent periods capped at a maximum of 7.1%. The LIBOR rate has not
exceeded 7.1% since inception of the Contract and it was treated, prior
to adoption of SFAS No. 133, as a hedge agreement and accounted for as
such. The Contract was designated as a cash flow hedge of variable
future cash flows associated with the interest on the previous Bank
Credit Agreement, Tranche B Long Term Debt, through May 13, 2004 (the
maturity date of the debt). However, the swap was redesignated to the
Term A and B Loans upon entering into the Foothill Facility. The following sensitivity analysis summarizes the potential impact on the
Company of additional interest expense resulting from a hypothetical 100
basis point increase in the interest rate indices upon which AMTROLs
floating rate debt instruments are based
(000): Year End2003 Exposure
    
    Hypothetical
    
    Effect onVariable
    
    to Interest
    
    Change in
    
    AmtrolRate Debt
    
    Rate Risk
    
    Rate Index
    
    InterestRevolver
    
    $
    4,720
    
    
    
    100 bps
    
    
    $
    47Term A Loan
    
    
    7,255
    
    
    
    100 bps
    
    
    
    73Term B Loan
    
    
    20,338
    
    
    
    100 bps
    
    
    
    203$
    32,313
    
    
    
    100 bps
    
    
    $
    323
 The Company believes that the potential effects of a hypothetical
100-basis point increase in its floating rate debt instruments are not
material to cash flows or net income. 24




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##### Table of Contents



The Companys Term C Loan and Senior Subordinated Notes are not subject
to interest rate risk since the rate of interest on these securities is
fixed until their respective maturities. Commodity Risk The Company is subject to market risk with respect to the pricing of its
principal raw materials (steel, rubber, corrugate and paint) and
utilities. If prices of these raw materials and utilities were to
increase dramatically, the Company might not be able to pass such
increases on to its customers and, as a result, gross margins could
decline. The Company manages its exposure to commodity pricing risk by
continuing to diversify its product mix, strategic buying programs and
vendor partnering. At December 31, 2003, the Company had not entered
into any derivative financial instruments to manage its exposure to
higher prices. 
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Financial
Statements are included in a separate section beginning on page 36 of this report. 
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE None. 
 ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures As of December 2003, the Company, under the supervision and with the
participation of its management, including its principal executive
officer and principal financial officer, performed an evaluation of the
Companys disclosure controls and procedures, as required by Securities
Exchange Act Rule 13a-15. Based on that evaluation, the Companys
principal executive officer and principal financial officer concluded
that such disclosure controls and procedures are effective to ensure that
material information relating to the Company, including its consolidated
subsidiaries, is made known to them, particularly during the period for
which the periodic reports are being prepared. Changes in Internal Controls No significant changes were made in the Companys internal controls or in
other factors that could significantly affect these controls subsequent
to the date of the evaluation performed pursuant to Securities Exchange
Act Rule 13a-15. 25




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##### Table of Contents



PART III 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information regarding each of the
directors and executive officers of the Company: Name
    
    Age
    
    PositionAlbert D. Indelicato
    
    
    53
    
    
    President, Chairman of
the Board, Chief
Executive Officer and
DirectorLarry T. Guillemette
    
    
    48
    
    
    Executive Vice
President, Chief
Financial Officer and
TreasurerJoseph L. DePaula
    
    
    49
    
    
    Vice President-Finance
& Corporate ControllerPatricia A. Pickrel
    
    
    53
    
    
    SecretaryJohn P. Cashman
    
    
    63
    
    
    DirectorAndrew M. Massimilla
    
    
    62
    
    
    DirectorDavid P. Spalding
    
    
    49
    
    
    DirectorJames A. Stern
    
    
    53
    
    
    Director
 Albert D. Indelicato became President, Chairman of the Board and Chief
Executive Officer in June 2000. Previously, Mr. Indelicato served as President
and Chief Executive Officer since joining the Company in July 1998. From 1996
to 1998, he was President of Litorale Holdings, Inc., a consulting firm
specializing in acquisitions. From 1970 to 1996, Mr. Indelicato served in
various managerial capacities of Power Control Technologies and its predecessor
companies, including most recently as Chief Executive Officer and Director. Larry T. Guillemette became Executive Vice President, Chief Financial Officer
and Treasurer in August 2000. Previously, Mr. Guillemette served as Executive
Vice President-Marketing and Business Development since joining the Company in
1998. From 1991 to 1998, Mr. Guillemette was President and Chief Executive
Officer of Balcrank Products, Inc. Joseph L. DePaula became Vice President-Finance & Corporate Controller in April
2001. For the previous five-year period thereto, Mr. DePaula served as Chief
Financial Officer of Semi-Alloys Co. Patricia A. Pickrel, Secretary joined the Company as General Counsel in 1998
and became Secretary in 1999. Previously, Ms. Pickrel was engaged in the
private practice of law. John P. (Jack) Cashman became a Director upon the Merger in November, 1996.
In addition, Mr. Cashman served as Chairman of the Board, Chief Executive
Officer and President 26




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##### Table of Contents



upon the Merger until Mr. Indelicato joined the Company
in July 1998. From 1989 until March 1996, Mr. Cashman served as Chairman and
Co-Chief Executive Officer of R. P. Scherer Corporation. Andrew M. Massimilla became a Director of the Company in June 1998. Mr.
Massimilla has been the sole proprietor of a consulting firm providing
management consulting services to various businesses since 1991. Mr.
Massimilla is also a director of the Republic National Cabinet Corporation. David P. Spalding became a Director of the Company upon the Merger. Mr.
Spalding has been Vice Chairman of Cypress since its formation in April 1994.
Prior to joining Cypress, Mr. Spalding was Managing Director in the Merchant
Banking Group of Lehman Brothers Inc. since February 1991. Mr. Spalding is
also a director of Lear Corporation, William Scotsman, Inc., and Republic
National Cabinet Corporation. James A. Stern became a Director of the Company upon the Merger. Mr. Stern has
been Chairman of Cypress since its formation in April 1994. Prior to joining
Cypress, Mr. Stern spent his entire career with Lehman Brothers Inc., most
recently as head of the Merchant Banking Group. Mr. Stern is a director of
Lear Corporation, Cinemark USA, Inc, and Wesco International Inc. Audit
Committee Financial Expert The
Finance Committee performs similar functions as an audit committee
(the Committee), which comprises a member of the Board of
Directors (the Board), is designated to oversee the
financial reporting process of the Board. The Board has determined
that David Spalding, a member of the Committee, qualifies as an audit
committee financial expert as defined by SEC rules. Mr. Spalding is
not independent of the Company. Because the Company is not listed on
an exchange, the Company has chosen to use the definition of
independence for audit committee members as such term is
used by the New York Stock Exchange listing standards. Code
of Ethics The Company has adopted a Code of Ethics, within the meaning of applicable SEC
rules, applicable to its principal executive, financial and accounting
officers, or persons performing similar functions. The Company has
filed its Code of Ethics as an exhibit to this Annual Report on Form
10-K. 27




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##### Table of Contents



Compliance with Section 16(a) of the Securities Exchange Act of 1934. Not applicable 
 ITEM 11. EXECUTIVE COMPENSATION The following table summarizes the compensation paid or accrued by the Company
to its Chief Executive Officer and the four other most highly compensated
executive officers who earned more than $100,000 in salary and bonus in 2003 in
each case for services rendered in all capacities to the Company during the
three year period ended December 31, 2003: Summary Compensation Table Long TermAnnual
    
    
    
    
    
    CompensationCompensation (a)
    
    
    
    
    
    AwardsSecuritiesName and Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    Underlying
    
    All OtherPosition
    
    Year
    
    Salary (b)
    
    Bonus
    
    Options/SARs
    
    Compensation (c)Albert D. Indelicato
    
    
    2003
    
    
    $
    414,231
    
    
    $
    
    
    
    
    
    
    
    $
    71,403Chairman, President and
    
    
    2002
    
    
    
    350,000
    
    
    
    217,000
    
    
    
    
    
    
    
    76,617Chief Executive Officer
    
    
    2001
    
    
    
    350,000
    
    
    
    
    
    
    
    
    
    
    
    12,970Larry T. Guillemette
    
    
    2003
    
    
    
    201,945
    
    
    
    
    
    
    
    
    
    
    
    11,779Executive Vice President,
    
    
    2002
    
    
    
    190,457
    
    
    
    67,000
    
    
    
    
    
    
    
    30,783Chief Financial Officer
    
    
    2001
    
    
    
    185,000
    
    
    
    
    
    
    
    
    
    
    
    9,911and TreasurerChristopher A. Laus
    
    
    2003
    
    
    
    172,466
    
    
    
    
    
    
    
    
    
    
    
    11,494Senior Vice President -
    
    
    2002
    
    
    
    159,855
    
    
    
    70,000
    
    
    
    
    
    
    
    29,596Operations
    
    
    2001
    
    
    
    152,250
    
    
    
    
    
    
    
    
    
    
    
    7,390Robert R. Pape (d)
    
    
    2003
    
    
    
    163,201
    
    
    
    
    
    
    
    
    
    
    
    18,281Vice President -
    
    
    2002
    
    
    
    149,216
    
    
    
    50,000
    
    
    
    
    
    
    
    19,210Sales & Marketing
    
    
    2001
    
    
    
    146,058
    
    
    
    
    
    
    
    
    
    
    
    8,010Joseph L. DePaula
    
    
    2003
    
    
    
    187,365
    
    
    
    
    
    
    
    
    
    
    
    19,237Vice President  Finance
    
    
    2002
    
    
    
    171,961
    
    
    
    35,000
    
    
    
    
    
    
    
    14,053and Corporate Controller
    
    
    2001
    
    
    
    124,231
    
    
    
    
    
    
    
    
    
    
    
    2,853
 28




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##### Table of Contents



(a)
    
    Any perquisites or other personal benefits received from the Company by
any of the named executives were substantially less than the reporting
thresholds established by the Securities and Exchange Commission (the
lesser of $50,000 or 10% of the individuals cash compensation).(b)
    
    Includes portion of salary deferred under the Companys 401(k) Plan.(c)
    
    Amounts paid in 2003 include the Companys contributions under the
Companys 401(k) Plan in the amount of $10,200, $10,200, $10,125, $8,948
and $9,685 for Mssrs. Indelicato, Guillemette, Laus, Pape, and DePaula,
respectively, premiums paid by the Company with respect to term life and
long-term disability insurance purchased for such executive officers in
the amount of $2,510, $1,579, $1,369, $1,233 and $1,452 for Mssrs.
Indelicato, Guillemette, Laus, Pape and DePaula, respectively and an
automobile allowance received by Messrs. Indelicato, Pape and DePaula in
the amount of $4,100, $8,100 and $8,100, respectively. Mr. Indelicato
received $54,593 in connection with his employment agreement.(d)
    
    Mr. Pape retired from the Company effective January 1, 2004. Option Plans The following table sets forth certain information regarding currently
outstanding options to buy the common stock of Holdings held by the directors
and named executive officers as of December 31, 2003. Aggregated Option/SAR Exercises in Last Fiscal Year and Year-End Option/SAR Values Number ofSecuritiesUnderlyingUnexercisedNumber of
    
    
    
    
    
    Option/SARs atSecurities
    
    
    
    
    
    Calendar Year EndUnderlying
    
    
    
    
    
    2003
    
    Value of UnexercisedOptions/SARs
    
    Value
    
    Exercisable/
    
    In-the-MoneyName
    
    Exercised
    
    Realized($)
    
    Unexercisable
    
    Options/SAR($)John P. Cashman
    
    
    0
    
    
    
    0
    
    
    
    44,796/0
    
    
    
    0/0Albert D. Indelicato
    
    
    0
    
    
    
    0
    
    
    
    15,250/15,250
    
    
    
    0/0Larry T. Guillemette
    
    
    0
    
    
    
    0
    
    
    
    5,500/5,500
    
    
    
    0/0Andrew M. Massimilla
    
    
    0
    
    
    
    0
    
    
    
    10,520/10,519
    
    
    
    0/0Robert R. Pape
    
    
    0
    
    
    
    0
    
    
    
    1,500/1,500
    
    
    
    0/0
 29




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##### Table of Contents



Supplemental Retirement Plans The Company maintains two Supplemental Retirement Plans: Supplemental
Retirement Plan I which covers a former officer and director and
Supplemental Retirement Plan II which covers two former officers. In the
event a participant in either Supplemental Plan dies after retirement,
the participants beneficiary will receive any remaining benefits which
such participant was entitled to receive at the time of the participants
death. Employment Agreements and Other Transactions The Company has entered into an employment agreement (Employment
Agreement) with Mr. Indelicato to secure his continued employment with
the Company. The Employment Agreement provides for an annual base
salary, subject to annual adjustments. In addition, Mr. Indelicato is
entitled to participate in incentive compensation plans and all employee
benefit arrangements generally appropriate to his responsibilities. In
the event Mr. Indelicatos employment is terminated without cause by the
Company, he would be entitled (for a period of 18 months after
termination) to continuation of monthly salary, including the pro rata
portion of any bonus or other incentive compensation otherwise payable
for the fiscal period in which such termination occurs, and maintenance
of all life, disability, medical and health insurance benefits to which
Mr. Indelicato was entitled immediately prior to termination. Directors Compensation The Company has a total of five directors, four of who are non-employees,
that sit on various committees. For 2003, two non-employee directors,
Mr. Cashman and Mr. Massimilla, were paid $2,500 per committee meeting
attended plus out-of-pocket expenses associated with travel. The two
remaining non-employee directors, Mr. Spalding and Mr. Stern, do not
receive any remuneration for any of the committee meetings attended,
except for out-of-pocket travel expenses, given their association to
Cypress. Compensation and Benefits Committee The
Compensation and Benefits Committee held one meeting in 2003.
Messrs. Spalding and Stern are the current members of this committee.
This committee has functions that include reviewing the salary system
with regard to external competitiveness and reviewing incentive
compensation plans to ensure that they continue to be effective incentive
and reward systems. The Compensation and Benefits Committee also
determines the CEOs compensation and considers and, if appropriate,
approves the CEOs recommendations with respect to the compensation of
executive officers who report to him. Compensation Committee Interlocks and Insider Participation No member of the Committee has any interlocking or insider relationship
with the Company which is required to be reported under the applicable
rules and regulations of the Securities and Exchange Commission. 30




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##### Table of Contents



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Company is a direct, wholly-owned subsidiary of Holdings Inc. The
following table sets forth information with respect to the beneficial
ownership of Holdings common stock or preferred stock as of March 29,
2004 by (i) each person known to the Company to beneficially own more
than 5% of Holdings Inc.s outstanding common stock, (ii) each of the
Companys directors and named executive officers and (iii)
all directors and executive officers of the Company as a group. Each
share of Holdings Inc. preferred stock is convertible at any time into
one share of Holdings Inc. common stock. Unless otherwise indicated
below, the persons and entities named in the table have sole voting and
investment power with respect to all shares beneficially owned. Common Stock
    
    Preferred StockNumberof
    
    Percentage
    
    Number
    
    PercentageName and Address of Beneficial Owner
    
    Shares
    
    of Total
    
    of Shares
    
    of TotalCypress Merchant Banking Partners L.P.(a) (c)c/o The Cypress Group L.L.C.65 East 55th Street, 28th FloorNew York, NY 10022
    
    
    847,127
    
    
    
    80.9
    
    
    
    95,076
    
    
    
    93.0Cypress Offshore Partners L.P. (a) (c)c/o The Cypress Group L.L.C.65 East 55th Street, 28th FloorNew York, NY 10022
    
    
    43,873
    
    
    
    4.2
    
    
    
    4,924
    
    
    
    4.8John P. Cashman (b)
    
    
    62,032
    
    
    
    5.9
    
    
    
    2,235
    
    
    
    2.2Larry T. Guillemette (b)
    
    
    11,666
    
    
    
    1.1
    
    
    
    
    
    
    
    Albert D. Indelicato (b)
    
    
    32,666
    
    
    
    3.1
    
    
    
    
    
    
    
    Andrew M. Massimilla (b)
    
    
    21,705
    
    
    
    2.1
    
    
    
    
    
    
    
    Robert R. Pape (b)
    
    
    3,000
    
    
    
    0.3
    
    
    
    
    
    
    
    Christopher A. Laus
    
    
    5,700
    
    
    
    0.6
    
    
    
    
    
    
    
    Joseph L. DePaula
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    David P. Spalding(a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    James A. Stern(a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    All directors and executive officers as a
group (consisting of 9 persons)
    
    
    136,769
    
    
    
    13.1
    
    
    
    2,235
    
    
    
    2.2
  (a)
    
    Cypress Merchant Banking Partners L.P. and
Cypress Offshore Partners L.P. are affiliates of The Cypress
Group L.L.C. Messrs. Spalding and Stern are executives of
The Cypress Group L.L.C. and may be deemed to share beneficial
ownership of the shares shown as beneficially owned by such
Cypress entities. Each of such individuals disclaims
beneficial ownership of such shares. See Item 10, Directors
and Executive Officers of the Company.(b)
    
    Includes 44,796, 11,000, 30,500, 21,039, and
3,000 shares of Common Stock issuable upon exercise of options
granted to Messrs. Cashman, Guillemette, Indelicato,
Massimilla, and Pape, respectively. See Item 11, Executive
Compensation.(c)
    
    Includes 57,046 and 2,954 shares of common stock
issuable upon exercise of warrants granted to Cypress Merchant
Banking Partners, L.P. and Cypress Offshore Partners, L.P. 31




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##### Table of Contents



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS A director
of the Company, Mr. Massimilla, provides management consulting services
to the Company for which he is paid by the Cypress Group L.L.C. The
Company reimburses Cypress for its payments to Mr. Massimilla. During
2003, the amount of such payments was $32,211. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Audit Fees: The Company
during the years 2002 and 2003 were billed audit fees of $367,000 and
$408,500, respectively. Audit Related Fees: The Company
during the years 2002 and 2003 were billed audit related
fees of $15,000 and $15,000, respectively. Tax Fees: The Company
during the years 2002 and 2003 were billed tax fees of
$74,230 and $136,115, respectively. All Other Fees: The Company
during the years 2002 and 2003 were billed no other fees. 32




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##### Table of Contents



ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) Financial Statements The following financial statements are included in a separate section of
this Report commencing on the page numbers specified below: PageReport of Independent Auditors
    
    
    34Consolidated Balance Sheets as of December 31, 2002 and 2003
    
    
    36Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2001, 2002 and 2003
    
    
    37Consolidated Statements of Shareholders Equity for the years ended December 31, 2001, 2002 and 2003
    
    
    38Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2002 and 2003
    
    
    39Notes to Consolidated Financial Statements
    
    
    40(a) (2) Financial Statement ScheduleSchedule II  Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2001, 2002 and 2003.
    
    
    56
 All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted. (a) (3) Exhibits See List of Exhibits, Page 58. (b) Reports filed on Form 8-K On November 25, 2003, a Form 8-K was filed in connection with the First
Amendment and Second Amendment to the Foothill and Cypress Facilities. 33




---



##### Table of Contents



Report of Independent Auditors To the Board of Directors of
AMTROL Inc. We have audited the accompanying consolidated balance sheets of AMTROL Inc.
(the Company) as of December 31, 2003 and 2002, and the related consolidated
statements of operations, comprehensive loss, shareholders equity,
and cash flows for the years then ended. Our audits also included the financial
statement schedule listed in the Index at Item 15(a). These financial
statements and schedule are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits. The consolidated financial statements of the
Company for the year ended December 31, 2001, were audited by
other auditors who have ceased operations and whose report dated March 1, 2002,
expressed an unqualified opinion on those statements before the revisions
described in Note 4. We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of AMTROL Inc. at
December 31, 2003 and 2002, and the consolidated results of its operations and
its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein. As discussed in Note 2 to the consolidated financial statements, effective
January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets. As
discussed above, the financial statements of AMTROL Inc. for the year
ended December 31,
2001 were audited by other auditors who have ceased
operations. As described in Note 4, these financial statements have been
revised to include the transitional disclosures required by Statement of
Financial Accounting Standards (Statement) No. 142, Goodwill and Other
Intangible Assets, which was adopted by the Company as of January 1, 2002.
Our audit procedures with respect to the disclosures in Note 4 with respect to
2001 included (a) agreeing the previously reported net loss to the previously
issued financial statements and the adjustments to reported net loss
representing amortization expense (including any related tax effects)
recognized in that period related to goodwill to the Companys underlying
records obtained from management, and (b) testing the mathematical accuracy of
the reconciliation of adjusted net loss to reported net loss. In our opinion,
the disclosures for 2001 in Note 4 are appropriate. However, we were not
engaged to audit, review, or apply any procedures to the 2001 financial
statements of the Company other than with respect to such disclosures and,
accordingly, we do not express an opinion or any other form of assurance on the
2001 financial statements taken as a whole. ERNST & YOUNG LLP 34
    Table of Contents  To the Board of Directors of
AMTROL Inc. We have audited the accompanying consolidated balance sheets of AMTROL Inc. and
subsidiaries as of December 31, 2001 and 2000, and the related consolidated
statements of operations, comprehensive loss, shareholders equity and cash
flows for the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion. In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AMTROL Inc. and subsidiaries
as of December 31, 2001 and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States. Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The financial statement
schedule listed in item 14(a)(2) is the responsibility of the Companys
management and is presented for purposes of complying with the Securities and
Exchange Commissions rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in our
audit of the basic financial statements and, in our opinion, fairly states in
all material respects, the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN LLPBoston, MassachusettsMarch 1, 2002
 Note: This report of Independent Certified Public Accountants is a copy of a
previously issued Arthur Andersen LLP (Andersen) report and has not been
reissued by Andersen. The inclusion of this previously issued Andersen report
is made pursuant to Rule 2.02(e) of Regulation S-X. Note that this previously
issued Andersen report includes references to certain fiscal years which are
not required to be presented in the accompanying consolidated financial
statements as of and for the year ended December 31, 2003. 35
    Table of Contents  AMTROL INC. AND SUBSIDIARIES Consolidated Balance Sheets  (In thousands)
 December 312002
    
    2003AssetsCurrent Assets:Cash and cash equivalents
    
    $
    1,797
    
    
    $
    13,488Accounts receivable, less allowance for doubtful
accounts of $1,149 and $1,247 in 2002 and 2003, respectively
    
    
    26,974
    
    
    
    27,728Inventories
    
    
    22,445
    
    
    
    25,908Tax refund receivable
    
    
    2,233
    
    
    
    1,838Deferred income taxes  short-term
    
    
    1,681
    
    
    
    1,489Prepaid expenses and other
    
    
    1,357
    
    
    
    1,199Total current assets
    
    
    56,487
    
    
    
    71,650Property, Plant and
Equipment, at costLand
    
    
    5,260
    
    
    
    5,794Buildings and improvements
    
    
    13,485
    
    
    
    15,070Machinery and equipment
    
    
    57,083
    
    
    
    63,238Furniture and fixtures
    
    
    1,343
    
    
    
    1,434Information systems software and other
    
    
    6,254
    
    
    
    7,24683,425
    
    
    
    92,782Less: accumulated depreciation and amortization
    
    
    44,924
    
    
    
    57,69338,501
    
    
    
    35,089Other Assets:Goodwill
    
    
    119,205
    
    
    
    119,205Deferred financing costs
    
    
    4,186
    
    
    
    2,880Deferred income taxes  long-term
    
    
    7,267
    
    
    
    7,459Other
    
    
    1,227
    
    
    
    740131,885
    
    
    
    130,284$
    226,873
    
    
    $
    237,023Liabilities and Shareholders EquityCurrent Liabilities:Current maturities of long-term debt
    
    $
    2,957
    
    
    $
    2,957Notes payable to banks
    
    
    6,923
    
    
    
    9,283Accounts payable
    
    
    26,124
    
    
    
    23,741Accrued expenses
    
    
    11,684
    
    
    
    11,260Accrued interest
    
    
    203
    
    
    
    241Accrued income taxes
    
    
    719
    
    
    
    872Total current liabilities
    
    
    48,610
    
    
    
    48,354Other Noncurrent Liabilities
    
    
    4,023
    
    
    
    4,436Long-Term Debt, less current maturities
    
    
    158,391
    
    
    
    167,022Commitments and Contingencies
    
    
    
    
    
    
    Shareholders EquityCapital stock $.01 par value  authorized 1,000 shares,
100 shares issued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    99,273
    
    
    
    99,273Retained deficit
    
    
    (81,393
    )
    
    
    (83,125
    )Accumulated other comprehensive income (loss)
    
    
    (2,031
    )
    
    
    1,063Total shareholders equity
    
    
    15,849
    
    
    
    17,211$
    226,873
    
    
    $
    237,023
 The accompanying notes are an integral part of these consolidated financial statements. 36
    Table of Contents  AMTROL INC. AND SUBSIDIARIES
Consolidated Statements of Operations(In thousands) Year Ended December 312001
    
    2002
    
    2003Net sales
    
    $
    182,325
    
    
    $
    186,803
    
    
    $
    196,157Cost of goods sold
    
    
    141,278
    
    
    
    144,217
    
    
    
    156,124Gross profit
    
    
    41,047
    
    
    
    42,586
    
    
    
    40,033Operating expenses:Selling
    
    
    11,400
    
    
    
    11,565
    
    
    
    11,803General and administrative
    
    
    16,478
    
    
    
    17,081
    
    
    
    16,468Amortization of goodwill
    
    
    4,451
    
    
    
    
    
    
    
    Income from operations
    
    
    8,718
    
    
    
    13,940
    
    
    
    11,762Other income (expense):Interest expense
    
    
    (19,235
    )
    
    
    (20,061
    )
    
    
    (19,564
    )Interest income
    
    
    134
    
    
    
    52
    
    
    
    67License and distributorship fees
    
    
    291
    
    
    
    40
    
    
    
    Gain (loss) on extinguishment of debt, net
    
    
    (584
    )
    
    
    
    
    
    
    6,760Other income (expense), net
    
    
    95
    
    
    
    (374
    )
    
    
    424Loss before provision (benefit) for income taxes
and cumulative effect of a change in
accounting principle
    
    
    (10,581
    )
    
    
    (6,403
    )
    
    
    (551
    )Provision (benefit) for income taxes
    
    
    (1,166
    )
    
    
    839
    
    
    
    1,181Loss before cumulative effect of a change in accounting principle
    
    
    (9,415
    )
    
    
    (7,242
    )
    
    
    (1,732
    )Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    (38,087
    )
    
    
    Net loss
    
    $
    (9,415
    )
    
    $
    (45,329
    )
    
    $
    (1,732
    )
 Consolidated Statements of Comprehensive Loss(In thousands) Year Ended December 312001
    
    2002
    
    2003Net loss
    
    $
    (9,415
    )
    
    $
    (45,329
    )
    
    $
    (1,732
    )Foreign currency translation adjustments
    
    
    (382
    )
    
    
    2,799
    
    
    
    2,800Derivative instrument valuation
    
    
    (511
    )
    
    
    160
    
    
    
    294Comprehensive income (loss)
    
    $
    (10,308
    )
    
    $
    (42,370
    )
    
    $
    1,362
 The accompanying notes are an integral part of these consolidated financial statements. 37
    Table of Contents  AMTROL INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders Equity(In thousands) AccumulatedAdditional
    
    
    
    
    
    OtherCapital
    
    Paid-in
    
    Retained
    
    ComprehensiveStock
    
    Capital
    
    (Deficit)
    
    Income (Loss)Balance, December 31, 2000
    
    $
    
    
    
    $
    89,903
    
    
    $
    (26,649
    )
    
    $
    (3,382
    )Capital contribution
    
    
    
    
    
    
    6,016
    
    
    
    
    
    
    
    Repurchase of options and common stock
    
    
    
    
    
    
    (93
    )
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    (9,415
    )
    
    
    Warrant valuation
    
    
    
    
    
    
    3,447
    
    
    
    
    
    
    
    Derivative instrument valuation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (511
    )Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,097
    )Balance, December 31, 2001
    
    
    
    
    
    
    99,273
    
    
    
    (36,064
    )
    
    
    (4,990
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (45,329
    )
    
    
    Derivative instrument valuation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,799Balance, December 31, 2002
    
    
    
    
    
    
    99,273
    
    
    
    (81,393
    )
    
    
    (2,031
    )Net loss
    
    
    
    
    
    
    
    
    
    
    (1,732
    )
    
    
    Derivative instrument valuation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    294Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,800Balance, December 31, 2003
    
    $
    
    
    
    $
    99,273
    
    
    $
    (83,125
    )
    
    $
    1,063
 The accompanying notes are an integral part of these consolidated financial statements. 38
    Table of Contents  AMTROL INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows(In thousands) Year Ended December 312001
    
    2002
    
    2003Cash Flows Provided by (Used in) Operating Activities:Net loss
    
    $
    (9,415
    )
    
    $
    (45,329
    )
    
    $
    (1,732
    )Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    38,087
    
    
    
    Adjustments to reconcile net loss to net cash
provided by (used in) operating activities -Depreciation
    
    
    8,271
    
    
    
    8,046
    
    
    
    8,390Amortization
    
    
    5,027
    
    
    
    1,047
    
    
    
    1,452Provision for losses on accounts receivable
    
    
    628
    
    
    
    143
    
    
    
    90(Gain) loss on extinguishment of debt, net
    
    
    584
    
    
    
    
    
    
    
    (6,760
    )Loss on sale of fixed assets
    
    
    12
    
    
    
    5
    
    
    
    Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (2,330
    )
    
    
    1,042
    
    
    
    2,028Tax refund receivable
    
    
    (52
    )
    
    
    (309
    )
    
    
    746Inventory
    
    
    238
    
    
    
    (1,218
    )
    
    
    (1,265
    )Deferred income taxes  short-term
    
    
    (708
    )
    
    
    58
    
    
    
    112Prepaid expenses and other current assets
    
    
    289
    
    
    
    (601
    )
    
    
    293Other assets
    
    
    (738
    )
    
    
    572
    
    
    
    1,914Accounts payable
    
    
    (2,224
    )
    
    
    798
    
    
    
    (4,880
    )Accrued expenses and other current liabilities
    
    
    1,014
    
    
    
    2,788
    
    
    
    (1,993
    )Other noncurrent liabilities
    
    
    (859
    )
    
    
    31
    
    
    
    546Deferred income taxes  long-term
    
    
    (2,454
    )
    
    
    (58
    )
    
    
    (112
    )Net cash provided by (used in) operating activities
    
    
    (2,717
    )
    
    
    5,102
    
    
    
    (1,171
    )Cash Flows Used in Investing Activities:Proceeds from sale of property, plant and equipment
    
    
    70
    
    
    
    7
    
    
    
    Capital expenditures
    
    
    (4,199
    )
    
    
    (3,321
    )
    
    
    (3,417
    )Net cash used in investing activities
    
    
    (4,129
    )
    
    
    (3,314
    )
    
    
    (3,417
    )Cash Flows Provided by (Used in) Financing Activities:Repayment of long term debt
    
    
    (37,662
    )
    
    
    (125,867
    )
    
    
    (124,276
    )Issuance of long term debt
    
    
    42,550
    
    
    
    126,829
    
    
    
    124,450Repayment of short term debt
    
    
    (29,156
    )
    
    
    (27,191
    )
    
    
    (15,461
    )Issuance of short term debt
    
    
    29,444
    
    
    
    25,120
    
    
    
    16,350Extinguishment of senior credit facility
    
    
    (52,836
    )
    
    
    
    
    
    
    Issuance of new senior debt and warrants
    
    
    48,876
    
    
    
    
    
    
    
    15,000Capital contribution
    
    
    6,016
    
    
    
    
    
    
    
    Repurchase of options and common stock
    
    
    (93
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    7,139
    
    
    
    (1,109
    )
    
    
    16,063Net increase in cash and cash equivalents
    
    
    293
    
    
    
    679
    
    
    
    11,475Effect of exchange rate changes on cash and cash equivalents
    
    
    (14
    )
    
    
    135
    
    
    
    216Cash and cash equivalents, beginning of period
    
    
    704
    
    
    
    983
    
    
    
    1,797Cash and cash equivalents, end of period
    
    $
    983
    
    
    $
    1,797
    
    
    $
    13,488
 The accompanying notes are an integral part of these consolidated financial statements. 39
    Table of Contents  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (1)
    
    Basis of PresentationAMTROL Inc., a Rhode Island corporation, and its wholly-owned subsidiaries
(collectively referred to herein as the Company), designs, manufactures
and markets products used principally in flow control, storage, heating and
other treatment of fluids in the water systems market and selected sectors
of the heating, ventilating and air conditioning (HVAC) market. The
Company offers a broad product line of quality fluid handling products and
services marketed under widely recognized brand names.The Company is a wholly-owned subsidiary of AMTROL Holdings, Inc.
(Holdings Inc.), a Delaware corporation formed by The Cypress Group,
L.L.C. in 1996 to effect the acquisition of all of the outstanding common
stock of the Company. Holdings Inc. has no other material assets,
liabilities or operations other than those that result from its ownership
of the common stock of the Company.(2)
    
    Summary of Significant Accounting PoliciesPrinciples of ConsolidationThe accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All material intercompany
balances and transactions have been eliminated in consolidation.Use of EstimatesThe preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.Fiscal YearThe Company uses a calendar fiscal year and three quarterly interim periods
ending on Saturday of the thirteenth week of the quarter.ReclassificationsCertain prior year balances have been reclassified to conform to the
current year presentation.Revenue Recognition and Related CostsIn accordance with Staff Accounting Bulletin (SAB) No. 104, the Company
recognizes revenue only when there is a valid contract or purchase order,
which includes a fixed price; the goods have been delivered in accordance
with the shipping terms; and there is an expectation that the collection of
the revenue is reasonably assured. The Company has reclassed
shipping/handling fees and costs to net sales and cost of goods sold,
respectively, consistent with the presentation required by Emerging Issues
Task Force (EITF) 00-10. 40
    Table of Contents  (2)Summary of Significant Accounting Policies (Continued)The Company generally recognizes revenue upon shipment of its products to
customers net of applicable provisions for discounts and allowances.
Allowances for cash discounts and volume rebates, among others, are
recorded as a reduction to revenue at the time of sale based upon the
estimated future outcome. Cash discounts and volume rebates are based
upon certain percentages and sales targets agreed to with the Companys
customers, which are typically earned by the customers over an annual
period. The allowance for volume rebates is consistent with the provisions
of EITF 00-22, Accounting for Points and Certain Other Time-Based or
Volume-Based Sales Incentive Offers, and Offers for Free Products or
Services to Be Delivered in the Future. At December 31, 2002 and 2003, the
Company had accrued $3.9 million for such volume allowances. These amounts
are included in accrued expenses in the accompanying consolidated balance
sheets.Cash and Cash EquivalentsCash and cash equivalents include cash on hand and short-term investments
that are readily convertible into cash with an original maturity to the
Company of three months or less.Allowance for Doubtful AccountsIn circumstances where the Company is aware of a specific customers
inability to meet its financial obligations, an allowance is established.
The majority of accounts are individually evaluated on a regular basis and
appropriate allowances are established as deemed appropriate. The
remainder of the allowance is based upon historical trends and current
market assessments.Concentration of Credit RiskThe Company extends credit to almost all its customers on an
uncollateralized basis. Concentration of credit and geographic risk with
respect to accounts receivable is limited due to the large number of and
general dispersion of accounts which constitute the Companys customer
base. The Company periodically performs credit evaluations of its
customers. At December 31, 2002 and 2003, there were no customers
accounting for greater than ten percent of the Companys accounts
receivable. The Company has not experienced significant credit losses on
customers accounts.The Company invests its excess cash in highly liquid short-term
investments. The Company has established guidelines that maintain safety
and liquidity and reviews these guidelines when economic conditions change.
The Company has not experienced any losses on its cash equivalents or
short-term investments.Depreciable Property and EquipmentProperty, plant, and equipment are stated on the basis of cost. The
Company provides for depreciation by charges to income (computed on the
straight-line method) in amounts estimated to depreciate the cost of
properties over their estimated useful lives which generally fall within
the following ranges: Building and improvements
    
    10-40 yearsMachinery and equipment
    
    3-12 yearsFurniture and fixtures
    
    5-20 yearsOther
    
    3-10 years
 41
    Table of Contents  (2)  Summary of Significant Accounting Policies (Continued)Leasehold improvements are amortized over the life of the lease or the
estimated useful life of the improvement, whichever is shorter.Interest costs, during the construction period, on borrowings used to
finance construction of buildings and related property are included in the
cost of the constructed property. As of December 31, 2003, the Company had
no capitalized interest.InventoriesThe Companys inventories are stated at the lower of cost or market
including material, labor and manufacturing overhead (see Note 3). The
Company records provisions, as appropriate, to write-down obsolete and
excess inventory to estimated net realizable value. The process for
evaluating obsolete and excess inventory often requires the Company to make
subjective judgments and estimates concerning future sales levels,
quantities and prices at which such inventory will be able to be sold in
the normal course of business. Accelerating the disposal process or
incorrect estimates of future sales potential may cause the actual results
to differ from the estimates at the time such inventory is disposed or
sold. The Company believes that its procedures for estimating such amounts
are reasonable and historically have not resulted in material adjustments
in subsequent periods when the estimates are adjusted to the actual
amounts.WarrantyThe Company extends various warranties covering most of its products
ranging from a limited one-year warranty to a limited lifetime warranty
against defects in materials and workmanship. The specific terms and
conditions of the warranties depend on the type of product that is sold.
The Companys warranties are generally limited to the replacement of the
defective parts or products at the Companys option. The Company estimates
the costs that may be incurred under its warranty program and records a
liability at the time of sale. Factors that influence the Companys
warranty liability include the amount of production, manufactured cost of
the product, historical warranty returns and anticipated returns based upon
engineering and material improvements. The Company periodically assesses
the adequacy of its warranty reserve through a detailed analysis and
adjusts the reserve accordingly.As part of the Companys regular review of its warranty reserve at December
31, 2003, the Company increased its warranty reserve by $0.8 million. This
was due to a higher than anticipated level of warranty returns associated
with its limited lifetime products during the current period.The following chart illustrates the changes in the Companys warranty
reserve during the latest twelve month period: 42
    Table of Contents  (2) Summary of Significant Accounting Policies (Continued)  (in thousands) 2002
    
    2003Balance, beginning of year
    
    $
    2,198
    
    
    $
    2,367Warranties
issued during year
    
    
    1,354
    
    
    
    2,059Claims during year
    
    
    (1,185
    )
    
    
    (2,059
    )Change
in
estimate
    
    
    
    
    
    
    796Balance, end
of year
    
    $
    2,367
    
    
    $
    3,163
  Goodwill and Long-Lived Assets  Goodwill represents the excess of acquisition costs over the estimated fair
value of the net assets acquired. The Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards (SFAS) No.
142, Goodwill and Other Intangible Assets,which requires that
amortization of goodwill cease and that the Company evaluate the
recoverability of goodwill and other intangible assets annually, or more
frequently if events or changes in circumstances, such as a decline in
sales, earnings or cash flows, or material adverse changes in the business
climate, indicate that the carrying value of an asset might be impaired.
Goodwill is considered to be impaired when the net book value of a
reporting unit exceeds its estimated fair value.  Fair values are established using a discounted cash flow methodology
(specifically, the income approach). The determination of discounted cash
flows is based on the Companys strategic plans and long-range forecasts.
The revenue growth rates included in the forecasts are the Companys best
estimates based on current and anticipated market conditions, and the
profit margin assumptions are projected based on the current and
anticipated costs structures. In accordance with the SFAS No. 142
transition procedures, the Company recorded a goodwill impairment charge
for the cumulative effect of a change in accounting principle of $38.1
million upon adoption of SFAS No. 142, as further described in
Note 4.  The Company performs an annual evaluation for the impairment
of long-lived assets, other than goodwill, based on expectations of
non-discounted future cash flows compared to the carrying value of
the subsidiary in accordance with SFAS No. 144. The Companys cash flow
estimates are based upon historical cash flows, as well as future
projected cash flows received from subsidiary management in
connection with the annual Company wide planning process, and include
a terminal valuation for the applicable subsidiary based upon a
multiple of earnings before interest expense, net, depreciation and
amortization expense and income taxes (EBITDA). The
Company estimates the EBITDA multiple by reviewing comparable company
information and other industry data. The Company believes that its
procedures for estimating gross future cash flows, including the
terminal valuation, are reasonable and consistent with current market
conditions. The Company historically has not had any material
impairment adjustments for long-lived assets other than goodwill.  Fair Value of Financial Instruments  In accordance with the requirements of SFAS No. 107, Disclosures About Fair
Value of Financial Instruments, the Company has determined the estimated
fair value of its financial instruments using appropriate market
information and valuation methodologies. Considerable judgment is required
to develop the estimates of fair value; thus, the estimates are not
necessarily indicative of the amounts that could be realized in a current 43
    Table of Contents  (2) Summary of Significant Accounting Policies (Continued)  market exchange. The Companys financial instruments consist of cash,
accounts receivable, accounts payable, senior subordinated notes and bank
debt. Based upon information provided by an independent financial advisor,
the Company believes that the fair value of the senior subordinated notes
is approximately $65 to $70 on a par value of $100. The carrying value of
the remaining assets and liabilities is a reasonable estimate of their fair
market value at December 31, 2003.  Research and Development Expenses  All costs for research and development, which amounted to approximately
$0.8 million, $0.8 million, and $0.9 million for the years ended December
31, 2001, 2002, and 2003, respectively, are charged to general and
administrative expenses as incurred.  Deferred Financing Costs  Deferred financing costs are stated at cost as a component of other assets
and amortized over the life of the related debt using the effective
interest method. Amortization of deferred financing costs is included in
interest expense.  Foreign Currency Translation  Assets and liabilities of non-U.S. operations have been translated into
United States dollars using the year-end rate of exchange. Shareholders
equity has been converted using historical rates, and revenues and expenses
at the average exchange rates prevailing during the year. The cumulative
effect of the resulting translation was reflected as a separate component
of shareholders equity. $1.3 million and $0.6 million in foreign
currency exchange losses were recorded in the Consolidated Statement of
Operations during 2002 and 2003, respectively.  During 2003, the Company used forward contracts, generally three months in
duration, to hedge its foreign currency exposures. The foreign currency
exposures relate primarily to its operations in Portugal. A portion of
revenues from the Companys Portuguese operations were denominated in U.S.
dollars and British Pounds so as the Euro strengthened, the corresponding
receivables lost value. At December 31, 2003, the Companys Portuguese
operations had forward contracts for the purchase of $200,000 and £600,000
with maturity dates through February 2004. The value of these forward
contracts was immaterial to the balance sheet of the Company.  The following table illustrates the components of accumulated other
comprehensive income (loss):  (in thousands) 2002
    
    2003Currency translation adjustment
    
    $
    (1,680
    )
    
    $
    1,120Derivative instrument valuation
    
    
    (351
    )
    
    
    (57
    )Total accumulated other comprehensive income (loss)
    
    $
    (2,031
    )
    
    $
    1,063
 44
    Table of Contents  (2) Summary of Significant Accounting Policies (Continued)  Stock Options  The Company accounts for employee stock options in accordance with SFAS No.
123, Accounting for Stock Based Compensation. As permitted under SFAS No.
123, the Company applies Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees,and related interpretations
to account for its stock option plans.  Accounting for Derivative Instruments and Hedging Activities  The Company has an interest rate swap contract and an interest rate
cap (the Contract) outstanding as of December 31, 2003, with an initial
notional amount of $15 million. Under this arrangement, which will mature
on June 30, 2004, the Company receives the 90-day LIBOR rate and pays a
fixed rate of 4.60% for the period from January 1, 2001 through maturity,
unless LIBOR increases to 7.1%. If LIBOR increases to 7.1%, then the
Company continues to receive the 90-day LIBOR rate but would pay the 90-day
LIBOR rate for all subsequent periods capped at a maximum of 7.1%. The
LIBOR rate has not exceeded 7.1% since inception of the Contract and it was
treated, prior to adoption of SFAS No. 133, as a hedge agreement and
accounted for as such. The Contract was redesignated as a cash flow hedge
of variable future cash flows associated with the Foothill Facility Term
Loan A and B Debt.  As of December 31, 2003, the fair value of the instrument ($0.1 million)
was recorded in other non-current liabilities with a corresponding entry to
accumulated other comprehensive loss. Subsequent changes in the fair value
of the swap will be recorded through accumulated other comprehensive loss
(except for changes related to ineffectiveness, which will be recorded
currently through net income). The Company did not realize any material
ineffectiveness during 2003 and does not currently anticipate any material
ineffectiveness under the hedge for 2004.  Recent Accounting Pronouncements  In January
2003, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation 46, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51 (Interpretation 46).
In December 2003, the FASB issued a revision to Interpretation 46 to
make certain technical corrections and address certain implementation
issues that had arisen. Interpretation 46, as revised, provides a new
framework for identifying variable interest entities (VIEs) and
determining when a company should include the assets, liabilities,
noncontrolling interests and results of activities of a VIE in its
consolidated financial statements. Interpretation 46 was effective
immediately for VIEs created after January 31, 2003. The provisions
of Interpretation 46, as revised, will be adopted by the Company
during 2004. It is expected that the adoption of this Interpretation
will have no impact on the Companys overall financial position and
results of operations.  SFAS No. 145 Rescission of FASB Statements No. 4, 44 and 64, Amendment of
FASB Statement No. 13 and Technical Corrections(SFAS No. 145), was
issued in April 2002 and addresses the reporting of gains and losses
resulting from the extinguishment of debt, accounting for sale-leaseback
transactions and rescinds or amends other existing authoritative
pronouncements. SFAS No. 145 requires that any gain or loss on
extinguishment of debt that does not meet the criteria of APB 30 for
classification as an extraordinary item shall not be classified as
extraordinary and shall be included in earnings from continuing operations.
The provisions of this statement related to the 45
    Table of Contents  extinguishment of debt are effective for financial statements issued in
fiscal years beginning after May 15, 2002 with early application
encouraged. The Company adopted SFAS No. 145 on January 1, 2003.
Accordingly, the Companys $0.4 million loss from debt
retirement recorded in 2001 (net of tax effect of $0.2 million) was
reclassified from extraordinary loss to earnings from continuing
operations in the Companys Consolidated Statement of Operations.  In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, which addresses financial accounting and
reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring).The
provisions of SFAS No. 146 are effective for exit or disposal activities
that are initiated after December 31, 2002, with earlier application
encouraged. Adoption of SFAS 146 did not have a material effect on the
Companys Consolidated Financial Statements.  In November 2002, FASB Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Otherswas issued. This interpretation requires certain
guarantees to be recorded at fair value as opposed to the current practice
of recording a liability only when a loss is probable and reasonably
estimable. It also requires a guarantor to make enhanced disclosures
concerning guarantees, even when the likelihood of making any payments
under the guarantee is remote. The initial recognition and initial
measurement provisions are applicable on a prospective basis to guarantees
issued or modified after December 31, 2002, while the enhanced disclosure
requirements are effective after December 15, 2002. Adoption of FASB
Interpretation No. 45 did not have a material impact on the Companys
results of operations or financial condition.  In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities(SFAS No. 149), which
clarifies the financial accounting and reporting proscribed by SFAS No.
133, Accounting for Derivative Instruments and Hedging
Activities (SFAS
No. 133) for derivative instruments, including certain derivative
instruments embedded in other contracts. Certain provisions of SFAS No.
149 related to implementation issues of SFAS No. 133 are already effective
and other provisions related to forward purchases or sales are effective
for both existing contracts and new contracts entered into after June 30,
2003. The Company has previously adopted SFAS No. 133, including the
implementation issues addressed in SFAS No. 149, and the adoption of the
new provisions of SFAS No. 149 on July 1, 2003 did not have a material
impact on the Companys Consolidated Financial Statements.  In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity
(SFAS No. 150), which addresses the accounting and reporting for the
classification and measurement of certain financial instruments with
characteristics of both liabilities and equity. SFAS No. 150 is effective
for all financial instruments entered into or modified after May 31, 2003
and for all existing financial instruments beginning in the first interim
period after June 15, 2003, except for mandatorily redeemable financial
instruments of nonpublic entities, which are subject to the provisions for
the first fiscal period beginning after December 15, 2004. The Company
adopted SFAS No. 150 on July 1, 2003. Adoption of this accounting standard
did not have an impact on the Companys Consolidated Financial
Statements.  (3)
    
    Inventories  Inventories are stated at the lower of cost (first-in, first-out method) or
market and consist of the following at December 31 (in thousands): 46
    Table of Contents  2002
    
    2003Raw materials and work in process
    
    $
    12,860
    
    
    $
    15,078Finished goods
    
    
    9,585
    
    
    
    10,830$
    22,445
    
    
    $
    25,908
  (4)
    
    Cumulative Effect of Change in Accounting Principle  SFAS No. 142 requires that amortization of goodwill cease and that the
Company evaluate the recoverability of goodwill and other intangible assets
annually, or more frequently if events or changes in circumstances indicate
that the carrying value of an asset might be impaired.  Under SFAS No. 142, the Company was required to test all existing goodwill
for impairment (using a two-step method) as of January 1, 2002, on a
reporting unit basis. The Company determined the reporting units to be
AMTROL North America, AMTROL ALFA, AMTROL NOVA and AMTROL Poland. In step
1, goodwill is considered to be impaired when the net book value of a
reporting units exceeds its estimated fair value. The fair values of the
reporting units were determined utilizing a discounted cash flow
methodology and considered such assumptions as weighted average cost of
capital, revenue growth, profitability, capital expenditures and premium
for control. For reporting units that failed step 1, the Company proceeded
to step 2. In step 2, the Company calculated the implied fair value of
goodwill by deducting the fair value of all tangible and intangible net
assets of the reporting unit from the fair value of the reporting unit as
determined in step 1. The Company then compared the implied fair value of
goodwill as determined in step 2 above to the carrying value of goodwill.  As a result of the impairment review, the Company recorded an after-tax
goodwill impairment charge of $38.1 million, which was recorded as a
cumulative effect of change in accounting principle as of January 1,
2002. This charge consists of $34.5 million at the
AMTROL North America unit and $3.6 million at AMTROL NOVA. The impairment
charge recorded in 2002 was principally due to the change in the
methodology from the undiscounted cash flow method used in 2001 under the
Companys previous accounting policy, to the discounted cash flow method
used in accordance with SFAS No. 142.  Pro forma results as if SFAS No. 142 had been adopted at the beginning of
2001 are as follows:  (in thousands) December 31,2001Net loss as reported
    
    $
    (9,415
    )Add back: goodwill amortization
    
    
    4,451Adjusted net loss
    
    $
    (4,964
    )
 47
    Table of Contents  The changes in the carrying amount of goodwill for 2002 and 2003 are as
follows:  (in thousands) NorthAmerica
    
    Alfa
    
    Nova
    
    Poland
    
    ConsolidatedBalance, December 31, 2001
    
    $
    129,797
    
    
    $
    23,900
    
    
    $
    3,595
    
    
    $
    
    
    
    $
    157,292Cumulative effect of change in
accounting principle  adoption of
SFAS No. 142
    
    
    (34,492
    )
    
    
    
    
    
    
    (3,595
    )
    
    
    
    
    
    
    (38,087
    )Balance, December 31, 2002 and 2003
    
    $
    95,305
    
    
    $
    23,900
    
    
    $
    
    
    
    $
    
    
    
    $
    119,205
  (5)
    
    Long-term Debt and Notes Payable to Banks  Long-term debt consisted of the following at December 31, (in
thousands): 2002
    
    2003Revolving credit facility
    
    $
    5,373
    
    
    $
    4,720Term A loan
    
    
    8,962
    
    
    
    7,255Term B loan
    
    
    6,563
    
    
    
    20,338Term C loan
    
    
    25,450
    
    
    
    39,817Senior subordinated notes, due 2006,
10.625%
    
    
    115,000
    
    
    
    97,849161,348
    
    
    
    169,979Less: Current maturities of long-term debt
    
    
    2,957
    
    
    
    2,957$
    158,391
    
    
    $
    167,022
  Revolving Credit and Term Loans  The Company is a party to two credit facilities: a $52.5 million ($42.5
million prior to the November 18, 2003 amendments discussed below) senior
first-priority secured credit facility arranged by Foothill Capital
Corporation (the Foothill Facility) and a
$35.0 million ($25.0 million prior to the November 18, 2003
Amendments discussed below) senior
second-priority secured credit facility with affiliates of The Cypress
Group L.L.C. (the Cypress Facility).  The Foothill Facility provides the Company (i) a term loan facility
consisting of a five-year Term A Loan maturing in December 2006, $7.3
million at December 31, 2003, bearing interest at LIBOR plus 3.5% (4.75%),
and a four-year Term B Loan maturing December 2005, $20.3 million as of
December 31, 2003, bearing interest at the Wells Fargo Reference Rate
(approximates the prime rate) plus 3.5% and a paid-in-kind (PIK)
component of 3.5% (11%) (collectively the Term Loans) and (ii) a
five-year Revolving Credit Facility maturing December 2006, bearing
interest at LIBOR plus 2.5% (4.5%) or the Wells Fargo Reference Rate plus
0.5%, providing the lesser of (a) $30.0 million less the aggregate
outstanding principal amount of the Term A Loan less letter of credit usage
and (b) borrowing base less letter of credit usage. At December 31, 2003,
total availability and aggregate borrowings under the Revolving Credit
Facility were $7.3 million and $4.7 million, respectively.  On November 18, 2003, the Company amended its Foothill Facility by entering
into the First Amendment and Waiver to Loan and Security Agreement (the
First Amendment) and also amended its Cypress Facility by entering into
the Second Amendment to Loan and Security Agreement (the Second
Amendment). The First Amendment increased the Term B Loan by $15.0
million to $20.3 million and extended the maturity date of Term B Loan to
December 26, 2005. Commitments under the Revolving Credit Facility and
Term A Loan were reduced in the aggregate from $35.0 million to $30.0
million. The additional funds provided by the First Amendment will be used
for capital investment programs, general working capital purposes and may
also be used to purchase the Companys Senior Subordinated Notes in an
aggregate amount not to exceed $5.0 million. The First Amendment also
revised certain covenants to be more consistent with the Companys business
plans. The amendments did not effect the maturity date (December 26, 2006)
of the Revolving Credit Facility, Term A Loan and the Cypress Facility. 48
    Table of Contents  Upon execution of the First Amendment and Second Amendment, the Company was required per EITF 96-19,
Debtors Accounting for a Modification or Exchange of Debt Instruments,to
record a loss of $0.5 million on extinguishment of debt for unamortized
costs associated with the original Term B Loan and any bank related fees in
relation to the recent Amendments.  The Cypress Facility consists of term loans totalling $35.0
million (the Term C Loan). The Term C Loan, $39.8 million as of December
31, 2003, has a maturity date of December 26, 2006, and bears Pay-In-Kind
(PIK) interest fixed at 12% per annum paid quarterly, which at the lenders
option can be paid in common stock of the Company.
In connection with the Cypress Facility, Holdings
has issued the lenders under the Cypress Facility 60,000 warrants to
purchase approximately 5.2% of its common stock on a fully diluted basis.
The 60,000 warrants, which have an exercise price of $.01 and are
exercisable immediately, were valued at $3.4 million using the
Black-Scholes model. This amount was recorded as a discount to the Term C
Loan debt and included as a component of shareholders equity. The Company
expects that the effective interest rate associated with the Term C Loan
will be greater than 12% given the additional interest expense associated
with the warrants.  The Foothill Facility and Cypress Facility contain certain affirmative and
negative covenants and restrictions, such as EBITDA and Fixed Charges Ratio
on a North America and Worldwide basis. As of December 31, 2003, the
Company was in compliance with the various covenants of the Cypress
Facility and Foothill Facility. 49
    Table of Contents  Senior Subordinated Notes  The Company has $97.8 million of Senior Subordinated Notes due 2006 (the
Notes), which are unsecured obligations of the Company and bear interest
at a rate of 10.625% per annum payable semi-annually on June 30 and
December 31.  The Notes are redeemable at the option of the Company on or after December
31, 2003, in whole or in part, at par. Upon a Change of Control (as
defined in the Indenture), each Note holder has the right to require the
Company to repurchase such holders Notes at a purchase price of 101% of
the principal amount plus accrued interest.
The Indenture contains certain affirmative and negative covenants and
restrictions. As of December 31, 2003, the Company was in compliance with the various
covenants of the Notes.  In 2003, the Company purchased from Cypress a portion of the Notes with a face value of
$17.2 million. The purchase was facilitated through Cypress and financed
through the issuance of additional Term C debt of $10.0 million. The
extinguishment resulted in a gain of $7.2 million that was included on the
Companys Consolidated Statement of Operations. The Company and/or
affiliates of the Company, including entities related to Cypress may
continue, from time to time, to purchase the Notes previously issued by the
Company in the open market or by other means.  Long-term debt repayable in each of the next five years is as follows (in
thousands): 2004
    
    $
    2,9572005
    
    
    20,7952006
    
    
    146,2272007
    
    
    2008
    
    
    $
    169,979
  Short-Term Debt  AMTROL ALFA has available revolving credit facilities with local banks
providing for short-term working capital loans of up to the equivalent of
approximately $10.5 million. Borrowings under these agreements accrue
interest at EURIBOR plus a premium ranging from 1.00% to 1.25% (3.10% -
3.35%) at December 31, 2003. The balance outstanding at
December 31, 2002
and 2003 was approximately $6.9 million and $9.3 million,
respectively. The highest amount outstanding under these
facilities in 2003 was approximately $10.2 million.Worldwide cash paid for interest
amounted to approximately $18.7 million, $14.9 million, and
$13.7 million
for the years ended December 31, 2001, 2002 and 2003, respectively. 50
    Table of Contents  (6)
    
    Income Taxes  The components of the provision (benefit) for income taxes are as follows
(in thousands): 2001
    
    2002
    
    2003Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    40State
    
    
    50
    
    
    
    
    
    
    
    75Foreign
    
    
    1,751
    
    
    
    839
    
    
    
    1,0661,801
    
    
    
    839
    
    
    
    1,181Deferred:Federal
    
    
    (2,291
    )
    
    
    
    
    
    
    State
    
    
    (435
    )
    
    
    
    
    
    
    Foreign
    
    
    (241
    )
    
    
    
    
    
    
    (2,967
    )
    
    
    
    
    
    
    $
    (1,166
    )
    
    $
    839
    
    
    $
    1,181
  The income tax rate reconciliation of the difference between actual and
statutory effective tax rates is as follows: Year Ended December 31,2001
    
    2002
    
    2003Benefit for income taxes at
the Federal statutory rate
    
    $
    (3,538
    )
    
    $
    (2,177
    )
    
    $
    (187
    )State taxes, net of Federal
tax effect
    
    
    (254
    )
    
    
    
    
    
    
    50Goodwill amortization not
deductible for tax purposes
    
    
    1,512
    
    
    
    
    
    
    
    Foreign losses not benefited
    
    
    1,044
    
    
    
    570
    
    
    
    644Foreign taxes
    
    
    302
    
    
    
    4
    
    
    
    397Increase (decrease) in U.S.
valuation allowance
    
    
    
    
    
    
    2,373
    
    
    
    (11
    )Rate differential
    
    
    
    
    
    
    
    
    
    
    129Other, net
    
    
    (232
    )
    
    
    69
    
    
    
    159Recorded (benefit) provision
    
    $
    (1,166
    )
    
    $
    839
    
    
    $
    1,181
 51
    Table of Contents  Significant items giving rise to deferred tax assets (liabilities) are as
follows (in thousands): December 31,2002
    
    2003Deferred Income Taxes short-termWarranty reserves  current
    
    $
    145
    
    
    $
    145Allowance for doubtful accounts
    
    
    189
    
    
    
    135Accrued vacation
    
    
    48
    
    
    
    40Inventory Adjustment
    
    
    722
    
    
    
    827Accrued Liabilities and Other
    
    
    577
    
    
    
    342$
    1,681
    
    
    $
    1,489
 2002
    
    2003Deferred Income Taxes long-termNet operating loss carryforward
    
    $
    14,485
    
    
    $
    14,802Accelerated depreciation
    
    
    (2,576
    )
    
    
    (2,362
    )Warranty reserves  long-term
    
    
    617
    
    
    
    998Deferred compensation
    
    
    449
    
    
    
    394NOL valuation allowance
    
    
    (5,708
    )
    
    
    (6,754
    )Other
    
    

    
    
    
    381$
    7,267
    
    
    $
    7,459
  The net deferred tax assets are included in the accompanying consolidated
balance sheets in deferred income taxes-long-term and deferred income
taxes-short-term. Net deferred tax assets recognized on the Companys
balance sheet continue to require managements evaluation as to their
realization. Although realization is not assured, management believes it
is more likely than not that the net deferred tax assets will be realized.
The amount expected to be realized is based upon estimates derived from tax
planning strategies which the Company believes are currently prudent and
feasible. A valuation allowance has been provided for certain net
operating loss carryforwards as it is more likely than not that the related
deferred tax assets for these carryforwards will not be realized.
Additions to the valuation allowance may be required in the event that
estimates are changed. The total change in valuation allowance was a
$3.6
million increase for the year December 31, 2002, and a $1.0 million
increase for the year December 31, 2003. The increase in valuation
allowance relates to continuing operations and includes a cumulative effect
of a change in accounting principle of $1.2 million for 2002.  Cash paid for income taxes amounted to $0.5 million, $0.9 million, and $1.1
million for the years ended December 31, 2001, 2002 and 2003, respectively.
At December 31, 2003, the Company had net operating loss carryforwards in
the United States of approximately $28.1 million expiring in 2012 through
2022.  (7)
    
    Pension and Profit Sharing Plans  The Company has a defined contribution 401(k) plan covering substantially
all of its U.S. employees. Under the Plan, eligible employees are
permitted to contribute up to 25% of gross pay, not to exceed the maximum
allowed under the Internal Revenue Code. The Company matches each employee
contribution up to 6% of gross pay at a rate of $0.25
per $1 of employee contribution. 52
    Table of Contents  The Company also contributes 3% of each employees gross pay up to the
Social Security taxable wage base and 4% of amounts in excess of that level
up to approximately $0.2 million of wages. Company contributions to the
401(k) plan totaled approximately $0.6 million for the years ended
December 31, 2001, 2002 and 2003.  (8)
    
    Lease Commitments  The Company leases certain plant facilities and equipment. Total rental
expenses charged to operations approximated $1.7 million, $1.6 million and
$1.3 million for the years ended December 31, 2001, 2002 and 2003,
respectively. Minimum rental commitments under all non-cancelable
operating leases are as follows (in thousands): 2004
    
    $
    6842005
    
    
    4682006
    
    
    4042007
    
    
    3602008
    
    
    $
    1,916
  Certain of the leases provide for renewal options.  (9)
    
    Commitments and Contingencies  At December 31, 2003, the Foothill Agreement contained a sublimit to
support the issuance of letters of credit in the amount of
$3.0 million.


At December 31, 2003, letters of credit outstanding amounted to $0.4
million.  Some of the Companys operations generate or have in the
past generated waste materials that are regulated under environmental
laws. In the past, certain of the Companys operations have been
named parties in litigation associated with off-site hazardous waste
treatment and disposal. Based upon the Companys experience in
matters that have been resolved and the amount of hazardous waste
shipped to off-site disposal facilities, the Company believes that
any share of costs attributable to it will not be material should any
litigation arise or any claims be made in the future. However, there
can be no assurance that any liability arising from, for example,
contamination at facilities the Company owns or operates or formerly
owned or operated (or an entity or business the Company has acquired
or disposed of), or locations at which waste or contaminants generated
by the Company have been deposited (or deposited by an equity or
business the Company has acquired or disposed of) will not arise or be
asserted against the Company or entities for which the Company may be
responsible in a manner that could materially and adversely affect
the Company.  The Company monitors and reviews its procedures and policies
for compliance with environmental laws. Based upon the Companys
experience to date, the Company operates in substantial compliance
with environmental laws, and the cost of compliance with existing
regulations is not expected to have a material adverse effect on the
Companys results of operations financial condition or
competitive position. However, future events, including changes in
existing laws and regulations or enforcement policies, may give rise
to additional compliance costs which could have a material adverse
effect on the Companys results of operations, financial
condition or competitive position.  The Company is involved in various legal proceedings which, in the opinion
of management, will not result in a material adverse effect on its
financial condition or results of operations.  (10)
    
    Stock Plans  Certain key employees and directors have been granted options to purchase
common shares of the Companys parent, Holdings Inc, under the AMTROL
Holdings 1997 Incentive Stock Plan (the Plan). The Plan includes both
time vesting and performance-based vesting options. The options which vest
over time are subject to fixed plan accounting under APB 25. Under fixed
plan accounting, compensation is measured as the intrinsic value of the
option at date of grant. The performance-based options are accounted for
as variable options under APB 25. Under variable plan accounting, the
compensation is measured as the intrinsic value of the actual number of shares that are awarded at the then current fair market value of the stock
when the performance conditions are satisfied.  As of December 31, 2003, options to purchase 129,335 shares under the Plan
were outstanding. The outstanding options include 44,796 non-qualified
options which are exercisable immediately, provided that purchased shares
are subject to repurchase by Holdings at fair market value until such shares vest under certain circumstances. The remaining 84,539 options are
non-qualified options issued in 1999 and 2000, 48,770 of which are
exercisable. 53
    Table of Contents  The Company applies APB Opinion No. 25 to account for its stock option
plans. Accordingly, pursuant to the terms of the Plan, no compensation
cost related to the issuance of stock options has been recognized in the
Companys financial statements. During 2002 and 2003, no options were
granted or vested under this plan. If the Company had determined
compensation cost for options under the provisions of SFAS No. 123 in 2001,
the Companys net loss would have increased approximately $0.2 million.
The fair value of the options granted or vested in 2001 was estimated using
the Black-Scholes option pricing model. The following 2001 key assumptions
were used to value the options granted: volatility, 20%; weighted average
risk free rate, 5.00%; average expected life, 3 years. The weighted
average fair value per share of the stock options vested or granted in 2001
amounted to $3.42. It should be noted that the option pricing model used
was designed to value readily tradeable stock options with relatively short
lives. The options granted are not tradeable. However, management
believes that the assumptions used and the model applied to value the
awards yield a reasonable estimate of the fair value of the options under
the circumstances.  (11)
    
    Business Segment Information  AMTROLs reportable segments are delineated geographically. In addition to
the geographic delineation, the segments are managed separately because of
their different product offerings, markets served and cost structures.  The Companys North American segment operates manufacturing facilities in
Rhode Island, Kentucky, Maryland and Ohio, and operates a distribution
facility in Ontario, Canada. This segment manufactures and markets
products used principally in flow control, storage, heating, and other
treatment of fluids in the water system and HVAC markets. These products
are marketed throughout the world but primarily in North America, Western
Europe and Asia.  The Companys European segment includes its facilities in Guimaraes,
Portugal, Donaueschingen, Germany and Swarzedz, Poland. The Guimaraes
facility manufactures returnable and non-returnable steel gas cylinders for
storing cooking, heating and refrigerant gases which are marketed
worldwide. The Donaueschingen facility manufactures residential and
commercial water heaters marketed primarily in Switzerland, Austria and
Germany. The Swarzedz facility refurbishes gas cylinders.  The primary criteria by which financial performance is evaluated and
resources are allocated include revenues and EBITDA. The following is a
summary of key financial data by segment: 54
    Table of Contents  2001
    
    2002
    
    2003Net Sales to external customersNorth AmericaUS
    
    $
    117,898
    
    
    $
    116,887
    
    
    $
    110,411Other
    
    
    5,671
    
    
    
    5,412
    
    
    
    6,700EuropePortugal
    
    
    48,489
    
    
    
    55,101
    
    
    
    65,987Other
    
    
    10,267
    
    
    
    9,403
    
    
    
    13,059Consolidated
    
    $
    182,325
    
    
    $
    186,803
    
    
    $
    196,157Income from operationsNorth America
    
    $
    7,717
    
    
    $
    12,149
    
    
    $
    12,371Europe
    
    
    1,001
    
    
    
    1,791
    
    
    
    (609
    )Consolidated
    
    $
    8,718
    
    
    $
    13,940
    
    
    $
    11,762EBITDANorth America
    
    $
    17,539
    
    
    $
    17,336
    
    
    $
    17,433Europe
    
    
    4,433
    
    
    
    4,373
    
    
    
    3,210Consolidated
    
    $
    21,972
    
    
    $
    21,709
    
    
    $
    20,643Long-Lived assetsNorth AmericaUS
    
    $
    156,998
    
    
    $
    119,266
    
    
    $
    115,819Other
    
    
    9
    
    
    
    4
    
    
    
    10EuropePortugal
    
    
    32,304
    
    
    
    32,441
    
    
    
    31,999Other
    
    
    9,173
    
    
    
    5,995
    
    
    
    6,466Consolidated
    
    $
    198,484
    
    
    $
    157,706
    
    
    $
    154,294
  Income from operations is reduced by goodwill amortization for 2001 of $4.5
million. EBITDA is earnings (net income/loss) before interest, taxes, depreciation
and amortization. The method of calculating consolidated EBITDA is
consistent with the definition contained in the Foothill Agreement and the
Indenture. Readers of financial statements frequently consider EBITDA a
useful tool in evaluating a companys performance. Therefore, the Company
believes that inclusion of EBITDA is useful supplemental information.
However, EBITDA is not a measure of true cash flow since it does not
incorporate changes of other assets or liabilities that may generate or
require cash. EBITDA is not a generally accepted accounting measure.
Long-Lived assets include property, plant and equipment and goodwill. 55
    Table of Contents  (12)
    
    Subsequent Event  On February 27, 2004, the Company completed the sale of the stock of Amtrol
Holdings GmbH (Holdings) to DTT NOVA Beteiligungen GmbH & Co. KG (DTT)
for approximately 300,000 Euros or $375,000. Holdings principal subsidiary
is AMTROL Nova GmbH & Co. KG, a German based manufacturer of indirect fired
water heaters. DTT is a German based company that operates as a
manufacturer of water heaters.  Holdings results of operations are included within the Companys Europe
segment. The Company will treat the sale of Holdings as a discontinued
operation in its quarterly report on Form 10-Q for the period ended March
31, 2004 and accordingly the results of operations of Holdings will be
excluded from continuing operations for all periods presented in the form
10-Q filing.  The following table illustrates the Companys 2003 results as if the sale
occurred on January 1: (Unaudited)Reported
    
    ProFormaNet sales
    
    $
    196,157
    
    
    $
    185,046Gross profit
    
    
    40,033
    
    
    
    40,284Income from operations
    
    
    11,762
    
    
    
    13,583Net loss
    
    
    (1,732
    )
    
    
    (422
    )Total assets *
    
    
    237,023
    
    
    
    230,459
  *
    
    As if the sale occurred on December 31, 2003. 
 Item 14(a)(2) SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS AND RESERVES  (in thousands) Balance atBeginning of
    
    
    
    
    
    
    
    
    
    Adjustments/
    
    Balance at EndConsolidated
    
    Period
    
    Provision
    
    Recoveries
    
    Write-Offs
    
    of PeriodYear ended December 31, 2001
Allowance for doubtful accounts
    
    $
    833
    
    
    $
    628
    
    
    $
    
    
    $
    
    (96
    )
    
    $
    1,365Year ended December 31, 2002
Allowance for doubtful accounts
    
    
    1,365
    
    
    
    143
    
    
    
    
    
    
    
    (359
    )
    
    
    1,149Year ended December 31, 2003
Allowance for doubtful accounts
    
    
    1,149
    
    
    
    90
    
    
    
    37
    
    
    
    (29
    )
    
    
    1,247
 56
    Table of Contents  SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, in West Warwick, Rhode
Island, on the 29th day of March 2004. AMTROL Inc.By:
    
    s/s Larry T. GuillemetteLarry T. GuillemetteChief Financial OfficerDate:
    
    March 29, 2004
 Pursuant to the requirements of the Securities Act of 1934, this registration
statement has been signed by the following persons in the capacities and on the
date indicated. Signature
    
    Title
    
    Dates/s Albert D. Indelicato

Albert D. Indelicato
    
    President, Chairman of the
Board,
Chief Executive Officer and Director
(Principal Executive Officer)
    
    March 29, 2004s/s Larry T. Guillemette

Larry T. Guillemette
    
    Exec. Vice President, Chief Financial
Officer, and Treasurer (Principal
Financial Officer)
    
    March 29, 2004s/s Joseph L. DePaula

Joseph L. DePaula
    
    Vice President and Worldwide
Controller (Principal Accounting
Officer)
    
    March 29, 2004s/s John P. Cashman

John P. Cashman
    
    Director
    
    March 29, 2004s/s Andrew M. Massimilla

Andrew M. Massimilla
    
    Director
    
    March 29, 2004s/s David P. Spalding

David P. Spalding
    
    Director
    
    March 29, 2004s/s James A. Stern

James A. Stern
    
    Director
    
    March 29, 2004
 57
    Table of Contents  EXHIBIT INDEX Exhibit #
    
    Document Description3.1
    
    Restated Articles of Incorporation of AMTROL Inc. (incorporated by
reference from the Companys Registration Statement on Form S-4,
Registration No. 333-18075, declared effective by the Securities and
Exchange Commission on January 2, 1997).3.2
    
    Bylaws of AMTROL Inc. (incorporated by reference from the Companys
Registration Statement on Form S-4, Registration No. 333-18075, declared
effective by the Securities and Exchange Commission on January 2, 1997).4.1
    
    Indenture, dated as of November 1, 1996 between AMTROL Acquisition, Inc.
and The Bank of New York (incorporated by reference from the Companys
Registration Statement on Form S-4, Registration No. 333-18075, declared
effective by the Securities and Exchange Commission on January 2, 1997).4.2
    
    Form of 10-5/8% Senior Subordinated Notes due 2006 (included in Exhibit
4.1) (incorporated by reference from the Companys Registration Statement
on Form S-4, Registration No. 333-18075, declared effective by the
Securities and Exchange Commission on January 2, 1997).4.3
    
    First Supplemental Indenture, dated as of November 13, 1996, between
AMTROL Inc. and The Bank of New York (incorporated by reference from the
Companys Registration Statement on Form S-4, Registration No. 333-18075,
declared effective by the Securities and Exchange Commission on January 2,
1997).10.1
    
    Credit Agreement, dated as of November 13, 1996, among AMTROL
Acquisition, Inc. and AMTROL Holdings, Inc., various lending institutions
party thereto, Morgan Stanley Senior Funding, Inc. as documentation agent,
and Bankers Trust Company, as administrative agent (incorporated by
reference from the Companys Registration Statement on Form S-4,
Registration No. 333-18075, declared effective by the Securities and
Exchange Commission on January 2, 1997).10.1.1
    
    First Amendment to Credit Agreement, dated as of June 24, 1997
(incorporated by reference to the Companys Quarterly Report on Form 10-Q
for the quarter ended July 5, 1997).10.1.2
    
    Second Amendment to Credit Agreement, dated as of December 12, 1997
(incorporated by reference to Exhibit 7(c) in the Companys Current Report
on Form 8-K dated December 22, 1997).10.1.3
    
    Third Amendment to the Credit Agreement dated as of June 24, 1998
(incorporated by reference to the Companys Quarterly report on Form 10-Q
for the quarter ended July 4, 1998).10.1.4
    
    Fourth Amendment to the Credit Agreement dated as of July 13, 1998
(incorporated by reference to the Companys Quarterly report on Form 10-Q
for the third quarter ended October 3, 1998).10.1.5
    
    Fifth Amendment to the Credit Agreement dated as of March 30, 2001
(incorporated by reference to the Companys Annual Report of Form 10-K for
the fiscal year ended December 31, 2000).10.2
    
    AMTROL Inc. Pension Plan and Trust (incorporated by reference from the
Companys Registration Statement on Form S-1, Registration No. 33-48413,
declared effective by the Commission on March 18, 1993).*10.3
    
    Amendments to AMTROL Inc. Pension Plan and Trust (incorporated by
reference from the Companys Registration Statement on Form S-1,
Registration No. 33-48413, declared effective by the Securities and
Exchange Commission on March 18, 1993).*10.4
    
    AMTROL Inc. Executive Cash Bonus Plan (incorporated by reference from the
Companys Annual Report on Form 10-K for the fiscal year ended December
31, 1994).*
 58
    Table of Contents  Exhibit #
    
    Document Description10.5
    
    AMTROL Inc. Supplemental Retirement Plan II (incorporated by reference
from the Companys Registration Statement on Form S-1, Registration No.
33-48413, declared effective by the Commission on March 18, 1993).*10.6
    
    First Amendment to AMTROL Inc. Supplemental Retirement Plan II
(incorporated by reference from the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 1995).*10.10
    
    Employment Agreement dated June 24, 1998 by and between AMTROL Inc. and
Albert D. Indelicato (incorporated by reference from the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 1998).*10.11
    
    AMTROL Holdings Inc. 1997 Incentive Stock Plan dated December 16, 1997.
(incorporated by reference to the Companys Annual Report on Form 10-K
for the year ended December 31, 1997).*10.12
    
    Loan and Security Agreement dated December 26, 2001 among Amtrol
Holdings, Inc., Amtrol Inc. and WaterSoft Inc. and Foothill Capital
Corporation as the Arranger and Administrative Agent (incorporated by
reference from the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2001).10.12.1
    
    First Amendment and Waiver To Loan and Security Agreement dated November
18, 2003 among Amtrol Holdings, Inc., Amtrol Inc., WaterSoft Inc., Amtrol
Canada LTD (incorporated by reference from the Companys Form 8-K dated
November 25, 2003).10.13
    
    Loan and Security Agreement dated December 26, 2001 among Amtrol
Holdings, Inc., Amtrol Inc. and WaterSoft Inc. and Cypress Merchant
Banking Partners, L.P. and Cypress Offshore Partners, L.P. (incorporated
by reference from the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2001).10.13.1
    
    First Amendment to Loan and Security Agreement dated November 18, 2003
among Amtrol Holdings, Inc., Amtrol Inc., WaterSoft Inc., Amtrol Canada
LTD, and Cypress Merchant Banking Partners, L.P. and Cypress Offshore
Partners, L.P. (incorporated by reference from the Companys Form 8-K
dated November 25, 2003).10.13.2
    
    Second Amendment to Loan and Security Agreement dated November 18, 2003
among Amtrol Holdings, Inc., Amtrol Inc., WaterSoft Inc., Amtrol Canada
LTD, and Cypress Merchant Banking Partners, L.P. and Cypress Offshore
Partners, L.P. (incorporated by reference from the Companys Form 8-K
dated November 25, 2003).10.14
    
    Subsidiary Guaranty Agreement
dated December 26, 2001 among Amtrol
International Investments, Inc. and
Cypress Merchant Banking Partners, L.P.
and Cypress Offshore Partners, L.P.
(incorporated by reference from the
Companys Annual Report on Form 10-K
for the fiscal year ended December 31,
2001).10.15
    
    Contribution Agreement dated
December 26, 2001 among Amtrol
Holdings, Inc., Amtrol Inc. and
WaterSoft Inc. and Cypress Merchant
Banking Partners, L.P. and Cypress
Offshore Partners, L.P. (incorporated
by reference from the Companys Annual
Report on Form 10-K for the fiscal year
ended December 31, 2001).10.16
    
    Subsidiary Guaranty Agreement
dated December 26, 2001 among Amtrol
International Investments, Inc. and
Foothill Capital Corporation
(incorporated by reference from the
Companys Annual Report on Form 10-K
for the fiscal year ended December 31,
2001).10.17
    
    Contribution Agreement dated
December 26, 2001 among Amtrol
Holdings, Inc., Amtrol Inc. and
WaterSoft Inc. and Foothill Capital
Corporation (incorporated by reference
from the Companys Annual Report on
Form 10-K for the fiscal year ended
December 31, 2001).14
    
    Code of Ethics18
    
    Preferability letter regarding change in accounting policy from LIFO to
FIFO (incorporated by reference from the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 1998).21
    
    Subsidiaries of AMTROL Inc.31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934.
 59
    Table of Contents  Exhibit #
    
    Document Description31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14 (a)
under the Securities Exchange Act of 1934.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.,
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.,
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
  *
    
    Management contract or compensatory plan arrangement. 60