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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-Q þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 2, 2005 OR o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition period from to Commission file number0-20328 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 02893-1008 
 (Address of principal executive offices)
 Registrants telephone number, including area code: (401) 884-6300 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
þ No o Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). Yes o No
þ Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date: $.01 Par Value: 100 shares of Common stock as of May 10, 2005.   1




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FORM 10-Q FOR THE QUARTER ENDED APRIL 2, 2005 INDEX PAGEPART I
    
    Financial InformationItem 1.
    
    Condensed
Consolidated Balance Sheets - April 2, 2005 and December 31, 2004
    
    
    3Condensed
Consolidated Statements of Operations - For the Quarters Ended April 2, 2005 and April 3, 2004
    
    
    4Condensed
Consolidated Statements of Shareholders Deficit - For the Quarters Ended April 2, 2005 and April 3, 2004
    
    
    5Condensed
Consolidated Statements of Cash Flows - For the Quarters Ended April 2, 2005 and April 3, 2004
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4.
    
    Controls and Procedures
    
    
    22PART II
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    23Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3.
    
    Defaults Upon Senior Securities
    
    
    23Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    23Item 5.
    
    Other Information
    
    
    23Item 6.
    
    Exhibits
    
    
    23Signatures
    
    
    24Certifications
    
    
    25Ex-31.1 Section 302 Certification of the C.E.O.Ex-31.2 Section 302 Certification of the C.F.O.Ex-32.1 Section 906 Certification of the C.E.O.Ex-32.2 Section 906 Certification of the C.F.O.
  2




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AMTROL INC. AND SUBSIDIARIES 
 Condensed Consolidated Balance Sheets
 (Unaudited  In thousands)
 April 2,
    
    
    December 31,2005
    
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    6,159
    
    
    $
    12,378Accounts receivable, less allowance for doubtful
accounts
    
    
    33,895
    
    
    
    29,946Inventories
    
    
    33,584
    
    
    
    30,637Tax refund receivable
    
    
    1,689
    
    
    
    2,010Prepaid expenses and other
    
    
    1,632
    
    
    
    1,030Total current assets
    
    
    76,959
    
    
    
    76,001Property, plant and
equipment, net
    
    
    30,100
    
    
    
    30,800Other assets:Goodwill
    
    
    119,205
    
    
    
    119,205Deferred financing costs
    
    
    1,670
    
    
    
    1,920Other
    
    
    329
    
    
    
    314Total other assets
    
    
    121,204
    
    
    
    121,439$
    228,263
    
    
    $
    228,240Liabilities
and Shareholders DeficitCurrent liabilities:Current maturities of long-term debt
    
    $
    2,957
    
    
    $
    2,957Notes payable to banks
    
    
    8,686
    
    
    
    10,774Accounts payable
    
    
    24,306
    
    
    
    23,006Accrued volume rebates
    
    
    1,430
    
    
    
    4,615Accrued expenses
    
    
    10,400
    
    
    
    10,158Accrued interest
    
    
    2,675
    
    
    
    256Accrued income taxes
    
    
    1,340
    
    
    
    1,415Total current liabilities
    
    
    51,794
    
    
    
    53,181Other noncurrent liabilities
    
    
    4,148
    
    
    
    3,979Long-term debt, less current maturities
    
    
    175,038
    
    
    
    171,300Shareholders Deficit:Capital stock $.01 par value  authorized 1,000 shares,
100 shares issued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    99,273
    
    
    
    99,273Accumulated deficit
    
    
    (106,866
    )
    
    
    (105,339
    )Accumulated other comprehensive income
    
    
    4,876
    
    
    
    5,846Total shareholders deficit
    
    
    (2,717
    )
    
    
    (220
    )$
    228,263
    
    
    $
    228,240
 The accompanying notes are an integral part of these condensed consolidated financial statements. 3




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AMTROL INC. AND SUBSIDIARIES 
 Condensed Consolidated Statements of Operations (Unaudited  in thousands)
 Quarter EndedApril 2,
    
    
    April 3,2005
    
    
    2004Net sales
    
    $
    54,990
    
    
    $
    52,655Cost of goods sold
    
    
    43,699
    
    
    
    41,139Gross profit
    
    
    11,291
    
    
    
    11,516Operating expenses:Selling, general and administrative
    
    
    7,137
    
    
    
    7,266Income from operations
    
    
    4,154
    
    
    
    4,250Other income (expense):Interest expense
    
    
    (5,536
    )
    
    
    (5,478
    )Interest income
    
    
    43
    
    
    
    41Other, net
    
    
    70
    
    
    
    66Loss from continuing operations before
provision for income taxes
    
    
    (1,269
    )
    
    
    (1,121
    )Provision for income taxes
    
    
    258
    
    
    
    145Loss from continuing operations
    
    
    (1,527
    )
    
    
    (1,266
    )Discontinued operations:Loss from sale of subsidiary, net
    
    
    
    
    
    
    (8,331
    )Loss from discontinued operations, net
    
    
    
    
    
    
    (389
    )Net loss
    
    $
    (1,527
    )
    
    $
    (9,986
    )
 The accompanying notes are an integral part of these condensed consolidated financial statements. 4




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AMTROL INC. AND SUBSIDIARIES 
 Condensed Consolidated
Statements of Shareholders Deficit (Unaudited  in thousands)
 Quarter Ended April 2, 2005 Accumulated OtherAdditional Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ComprehensiveCommon Stock
    
    
    Capital
    
    
    Deficit
    
    
    Income/(Loss)
    
    
    LossBalance, December 31, 2004
    
    $
    
    
    
    $
    99,273
    
    
    $
    (105,339
    )
    
    $
    5,846
    
    
    $
    Net loss
    
    
    
    
    
    
    
    
    
    
    (1,527
    )
    
    
    
    
    
    
    (1,527
    )Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (970
    )
    
    
    (970
    )Balance, April 2, 2005
    
    $
    
    
    
    $
    99,273
    
    
    $
    (106,866
    )
    
    $
    4,876
    
    
    $
    (2,497
    )
 Quarter Ended April 3, 2004 Accumulated OtherAdditional Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ComprehensiveCommon Stock
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    LossBalance, December 31, 2003
    
    $
    
    
    
    $
    99,273
    
    
    $
    (83,125
    )
    
    $
    1,063
    
    
    $
    Net loss
    
    
    
    
    
    
    
    
    
    
    (9,986
    )
    
    
    
    
    
    
    (9,986
    )Derivative instrument valuation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    37Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,405
    
    
    
    2,405Balance, April 3, 2004
    
    $
    
    
    
    $
    99,273
    
    
    $
    (93,111
    )
    
    $
    3,505
    
    
    $
    (7,544
    )
 The accompanying notes are an integral part of these condensed consolidated financial statements. 5




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AMTROL INC. AND SUBSIDIARIES 
 Condensed Consolidated Statements of Cash Flows (Unaudited  in thousands)
 Quarter EndedApril 2,
    
    
    April 3,2005
    
    
    2004Cash Flows Provided by (Used in) Operating Activities:Loss from continuing operations
    
    $
    (1,527
    )
    
    $
    (1,266
    )Loss from discontinued operations
    
    
    
    
    
    
    (8,720
    )Adjustments to reconcile net loss to net cash
provided by (used in) operating activities -Depreciation and amortization
    
    
    1,953
    
    
    
    2,122Provision for losses on accounts receivable
    
    
    17
    
    
    
    18Deferred interest
    
    
    1,594
    
    
    
    1,442Net assets of discontinued operations
    
    
    
    
    
    
    5,011Changes in operating assets and liabilities
    
    
    (6,834
    )
    
    
    (1,005
    )Net cash used in operating activities
    
    
    (4,797
    )
    
    
    (2,398
    )Cash Flows Provided by (Used in) Investing Activities:Capital expenditures
    
    
    (1,629
    )
    
    
    (1,768
    )Proceeds from sale of discontinued business
    
    
    
    
    
    
    125Net cash used in investing activities
    
    
    (1,629
    )
    
    
    (1,643
    )Cash Flows Provided by (Used in) Financing Activities:Repayment of debt
    
    
    (37,702
    )
    
    
    (35,512
    )Issuance of debt
    
    
    38,084
    
    
    
    41,306Net cash provided by financing activities
    
    
    382
    
    
    
    5,794Net increase (decrease) in cash and cash equivalents
    
    
    (6,044
    )
    
    
    1,753Effect of exchange rate changes on cash and cash
equivalents
    
    
    (175
    )
    
    
    (32
    )Cash and cash equivalents, beginning of period
    
    
    12,378
    
    
    
    13,289Cash and cash equivalents, end of period
    
    $
    6,159
    
    
    $
    15,010
 The accompanying notes are an integral part of these condensed consolidated financial statements. 6




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AMTROL INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 1.Basis of Presentation In the opinion of management, the accompanying unaudited condensed consolidated financial
statements contain all adjustments necessary to present fairly, in accordance with U.S. generally
accepted accounting principles, the financial position, results of operations and cash flows of
AMTROL Inc. and its subsidiaries (the Company) for the interim periods presented. Such
adjustments consisted of only normal recurring items. The results of operations for the interim
periods shown in this report are not necessarily indicative of results for any future interim
period or for the entire year. These condensed consolidated financial statements do not include
all disclosures associated with annual consolidated financial statements and accordingly should be
read in conjunction with the consolidated financial statements and notes thereto included in the
Companys Annual Report on Form 10-K. 2.Use of Estimates The preparation of consolidated financial statements in conformity with U.S. 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 consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. 3.Significant Accounting Policies Revenue Recognition and Related Costs In 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. Shipping/handling fees and costs are included in net sales and
cost of goods sold, respectively, consistent with the presentation required by Emerging Issues Task
Force (EITF) 00-10. 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. 7




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Cash and Cash Equivalents Cash 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 Accounts In 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. Reclassifications Certain prior year balances
have been reclassified to conform to the current year presentation. Concentration of Credit Risk The 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 April 2, 2005 and April 3,
2004, 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 as economic
conditions change. The Company has not experienced any losses on its cash equivalents or
short-term investments. Depreciable Property
and Equipment Property, 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 that 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
 Inventories The Companys inventories are stated at the lower of cost or market including material, labor and
manufacturing overhead (see Note 6). 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. Warranty The 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 8




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improvements. The Company periodically assesses the adequacy of its warranty reserve through a
detailed analysis and adjusts the reserve accordingly. The following chart illustrates the changes in the Companys warranty reserve for the periods
presented: Three Months Ended
    
    
    Year EndedApril 2,
    
    
    December 31,(in thousands)
    
    2005
    
    
    2004Balance, beginning of period
    
    $
    3,662
    
    
    $
    3,065Warranties issued during the period
    
    
    589
    
    
    
    1,924Claims during the period
    
    
    (651
    )
    
    
    (1,987
    )Change in estimate
    
    
    
    
    
    
    660Balance, end of period
    
    $
    3,600
    
    
    $
    3,662
 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 SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS No. 144, the Company has evaluated
the realizability of non-goodwill long-lived assets, which primarily
consist of property, plant and equipment and intangible assets, based
on expectations of the non-discounted future cash flows for each
subsidiary having a material amount of these assets. If the sum of
the expected non-discounted future cash flows is less than the
carrying amount of all assets, the Company would recognize an
impairment loss. 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, taxes and depreciation and amortization expense
(EBITDA). The Company estimates the EBITDA multiple by
reviewing comparable company information and other industry data. The
Company believes that its procedure for estimating gross future cash
flows, including the terminal valuation, are reasonable and
consistent with current market conditions. Based on its most recent
analysis, the Company believes that no material impairment exists at
April 2, 2005. Deferred Financing Costs Deferred financing costs are stated at cost 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 quarter-end rate of exchange. Shareholders equity has been converted using historical rates,
and revenues and expenses at the average exchange rates prevailing during the quarter. The
cumulative effect of the resulting translation was reflected as a separate component of
shareholders equity. 9




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During the current quarter, 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 changed, the corresponding value of
these receivables also changed. At April 2, 2005, the Companys Portuguese operations had forward
contracts totalling $1.0 million with maturity dates through June 2005. The value of
these forward contracts was immaterial to the balance sheet of the Company. Recent Accounting Pronouncements In December 2004, the
FASB issued SFAS No. 123(R) (revised 2004), Share-Based
Payment,which is a
revision of SFAS No. 123.SFAS No. 123(R) supersedes APB Opinion No. 25 and amends SFAS No. 95,
Statement of Cash Flows.SFAS No. 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the statement of operations based
on their fair values. The new standard will be effective for the Company in the quarter beginning
January 1, 2006. The adoption of this standard is not expected to have a material impact on the
Companys overall financial position or results of operations. In November 2004, the FASB issued SFAS No. 151, Inventory Costs  an amendment of ARB No. 43.
SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15,
2005. This Statement amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing,to clarify
the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted
material (spoilage). This Statement requires that those items be recognized as current-period
charges regardless of whether they meet the criterion of so abnormal. In addition, this
Statement requires that allocation of fixed production overheads to the costs of conversion be
based on the normal capacity of the production facilities. The adoption of this standard is not
expected to have a material impact on the Companys overall
financial position or results of
operations. In January 2003, the
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, were adopted by the Company during the latest quarter. The adoption of this
Interpretation had no impact on the Companys overall financial position and results of operations. 4.Long-Term Debt 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 (as amended, the Foothill Facility) and a $35.0 10




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million ($25.0 million prior to the November 18, 2003 amendments discussed below) senior second-priority
secured credit facility with affiliates of Cypress (as amended, the Cypress Facility). The Foothill Facility provides the Company (i) a term loan facility consisting of a five-year Term
A Loan maturing December 2006, with an outstanding principal amount of $4.7 million at April 2,
2005, bearing cash interest at Wells Fargo Reference Rate (approximating the prime rate) plus 0.75%
(6.50% at April 2, 2005), and a four-year Term B Loan maturing December 2006, with an outstanding
principal amount of $19.4 million as of April 2, 2005, bearing cash interest at the Wells Fargo
Reference Rate plus 3.5%, and Paid-In-Kind (PIK) interest at 3.5% (12.75% at April 2, 2005)
(collectively the Term Loans) and (ii) a five-year Revolving Credit Facility maturing December
2006, bearing interest at Wells Fargo Reference Rate plus 0.5% (6.25% at April 2, 2005), 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 April 2, 2005,
total availability and aggregate borrowings under the Revolving Credit Facility were $15.9 million
and $8.6 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), collectively the Amendments. 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 First Amendment also revised certain covenants to be more consistent with the
Companys business plans. The Amendments did not affect the maturity date (December 26, 2006) of
the Revolving Credit Facility, Term A Loan or the Cypress Facility. On December 22, 2004, the Company further amended its Foothill Facility by entering into the Second
Amendment to Loan and Security Agreement (the Foothill Second Amendment). This Foothill Second
Amendment extended the maturity date of the Term B Loan to December 21, 2006. The Foothill Second
Amendment did not affect the maturity dates of the Revolving Credit Facility, Term A Loan or the
Cypress Facility and did not revise any covenants. The Cypress Facility consists of term loans totaling $35.0 million (the Term C Loan). The Term C
Loan, $47.5 million (includes PIK interest of $12.5 million) as of April 2, 2005, 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 shareholders 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
April 2, 2005, the Company was in compliance with the various covenants of the Foothill Facility
and Cypress Facility. 11




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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 April 2, 2005, the Company was in compliance with the various
covenants of the Notes. 5.Discontinued Operations The Company on February 27, 2004, 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
$363,000 of which $238,000 was received during the second quarter of
2004 satisfying the full obligation. 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 were included within the Companys Europe segment. The Company has
treated the sale of Holdings as a discontinued operation in this quarterly report on Form 10-Q for
the period ended April 3, 2004 and accordingly the results of operations of
Holdings is excluded from continuing operations. Net sales and
Pre-tax loss excluded from continuing operations for the period ended April 3, 2004 was $1.9
million and $0.4 million, respectively. There was no interest expense allocated to this
discontinued operation. 6.Inventories Inventories are stated at the lower of cost or market and were as follows (in thousands): April 2,
    
    
    December 31,2005
    
    
    2004Raw materials and work in process
    
    $
    21,213
    
    
    $
    18,935Finished goods
    
    
    12,371
    
    
    
    11,702$
    33,584
    
    
    $
    30,637
 7.Accounting for Derivative Instruments and Hedging Activities The Company had an interest rate swap contract and an interest rate cap (the Contract) that
matured on June 30, 2004. The Company received the 90-day LIBOR rate and paid a fixed rate 12




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##### Table of Contents



of 4.60% unless LIBOR increased to 7.1%. The Contract was designated as a cash flow hedge of variable
future cash flows associated with the Foothill Agreement Term Loan A and B Debt. 8.Provision for Income Taxes The effective income tax rates used in the interim consolidated financial statements are estimates
of the full years rates. The Company increased the valuation allowance for certain deferred tax
assets related to net operating loss carryforwards during 2004. The increase resulted from a
reassessment by management of the timing and likelihood of certain prospective events central to
managements tax planning strategies, consistent with the requirements of SFAS No. 109. The net
operating loss carryforwards are long-term in nature and management may reduce the valuation
allowance if its assessment of the timing and likelihood of these prospective events changes. 9.Business Segment Information The Company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, HVAC and refrigerant cylinder markets. These products are
marketed throughout the world but primarily in North America, Western Europe and Asia. The Companys Europe segment includes its facilities in Guimaraes, Portugal and Swarzedz, Poland.
The Guimaraes facility manufactures returnable and non-returnable steel gas cylinders for storing
and dispensing of cooking, heating and refrigerant gases that are marketed worldwide. The Swarzedz
facility refurbishes gas cylinders. The primary criteria by which financial performance is evaluated and resources are allocated
include revenues and EBITDA. EBITDA is earnings (net income/loss) before interest, taxes,
depreciation and amortization. The method of calculating EBITDA is consistent with the definition
contained in the Foothill Agreement, the Cypress 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 are comprised of goodwill and
property, plant and equipment, net. The following is a summary of key financial data by segment: 13




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##### Table of Contents



April 2,
    
    
    April 3,2005
    
    
    2004Net Sales to external customersNorth AmericaUSWater technologies
    
    $
    23,997
    
    
    $
    24,976Cylinders
    
    
    7,134
    
    
    
    6,054OtherWater technologies
    
    
    2,042
    
    
    
    1,808EuropePortugalCylinders
    
    
    21,476
    
    
    
    19,525OtherCylinders
    
    
    341
    
    
    
    292Consolidated
    
    $
    54,990
    
    
    $
    52,655Income from operationsNorth America
    
    $
    2,473
    
    
    $
    3,238Europe
    
    
    1,681
    
    
    
    1,012Consolidated
    
    $
    4,154
    
    
    $
    4,250EBITDANorth America
    
    $
    3,506
    
    
    $
    4,381Europe
    
    
    2,464
    
    
    
    1,848Consolidated
    
    $
    5,970
    
    
    $
    6,229
 April 2,
    
    
    December 31,Long-Lived assets
    
    2005
    
    
    2004North AmericaUS
    
    $
    114,501
    
    
    $
    114,859Other
    
    
    8
    
    
    
    9EuropePortugal
    
    
    32,969
    
    
    
    33,127Other
    
    
    1,827
    
    
    
    2,010Consolidated
    
    $
    149,305
    
    
    $
    150,005
 14




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##### Table of Contents



The following represents the reconciliation of EBITDA to a recognized Generally Accepted
Accounting Principles (GAAP) measure. April 2,
    
    
    April 3,(in thousands)
    
    2005
    
    
    2004Loss from continuing operations
    
    $
    (1,527
    )
    
    $
    (1,266
    )Interest expense
    
    
    5,536
    
    
    
    5,478Depreciation (a)
    
    
    1,703
    
    
    
    1,872Income taxes
    
    
    258
    
    
    
    145EBITDA
    
    $
    5,970
    
    
    $
    6,229
    10.Commitments and Contingencies At April 2, 2005, the Foothill Facility contained a sublimit to support the issuance of letters of
credit in the amount of $3.0 million. At April 2, 2005, letters of credit outstanding amounted to
$1.7 million. Some of the Companys operations generate or have in the past generated waste materials that are
regulated under environmental laws. 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, cash
flows 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,
results of operations and cash
flows. 15




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##### Table of Contents



Item 2.       Managements Discussion and Analysis of Financial Condition and Results of Operations Overview This section should be read in conjunction with the condensed Consolidated Financial Statements of
the Company included elsewhere herein and the Companys Form 10-K for 2004. The Company and its representatives may from time to time make written or oral statements,
including statements contained in the Company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. All statements other than statements of historical fact included in this Form 10-Q 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 domestic and
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
 Three Months Ended April 2, 2005 Compared to Three Months Ended April 3, 2004. Consolidated Operations The following table sets forth consolidated operating results for the quarterly periods
presented: 16




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##### Table of Contents



April 2, 2005
    
    
    April 3, 2004% of Net
    
    
    
    
    
    
    
    
    
    
    % of NetIn millions of dollars
    
    Actual
    
    
    Sales
    
    
    % Change
    
    
    Actual
    
    
    SalesNet sales
    
    $
    55.0
    
    
    
    100.0
    %
    
    
    4.6
    %
    
    $
    52.6
    
    
    
    100.0
    %Cost of goods sold
    
    
    43.7
    
    
    
    79.5
    %
    
    
    6.3
    %
    
    
    41.1
    
    
    
    78.1
    %Gross profit
    
    
    11.3
    
    
    
    20.5
    %
    
    
    -1.7
    %
    
    
    11.5
    
    
    
    21.9
    %Selling, general and administrative
expenses
    
    
    7.1
    
    
    
    12.9
    %
    
    
    -2.7
    %
    
    
    7.3
    
    
    
    13.9
    %Income from operations
    
    
    4.2
    
    
    
    7.6
    %
    
    
    0.0
    %
    
    
    4.2
    
    
    
    8.0
    %Other income (expense), netInterest expense, net
    
    
    (5.5
    )
    
    
    -10.0
    %
    
    
    0.0
    %
    
    
    (5.5
    )
    
    
    -10.5
    %Other, net
    
    
    0.1
    
    
    
    0.2
    %
    
    
    0.0
    %
    
    
    0.1
    
    
    
    0.2
    %Loss from continuing operations
before income taxes
    
    
    (1.2
    )
    
    
    -2.2
    %
    
    
    0.0
    %
    
    
    (1.2
    )
    
    
    -2.3
    %Income tax expense
    
    
    0.3
    
    
    
    0.5
    %
    
    
    200.0
    %
    
    
    0.1
    
    
    
    0.2
    %Loss from continuing operations
    
    
    (1.5
    )
    
    
    -2.7
    %
    
    
    -15.4
    %
    
    
    (1.3
    )
    
    
    -2.5
    %Loss from discontinued operations, net
    
    
    
    
    
    
    0.0
    %
    
    
    100.0
    %
    
    
    (8.7
    )
    
    
    -16.5
    %Net loss
    
    $
    (1.5
    )
    
    
    -2.7
    %
    
    
    85.0
    %
    
    $
    (10.0
    )
    
    
    -19.0
    %
 Net Sales.Net sales for the first quarter of 2005 increased $2.4 million or 4.6% to $55.0
million from $52.6 million for the first quarter of 2004. In North America, net sales for the
first quarter of 2005 increased $0.4 million or 1.2% as compared to the first quarter of 2004
due principally to implemented price increases during 2004 to offset rising steel costs,
mitigated by a slight reduction in volume. Net sales for the first quarter of 2005 in Europe
increased $2.0 million or 10.1% as compared to the first quarter of 2004 due principally to a
favorable product mix and the strengthening of the Euro against the U.S. dollar. If the value
of the Euro had remained at the average level of the first quarter of 2004, reported net sales
in Europe for the first quarter of 2005 would have increased $0.9 million or 4.6% from the first
quarter of 2004. Gross Profit.Gross profit decreased $0.2 million for the first quarter of 2005 to $11.3
million from $11.5 million for the first quarter of 2004. As a percentage of net sales, gross
profit for the first quarter of 2005 decreased to 20.5% from 21.9% in 2003. This decrease was
due principally to product mix. Selling, General and Administrative Expenses.Selling, general and administrative expenses
decreased $0.2 million or 2.7% during the first quarter of 2005 to $7.1 million from $7.3
million for the first quarter of 2004. The decrease was primarily due to a reduction of
software amortization of $0.2 million and certain 2004 marketing initiatives that did not reoccur in
2005 offset by the strengthening of the Euro versus the U.S. dollar. Interest Expense.Interest expense for the first quarter of 2005 was unchanged as compared to
the first quarter of 2004. 17




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##### Table of Contents



Other Income (Expense), Net.Other income, net for the first quarter of 2005 of $0.1 million
was unchanged as compared to the first quarter of 2004 of $0.1 million. Income Taxes.Income tax expense increased $0.2 million during the first quarter of 2005 as
compared to the first quarter of 2004 reflecting higher pretax earnings in the Companys Europe
segment. Net Loss.The net loss for the first quarter of 2005 of $1.5 million compares to a net loss for
the first quarter of 2004 of $10.0 million. The reduction was principally due to the loss of
$8.7 million incurred on the sale of the discontinued subsidiary in February 2004. Segment Operations North America The following table presents a summary of operating results for the quarterly periods
presented: April 2, 2005
    
    
    
    
    
    
    

    April 3, 2004% of Net
    
    
    
    
    
    
    
    
    
    
    % of NetIn millions
    
    Actual
    
    
    Sales
    
    
    % Change
    
    
    Actual
    
    
    SalesNet sales
    
    $
    33.2
    
    
    
    100.0
    %
    
    
    1.2
    %
    
    $
    32.8
    
    
    
    100.0
    %Cost of goods sold
    
    
    25.0
    
    
    
    75.3
    %
    
    
    5.9
    %
    
    
    23.6
    
    
    
    72.0
    %Gross profit
    
    
    8.2
    
    
    
    24.7
    %
    
    
    -10.9
    %
    
    
    9.2
    
    
    
    28.0
    %Selling, general and
administrative
expenses
    
    
    5.7
    
    
    
    17.2
    %
    
    
    -5.0
    %
    
    
    6.0
    
    
    
    18.3
    %Income from operations
    
    $
    2.5
    
    
    
    7.5
    %
    
    
    -21.9
    %
    
    $
    3.2
    
    
    
    9.7
    %Units shipped
    
    
    1.29
    
    
    
    
    
    
    
    
    
    
    
    1.32
 In North America, net sales increased $0.4 million or 1.2% during the first quarter of 2005 as
compared to the first quarter of 2004 due principally to a reduction in volume and implemented
price increases during 2004 to mitigate rising steel costs. The Companys average selling price
for the first quarter of 2005 increased 3.6% to $25.74 versus $24.85 for the first quarter of 2004
as a function of both the implemented price increases and offset by product mix. Gross profit
decreased $1.0 million during the first quarter of 2005 to $8.2 million from $9.2 million during
the first quarter of 2004. As a percentage of net sales, gross profit during the first quarter of
2005 decreased to 24.7% from 28.0% for the first quarter of 2004. This decrease was due
principally to product mix. Selling, general and administrative expenses decreased $0.3 million or
5.0% during the first quarter of 2005 to $5.7 million from $6.0 million during the first quarter of
2004. The decrease was primarily due to lower software amortization and 2004 marketing initiatives
that did not reoccur in 2005. Europe The following table presents a summary of operating results for the quarterly periods
presented: 18




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##### Table of Contents



April 2, 2005
    
    
    April 3, 2004% of Net
    
    
    
    
    
    
    
    
    
    
    % of NetIn millions
    
    Actual
    
    
    Sales
    
    
    % Change
    
    
    Actual
    
    
    SalesNet sales
    
    $
    21.8
    
    
    
    100.0
    %
    
    
    10.1
    %
    
    $
    19.8
    
    
    
    100.0
    %Cost of goods sold
    
    
    18.7
    
    
    
    85.8
    %
    
    
    6.9
    %
    
    
    17.5
    
    
    
    88.4
    %Gross profit
    
    
    3.1
    
    
    
    14.2
    %
    
    
    34.8
    %
    
    
    2.3
    
    
    
    11.6
    %Selling, general and
administrative
expenses
    
    
    1.4
    
    
    
    6.4
    %
    
    
    7.7
    %
    
    
    1.3
    
    
    
    6.6
    %Income from operations
    
    $
    1.7
    
    
    
    7.8
    %
    
    
    70.0
    %
    
    $
    1.0
    
    
    
    5.0
    %Units shipped
    
    
    1.00
    
    
    
    
    
    
    
    
    
    
    
    1.21
 In Europe, net sales for the first quarter of 2005 increased $2.0 million or 10.1% as compared to
the first quarter of 2004 due principally to favorable product mix of $0.9 million and the
strengthening of the Euro against the U.S. dollar of $1.1 million. The Companys average selling
price for the first quarter of 2005 increased 33.2% in 2005 to $21.80 versus $16.36 due to a
favorable product mix and the strengthening of the Euro against the U.S. dollar, which amounted to
$0.83 of the change in the average selling price. Gross profit increased approximately $0.8
million during the first quarter of 2005 to $3.1 million from $2.3 million during the first quarter
of 2004. As a percentage of net sales, gross profit for the first quarter of 2005 increased to
14.2% from 11.6% for the first quarter of 2004. This increase was due principally to a favorable
product mix and the strengthening of the Euro against the U.S. dollar of $0.1 million. Selling,
general and administrative expenses during the first quarter of 2005 increased $0.1 million or 7.7%
to $1.4 million from $1.3 million for the first quarter of 2004. The increase was primarily due to
higher commission expenses as a result of the increase in net sales and the strengthening of the
Euro against the U.S. dollar. Liquidity and Capital Resources As of April 2, 2005, the Companys operating capital (defined as accounts receivable and inventory,
less accounts payable) increased $5.6 million from $37.6 as of December 31, 2004 to $43.2 million.
Accounts receivable, inventories and accounts payable increased $4.0 million, $2.9 million and $1.3
million, respectively. The increase in accounts receivable was due principally to higher sales levels and the impact of
the strengthening Euro on the translation of the Companys European operations. The Company did
not experience any significant changes in credit terms, credit utilization or delinquency in
accounts receivable during the first quarter of 2005. The increase in inventories was due principally to higher sales levels and the impact of the
strengthening Euro on the translation of the Companys European operations. The increase in accounts payable was due principally to the higher sales levels and the impact of
the strengthening Euro on the translation of the Companys European operations. For the first three months of 2005, net cash used in operations of $4.8 million was $2.4 million
more than the first three months of 2004 due principally to increased working capital
requirements (defined as current assets less current liabilities) attributable to the higher sales
and the strengthening of the Euro. Capital expenditures of $1.6 million were $0.1 million less
than 19




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##### Table of Contents



the first three months of 2004. Cash provided by financing activities during the quarter
ended April 2, 2005 decreased $5.4 million due principally to the Companys use of its cash
reserves. 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 (as amended, 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 Cypress (as amended, the Cypress Facility). The Foothill Facility provides the Company (i) a term loan facility consisting of a five-year Term
A Loan maturing December 2006, with an outstanding principal amount of $4.7 million at April 2,
2005, bearing cash interest at Wells Fargo Reference Rate (approximating the prime rate) plus 0.75%
(6.50% at April 2, 2005), and a four-year Term B Loan maturing December 2006, with an outstanding
principal amount of $19.4 million as of April 2, 2005, bearing cash interest at the Wells Fargo
Reference Rate plus 3.5%, and Paid-In-Kind (PIK) interest at 3.5% (12.75% at April 2, 2005)
(collectively the Term Loans) and (ii) a five-year Revolving Credit Facility maturing December
2006, bearing interest at Wells Fargo Reference Rate plus 0.5% (6.25% at April 2, 2005), 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 April 2, 2005,
total availability and aggregate borrowings under the Revolving Credit Facility were $15.9 million
and $8.6 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), collectively the Amendments. 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 First Amendment also revised certain covenants to be more consistent with the
Companys business plans. The Amendments did not affect the maturity date (December 26, 2006) of
the Revolving Credit Facility, Term A Loan or the Cypress Facility. On December 22, 2004, the Company further amended its Foothill Facility by entering into the Second
Amendment to Loan and Security Agreement (the Foothill Second Amendment). This Foothill Second
Amendment extended the maturity date of the Term B Loan to December 21, 2006. The Foothill Second
Amendment did not affect the maturity dates of the Revolving Credit Facility, Term A Loan or the
Cypress Facility and did not revise any covenants. The Cypress Facility consists of term loans totaling $35.0 million (the Term C Loan). The Term C
Loan, $47.5 million (includes PIK interest of $12.5 million) as of April 2, 2005, 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 shareholders 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. 20




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##### Table of Contents



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
April 2, 2005, the Company was in compliance with the various covenants of the Cypress Facility and
Foothill Facility. 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 April 2, 2005, the
Company was in compliance with the various covenants of the Notes. 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
assurances that the Company will be able to refinance the maturing debt. The Company intends to fund future working capital, capital expenditure and debt service
requirements with its cash position, cash flow from operations and borrowings under the Revolving
Credit Facility. Management believes that cash generated from these sources will be sufficient to
meet the Companys working capital and capital expenditure needs in the foreseeable future.
Finally, the Company may consider other options to fund future working capital and capital
expenditure needs, including the issuance of additional debt and equity securities. 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 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. Inflation The Company believes that anticipated inflation rates will not have a materially adverse effect on
its results of operations or its financial condition in 2005. 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. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in information relating to market risk since the Companys
disclosure included in Item 7A of Form 10-K as filed with the Securities and Exchange Commission on
March 31, 2005. 21




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Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this report, 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 There have been no significant changes in internal control over financial reporting that occurred
during the first quarter of 2005, that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting. 22




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AMTROL INC. AND SUBSIDIARIES
 
 PART II 
 Item 1.Legal Proceedings No material legal proceedings were terminated or filed against the Company during the period
covered by this report. 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None.
 
 Item 3. Defaults Upon Senior Securities None. 
 Item 4. Submission of Matters to a Vote of Security Holders None. 
 Item 5. Other Information None. 
 Item 6. Exhibits (a) Exhibits:  31.1
    Certification of Chief Executive Officer pursuant to
Rule 13a-14(a) under the Securities Exchange Act of 1934.31.2
    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. 23




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AMTROL INC. AND SUBSIDIARIES
 
 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. AMTROL INC.Date: May 11, 2005
    By:
    /s/ ALBERT D. INDELICATOAlbert D. IndelicatoPresident, Chairman of the Board,
Chief Executive Officer and
Director Date: May 11, 2005
    By:
    /s/ LARRY T. GUILLEMETTELarry T. Guillemette,Executive Vice President,

Chief Financial Officer and

Treasurer 24