##### Table of Contents



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 June 30, 2005
 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 number 333-115267
 ERICO INTERNATIONAL CORPORATION
 (Exact Name of Registrant as Specified in Its Charter)
 Ohio
    
    34-0201460(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification Number)
 
 30575 Bainbridge Road
Suite 300
Solon, Ohio 44139
(440) 349-2630  Address, including zip code, and telephone number, including area code, of Registrants Principal Executive Offices)
 o þ
 o þ




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##### Table of Contents



INDEX TO QUARTERLY REPORT
  
 Page No.Part I. Financial InformationItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004
    
    
    2Condensed Consolidated Income Statements for the Three and Six Months Ended
June 30, 2005 and 2004
    
    
    3Condensed Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2005 and 2004
    
    
    4Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    5Item 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
    
    
    21Part II. Other InformationItem 6. Exhibits
    
    
    22Signatures
    
    
    23EX-31.1 Form of Rule 13A-14(A)/15D-14(A) Cert. of CEOEX-31.2 Form of Rule 13A-14(A)/15D-14(A) Cert. of CFOEX-32 Form of Section 1350 Cert. of CEO & CFO
 1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 ERICO International Corporation and Subsidiaries
 
 Condensed Consolidated Balance Sheets
  June 30,
    
    December 31,2005
    
    2004(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,294
    
    
    $
    2,321Trade accounts receivable, net
    
    
    60,727
    
    
    
    50,485Inventories, net
    
    
    53,972
    
    
    
    59,600Other current assets
    
    
    6,889
    
    
    
    8,909Total current assets
    
    
    123,882
    
    
    
    121,315Property, plant and equipment, net
    
    
    46,314
    
    
    
    52,522Goodwill
    
    
    101,403
    
    
    
    101,303Other intangible assets, net
    
    
    36,922
    
    
    
    36,905Other assets
    
    
    10,246
    
    
    
    10,676Total assets
    
    $
    318,767
    
    
    $
    322,721Liabilities and stockholders net investmentCurrent liabilities:Trade accounts payable
    
    $
    30,231
    
    
    $
    26,422Accrued compensation
    
    
    10,861
    
    
    
    13,446Dividend payable
    
    
    
    
    
    
    15,000Other current liabilities
    
    
    21,264
    
    
    
    21,874Total current liabilities
    
    
    62,356
    
    
    
    76,742Long-term debt
    
    
    160,175
    
    
    
    152,175Deferred income taxes
    
    
    27,831
    
    
    
    28,894Other long-term liabilities
    
    
    15,548
    
    
    
    16,785Stockholders net investment:Common stock, par value $1.00 per share, 1,500,000
shares authorized, 1 share issued and outstanding
    
    
    
    
    
    
    Parent company investment
    
    
    55,702
    
    
    
    46,699Accumulated other comprehensive (loss) income
    
    
    (2,845
    )
    
    
    1,426Total stockholders net investment
    
    
    52,857
    
    
    
    48,125Total liabilities and stockholders net investment
    
    $
    318,767
    
    
    $
    322,721
  The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
 2




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ERICO International Corporation and Subsidiaries
 
 Condensed Consolidated Income Statements (Unaudited)
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net sales
    
    $
    100,128
    
    
    $
    92,112
    
    
    $
    190,078
    
    
    $
    175,562Cost of sales
    
    
    64,089
    
    
    
    58,529
    
    
    
    123,090
    
    
    
    112,140Gross profit
    
    
    36,039
    
    
    
    33,583
    
    
    
    66,988
    
    
    
    63,422Operating expenses
    
    
    23,004
    
    
    
    20,972
    
    
    
    44,623
    
    
    
    42,311Operating income
    
    
    13,035
    
    
    
    12,611
    
    
    
    22,365
    
    
    
    21,111Interest expense, net
    
    
    3,905
    
    
    
    3,857
    
    
    
    7,785
    
    
    
    7,347Foreign exchange loss (gain), net
    
    
    275
    
    
    
    (817
    )
    
    
    466
    
    
    
    (393
    )Other expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,236Income before income taxes
    
    
    8,855
    
    
    
    9,571
    
    
    
    14,114
    
    
    
    12,921Provision for income taxes
    
    
    3,062
    
    
    
    3,749
    
    
    
    5,111
    
    
    
    5,077Net income
    
    $
    5,793
    
    
    $
    5,822
    
    
    $
    9,003
    
    
    $
    7,844
 The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
 3




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##### Table of Contents



ERICO International Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows (Unaudited)
  Six Months EndedJune 30,2005
    
    2004Operating activitiesNet income
    
    $
    9,003
    
    
    $
    7,844Depreciation and amortization
    
    
    6,664
    
    
    
    6,074Other operating activities
    
    
    (6,848
    )
    
    
    (7,315
    )Net cash provided by operating activities
    
    
    8,819
    
    
    
    6,603Investing activitiesCapital expenditures
    
    
    (1,175
    )
    
    
    (1,000
    )Other investing activities
    
    
    (624
    )
    
    
    (205
    )Net cash used in investing activities
    
    
    (1,799
    )
    
    
    (1,205
    )Financing activitiesDividends paid
    
    
    (15,000
    )
    
    
    (25,000
    )Net borrowings (payments) on revolving line of credit
    
    
    8,000
    
    
    
    (23,200
    )Proceeds from issuance of subordinated debt
    
    
    
    
    
    
    121,500Principal payments on long-term debt
    
    
    
    
    
    
    (72,950
    )Financing fees paid
    
    
    
    
    
    
    (4,970
    )Net cash used in financing activities
    
    
    (7,000
    )
    
    
    (4,620
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    (47
    )
    
    
    16(Decrease) increase in cash and cash equivalents
    
    
    (27
    )
    
    
    794Cash and cash equivalents at beginning of period
    
    
    2,321
    
    
    
    2,421Cash and cash equivalents at end of period
    
    $
    2,294
    
    
    $
    3,215
 The accompanying notes are an integral part of these unaudited condensed consolidated financial
statements.
 4




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ERICO International Corporation and Subsidiaries
 
 Notes to Unaudited Condensed Consolidated Financial Statements
 June 30, 2005
  1. Basis of Presentation
  Nature of Operations , Pushdown Basis of Accounting Required in Certain Limited Circumstances
  Use of Estimates
 Principles of Consolidation
 Recently Issued Accounting Standards: Inventory Costs, an Amendment of ARB No. 43, Chapter 4
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for
Stock Issued to Employees
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ERICO International Corporation and Subsidiaries
 Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2005
 2. Inventories
  June 30,
    
    December 31,2005
    
    2004Finished goods
    
    $
    43,655
    
    
    $
    51,439Work in process
    
    
    4,688
    
    
    
    4,166Raw materials
    
    
    11,005
    
    
    
    9,51559,348
    
    
    
    65,120Inventory reserves
    
    
    (5,376
    )
    
    
    (5,520
    )Inventories, net
    
    $
    53,972
    
    
    $
    59,600
 3. Goodwill and Other Intangible Assets
   June 30, 2005GrossCarrying
    
    AccumulatedAmount
    
    Amortization
    
    NetFinite-lived intangible assets:Patents
    
    $
    3,952
    
    
    $
    (1,288
    )
    
    $
    2,664Customer relationships
    
    
    787
    
    
    
    (102
    )
    
    
    685$
    4,739
    
    
    $
    (1,390
    )
    
    $
    3,349Indefinite-lived intangible assets:Trademarks
    
    $
    33,573
    
    
    $
    
    
    
    $
    33,573Goodwill
    
    
    101,403
    
    
    
    
    
    
    
    101,403$
    134,976
    
    
    $
    
    
    
    $
    134,976
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ERICO International Corporation and Subsidiaries
 Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2005
 3. Goodwill and Other Intangible Assets (continued)
 December 31, 2004GrossCarrying
    
    AccumulatedAmount
    
    Amortization
    
    NetFinite-lived intangible assets:Patents
    
    $
    3,647
    
    
    $
    (1,010
    )
    
    $
    2,637Customer relationships
    
    
    787
    
    
    
    (82
    )
    
    
    705$
    4,434
    
    
    $
    (1,092
    )
    
    $
    3,342Indefinite-lived intangible assets:Trademarks
    
    $
    33,563
    
    
    $
    
    
    
    $
    33,563Goodwill
    
    
    101,303
    
    
    
    
    
    
    
    101,303$
    134,866
    
    
    $
    
    
    
    $
    134,866
  4. Debt and Financing Arrangements
  June 30,
    
    December 31,2005
    
    2004Revolving credit facility with commercial banks
    
    $
    8,000
    
    
    $
    8.875% subordinated notes, due 2012
    
    
    151,500
    
    
    
    151,500Other notes, due 2009
    
    
    675
    
    
    
    675$
    160,175
    
    
    $
    152,175
   7




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ERICO International Corporation and Subsidiaries
 Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2005
 4. Debt and Financing Arrangements (continued)
   5. Income Taxes
   6. Post-Retirement Benefit Plan
  8




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ERICO International Corporation and Subsidiaries
 Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2005
 6. Post-Retirement Benefit Plan (continued)
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Service cost
    
    $
    1
    
    
    $
    30
    
    
    $
    3
    
    
    $
    60Interest cost
    
    
    7
    
    
    
    100
    
    
    
    24
    
    
    
    200Amortization of net gain
    
    
    (106
    )
    
    
    
    
    
    
    (310
    )
    
    
    Curtailment gain
    
    
    
    
    
    
    
    
    
    
    (68
    )
    
    
    Net periodic (income) expense
    
    $
    (98
    )
    
    $
    130
    
    
    $
    (351
    )
    
    $
    260
 Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003
 7. Commitments and Contingencies
  8. Comprehensive Income
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net income
    
    $
    5,793
    
    
    $
    5,822
    
    
    $
    9,003
    
    
    $
    7,844Foreign currency translation adjustments
    
    
    (2,643
    )
    
    
    (1,482
    )
    
    
    (4,271
    )
    
    
    (1,725
    )Comprehensive income
    
    $
    3,150
    
    
    $
    4,340
    
    
    $
    4,732
    
    
    $
    6,119
 9




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ERICO International Corporation and Subsidiaries
 Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2005
 9. Guarantor and Non-Guarantor Subsidiaries
  Unaudited Condensed Consolidating Balance Sheets  June 30, 2005
 Non-Guarantor
    
    GuarantorParent
    
    Subsidiary
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedCash and cash equivalents
    
    $
    469
    
    
    $
    515
    
    
    $
    1,310
    
    
    $
    
    
    
    $
    2,294Trade accounts receivable, net
    
    
    
    
    
    
    32,618
    
    
    
    28,109
    
    
    
    
    
    
    
    60,727Inventories, net
    
    
    
    
    
    
    30,240
    
    
    
    23,732
    
    
    
    
    
    
    
    53,972Other current assets
    
    
    1,325
    
    
    
    2,618
    
    
    
    2,946
    
    
    
    
    
    
    
    6,889Total current assets
    
    
    1,794
    
    
    
    65,991
    
    
    
    56,097
    
    
    
    
    
    
    
    123,882Property, plant and equipment, net
    
    
    186
    
    
    
    35,476
    
    
    
    10,652
    
    
    
    
    
    
    
    46,314Goodwill
    
    
    101,403
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,403Other intangible assets, net
    
    
    36,922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,922Investment in and advances to subsidiaries
    
    
    103,598
    
    
    
    
    
    
    
    
    
    
    
    (103,598
    )
    
    
    Other assets
    
    
    6,369
    
    
    
    2,997
    
    
    
    880
    
    
    
    
    
    
    
    10,246Total assets
    
    $
    250,272
    
    
    $
    104,464
    
    
    $
    67,629
    
    
    $
    (103,598
    )
    
    $
    318,767Trade accounts payable
    
    $
    
    
    
    $
    21,048
    
    
    $
    9,183
    
    
    $
    
    
    
    $
    30,231Accrued compensation
    
    
    799
    
    
    
    5,872
    
    
    
    4,190
    
    
    
    
    
    
    
    10,861Other current liabilities
    
    
    5,532
    
    
    
    8,394
    
    
    
    7,338
    
    
    
    
    
    
    
    21,264Total current liabilities
    
    
    6,331
    
    
    
    35,314
    
    
    
    20,711
    
    
    
    
    
    
    
    62,356Long-term debt
    
    
    159,500
    
    
    
    675
    
    
    
    
    
    
    
    
    
    
    
    160,175Deferred income taxes
    
    
    20,769
    
    
    
    5,750
    
    
    
    1,312
    
    
    
    
    
    
    
    27,831Intercompany payable
    
    
    
    
    
    
    17,473
    
    
    
    60,827
    
    
    
    (78,300
    )
    
    
    Other long-term liabilities
    
    
    7,970
    
    
    
    6,345
    
    
    
    1,233
    
    
    
    
    
    
    
    15,548Total stockholders net investment
    
    
    55,702
    
    
    
    38,907
    
    
    
    (16,454
    )
    
    
    (25,298
    )
    
    
    52,857Total liabilities and stockholders
net investment
    
    $
    250,272
    
    
    $
    104,464
    
    
    $
    67,629
    
    
    $
    (103,598
    )
    
    $
    318,767
 10




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ERICO International Corporation and Subsidiaries
 Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2005
 9. Guarantor and Non-Guarantor Subsidiaries ( continued )
 Condensed Consolidating Balance Sheets  December 31, 2004
 Non-Guarantor
    
    GuarantorParent
    
    Subsidiary
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedCash and cash equivalents
    
    $
    398
    
    
    $
    21
    
    
    $
    1,902
    
    
    $
    
    
    
    $
    2,321Trade accounts receivable, net
    
    
    
    
    
    
    24,646
    
    
    
    25,839
    
    
    
    
    
    
    
    50,485Inventories, net
    
    
    
    
    
    
    32,709
    
    
    
    26,891
    
    
    
    
    
    
    
    59,600Other current assets
    
    
    2,801
    
    
    
    2,498
    
    
    
    3,610
    
    
    
    
    
    
    
    8,909Total current assets
    
    
    3,199
    
    
    
    59,874
    
    
    
    58,242
    
    
    
    
    
    
    
    121,315Property, plant and equipment, net
    
    
    224
    
    
    
    38,986
    
    
    
    13,312
    
    
    
    
    
    
    
    52,522Goodwill
    
    
    101,303
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,303Other intangible assets, net
    
    
    36,905
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,905Investment in and advances to subsidiaries
    
    
    102,684
    
    
    
    
    
    
    
    
    
    
    
    (102,684
    )
    
    
    Other assets
    
    
    6,680
    
    
    
    2,983
    
    
    
    1,013
    
    
    
    
    
    
    
    10,676Total assets
    
    $
    250,995
    
    
    $
    101,843
    
    
    $
    72,567
    
    
    $
    (102,684
    )
    
    $
    322,721Trade accounts payable
    
    $
    
    
    
    $
    15,972
    
    
    $
    10,450
    
    
    $
    
    
    
    $
    26,422Accrued compensation
    
    
    1,555
    
    
    
    6,547
    
    
    
    5,344
    
    
    
    
    
    
    
    13,446Dividend payable
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Other current liabilities
    
    
    5,664
    
    
    
    6,184
    
    
    
    10,026
    
    
    
    
    
    
    
    21,874Total current liabilities
    
    
    22,219
    
    
    
    28,703
    
    
    
    25,820
    
    
    
    
    
    
    
    76,742Long-term debt
    
    
    151,500
    
    
    
    675
    
    
    
    
    
    
    
    
    
    
    
    152,175Deferred income taxes
    
    
    22,030
    
    
    
    5,761
    
    
    
    1,103
    
    
    
    
    
    
    
    28,894Intercompany payable
    
    
    
    
    
    
    31,906
    
    
    
    59,444
    
    
    
    (91,350
    )
    
    
    Other long-term liabilities
    
    
    8,547
    
    
    
    6,860
    
    
    
    1,378
    
    
    
    
    
    
    
    16,785Total stockholders net investment
    
    
    46,699
    
    
    
    27,938
    
    
    
    (15,178
    )
    
    
    (11,334
    )
    
    
    48,125Total liabilities and stockholders
net investment
    
    $
    250,995
    
    
    $
    101,843
    
    
    $
    72,567
    
    
    $
    (102,684
    )
    
    $
    322,721
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ERICO International Corporation and Subsidiaries
 Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2005
 9. Guarantor and Non-Guarantor Subsidiaries ( continued )
 Unaudited Condensed Consolidating Income Statements  Three Months Ended June 30, 2005
 Non-Guarantor
    
    GuarantorParent
    
    Subsidiary
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    64,671
    
    
    $
    40,037
    
    
    $
    (4,580
    )
    
    $
    100,128Cost of sales
    
    
    
    
    
    
    41,503
    
    
    
    27,166
    
    
    
    (4,580
    )
    
    
    64,089Gross profit
    
    
    
    
    
    
    23,168
    
    
    
    12,871
    
    
    
    
    
    
    
    36,039Operating expenses
    
    
    1,760
    
    
    
    11,095
    
    
    
    10,149
    
    
    
    
    
    
    
    23,004Operating (loss) income
    
    
    (1,760
    )
    
    
    12,073
    
    
    
    2,722
    
    
    
    
    
    
    
    13,035Interest expense, net
    
    
    3,048
    
    
    
    682
    
    
    
    175
    
    
    
    
    
    
    
    3,905Foreign exchange loss, net
    
    
    
    
    
    
    64
    
    
    
    211
    
    
    
    
    
    
    
    275(Loss) income before income taxes
and equity income
    
    
    (4,808
    )
    
    
    11,327
    
    
    
    2,336
    
    
    
    
    
    
    
    8,855(Benefit) provision for income taxes
    
    
    (2,318
    )
    
    
    4,464
    
    
    
    916
    
    
    
    
    
    
    
    3,062(Loss) income before equity income
    
    
    (2,490
    )
    
    
    6,863
    
    
    
    1,420
    
    
    
    
    
    
    
    5,793Equity income from subsidiaries
    
    
    8,283
    
    
    
    
    
    
    
    
    
    
    
    (8,283
    )
    
    
    Net income
    
    $
    5,793
    
    
    $
    6,863
    
    
    $
    1,420
    
    
    $
    (8,283
    )
    
    $
    5,793
 Unaudited Condensed Consolidating Income Statements  Three Months Ended June 30, 2004
 Non-Guarantor
    
    GuarantorParent
    
    Subsidiary
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    58,796
    
    
    $
    37,560
    
    
    $
    (4,244
    )
    
    $
    92,112Cost of sales
    
    
    
    
    
    
    38,452
    
    
    
    24,321
    
    
    
    (4,244
    )
    
    
    58,529Gross profit
    
    
    
    
    
    
    20,344
    
    
    
    13,239
    
    
    
    
    
    
    
    33,583Operating expenses
    
    
    1,551
    
    
    
    9,806
    
    
    
    9,615
    
    
    
    
    
    
    
    20,972Operating (loss) income
    
    
    (1,551
    )
    
    
    10,538
    
    
    
    3,624
    
    
    
    
    
    
    
    12,611Interest expense, net
    
    
    3,024
    
    
    
    673
    
    
    
    160
    
    
    
    
    
    
    
    3,857Foreign exchange loss (gain), net
    
    
    
    
    
    
    101
    
    
    
    (918
    )
    
    
    
    
    
    
    (817
    )(Loss) income before income taxes
and equity income
    
    
    (4,575
    )
    
    
    9,764
    
    
    
    4,382
    
    
    
    
    
    
    
    9,571(Benefit) provision for income taxes
    
    
    (1,831
    )
    
    
    3,884
    
    
    
    1,696
    
    
    
    
    
    
    
    3,749(Loss) income before equity income
    
    
    (2,744
    )
    
    
    5,880
    
    
    
    2,686
    
    
    
    
    
    
    
    5,822Equity income from subsidiaries
    
    
    8,566
    
    
    
    
    
    
    
    
    
    
    
    (8,566
    )
    
    
    Net income
    
    $
    5,822
    
    
    $
    5,880
    
    
    $
    2,686
    
    
    $
    (8,566
    )
    
    $
    5,822
 12




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##### Table of Contents



ERICO International Corporation and Subsidiaries
 Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2005
 9. Guarantor and Non-Guarantor Subsidiaries ( continued )
 Unaudited Condensed Consolidating Income Statements  Six Months Ended June 30, 2005
 Non-Guarantor
    
    GuarantorParent
    
    Subsidiary
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    121,089
    
    
    $
    79,100
    
    
    $
    (10,111
    )
    
    $
    190,078Cost of sales
    
    
    
    
    
    
    79,724
    
    
    
    53,477
    
    
    
    (10,111
    )
    
    
    123,090Gross profit
    
    
    
    
    
    
    41,365
    
    
    
    25,623
    
    
    
    
    
    
    
    66,988Operating expenses
    
    
    2,804
    
    
    
    21,721
    
    
    
    20,098
    
    
    
    
    
    
    
    44,623Operating (loss) income
    
    
    (2,804
    )
    
    
    19,644
    
    
    
    5,525
    
    
    
    
    
    
    
    22,365Interest expense, net
    
    
    6,085
    
    
    
    1,363
    
    
    
    337
    
    
    
    
    
    
    
    7,785Foreign exchange loss, net
    
    
    1
    
    
    
    175
    
    
    
    290
    
    
    
    
    
    
    
    466(Loss) income before income taxes
and equity income
    
    
    (8,890
    )
    
    
    18,106
    
    
    
    4,898
    
    
    
    
    
    
    
    14,114(Benefit) provision for income taxes
    
    
    (3,929
    )
    
    
    7,137
    
    
    
    1,903
    
    
    
    
    
    
    
    5,111(Loss) income before equity income
    
    
    (4,961
    )
    
    
    10,969
    
    
    
    2,995
    
    
    
    
    
    
    
    9,003Equity income from subsidiaries
    
    
    13,964
    
    
    
    
    
    
    
    
    
    
    
    (13,964
    )
    
    
    Net income
    
    $
    9,003
    
    
    $
    10,969
    
    
    $
    2,995
    
    
    $
    (13,964
    )
    
    $
    9,003
 Unaudited Condensed Consolidating Income Statements  Six Months Ended June 30, 2004
 Non-Guarantor
    
    GuarantorParent
    
    Subsidiary
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    110,707
    
    
    $
    72,742
    
    
    $
    (7,887
    )
    
    $
    175,562Cost of sales
    
    
    
    
    
    
    71,639
    
    
    
    48,388
    
    
    
    (7,887
    )
    
    
    112,140Gross profit
    
    
    
    
    
    
    39,068
    
    
    
    24,354
    
    
    
    
    
    
    
    63,422Operating expenses
    
    
    2,812
    
    
    
    19,956
    
    
    
    19,543
    
    
    
    
    
    
    
    42,311Operating (loss) income
    
    
    (2,812
    )
    
    
    19,112
    
    
    
    4,811
    
    
    
    
    
    
    
    21,111Interest expense, net
    
    
    5,612
    
    
    
    1,352
    
    
    
    383
    
    
    
    
    
    
    
    7,347Foreign exchange loss (gain), net
    
    
    
    
    
    
    215
    
    
    
    (608
    )
    
    
    
    
    
    
    (393
    )Other expense
    
    
    1,236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,236(Loss) income before income taxes
and equity income
    
    
    (9,660
    )
    
    
    17,545
    
    
    
    5,036
    
    
    
    
    
    
    
    12,921(Benefit) provision for income taxes
    
    
    (3,864
    )
    
    
    7,017
    
    
    
    1,924
    
    
    
    
    
    
    
    5,077(Loss) income before equity income
    
    
    (5,796
    )
    
    
    10,528
    
    
    
    3,112
    
    
    
    
    
    
    
    7,844Equity income from subsidiaries
    
    
    13,640
    
    
    
    
    
    
    
    
    
    
    
    (13,640
    )
    
    
    Net income
    
    $
    7,844
    
    
    $
    10,528
    
    
    $
    3,112
    
    
    $
    (13,640
    )
    
    $
    7,844
 13




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##### Table of Contents



ERICO International Corporation and Subsidiaries
 Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2005
 9. Guarantor and Non-Guarantor Subsidiaries ( continued )
 Unaudited Condensed Consolidating Statements of Cash Flows  Six Months Ended June 30, 2005
 Non-Guarantor
    
    GuarantorParent
    
    Subsidiary
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedOperating activitiesNet income
    
    $
    9,003
    
    
    $
    10,969
    
    
    $
    2,995
    
    
    $
    (13,964
    )
    
    $
    9,003Depreciation and amortization
    
    
    342
    
    
    
    4,289
    
    
    
    2,033
    
    
    
    
    
    
    
    6,664Other operating activities
    
    
    1,956
    
    
    
    (1,846
    )
    
    
    (6,958
    )
    
    
    
    
    
    
    (6,848
    )Net cash provided by (used in) operating activities
    
    
    11,301
    
    
    
    13,412
    
    
    
    (1,930
    )
    
    
    (13,964
    )
    
    
    8,819Investing activitiesCapital expenditures
    
    
    (2
    )
    
    
    (632
    )
    
    
    (541
    )
    
    
    
    
    
    
    (1,175
    )Other investing activities
    
    
    (516
    )
    
    
    (150
    )
    
    
    42
    
    
    
    
    
    
    
    (624
    )Net cash used in investing activities
    
    
    (518
    )
    
    
    (782
    )
    
    
    (499
    )
    
    
    
    
    
    
    (1,799
    )Financing activitiesDividends paid
    
    
    (15,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,000
    )Change in intercompany payables/receivables
    
    
    (3,712
    )
    
    
    (12,136
    )
    
    
    1,884
    
    
    
    13,964
    
    
    
    Net borrowings on revolving line of credit
    
    
    8,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,000Net cash (used in) provided by financing activities
    
    
    (10,712
    )
    
    
    (12,136
    )
    
    
    1,884
    
    
    
    13,964
    
    
    
    (7,000
    )Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    (47
    )Net increase (decrease) in cash and cash equivalents
    
    
    71
    
    
    
    494
    
    
    
    (592
    )
    
    
    
    
    
    
    (27
    )Cash and cash equivalents at beginning of period
    
    
    398
    
    
    
    21
    
    
    
    1,902
    
    
    
    
    
    
    
    2,321Cash and cash equivalents at end of period
    
    $
    469
    
    
    $
    515
    
    
    $
    1,310
    
    
    $
    
    
    
    $
    2,294
 14




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##### Table of Contents



ERICO International Corporation and Subsidiaries
 Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2005
 9. Guarantor and Non-Guarantor Subsidiaries ( continued )
 Unaudited Condensed Consolidating Statements of Cash Flows  Six Months Ended June 30, 2004
 Non-Guarantor
    
    GuarantorParent
    
    Subsidiary
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedOperating activitiesNet income
    
    $
    7,844
    
    
    $
    10,528
    
    
    $
    3,112
    
    
    $
    (13,640
    )
    
    $
    7,844Depreciation and amortization
    
    
    288
    
    
    
    4,353
    
    
    
    1,433
    
    
    
    
    
    
    
    6,074Other operating activities
    
    
    4,415
    
    
    
    (3,497
    )
    
    
    (8,233
    )
    
    
    
    
    
    
    (7,315
    )Net cash provided by (used in) operating activities
    
    
    12,547
    
    
    
    11,384
    
    
    
    (3,688
    )
    
    
    (13,640
    )
    
    
    6,603Investing activitiesCapital expenditures
    
    
    
    
    
    
    (598
    )
    
    
    (402
    )
    
    
    
    
    
    
    (1,000
    )Other investing activities
    
    
    (205
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (205
    )Net cash used in investing activities
    
    
    (205
    )
    
    
    (598
    )
    
    
    (402
    )
    
    
    
    
    
    
    (1,205
    )Financing activitiesDividends paid
    
    
    (25,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,000
    )Change in intercompany payables/receivables
    
    
    (7,813
    )
    
    
    (10,789
    )
    
    
    4,962
    
    
    
    13,640
    
    
    
    Net payments on revolving line of credit
    
    
    (23,200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,200
    )Proceeds from issuance of subordinated debentures
    
    
    121,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121,500Principal payments on long-term debt
    
    
    (72,950
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72,950
    )Financing fees paid
    
    
    (4,970
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,970
    )Net cash (used in) provided by financing activities
    
    
    (12,433
    )
    
    
    (10,789
    )
    
    
    4,962
    
    
    
    13,640
    
    
    
    (4,620
    )Effect of exchange rates on cash
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    16Net (decrease) increase in cash and cash equivalents
    
    
    (91
    )
    
    
    (3
    )
    
    
    888
    
    
    
    
    
    
    
    794Cash and cash equivalents at beginning of period
    
    
    400
    
    
    
    3
    
    
    
    2,018
    
    
    
    
    
    
    
    2,421Cash and cash equivalents at end of period
    
    $
    309
    
    
    $
    
    
    
    $
    2,906
    
    
    $
    
    
    
    $
    3,215
 15




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Overview
   Market Outlook
  Results of Operations
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    64.0
    
    
    
    63.5
    
    
    
    64.8
    
    
    
    63.9Gross profit
    
    
    36.0
    
    
    
    36.5
    
    
    
    35.2
    
    
    
    36.1Operating expenses
    
    
    23.0
    
    
    
    22.8
    
    
    
    23.5
    
    
    
    24.1Interest expense, net
    
    
    3.9
    
    
    
    4.2
    
    
    
    4.1
    
    
    
    4.1Foreign exchange loss (gain), net
    
    
    0.3
    
    
    
    (0.9
    )
    
    
    0.2
    
    
    
    (0.2
    )Other expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.7Income before income taxes
    
    
    8.8
    
    
    
    10.4
    
    
    
    7.4
    
    
    
    7.4Provision for income taxes
    
    
    3.0
    
    
    
    4.1
    
    
    
    2.7
    
    
    
    2.9Net income
    
    
    5.8
    
    
    
    6.3
    
    
    
    4.7
    
    
    
    4.5
 Three Months Ended June 30, 2005 Compared With Three Months Ended June 30, 2004
 Net sales.
 16




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##### Table of Contents



Gross profit.
 Operating expenses
 Interest expense, net.
 Foreign exchange loss (gain), net
 Provision for income taxes.
 Net income.
 Six Months Ended June 30, 2005 Compared With Six Months Ended June 30, 2004
 Net sales.
 Gross profit.
 Operating expenses
  Interest expense, net.
 Foreign exchange loss (gain), net
 17




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##### Table of Contents



Other expense.
 Provision for income taxes.
 Net income.
 Liquidity and Capital Resources
      Six Months Ended June 30, 2005 Compared With Six Months Ended June 30, 2004
    18




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##### Table of Contents



Reconciliation of EBITDA to Net Cash Provided by Operating Activities
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net cash provided by operating activities
    
    $
    16,720
    
    
    $
    11,615
    
    
    $
    8,819
    
    
    $
    6,603Interest expense, net
    
    
    3,905
    
    
    
    3,857
    
    
    
    7,785
    
    
    
    7,347Provision for income taxes
    
    
    3,062
    
    
    
    3,749
    
    
    
    5,111
    
    
    
    5,077Foreign exchange (loss) gain, net
    
    
    (275
    )
    
    
    817
    
    
    
    (466
    )
    
    
    393Deferred taxes
    
    
    917
    
    
    
    252
    
    
    
    1,136
    
    
    
    457Amortization of financing fees and discount on
senior subordinated notes included in interest
expense, net
    
    
    (223
    )
    
    
    (224
    )
    
    
    (446
    )
    
    
    (399
    )Net changes in operating assets and liabilities
    
    
    (8,467
    )
    
    
    (3,600
    )
    
    
    6,623
    
    
    
    8,100EBITDA
    
    $
    15,639
    
    
    $
    16,466
    
    
    $
    28,562
    
    
    $
    27,578
 Critical Accounting Policies and Estimates
  Recently Issued Accounting Standards
 Inventory Costs, an Amendment of ARB No. 43,
Chapter 4
 19




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##### Table of Contents



Share-Based Payment Accounting for Stock-Based Compensation Accounting for
Stock Issued to Employees
 FORWARD-LOOKING STATEMENTS
   
    
    the availability of sufficient amounts of raw materials, particularly steel and copper,
and our ability to acquire these raw materials on an economic basis;
    
    risks associated with foreign operations, including fluctuations in exchange rates of foreign currencies;
    
    competitive pressures on pricing;
    
    operational issues at our facilities;
    
    availability of financing to fund operations at anticipated rates and terms;
    
    prolonged work stoppages;
    
    governmental or regulatory policies;
    
    product warranty, product liability and product recall costs;
    
    rapid increases in health care costs;
    
    our acquisition activities;
    
    our substantial debt and leverage and our ability to service our debt;
    
    the restrictive covenants contained in the agreements governing our indebtedness;
    
    our ability to realize revenue growth;
    
    our ability to implement initiatives designed to increase operating efficiencies and improve results;
    
    the loss of major customers; and
    
    acts of war or terrorism.
  20




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
     
 Item 4. Controls and Procedures
  
 21




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 6. Exhibits
 Exhibit Number
    
    Description of Document31.1
    
    Form of Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Form of Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32
    
    Form of Section 1350 Certification of Chief Financial Officer and Chief Executive Officer
 22




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##### Table of Contents



SIGNATURES
  ERICO INTERNATIONAL CORPORATIONBy:
    
    /s/ William H. RojName:
    
    William H. RojTitle:
    
    Chairman, Chief Executive Officer and DirectorAugust 10, 2005By:
    
    /s/ Jeffrey R. SteinhilberName:
    
    Jeffrey R. SteinhilberTitle:
    
    Chief Financial Officer and DirectorAugust 10, 2005
 23