##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
   FORM 10-K (Mark one) þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED JANUARY 1, 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 NUMBER 333-115543 
 AMH Holdings, Inc.
  
 DELAWARE
    
    16-1693178(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 3773 STATE ROAD
CUYAHOGA FALLS, OHIO 44223
(Address of principal executive offices) (800) 257-4335
(Registrants telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of the Registrants knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. þ Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). Yes o No þ The aggregate market value of the Common Stock held by non-affiliates of the registrant at
July 3, 2004: None As of March 28, 2005, the Registrant had outstanding 500,000 shares of voting convertible
preferred stock, 1,614,019 shares of non-voting convertible preferred stock and 500,000 shares of
voting class B common stock and 1,234,190 shares of non-voting class B common stock. Documents incorporated by reference: None




---



TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERSPART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERSITEM 6. SELECTED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONPART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-KSIGNATURESEXHIBIT INDEXExhibit 10.30 Tax Sharing AgreementExhibit 21.1 Subsidiaries of CompanyExhibit 31.1 Sect 302 CEO CertificationExhibit 31.2 Sect 302 CFO CertificationExhibit 32.1 Sect 906 CEO CertificationExhibit 32.2 Sect 906 CFO Certification    Table of Contents  
 PART I 
 ITEM 1. BUSINESS GENERAL DEVELOPMENT OF BUSINESS AMH Holdings, Inc. (AMH) was incorporated in Delaware on February 19, 2004. AMH has no
material assets or operations other than its 100% ownership of Associated Materials Holdings, Inc.
(Holdings), which in turn has no material assets or operations other than its 100% ownership of
Associated Materials Incorporated (AMI). AMH, Holdings and AMI are collectively referred to as
the Company. AMI was incorporated in Delaware in 1983 and is a leading, vertically integrated manufacturer
and North American distributor of exterior residential building products. AMI is a wholly owned
subsidiary of Holdings. The Companys core products are vinyl windows, vinyl siding, aluminum trim
coil, aluminum and steel siding and accessories, and vinyl fencing, decking and railing. Vinyl
windows and vinyl siding together comprise approximately 60% of the Companys total net sales.
These products are generally marketed under the Alside®, Revere® and Gentek® brand names and
sold on a wholesale basis to more than 50,000 professional contractors engaged in home remodeling
and new home construction principally through the Companys North American network of supply
centers. As of January 1, 2005, the Company had 125 supply centers in its network. Approximately
two-thirds of the Companys products are sold to contractors engaged in the home repair and
remodeling market with one-third sold to the new construction market. The supply centers provide
one-stop shopping to the Companys contractor customers, carrying products, accessories and tools
necessary to complete a vinyl window or siding project. In addition, the supply centers provide
high quality product literature, product samples and installation training to these customers. The Company believes that the strength of its products and distribution network has developed
strong brand loyalty and long-standing relationships with local contractors and has enabled the
Company to consistently gain market share over the last five years. Approximately 70% of the
Companys total net sales are generated through the Companys network of supply centers with the
remainder sold to independent distributors and dealers. RECAPITALIZATION TRANSACTIONS As part of a restructuring agreement dated as of March 4, 2004, stockholders and option
holders of Holdings became stockholders and option holders of AMH and are no longer stockholders
and option holders of Holdings. AMH has no material assets or operations other than its 100%
ownership of Holdings, AMIs direct parent company. On March 4, 2004, AMH completed an offering of
$446 million aggregate principal at maturity of 11 1/4% senior discount notes (11 1/4% notes).
The total gross proceeds were approximately $258.3 million. In connection with the note offering,
certain options to acquire preferred and common shares were exercised and the proceeds from the
note offering were used to redeem all of AMHs preferred stock including accrued and unpaid
dividends, pay a dividend to AMHs common stockholders and pay a bonus to certain members of AMIs
senior management and a director. Through Holdings, AMH contributed $14.5 million to AMI to pay
the bonus. The completion of the aforementioned transactions constitute the March 2004 dividend
recapitalization. On December 22, 2004, AMH completed a recapitalization transaction in which the then
outstanding capital stock of AMH was reclassified as a combination of voting and non-voting shares
of Class B common stock and shares of voting and non-voting convertible preferred stock. All of the
shares of the convertible preferred stock were immediately sold to affiliates of Investcorp S.A.
(Investcorp) for an aggregate purchase price of
$150 million, which was distributed by the Company to the
existing shareholders. As a result of this transaction, affiliates of
Investcorp acquired a 50% equity interest in AMH and the existing shareholders, led by Harvest
Partners, Inc. (Harvest Partners), retained shares of Class B common stock representing a 50%
equity interest in AMH, all on a fully diluted basis. Subsequent to the share purchase by Investcorp, each of Investcorp and
Harvest Partners have, through their respective affiliates, a 50% voting interest in AMH.
Immediately following these transactions, on December 22, 2004, the shareholders of AMH contributed
their shares of the capital stock of AMH to AMH Holdings II, Inc. (AMH II), a Delaware
corporation formed for the purpose of becoming the direct parent company of AMH, in exchange for
shares of the capital stock of AMH II mirroring (in terms of type and class, voting rights,
preferences and other rights) the shares of AMH capital stock contributed by such shareholders. In
connection with this transaction, on December 22, 2004, the Company increased its senior credit
facility by $42 million and AMH II issued $75 million of 13 5/8% senior notes due 2014 (13 5/8%
notes). AMH II then declared and paid a dividend on shares of its Class B common stock in an
aggregate amount of approximately $96.4 million, which included approximately $3.4 million in
aggregate proceeds received by AMH II through AMH upon the exercise of options to purchase AMH
common stock. Of this $96.4 million dividend, approximately $62.7 million was paid in cash and
approximately 2




---



##### Table of Contents



$33.7 million was paid in the form of promissory notes issued by AMH II to each of its Class B
common shareholders. In December of 2004, AMH made a payment to
AMH II for the proceeds received upon exercise of the options. In the first quarter of 2005, AMI made an intercompany loan of $33.7 million
to AMH II through its direct and indirect parent companies. Subsequently, AMI declared a dividend
in forgiveness of the intercompany loan. On December 22, 2004, in connection with such transactions, AMI paid a bonus in the
aggregate amount of approximately $22.3 million to certain members of AMIs management and a
director. Approximately $14.3 million of the bonus, including
payroll taxes, was paid in cash on December 22, 2004, with
promissory notes issued by AMI for the remaining $8.0 million. These promissory notes were settled
in cash during the first quarter of fiscal year 2005. AMI incurred
transaction related costs
of $28.4 million, which includes $16.3 million paid for investment banking and legal expenses, which have been classified as
recapitalization transaction costs in AMIs statement of
operations and $12.1 million for financing related costs, which
have been recorded in other assets on the Companys balance sheet. AMI also recognized stock
compensation expense of $30.8 million, including
payroll taxes, related to stock options exercised in the transaction. The
completion of the aforementioned transactions constitute the December 2004 recapitalization
transaction.  AMH(in thousands)SourcesAdditional borrowings under senior credit facility
    
    $
    42,000Cash on hand as of date of the December 2004 recapitalization
    transaction
    
    
    28,405Sale of convertible preferred stock to Investcorp
    
    
    150,000Capital contribution from AMH II for payment of bonuses
    
    
    14,025Proceeds from exercise of stock options
    
    
    3,406Total sources
    
    $
    237,836UsesDistribution of proceeds from sale of convertible preferred
    stock to Investcorp
    
    $
    150,000Payment to AMH II for stock option proceeds 
    December 2004
    
    
    3,406Loan/Dividend to AMH II for payment on AMH II promissory
    notes  First quarter of 2005
    
    
    33,713Management bonus
    
    
    22,313Transaction and financing fees
    
    
    28,404Total uses
    
    $
    237,836 FINANCIAL INFORMATION ABOUT SEGMENTS Prior to the sale of AmerCable, as discussed below in Acquisitions and Divestitures, the
Company had two reportable segments: building products and electrical cable products. Subsequent to
the sale of AmerCable, the Company is in the single business of manufacturing and distributing
exterior residential building products. See Note 20 in the Notes to Consolidated Financial
Statements in Item 8. Financial Statements and Supplementary Data. INDUSTRY OVERVIEW Demand for exterior residential building products is driven by a number of factors, including
consumer confidence, availability of credit, new housing starts and general economic cycles.
Historically, the demand for repair and remodeling products, where the Company is primarily
focused, has been less sensitive and thus less cyclical than demand for new home construction.
Demand for repair and remodeling is driven by the following:  
    Favorable demographics. The segment of the population age 50 years and above, which
generally favors professionally installed, low maintenance home improvements, is growing. By
2010, this age segment will represent approximately 40% of the United States population.
    Aging of the housing stock. The median home age increased from 23 years in 1985 to 31
years in 2003, and approximately 60% of the current housing stock was built prior to 1980.
    Increase in average home size. The average home size increased over 25% from 1,785
square feet in 1985 to 2,330 square feet in 2003.
    Favorable mortgage interest rates. Mortgage interest rates over the past few years have
been at historically low levels. As a result of these drivers, according to the U.S. Census Bureau, total expenditures for
residential improvements and repairs increased from $121.9 billion in 1993 to $187.4 billion in
2003. Repair and remodeling projects tend to utilize a greater mix of premium products with higher
margins than those used in new construction projects. Vinyl comprises the largest share of the residential window and siding markets. Vinyl has
greater durability, requires less maintenance and provides greater energy efficiency than many
competing siding and window products. According to industry reports, based on unit sales, vinyl
accounted for approximately 40% of the exterior siding market and approximately 58% of the
residential window market in 2003. Vinyl windows have achieved increased acceptance in the new
construction market as a result of builders and home buyers recognizing vinyls favorable
attributes, lifetime cost advantages, the enactment of local legal or building code requirements
that mandate more energy efficient windows and the increased development and promotion of vinyl
window products by national window manufacturers. Vinyl siding has achieved increased acceptance in
the new construction market as builders and home buyers have recognized vinyls low maintenance,
durability and price advantages. The Company believes that vinyl windows and vinyl siding will
continue to gain market share in the new residential construction market while remaining the
preferred product of the remodeling marketplace. 3




---



##### Table of Contents



Aluminum and steel building products complement vinyl window and siding installations.
Aluminum soffit, trim coil, and accessories are typically used in vinyl installations to prepare
surfaces and provide certain aesthetic features. Aluminum siding is primarily geared toward niche
markets in Canada and the United States. Steel siding continues to be an important product for the
hail belt regions due to steels superior resistance to impact damage. Products. The Companys principal product offerings are vinyl windows, vinyl siding, aluminum
trim coil, aluminum and steel siding and accessories, and vinyl fencing, decking and railing. Vinyl
windows and vinyl siding together comprise approximately 60% of the Companys net sales. The Company manufactures and distributes windows in the premium, standard and economy
categories, primarily under the Alside®, Revere®, and Gentek® brand names. Vinyl window
quality and price vary across categories and are generally based on a number of differentiating
factors including method of construction and materials used. Premium and standard windows are
primarily geared towards the repair and remodeling segment, while economy products are typically
used in new construction applications. The Companys vinyl windows are available in a broad range
of models, including fixed, double and single hung, horizontal sliding, casement and decorative bay
and bows, as well as patio doors. All of the Companys windows are made to order and are
custom-fitted to existing window openings. Additional features include frames that do not require
painting, tilt-in sashes for easy cleaning, and high-energy efficiency glass packages. Most models
offer multiple finish and glazing options, and substantially all are accompanied by a limited
lifetime warranty. Key offerings include Excalibur®, a fusion-welded window featuring a slim
design; Performance Series, a new construction product with superior strength and stability;
and UltraMaxx®, an extra-thick premium window available in light oak, dark oak and cherry
woodgrain interior finishes. The Company manufactures and distributes vinyl siding and related accessories in the premium,
standard and economy categories, primarily under the Alside®, Revere® and Gentek® brand
names. Vinyl siding quality and price vary across categories and are generally based on rigidity,
thickness, resistance to deflection and ease of installation, as well as other factors. Premium and
standard siding products are primarily geared towards the repair and remodeling segment, while
economy products are typically used in new construction applications. The Companys vinyl siding is
textured to simulate wood lap siding or shingles and is available in clapboard, Dutch lap and
board-and-batten styles. Products are available in a wide palette of colors to satisfy individual
aesthetic tastes. The Company also offers specialty siding products such as shakes and scallops,
beaded siding, extended length siding and variegated siding. The Companys product line is
complemented by a broad array of color and style-matched accessories, including soffit, fascia and
other components, which enable easy installation and provide numerous appearance options. All of
the Companys siding products are accompanied by limited 50 year to lifetime warranties. Key
offerings include Charter Oak®, a premium product whose exclusive TriBeam design system
provides superior rigidity; Centerlock®, an easy-to-install product designed for maximum visual
appeal; and Landscape®, an economy product featuring a premium look. The Companys metal offerings include aluminum trim coil and flatstock, as well as aluminum
and steel siding and accessories. These products are available in a broad assortment of colors,
styles and textures and are color-matched to vinyl and other metal product lines. The Company manufactures a broad range of painted and vinyl coated aluminum trim coil and
flatstock for application in siding projects. The Companys innovative Color Clear Through®
program matches twelve core colors across its vinyl, aluminum and steel product lines, as well as
those of other siding manufacturers. Trim coil and flatstock products are installed in most siding
projects, whether vinyl, brick, wood, stucco, or metal, and are used to seal exterior corners,
fenestration and other areas. These products are typically formed on site to fit such surfaces. As
a result, due to its superior pliability, aluminum remains the preferred material for these
products and is rarely substituted for by other materials. Trim coil and flatstock represented a
majority of the Companys metal product sales since the date of the Gentek acquisition. The Company offers a wide range of metal siding and accessories, with special features
including multi-colored paint applications, which replicate the light and dark tones of the grain
in natural wood. Steel siding and accessories are generally marketed in hail belt regions due to
steels superior resistance to impact damage. The Company offers steel siding in a full complement
of profiles including 8, vertical and Dutch lap. The Company manufactures aluminum siding and
accessories in economy, standard and premium grades in a broad range of profiles to appeal to
various geographic and contractor preferences. While aluminum siding sales are limited to niche
markets, aluminum accessories enjoy popularity in vinyl siding applications, particularly in
Canada. All aluminum soffit colors match or complement the Companys core vinyl siding colors, as
well as those of several of the Companys competitors. 4




---



##### Table of Contents



A summary of the Companys window and siding product offerings is presented in the table below
according to the Companys product line classification: PRODUCT LINE
    
    WINDOW
    
    VINYL SIDING
    
    STEEL SIDING
    
    ALUMINUM SIDINGPremium
    
    Preservation
    
    Berkshire Beaded
    
    Cedarwood
    
    CedarwoodSheffield UltraMaxx
    
    Bennington Board
    
    Driftwood
    
    Vin.Al.WoodAdvantage
    
    and Batten
    
    SuperGuard
    
    DeluxeSovereign
    
    Centennial Beaded
    
    SteelTekSequoia Select
    
    CenterLock
    
    SteelSideRegency
    
    Charter Oak
    
    UniversalNorthern Forest
    
    Gallery SeriesPreservationSequoiaSovereign SelectWilliamsportStandard
    
    Alpine 8000 Series
    
    Advantage PlusGentek 80 Series
    
    Advantage IIIExcalibur
    
    AmherstGeneva
    
    ConcordSignature
    
    Fair OaksBerkshire
    
    Odyssey Plus SenecaSierra
    
    Signature SupremeSomerville IIIEconomy
    
    Alpine 70 Series
    
    Conquest Driftwood
    
    
    
    Woodgrain SeriesGentek 70 Series
    
    LandscapeCenturion
    
    Aurora DriftwoodConcord
    
    Aurora BrushedNew ConstructionPerformance SeriesBlue Print SeriesAmherst
 The Company produces vinyl fencing, decking and railing under the brand name UltraGuard®,
consisting of both agricultural and residential vinyl fencing. The Company primarily markets its
fencing, decking and railing through independent dealers. In 2003, the Company sold its assets
related to vinyl garage doors and discontinued this product line. Sales of garage doors were less
than 1% of total net sales in 2003. To complete its line of exterior residential building products, the Company also distributes
building products manufactured by other companies. These products include roofing materials,
insulation, and installation equipment and tools. Marketing and Distribution. The Company markets exterior residential building products to
more than 50,000 professional home improvement and new construction contractors primarily through a
North American distribution network of 125 supply centers. Traditionally, most windows and siding
are sold to the home remodeling marketplace through independent distributors. The Company believes
that it is one of only two major vinyl window and siding manufacturers that markets its products
primarily through company-owned distribution centers. Approximately 70% of the Companys total net
sales are made through its supply centers. The Company believes that distributing products through its supply centers provides the
Company with certain competitive advantages such as (a) building long-standing customer
relationships; (b) developing comprehensive, customized marketing programs to assist the Companys
customer contractors; (c) closely monitoring developments in local customer preferences; and (d)
ensuring product availability through integrated logistics between the Companys manufacturing and
distribution facilities. The Companys customers look to their local supply center to provide a
broad range of specialty product offerings in order to maximize their ability to attract remodeling
and homebuilding customers. Many have established long-standing relationships with their local
supply center based on individualized service and credit terms, quality products, timely delivery,
breadth of product offerings, strong sales and promotional programs and competitive prices. The
Company supports its contractor customer base with marketing and promotional programs that include
product sample cases, sales literature, product videos and other sales and promotional materials.
Professional 5




---



##### Table of Contents



contractors use these materials to sell remodeling construction services to prospective
customers. The customer generally relies on the professional contractor to specify the brand of
siding or window to be purchased, subject to the customers price, color and quality requirements.
The Companys daily contact with its contractor customers also enables it to closely monitor
activity in each of the remodeling and new construction markets in which the Company competes. This
direct presence in the marketplace permits the Company to obtain current local market information,
providing it with the ability to recognize trends in the marketplace earlier and adapt its product
offerings on a location-by-location basis. The Company believes that its supply centers provide one-stop shopping to meet the
specialized needs of its contractor customers by distributing more than 2,000 building and
remodeling products, including a broad range of Company-manufactured vinyl windows, vinyl siding,
aluminum trim coil, aluminum and steel siding and accessories, and vinyl fencing, decking and
railing, as well as products manufactured by third parties. The Company believes that its ability
to provide a broad range of products is a key competitive advantage because it allows its
contractor customers, who often install more than one product type, to acquire multiple products
from a single source. In addition, the Company has historically achieved economies of scale in
sales and marketing by developing integrated multiple product programs on the national, regional
and local levels. For example, in 2000 the Company introduced Preservation as the industrys first
bundled premium window and siding marketing program. Each of the Companys supply centers is evaluated as a separate profit center, and
compensation of supply center personnel is based in part on the supply centers operating results.
Decisions to open new supply centers, and to close or relocate existing supply centers, are based
on the Companys continuing assessment of market conditions and individual location profitability.
Over the past five years, the Company has opened 28 supply centers. Through the Companys
acquisition of Gentek, the Company added 33 company-owned supply centers to its existing
distribution network. The Company intends to open five additional distribution centers in 2005 and
consolidate two distribution centers. Through many of its supply centers, the Company provides full-service product installation of
its vinyl siding products, principally to new homebuilders who value the importance of installation
services. The Company also provides installation services for vinyl replacement windows through
several of its supply centers. The Company also sells the products it manufactures directly to dealers and distributors, many
of which operate in multiple locations. Independent distributors comprise the industrys primary
market channel for the types of products that the Company manufactures and, as such, remain a key
focus of the Companys marketing activities. The Company provides these customers with distinct
brands and differentiated product, sales and marketing support. The Companys distribution partners
are carefully selected based on their ability to drive sales of the Companys products, high
customer service levels and other performance factors. The Company believes that its strength in
independent distribution provides it with a high level of operational flexibility because it allows
it to penetrate key markets without deploying the necessary capital to establish a company-owned
supply center. Sales to independent distribution account for approximately 30% of the Companys net
sales. Despite their aggregate lower percentage of total sales, the Companys largest individual
customers are its large direct dealers and independent distributors. No single customer accounted
for 5% or more of the Companys 2004 net sales. Manufacturing.The Company fabricates vinyl windows at its facilities in Cuyahoga Falls,
Ohio, Bothell, Washington, Cedar Rapids, Iowa, Kinston, North Carolina, and London, Ontario. The
Company manufactures its vinyl siding products at its facilities in Ennis, Texas and Burlington,
Ontario. In November 2004, the Company announced a plan to close its vinyl siding manufacturing
plant located in Freeport, Texas, which is expected to be completed in the second quarter of 2005
and move the volume to the Ennis, Texas vinyl siding plant. Since the Company opened the Freeport
facility, extrusion technology has improved so that throughput on new extruders is approximately
double that of older model extruders. The plant was closed to rationalize production capacity and
reduce fixed costs. The Company believes it has sufficient capacity at its other facilities to
meet anticipated sales of vinyl siding and accessories. Furthermore, the Company believes it can
improve product quality and efficiency by upgrading equipment at its remaining facilities. The Company operates a vinyl extrusion facility in West Salem, Ohio. The Companys window
fabrication plants in Cuyahoga Falls, Ohio, Kinston, North Carolina and Cedar Rapids, Iowa each use
vinyl extrusions manufactured by the West Salem, Ohio extrusion facility for a portion of their
production requirements and utilize high speed welding and cleaning equipment for their welded
window products. By internally producing a portion of its vinyl extrusions, the Company believes it
achieves significant cost savings and higher product quality compared to purchasing these materials
from third-party suppliers. The Companys Bothell, Washington facility produces its glass inserts,
but has a long-term contract to purchase its vinyl extrusions from a third-party supplier. The
Company also has two metals manufacturing facilities located in Woodbridge, New Jersey and Pointe
Claire, Quebec. The Company expects to complete construction in 2005 of a new window manufacturing
facility in Yuma, Arizona. The Company believes that it has adequate capacity to meet its sales expectations for the foreseeable
future. 6




---



##### Table of Contents



The Companys window plants generally operate on a single shift basis utilizing both a second
shift and increased numbers of leased production personnel to meet higher seasonal needs. The
Companys vinyl extrusion plants generally operate on a three-shift basis to optimize equipment
productivity and utilize additional equipment to increase capacity to meet higher seasonal needs. Raw Materials.The principal raw materials used by the Company are vinyl resin, aluminum,
steel, resin stabilizers and pigments, packaging materials, window hardware, and glass, all of
which are available from a number of suppliers. The Company has a contract with its resin supplier
to supply substantially all of its vinyl resin requirements and believes that other suppliers could
also meet its requirements. This contract will expire in December 2006. The price of vinyl resin
has been, and will likely continue to be, volatile. The Company generally has been able to pass
through price increases in raw materials to its customers. The price of vinyl resin increased
significantly during 2004 and also increased during 2003. Prices for aluminum and steel also
increased in 2004. The Company implemented two vinyl siding as well as two aluminum price
increases in 2004 to partially offset the increases in vinyl resin, aluminum and steel prices. The
Company also implemented price increases in 2003. The Company presently expects vinyl resin,
aluminum and steel prices to continue to increase in 2005. While the Company is optimistic that any
future significant cost increases will be offset by price increases to its customers, there can be
no assurances that the Company will be able to achieve any future price increases. Competition.Except for Owens Corning, the Company believes that no company within the
exterior residential building products industry competes with it on both the manufacturing and
distribution levels. There are, however, numerous small and large manufacturers of exterior
residential products, some of which are larger in size and have greater financial resources than
the Company. The Company competes with Owens Corning and numerous large and small distributors of
building products in its capacity as a distributor of these products. The Company believes that it
has approximately 11% of the U.S. vinyl siding market and approximately 25% of the Canadian vinyl
siding market. The Company believes that it is one of the largest manufacturers in the highly
fragmented North American market for vinyl windows. The Company believes that the window
fabrication industry will continue to experience consolidation due to the increased capital
requirements for manufacturing welded vinyl windows. The trend towards welded windows, which
require more expensive production equipment as well as more sophisticated information systems, has
driven these increased capital requirements. The Company generally competes on price, product
performance, and sales and service support. The Company also faces competition from alternative
materials: wood and aluminum in the window market, and wood, masonry and fiber cement in the siding
market. An increase in competition from other building product manufacturers and alternative
building materials may adversely impact the Companys business and financial performance. Seasonality.Because most of the Companys building products are intended for exterior use,
sales tend to be lower during periods of inclement weather. Weather conditions in the first quarter
of each calendar year usually result in that quarter producing significantly less sales revenue
than in any other period of the year. Consequently, the Company has historically had small profits
or losses in the first quarter and reduced profits from operations in the fourth quarter of each
calendar year. BACKLOG The Company does not have material long-term contracts. Vinyl window orders are generally
filled within 14 days of receipt. The Companys backlog is subject to fluctuation due to various
factors, including the size and timing of orders for the Companys products and is not necessarily
indicative of the level of future sales. ACQUISITIONS AND DIVESTITURES On August 29, 2003, AMI acquired all of the issued and outstanding shares of the capital stock
of Gentek Holdings, Inc., the parent company of Gentek Building Products, Inc. and Gentek Building
Products Limited, collectively referred to as Gentek. Gentek manufactures and distributes vinyl
windows, vinyl siding, aluminum trim coil, and aluminum and steel siding and accessories under the
Revere® and Gentek® brand names. Gentek markets its products to professional contractors on a
wholesale basis through 11 company-owned distribution centers in the mid-Atlantic region of the
United States and 21 company-owned distribution centers in Canada, as well as approximately 180
independent distributors in the United States. The acquisition was completed to expand the
Companys presence in the independent distributor market channel, to capitalize on synergy
opportunities related to the vertical integration of the metals products manufactured by Gentek and
sold in the Companys Alside supply centers, and to benefit from raw material savings resulting
from increased purchasing leverage. The Company intends to continue to maintain distinct separation
of the Revere® and Gentek® brands from the Companys Alside® brand by continuing to offer
differentiated product, sales and marketing support. 7




---



##### Table of Contents



On March 16, 2002, AMI entered into a merger agreement with Associated Materials Holdings Inc.
(Holdings) and its wholly owned subsidiary, Simon Acquisition Corp. The merger agreement provided
for the acquisition of all shares of the Companys then outstanding common stock by Simon
Acquisition Corp. through a cash tender offer of $50.00 per share. The merger agreement also
required that AMI commence a tender offer to purchase all of its then outstanding 9 1/4% senior
subordinated notes (9 1/4% notes). On April 19, 2002, the cash tender offer for AMIs then
outstanding common stock and the cash tender offer for approximately $74.0 million of AMIs then
outstanding 9 1/4% notes was completed. Simon Acquisition Corp. was then merged with and into AMI
with the AMI continuing as a privately held, wholly owned subsidiary of Holdings. The completion of
the aforementioned transactions constitute the April 2002 merger transaction. The purchase
consideration, financing costs, tender offer of $74.0 million of 9 1/4% notes and debt
extinguishment costs of $7.6 million were financed through: (1) the issuance of $165 million of 9
3/4% Senior Subordinated Notes due 2012, which the Company refers to as the 9 3/4% notes, (2) $125
million from a new $165 million credit facility, which the Company refers to as the credit
facility, (3) $164.8 million cash contribution from Holdings and (4) cash of approximately $6.3
million, representing a portion of the Companys total cash of $6.8 million on hand at the time of
the acquisition. On June 24, 2002, the Company completed the sale of its AmerCable division to AmerCable
Incorporated, a newly-formed entity controlled by members of AmerCables management and Wingate
Partners III, L.P., for cash proceeds of approximately $28.3 million and the assumption of certain
liabilities pursuant to an asset purchase agreement dated as of the same date. The Company used the
net proceeds to repay a portion of its credit facility. AmerCable is a leading manufacturer of
specialty electrical cable products primarily used in the mining, marine and offshore drilling
industries. In 2001, AmerCable accounted for approximately 12% of the Companys total net sales. TRADEMARKS, PATENTS AND OTHER INTANGIBLE ASSETS The Company has registered and nonregistered trade names and trademarks covering the principal
brand names and product lines under which its products are marketed. The allocation of purchase
price from the April 2002 merger transaction resulted in $98.7 million in trademarks and trade
names of which $24.0 million had remaining useful lives of 15 years and $74.7 million have
indefinite lives. The indefinite lived trademark and trade name consist of one trademark and the
Alside® trade name. The allocation of purchase price also resulted in $6.8 million of patents
with estimated useful lives of 10 years. The Company has obtained patents on certain claims
associated with its siding, fencing, decking and railing products, which the Company believes
distinguish Alsides products from those of its competitors. The allocation of purchase price from
the acquisition of Gentek resulted in an allocation of $10.7 million to trade names and trademarks
of which $4.3 million have remaining lives of 15 years and $6.4 million have indefinite lives. The
allocation of purchase price also resulted in $4.5 million to customer lists and $1.1 million to
Genteks order backlog. The customer lists are being amortized over 2 to 9 years and the order
backlog was fully amortized in 2003 as the backlog was fulfilled subsequent to the date of the
acquisition. GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS The Company is subject to various U.S. and Canadian environmental statutes and regulations,
including those addressing materials used in the manufacturing of its products. In addition, the
Companys operations are subject to various U.S. and Canadian environmental statutes and
regulations, including those relating to materials used in the Companys products, discharge of
pollutants into the air, water and soil, treatment, transport, storage and disposal of solid and
hazardous wastes, and remediation of soil and groundwater contamination. Such laws and regulations
may also impact the availability of materials used in manufacturing the Companys products. From
time to time, the Companys facilities are subject to investigation by governmental regulators. The
Company believes it is in material compliance with applicable environmental requirements, and does
not expect these requirements to result in material expenditures in the foreseeable future. The Company entered into a consent order dated August 25, 1992 with the United States
Environmental Protection Agency pertaining to corrective action requirements associated with the
use of hazardous waste storage facilities at its Cuyahoga Falls, Ohio site location. The effects of
the past practices at this facility are continuing to be investigated. The Company believes that
USX Corporation (USX), the former owner, bears responsibility for substantially all of the direct
costs of corrective action at these facilities under the relevant purchase contract terms and under
statutory and common law. To date, USX has reimbursed the Company for substantially all of the
direct costs of corrective action at these facilities. The Company expects that it will continue to
be reimbursed by USX. Payments, however, may not continue to be made by USX or USX may not have
adequate financial resources to fully reimburse the Company for these costs. The Company does not
expect future costs related to this matter to be significant. 8




---



##### Table of Contents



For additional information regarding pending proceedings relating to environmental matters,
please see Item 3  Legal Proceedings. EMPLOYEES The Companys employment needs vary seasonally with sales and production levels. As of January
1, 2005, the Company had approximately 3,137 full-time employees, including approximately 1,625
hourly workers. The following plants are unionized manufacturing facilities: (1) the West Salem,
Ohio plant, employing approximately 108 covered workers; (2) the Woodbridge, New Jersey plant,
employing approximately 112 covered workers; and (3) the Pointe Claire, Quebec, plant and London
and Burlington, Ontario plants, covering approximately 326 hourly workers. Additionally,
approximately 69 hourly workers in certain U.S. supply center locations are covered by collective
bargaining agreements. Approximately 3% of the Companys employees are covered by collective
bargaining agreements that expire within one year. The Company considers its labor relations to be
good. The Company utilizes leased employees to supplement its own workforce at its vinyl window
fabrication plants. The Company believes that the employee leasing program provides it with
scheduling flexibility for seasonal production requirements. The aggregate number of leased
employees in the window plants ranges from approximately 300 to 650 people based on seasonality. FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS Prior to the acquisition of Gentek in August 2003, all of the Companys business was conducted
in the United States. Currently, all of its operations are located in the United States and Canada.
Revenue from external customers in foreign countries was approximately $169 million in 2004 and was
primarily derived from customers in Canada. The Companys remaining revenue totaling $925 million
was derived from U.S. customers. At January 1, 2005, long-lived assets totaled approximately $34
million in Canada and $472 million in the U.S. The Company is exposed to risks inherent in any
foreign operation, including foreign exchange rate fluctuations. For further information on foreign
currency exchange risk, see Item 7A. Quantitative and Qualitative Disclosures About Market Risk 
Foreign Currency Exchange Rate Risk. RISK FACTORS The following discussion of risks relating to the Companys business should be read carefully
in connection with evaluating the Companys business, prospects and the forward-looking statements
contained in this report on Form 10-K and oral statements made by representatives of the Company
from time to time. Any of the following risks could materially adversely affect the Companys
business, operating results, financial condition and the actual outcome of matters as to which
forward-looking statements are made. For additional information regarding forward-looking
statements, see Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations  Certain Forward-Looking Statements. The Companys business is subject to a number of risks and uncertainties, including those
described below: The Companys substantial level of indebtedness could adversely affect its financial condition and
prevent it from fulfilling its obligations on the notes. The Company has a substantial amount of indebtedness, which will require significant interest
payments. As of January 1, 2005, the Company had approximately $622.9 million of indebtedness and
interest expense for the year ended January 1, 2005 was approximately $53.2 million, including
$24.6 million of accreted interest. Approximately $175.0 million of such debt is variable rate debt
and the effect of a 1% increase or decrease in interest rates would increase or decrease such total
annual interest expense by approximately $1.8 million. The Companys substantial level of indebtedness could have important consequences, including
the following:  
    the Companys ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired;
    the Company must use a substantial portion of its cash flow from operations to pay
interest and principal on the notes and other indebtedness, which will reduce the funds
available to the Company for other purposes such as potential acquisitions and capital
expenditures; 9




---



##### Table of Contents




    the Company is exposed to fluctuations in interest rates, because the credit facility has
a variable rate of interest;
    the Company has a higher level of indebtedness than some of its competitors, which may
put it at a competitive disadvantage and reduce the Companys flexibility in planning for,
or responding to, changing industry conditions, including increased competition;
    the Company is more vulnerable to general economic downturns and adverse developments in
its business; and
    the Companys failure to comply with financial and other restrictive covenants in the
credit facility, in the indentures governing the 9 3/4% notes and the 11 1/4% notes and
other debt obligations, some of which require the Company to maintain specified financial
ratios and limit the Companys ability to incur additional debt and sell assets, could
result in an event of default that, if not cured or waived, could harm the Companys
business or prospects and could result in bankruptcy. The Company expects to pay its expenses and to pay the principal and interest on the 9 3/4%
notes, 11 1/4% notes, credit facility and other debt from cash flows from operations. The Companys
ability to meet expenses depends on future performance, which will be affected by financial,
business, economic and other factors. The Company will not be able to control many of these
factors, such as economic conditions in the markets in which it operates and pressure from
competitors. The Company cannot be certain that cash flow will be sufficient to allow it to pay
principal and interest on its debt, including the 9 3/4% notes and 11 1/4% notes, and meet its
other obligations. If the Company does not have enough money, it may be required to refinance all
or part of its existing debt, including the 9 3/4% notes and 11 1/4% notes, sell assets or borrow
more money. The Company may not be able to refinance on acceptable terms, if at all. In addition,
the terms of existing or future debt agreements, including the credit facility and the indentures
governing the 9 3/4% notes and 11 1/4% notes, may restrict the Company from pursuing any of these
alternatives. The failure to generate sufficient cash flow or to achieve such alternative financing
could significantly and adversely affect the value of the 9 3/4% notes and 11 1/4% notes. The Companys parent company also has significant indebtedness. At January 1, 2005, AMH II
had $75.1 million of debt. Although the Company does not guarantee such indebtedness and has no
legal obligation to make payments on such indebtedness, the parent company has no operations of its
own and does have any source of funds to make payments in respect of its indebtedness except for
funds distributed or loaned by the Company. In addition, the terms of the indenture governing
AMIs 9 3/4% notes and senior credit facility significantly restrict AMI and its subsidiaries from
paying dividends and otherwise transferring assets to AMH or AMH II and the indenture governing
AMHs 11 1/4% notes further restricts AMH from making restricted payments. The amount available
for AMH to make restricted payments is further reduced by the indenture governing the 11 1/4%
notes. The Company will be able to incur more indebtedness and the risks associated with its
substantial leverage, including its ability to service its indebtedness, will increase. The indentures relating to the 9 3/4% notes, 11 1/4% notes and the amended and restated credit
agreement governing the credit facility will permit the Company, subject to specified conditions,
to incur a significant amount of additional indebtedness. In addition, the Company may incur an
additional $80.0 million of indebtedness under the revolving portion of its credit facility. If the
Company incurs additional debt, the risks associated with its substantial leverage, including its
ability to service its debt, would increase. The right to receive payments on the 9 3/4% notes and guarantees is subordinated to the
Companys senior debt. Payment on the 9 3/4% notes and guarantees is subordinated in right of payment to all of AMIs
and its guarantors senior debt. As of January 1, 2005, the 9 3/4% notes and the related guarantees
were subordinated to approximately $175.0 million of senior debt. In addition, $74.0 million of
senior debt was available for borrowing under the revolving portion of its credit facility. As a
result, upon any distribution to creditors or the creditors of the guarantors in a bankruptcy,
liquidation, reorganization or similar proceeding relating to the Company or its guarantors or its
or their property, the holders of the senior debt will be entitled to be paid in full in cash
before any payment may be made on the 9 3/4% notes or the guarantees thereof. In these cases, the
Company and its guarantors may not have sufficient funds to pay all of its creditors, and holders
of the 9 3/4% notes may receive less, ratably, than the holders of senior debt. In addition, all
payments on the 9 3/4% notes and the related guarantees will be blocked in the event of a payment
default on the designated senior debt and may be blocked for up to 179 consecutive days in the
event of certain non-payment defaults on designated senior debt. 10




---



##### Table of Contents



The indentures for the 9 3/4% notes and 11 1/4% notes and credit facility impose significant
operating and financial restrictions on the Company, which may prevent it from capitalizing on
business opportunities and taking some corporate actions. The indentures for the 9 3/4% notes and 11 1/4% notes and credit facility impose, and the
terms of any future debt may impose, significant operating and financial restrictions on the
Company. These restrictions, among other things, limit the Companys ability and that of its
subsidiaries to:  
    incur or guarantee additional indebtedness;
    pay dividends or make other distributions;
    repurchase stock;
    make investments;
    sell or otherwise dispose of assets including capital stock of subsidiaries;
    create liens;
    enter into agreements restricting the Companys subsidiaries ability to pay dividends;
    enter into transactions with affiliates; and
    consolidate, merge or sell all of its assets. These covenants may adversely affect the Companys ability to finance future operations or
capital needs to pursue available business opportunities. In addition, the credit facility requires the Company to maintain specified financial ratios.
These covenants may adversely affect the Companys ability to finance its future operations, meet
its capital needs, pursue available business opportunities, limit the ability to plan for or react
to market conditions or otherwise restrict activities or business plans. A breach of any of these
covenants or inability to maintain the required financial ratios could result in a default in
respect of the related indebtedness. If a default occurs, the relevant lenders could elect to
declare the indebtedness, together with accrued interest and other fees, to be immediately due and
payable and proceed against any collateral securing that indebtedness. AMH is the sole obligor under the 11 1/4% notes. Its subsidiaries, including AMI, do not
guarantee AMHs obligations under the 11 1/4% notes and do not have any obligation with respect to
the 11 1/4% notes; the 11 1/4% notes are structurally subordinated to the debt and liabilities of
AMHs subsidiaries including AMI and are effectively subordinated to any of the Companys existing
and future secured debt to the extent of the value of the assets secured by such debt. AMH has no operations of its own and derives all of its revenues and cash flow from its
subsidiaries. AMHs subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay amounts due under the notes or to make any funds available to pay
those amounts, whether by dividend, distribution, loan or other payments. The 11 1/4% notes are structurally subordinated to all debt and liabilities, including trade
payables, of AMHs subsidiaries, including AMI, and are effectively subordinated to any of the
Companys existing and future secured debt to the extent of the value of the assets secured by such
debt. AMHs subsidiaries may not have sufficient funds or assets to permit payments to AMH in
amounts sufficient to permit AMH to pay all or any portion of its indebtedness and other
obligations, including its obligations on the 11 1/4% notes. All of AMHs assets are owned, and all net sales are generated, by its subsidiaries. The
ability to repay the notes depends on the performance of its subsidiaries. AMH may not have access
to the cash flow and other assets of its subsidiaries that may be needed to make payments on the
notes. AMHs operations are conducted through its subsidiaries and its ability to make payment on the
11 1/4% notes is dependent on the earnings and the distribution of funds from its subsidiaries.
However, none of its subsidiaries is obligated to make funds available to 11




---



##### Table of Contents



AMH for payment on the 11 1/4% notes. In addition, the terms of the indenture governing AMIs
9 3/4% notes and the credit facility significantly restrict AMI and its subsidiaries from paying
dividends and otherwise transferring assets to AMH. After March 1, 2009, cash interest on
the 11 1/4% notes will accrue at the rate of 11 1/4% per annum, and will be payable semi-annually.
AMHs subsidiaries are permitted under the terms of the AMI credit facility and other indebtedness
(including under the indenture governing the 9 3/4% notes) to incur additional indebtedness that may
severely restrict or prohibit the making of distributions, the payment of dividends or the making
of loans by such subsidiaries to AMH. AMHs subsidiaries may not be able to maintain a level of cash flow from operating activities
sufficient to permit them and AMH to pay the principal, premium, if any, and interest on their and
AMHs indebtedness, including the 11 1/4% notes. The agreements governing the current and future
indebtedness of AMHs subsidiaries may not permit AMHs subsidiaries to provide AMH with sufficient
dividends, distributions or loans to fund scheduled interest and principal payments on the 11 1/4%
notes when due. The exterior building products industry is cyclical and downturns in the industry or the
economy could negatively affect business, operating results and the
value of the 9 3/4% notes and 11 1/4% notes. The exterior building products industry is cyclical and is significantly affected by changes
in national and local economic and other conditions such as employment levels, migration trends,
availability of financing, interest rates and consumer confidence. These factors can negatively
affect the demand for and pricing of the Companys products. If interest rates increase, the
ability of prospective buyers to finance purchases of home improvement products and invest in new
real estate will be adversely affected. A prolonged recession affecting the residential
construction industry could also adversely impact the Companys financial performance. The
occurrence or continuation of any of the above items, many of which are outside the Companys
control, and the items described below could have a negative impact on business and adversely
affect the value of the 9 3/4% notes and 11 1/4% notes. The Company has substantial fixed costs and, as a result, operating income is sensitive to
changes in net sales. The Company operates with significant operating and financial leverage. Significant portions
of the Companys manufacturing, selling, general and administrative expenses are fixed costs that
neither increase nor decrease proportionately with sales. In addition, a significant portion of the
Companys interest expense is fixed. There can be no assurance that the Company would be able to
reduce its fixed costs proportionately in response to a decline in its net sales. As a result, a
decline in the Companys net sales could result in a higher percentage decline in the Companys
income from operations. Changes
in raw materials costs and availability can adversely affect our profit margins. The principal raw materials used by the Company are vinyl resin, aluminum, steel, resin
stabilizers and pigments, packaging materials, window hardware, and glass, all of which have
historically been subject to price changes. Through price increases to its customers, the Company
has historically been able to pass on significant raw material cost increases. The results of
operations for individual quarters can and have been negatively impacted by a delay between the
time of raw material cost increases and price increases on our products. While the Company expects
that any significant cost increases in raw materials will be offset by price increases to its
customers, the Company may not be able to pass on any future increases. Additionally, the Company
relies on its suppliers for deliveries of raw materials. If any of the Companys suppliers were
unable to deliver raw materials to the Company for an extended period of time, the Company may not
be able to meet the its raw material requirements through other raw material suppliers without
incurring a material adverse impact on the its operations. The Company could face potential product liability claims relating to products it manufactures
or distributes. The Company faces a business risk of exposure to product liability claims in the event that
the use of its products is alleged to have resulted in injury or other adverse effects. The Company
currently maintains product liability insurance coverage, but it may not be able to obtain such
insurance on acceptable terms in the future, if at all, or any such insurance may not provide
adequate coverage against potential claims. Product liability claims can be expensive to defend and
can divert management and other personnel for months or years regardless of the ultimate outcome.
An unsuccessful product liability defense could have a material adverse effect on the Companys
business, financial condition, results of operations or business prospects or ability to make
payments on the 9 3/4% notes when due. 12




---



##### Table of Contents



The Company remains subject to risks of realizing synergies from the Gentek acquisition. The scale of the Companys business has increased significantly through the Gentek
acquisition. Although the Company believes that the Gentek acquisition will provide it with synergy
opportunities of approximately $6 million during 2005, and the Company has already implemented many
of the actions necessary to drive these opportunities, the successful realization of operational
synergies will depend on a number of factors, many of which are beyond the Companys control. The
Company may encounter other difficulties in realizing synergies of these operations, such as the
diversion of managements attention from daily operations, which could result in a delay in the
achievement of or a decrease in the anticipated economies of scale and other operating benefits
and, therefore, future revenues and profitability. If the Company does not successfully integrate
its operations, this could have a material adverse effect on its financial condition, results of
operations and liquidity. The Company has significant goodwill and other intangible assets. The Company has accounted for the April 2002 merger transaction and the acquisition of Gentek
using the purchase method of accounting. The purchase price has been allocated to assets and
liabilities based on the fair values of the assets acquired and the liabilities assumed. The excess
of cost over fair value of the new identifiable assets acquired has been recorded as goodwill.
These purchase price allocations have been made based upon valuations and other studies. As a
result of these transactions, the Company has approximately $113.0 million of other intangible
assets and $234.8 million of goodwill. Given the significant amount of goodwill and other
intangible assets, any future impairment of the goodwill and other intangible assets recorded could
have an adverse effect on the Companys financial condition and results of operations. The Company is controlled by affiliates of Investcorp S.A. and Harvest Partners, Inc., whose
interests may be different than other investors. By reason of their ownership of the Companys indirect parent company, affiliates of
Investcorp and Harvest Partners have the ability to designate a majority of the members of the
board of directors of the Company and its parent company, with each having the right to designate
three of the seven members, with the seventh board seat being occupied by the chief executive
officer of the Company. Investcorp and Harvest Partners will control actions to be taken by the
Companys stockholder and/or board of directors, including amendments to the Companys certificate
of incorporation and by-laws and approval of significant corporate transactions, including mergers
and sales of substantially all of the Companys assets. The interests of Investcorp and Harvest
Partners and their affiliates interests may be materially different than other investors in the
Company. For example, Investcorp and Harvest Partners may cause the Company to pursue a growth
strategy, which could impact the Companys ability to make payments under the indentures governing
the 9 3/4% notes and 11 1/4% notes and the credit facility or cause a change of control. In
addition, to the extent permitted by the indentures and the credit facility, Investcorp and Harvest
Partners may cause the Company to pay dividends rather than make capital expenditures. The Company may have inadequate warranty reserves. Consistent with industry practice, the Company provides to homeowners limited warranties on
certain products. Warranties are provided for varying lengths of time, from the date of purchase up
to and including lifetime. Warranties cover product failures such as stress cracks and seal
failures for windows and fading and peeling for siding products, as well as manufacturing defects.
Liabilities for future warranty costs are provided for annually based on managements estimates of
such future costs, which are based on historical trends and sales of products to which such costs
relate. To the extent that the Companys estimates are inaccurate and it does not have adequate
warranty reserves, the Companys liability for warranty payments could have a material impact on
its financial condition and results of operations. The Company is subject to various environmental statutes and regulations, which may result in
significant costs. The Companys operations are subject to various U.S. and Canadian environmental statutes and
regulations, including those relating to materials used in its products, discharge of pollutants
into the air, water and soil, treatment, transport, storage and disposal of solid and hazardous
wastes, and remediation of soil and groundwater contamination. Such laws and regulations may also
impact the availability of materials used in manufacturing the Companys products. From time to
time, the Companys facilities are subject to investigation by governmental regulators. The Company
believes it is in material compliance with applicable environmental requirements, and does not
expect these requirements to result in material expenditures in the foreseeable future. However,
future expenditures may increase as compliance standards and technology change. 13




---



##### Table of Contents



Certain environmental laws, including the federal Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended, or CERCLA, and comparable state laws, impose
strict, and in certain circumstances joint and several, liability for response costs and impose
liability for damages to natural resources upon specified responsible parties, which include
certain former owners and operators of sites designated for clean up by environmental regulators. A
facility initially owned by USX and subsequently owned by the Company in Lumber City, Georgia,
which is now owned by Amercord Inc. (Amercord), a company in which the Company currently holds a
minority interest, is undergoing soil and groundwater investigation, pursuant to a Consent Order
entered into by Amercord with the Georgia Department of Natural Resources in 1994. The Company is
not a party to these activities. The Company also understands that soil and groundwater in certain
areas of the site (including in the area of two industrial waste landfills) are being investigated
under CERCLA by the United States Environmental Protection Agency to determine whether remediation
of those areas may be required and whether the site should be listed on the state or federal list
of priority sites requiring remediation. Amercord, the current site owner, no longer has operations
and may not have adequate financial resources to perform required remediation and if substantial
remediation is required, claims may be made against the Company, which could result in material
expenditures. See Item 7. Managements discussion and analysis of financial condition and results
of operations and Item 1. Business  Government Regulation and Environmental Matters. Also, the Company cannot be certain that it has identified all environmental matters giving
rise to potential liability. Its past use of hazardous materials, releases of hazardous substances
at or from currently or formerly owned or operated properties, newly discovered contamination at
any of its current or formerly owned or operated properties, or more stringent future environmental
requirements (or stricter enforcement of existing requirements), or its inability to enforce
indemnification agreements, could result in increased expenditures or liabilities which could have
an adverse effect on its business and financial condition. Any judgment in an environmental
proceeding entered against the Company or its subsidiary that is greater than $10.0 million and is
not discharged, paid, waived or stayed within 60 days after becoming final and non-appealable would
be an event of default in the indentures governing the 9 3/4% notes and 11 1/4% notes. For details
regarding environmental matters giving rise to potential liability, see Item 1. Business 
Government Regulation and Environmental Matters and Item 3. Legal Proceedings. AVAILABLE INFORMATION AMH files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and other information with the SEC. Information filed with the SEC may be read and copied by the
public at the Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
The public may obtain information on the operation of the Public Reference Room by calling the SEC
at 1-800-SEC-0330. The SEC maintains an Internet site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding the issuers that file
electronically with the SEC. 
 ITEM 2. PROPERTIES The Companys operations include both owned and leased facilities as described below: LOCATION
    
    PRINCIPAL USE
    
    SQUARE FEETCuyahoga Falls, Ohio
    
    Associated Materials Incorporated Headquarters
    
    
    70,000Pepper Pike, Ohio
    
    Former Gentek Corporate Headquarters
    
    
    8,000
    (1)Cuyahoga Falls, Ohio
    
    Vinyl Windows, Vinyl Fencing, Decking and Railing
    
    
    577,000Bothell, Washington
    
    Vinyl Windows
    
    
    159,000
    (2)Cedar Rapids, Iowa
    
    Vinyl Windows
    
    
    257,000
    (2)Kinston, North Carolina
    
    Vinyl Windows
    
    
    319,000
    (2)London, Ontario
    
    Vinyl Windows
    
    
    60,000Richmond, Virginia
    
    Former Vinyl Window Plant
    
    
    60,000
    (3)Burlington, Ontario
    
    Vinyl Siding Products
    
    
    394,000
    (4)Ennis, Texas
    
    Vinyl Siding Products
    
    
    301,000Freeport, Texas
    
    Former Vinyl Siding Products Plant
    
    
    120,000
    (5)West Salem, Ohio
    
    Vinyl Window Extrusions, Vinyl Fencing, Decking
and Railing
    
    
    173,000Pointe Claire, Quebec
    
    Metal Products
    
    
    289,000Woodbridge, New Jersey
    
    Metal Products
    
    
    318,000
    (2)
 14




---



##### Table of Contents



(1)
    
    Leased facility closed in December 2003. Lease expires April 2005.(2)
    
    Leased facilities.(3)
    
    This plant was closed in June 2004 and is currently being subleased.(4)
    
    The Company leases a portion of its warehouse space in this facility.(5)
    
    During the fourth quarter of 2004, the Company began shutdown of the facility and is expected
to be to completed by the end of the second quarter of 2005. Management believes that the Companys facilities are generally in good operating condition
and are adequate to meet anticipated requirements in the near future. The Company also operates 125 supply centers in major metropolitan areas throughout the United
States and Canada. Except for one owned location in Akron, Ohio, the Company leases its supply
centers for terms generally ranging from five to seven years with renewal options. The supply
centers range in size from 6,000 square feet to 50,000 square feet depending on sales volume and
the breadth and type of products offered at each location. The leases for Alsides window plants expire in 2011 for the Bothell location, in 2013 for the
Cedar Rapids location and in 2010 for Kinston location. The lease at the Bothell location is
renewable at the Companys option for two additional five-year periods. The lease for Genteks
former corporate headquarters expires in 2005. The lease for Genteks Burlington location expires
in 2014. The lease for Genteks Woodbridge location expires in 2009 and is renewable for an
additional five-year period. The lease for Genteks Richmond location expires in 2007. 
 ITEM 3.LEGAL PROCEEDINGS The Company is involved from time to time in litigation arising in the ordinary course of its
business, none of which, after giving effect to the Companys existing insurance coverage, is
expected to have a material adverse effect on the Company. From time to time, the Company is
involved in a number of proceedings and potential proceedings relating to environmental and product
liability matters. Certain environmental laws, including the federal Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended, (CERCLA), and comparable state laws, impose
strict, and in certain circumstances joint and several, liability upon specified responsible
parties, which include certain former owners and operators of waste sites designated for clean up
by environmental regulators. A facility initially owned by USX and subsequently owned by the
Company in Lumber City, Georgia, which is now owned by Amercord Inc., is subject to a Consent Order
entered into by Amercord Inc. with the Georgia Department of Natural Resources in 1994. The Company
is not a party to the Consent Order. The Company understands that soil and groundwater in certain
areas of the site (including in the area of two industrial waste landfills) are being investigated
under CERCLA by the United States Environmental Protection Agency to determine whether remediation
of those areas may be required and whether the site should be listed on the state or federal list
of priority sites requiring remediation. Amercord Inc., the current site owner, does not have
adequate financial resources to carry out additional remediation that may be required, and if
substantial remediation is required, claims may be made against the Company, which could result in
material expenditures. If costs related to the remediation of this site are incurred, the Company
and USX have agreed to share in those costs; however, there can be no assurance that USX can or
will make the payments. The Woodbridge, New Jersey facility is currently the subject of an investigation and/or
remediation before the New Jersey Department of Environmental Protection, or NJDEP, for Gentek
Building Products, Inc., or Gentek U.S. (Woodbridge, Middlesex County, ISRA Case No. E20030110).
The facility is currently leased by Gentek U.S. Previous operations at the facility resulted in
soil and groundwater contamination in certain areas of the property. In 1999, the property owner
and Gentek U.S. signed a remediation agreement with NJDEP, pursuant to which the property owner and
Gentek U.S. agreed to continue an investigation/remediation that had been commenced pursuant to a
Memorandum of Agreement with NJDEP. Under the remediation agreement, NJDEP required posting of
$250,000 in a remediation funding source, $100,000 of which was provided by Gentek U.S. under a
self-guaranty. Investigations at this facility are ongoing and the Company cannot currently
determine the amount of any cleanup costs that may be associated with this facility. 15




---



##### Table of Contents



The same Woodbridge, New Jersey facility was the subject of a prior investigation and
remediation before NJDEP, under ISRA Case No. 94359. On February 1, 2000, NJDEP issued a no further
action letter and covenant not to sue, relying in part on the establishment of a 60-year duration
Classification Exception Area, or CEA and Wellhead Restriction Area, or WRA, for a discrete area of
the facility. By reason of this approval, Gentek U.S. has certain responsibilities imposed by law
and/or agreement to monitor the extent of contamination at the facility in the area of, and for the
duration of, the CEA and WRA. The Company does not anticipate that those responsibilities will lead
to material expenditures in the future. The Company handles other environmental claims in the ordinary course of business and
maintains product liability insurance covering certain types of claims. Although it is difficult to
estimate the Companys potential exposure to these matters, the Company believes that the
resolution of these matters will not have a material adverse effect on the Companys financial
position, results of operations or liquidity. 
 ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS By written consent in lieu of a meeting of the stockholders of AMH, dated December 22, 2004,
the stockholders of AMH, pursuant to the requirements of Section 280G of the Internal Revenue Code
of 1986, as amended, approved certain bonus payments, benefits and other payments to certain
employees of the Company in connection with the December 2004 recapitalization transaction. These
payments are more particularly described in Item 7 below under Recapitalization Transactions. 16




---



##### Table of Contents



PART II 
 ITEM 5.MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION There is no established public trading market for AMHs common equity securities. HOLDERS As of March 28, 2005, AMH II is the sole record holder of AMHs common stock. DIVIDENDS Prior to the April 2002 merger transaction, AMI paid dividends of $0.05 per share in the 108
days ended April 18, 2002. In 2004 AMH paid dividends of
$57.7 million to its then existing shareholders related to the March 2004 dividend
recapitalization. The
Company did not pay dividends in 2003 or for the 257 days ended
December 31, 2002. In addition, the Companys credit facility and indentures governing the 9 3/4%
notes and 11 1/4% notes restrict dividend payments by AMI and AMH. In the first quarter of 2005, AMI
made an intercompany loan of $33.7 million to AMH II through its direct and indirect parent
companies. Subsequently, a dividend was declared by AMI and its direct and indirect parent
companies in forgiveness of the intercompany loan. The Company presently does not plan to pay
other future cash dividends other than to allow AMH II to make interest payments on its debt
obligations. AMH II has no operations of its own. AMI is a separate and distinct legal entity and
has no obligation, contingent or otherwise, to pay amounts due under the 11 1/4% notes and the 13
5/8% notes or make any funds available to pay those amounts, whether by dividend, distribution,
loan or other payments. EQUITY COMPENSATION PLAN INFORMATION
  Number of securitiesremaining availablefor future issuanceunder equityNumber of Securities to
    
    Weighted-average
    
    compensation plansbe issued upon exercise
    
    exercise price of
    
    (excluding securitiesof outstanding options,
    
    outstanding options,
    
    reflected inwarrants and rights
    
    warrants and rights
    
    column (a))Plan Category
    
    (a)
    
    (b)
    
    (c)Equity compensation plans approved by
    stockholders(1)
    
    
    379,829
    
    
    
    $7.83
    
    
    
    Equity compensation plans not approved by stockholders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    379,829
    
    
    
    $7.83
    
    
    
     
 (1)
    Equity compensation plans approved by stockholders consist of
    the Associated Materials Holdings Inc. 2002 Stock Option Plan
    (the 2002 Plan).(2)
    Consists of shares of AMHs Class B non-voting common
    stock that may be issued upon exercise of the outstanding
    options under the 2002 Plan. In connection with the December
    2004 recapitalization transaction, each holder of such options
    entered into an agreement with AMH II whereby such option
    holders agreed, upon the exercise of any such options under the
    2002 Plan, to automatically contribute to AMH II the AMH
    shares issued upon any such option exercise, in exchange for an
    equivalent number and class of shares of AMH II. For
    additional information about the 2002 Plan, see Item 11.
    Executive Compensation  Compensation and
    Incentive Plans  Associated Materials Holdings Inc.
    2002 Stock Option Plan.  PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS None. 17




---



##### Table of Contents



ITEM 6.SELECTED FINANCIAL DATA The selected financial data set forth below for the five-year period ended January 1, 2005 was
derived from the audited consolidated financial statements of the Company. The Companys results of
operations prior to the date of the April 2002 merger transaction are presented as the results of
the Predecessor. The results of operations, including the April 2002 merger transaction and results
thereafter, are presented as the results of the Successor. In addition, the Company completed the
sale of its AmerCable division on June 24, 2002. AmerCables results through April 18, 2002 are
included in the results of continuing operations of the Predecessor. Subsequent to April 18, 2002,
AmerCables results are presented as discontinued operations of the Successor as it was the
Successors decision to divest this division. The Companys results of operations also include the
results of Gentek subsequent to its acquisition, which was completed on August 29, 2003. The data
should be read in conjunction with Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated financial statements, related notes and
other financial information included elsewhere in this report. 108 DAYS
    
    
    
    257 DAYSYEAR ENDED
    
    
    ENDED
    
    
    
    ENDED
    
    
    YEAR ENDEDDECEMBER 31,
    
    
    APRIL 18,
    
    
    
    DECEMBER 31,
    
    
    JANUARY 3,
    
    
    JANUARY 1,2000
    
    
    2001
    
    
    2002
    
    
    
    2002
    
    
    2004
    
    
    2005PREDECESSOR(IN THOUSANDS)INCOME STATEMENT DATA:Net sales
    
    $
    499,393
    
    
    $
    595,819
    
    
    $
    180,230
    
    
    
    $
    449,324
    
    
    $
    779,836
    
    
    $
    1,093,959Cost of sales
    
    
    353,994
    
    
    
    425,366
    
    
    
    130,351
    
    
    
    
    317,077
    
    
    
    561,525
    
    
    
    804,951Gross profit
    
    
    145,399
    
    
    
    170,453
    
    
    
    49,879
    
    
    
    
    132,247
    
    
    
    218,311
    
    
    
    289,008Selling, general and administrative
expenses
    
    
    107,255
    
    
    
    119,945
    
    
    
    43,272
    
    
    
    
    86,097
    
    
    
    149,571
    
    
    
    184,524Transaction costs:Bonuses (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,811Stock option
compensation expense (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,838Facility closure costs (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,535Income from operations
    
    
    38,144
    
    
    
    50,508
    
    
    
    6,607
    
    
    
    
    46,150
    
    
    
    68,740
    
    
    
    32,300Interest expense (4)
    
    
    6,046
    
    
    
    6,795
    
    
    
    2,068
    
    
    
    
    16,850
    
    
    
    27,369
    
    
    
    53,221Foreign currency (gain) loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (548
    )
    
    
    387Recapitalization transaction costs (5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,297Gain on the sale of UltraCraft (6)
    
    
    8,012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Merger transaction costs (7)
    
    
    
    
    
    
    
    
    
    
    9,319
    
    
    
    
    
    
    
    
    
    
    
    
    Debt extinguishment costs (8)(9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,579
    
    
    
    
    
    
    
    Write-down of Amercord (10)
    
    
    
    
    
    
    2,393
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) before income taxes
    
    
    40,110
    
    
    
    41,320
    
    
    
    (4,780
    )
    
    
    
    21,721
    
    
    
    41,919
    
    
    
    (37,605
    )Income taxes
    
    
    16,555
    
    
    
    15,908
    
    
    
    977
    
    
    
    
    9,016
    
    
    
    17,388
    
    
    
    (10,379
    )Income (loss) from continuing operations
    
    
    23,555
    
    
    
    25,412
    
    
    
    (5,757
    )
    
    
    
    12,705
    
    
    
    24,531
    
    
    
    (27,226
    )Loss from discontinued operations, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (521
    )
    
    
    
    
    
    
    Net income (loss)
    
    $
    23,555
    
    
    $
    25,412
    
    
    $
    (5,757
    )
    
    
    $
    12,184
    
    
    $
    24,531
    
    
    $
    (27,226
    )
 18




---



##### Table of Contents



108 DAYS
    
    
    
    257 DAYSYEAR ENDED
    
    
    ENDED
    
    
    
    ENDED
    
    
    YEAR ENDEDDECEMBER 31,
    
    
    APRIL 18,
    
    
    
    DECEMBER 31,
    
    
    JANUARY 3,
    
    
    JANUARY 1,2000
    
    
    2001
    
    
    2002
    
    
    
    2002
    
    
    2004
    
    
    2005PREDECESSOR(IN THOUSANDS)OTHER DATA:Capital expenditures
    
    $
    11,925
    
    
    $
    15,022
    
    
    $
    3,817
    
    
    
    $
    8,938
    
    
    $
    12,689
    
    
    $
    18,741Cash provided by (used in) operating
activities
    
    
    22,968
    
    
    
    43,989
    
    
    
    (18,258
    )
    
    
    
    42,577
    
    
    
    55,976
    
    
    
    21,005Cash used in investing activities(9)
    
    
    (5,538
    )
    
    
    (9,861
    )
    
    
    (3,597
    )
    
    
    
    (346,993
    )
    
    
    (123,510
    )
    
    
    (18,651
    )Cash provided by (used in) financing
activities(9)
    
    
    (4,983
    )
    
    
    (21,138
    )
    
    
    (245
    )
    
    
    
    311,745
    
    
    
    58,738
    
    
    
    50,908BALANCE SHEET DATA (END OF PERIOD):Working capital
    
    $
    106,635
    
    
    $
    110,632
    
    
    
    
    
    
    
    $
    88,546
    
    
    $
    113,698
    
    
    $
    198,149Total assets
    
    
    235,712
    
    
    
    258,660
    
    
    
    
    
    
    
    
    565,537
    
    
    
    718,633
    
    
    
    855,854Long-term debt, less current maturities
    
    
    75,000
    
    
    
    75,000
    
    
    
    
    
    
    
    
    242,408
    
    
    
    305,000
    
    
    
    621,981
   (1)
    
    Represents bonuses paid to certain members of management and a director in conjunction with
the March 2004 dividend recapitalization and the December 2004 recapitalization transaction of
$14.5 million and $22.3 million, respectively.(2)
    
    Represents stock option compensation expense recognized in connection with the December 2004
recapitalization transaction resulting from the exercise and redemption of certain stock
options.(3)
    
    Represents one-time costs associated with the closure of the Freeport, Texas manufacturing
facility consisting primarily of asset write-downs of $3.6 million, equipment relocation costs
of $0.4 million, severance benefits of $0.3 million and contract termination costs of $0.2
million.(4)
    
    The year ended January 1, 2005 includes
$25.4 million of interest expense related to the 11 1/4%
senior discount notes issued by AMH in March 2004, which is comprised
of accretion on the senior discount notes of $24.6 million and
amortization of deferred financing costs of $0.8 million. The years ended January 1, 2005 and January 3, 2004 include the write-off of $2.8 million and
$3.9 million, respectively, of debt issuance costs as a result of amending and restating the
Companys credit facility.(5)
    
    Recapitalization transaction costs include $16.3 million of investment banking, legal and
other expenses incurred as a result of the December 2004 recapitalization transaction.(6)
    
    The Company recorded an $8.0 million pre-tax gain on the sale of its UltraCraft operation, a
manufacturer of semi-custom cabinets, in June 2000.(7)
    
    Merger transaction costs include investment banking and legal fees incurred by the
Predecessor in conjunction with the strategic review process and subsequent April 2002 merger
transaction.(8)
    
    Debt extinguishments costs include $4.9 million for the extinguishment of substantially all
of the Successors assumed 9 1/4% notes and $2.7 million for the expense of financing fees
related to an interim credit facility utilized for the April 2002 merger transaction, which
was repaid shortly thereafter.(9)
    
    In 2003, the Company adopted FASB Statement of Financial Accounting Standards No. 145,
Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections, which among other provisions, required debt extinguishment costs
incurred in prior periods to be reclassified and no longer presented as extraordinary items.
As a result of adopting this standard, the Company reclassified debt extinguishment costs
recorded in the second quarter of 2002.(10)
    
    The Company recorded a $2.4 million loss upon the write-off of its remaining investment in
Amercord due to the deterioration of Amercords operations.   19




---



##### Table of Contents



ITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company is a leading, vertically integrated manufacturer and North American distributor of
exterior residential building products. The Companys core products are vinyl windows, vinyl
siding, aluminum trim coil, aluminum and steel siding and accessories, and vinyl fencing, decking
and railing. Vinyl windows and vinyl siding together comprise approximately 60% of the Companys
total net sales. These products are marketed under the Alside®, Revere® and Gentek® brand
names and sold on a wholesale basis to more than 50,000 professional contractors engaged in home
remodeling and new home construction principally through the Companys North American network of
125 supply centers. Approximately two-thirds of the Companys products are sold to contractors
engaged in the home repair and remodeling market with one-third sold to the new construction
market. The supply centers provide one-stop shopping to the Companys contractor customers,
carrying products, accessories and tools necessary to complete a vinyl window or siding project. In
addition, the supply centers provide high quality product literature, product samples and
installation training to these customers. Because its exterior residential building products are consumer durable goods, the Companys
sales are impacted by the availability of consumer credit, consumer interest rates, employment
trends, changes in levels of consumer confidence, national and regional trends in new housing
starts and general economic conditions. The Companys sales are also affected by changes in
consumer preferences with respect to types of building products. The Companys products are used in
the repair and remodeling, as well as the new construction, sectors of the building industry. The
industrys dynamics remained strong in the fourth quarter of 2004, with strong levels of existing
home sales and single family home starts, as well as continued low levels of mortgage interest
rates and increases in consumer confidence. During 2004, short-term interest rates increased, but
mortgage interest rates remained consistent with 2003. The Company believes it can sustain
moderate short-term interest rate and mortgage rate increases without a significant negative impact
on its net sales. Additionally, the Company believes increasing consumer confidence may offset any
significant negative impact of interest rate increases. Overall, the Company believes the
fundamentals for the building products industry remain strong. Due to the high price of oil and natural gas, as well as expected continued strong demand, the
Company, along with the entire building products industry, has experienced significant inflation in
key raw material commodity costs. These costs are expected to continue to increase in 2005. To
offset these increases, the Company announced prices increases on certain of its product offerings
in 2004 as well as the first quarter of 2005. The results of operations for the individual
quarters can and have been negatively impacted by a delay between the time of raw material cost
increases and price increases on our products. The Companys ability to maintain gross margin
levels on its products depends on the Companys ability to obtain its announced selling price
increases. The Company believes that vinyl building products continue to gain market share from metal and
wood products due to vinyls favorable attributes, which include its durability, lower maintenance
cost and lower cost. Although no assurances can be given, the Company further believes that these
increases in market share, together with increased marketing efforts, will increase the Companys
sales of vinyl windows, vinyl siding, and other complementary building products. The Company operates with significant operating and financial leverage. Significant portions
of the Companys manufacturing, selling, general and administrative expenses are fixed costs that
neither increase nor decrease proportionately with sales. In addition, a significant portion of the
Companys interest expense is fixed. There can be no assurance that the Company will be able to
reduce its fixed costs in response to a decline in its net sales. As a result, a decline in the
Companys net sales could result in a higher percentage decline in its income from operations. In 2003, the Company changed its fiscal year from a calendar year ending on December 31st to a
52 / 53 week fiscal year that ends on the Saturday closest to December 31st. The Companys 2004 and
2003 fiscal years ended on January 1, 2005 and January 3, 2004, respectively. On August 29, 2003, the Company completed the acquisition of Gentek Holdings, Inc. (Gentek
Holdings) and repaid all of the indebtedness and accrued interest of Gentek Holdings and its
subsidiaries for an aggregate purchase price of approximately $114.3 million, which included $1.1
million of cash acquired, a working capital adjustment and customary transaction fees. Gentek Holdings, which was privately held, is the parent of Gentek Building Products, Inc. and
Gentek Building Products Limited (collectively, Gentek). Gentek manufactures and distributes
vinyl windows, vinyl siding and accessories, aluminum trim coil, and 20




---



##### Table of Contents



aluminum and steel siding and accessories under the Revere® and Gentek® brand names.
Gentek markets its products to professional contractors on a wholesale basis through 11
company-owned distribution centers in the mid-Atlantic region of the United States, 21
company-owned distribution centers in Canada, and independent distributors in the United States. The Gentek acquisition has provided the Company with a number of significant cost savings and
other operational opportunities, including increased purchasing leverage, insourcing of distributed
metal products and operational best practices. The Company recognized approximately $5 million of
synergies during 2004. The Company believes that the Gentek acquisition will provide synergy
opportunities of approximately $6 million during 2005 resulting from moving the Alside metals
business to Genteks Woodbridge plant as well as the realization of a full year of savings from
closing its Richmond facility. The Company seeks to distinguish itself from other suppliers of residential building products
and to sustain its profitability through a business strategy focused on increasing sales at
existing supply centers, expanding its supply center network, increasing sales through independent
specialty distributor customers, realizing synergies from the Gentek acquisition, developing
innovative new products, and driving operational excellence by reducing costs, increasing customer
service levels and reducing lead times. RESULTS OF OPERATIONS The Company is a wholly owned subsidiary of AMH Holdings II, Inc. (AMH II) which is
controlled by affiliates of Investcorp S.A. (Investcorp) and Harvest Partners, Inc. (Harvest
Partners). AMH and AMH II were incorporated in connection with the recapitalization transactions
described below. AMH and AMH II do not have material assets or operations other than a direct or
indirect ownership of the common stock of AMI. The Companys 2004 and 2003 results of operations
include the results of Gentek subsequent to its acquisition on August 29, 2003. The Companys
results of operations prior to the date of the April 2002 merger transaction are presented as the
results of the Predecessor. The Company completed the sale of its AmerCable division on June 24,
2002. AmerCables results through April 18, 2002 are included in the results of continuing
operations of the Predecessor. Subsequent to April 18, 2002, AmerCables results are presented as
discontinued operations of the Successor as it was the Successors decision to divest this
division. Genteks results as compared to Alsides results typically have a lower gross profit margin
percentage as a larger proportion of Genteks net sales are to independent distributors versus to
contractors through company-owned distribution centers. As such, Genteks selling, general and
administrative expense as a percentage of net sales is typically lower than Alsides as Gentek does
not have as large of a proportion of fixed costs associated with operating company-owned
distribution centers. The Company anticipates that on a consolidated basis, its gross profit margin
percentage and its selling, general and administrative expense as a percentage of net sales will
decrease as compared to periods prior to the Gentek acquisition. Prior to the April 2002 merger transaction and the sale of AmerCable, the Company consisted of
two operating segments, Alside and AmerCable. Subsequent to the April 2002 merger transaction, the
Company is in the single business of manufacturing and distributing exterior residential building
products. The results of Alside and Gentek represent the ongoing operations of the Company. RECAPITALIZATION TRANSACTIONS AMH was incorporated in Delaware on February 19, 2004. As part of a restructuring agreement
dated as of March 4, 2004, stockholders and option holders of Holdings became stockholders and
option holders of AMH and are no longer stockholders and option holders of Holdings. AMH has no
material assets or operations other than its 100% ownership of Holdings, its direct subsidiary. On
March 4, 2004, AMH completed an offering of $446 million
aggregate principal at maturity of 11 1/4%
notes. The total gross proceeds were approximately $258.3 million. In connection with the note
offering, certain options to acquire preferred and common shares were exercised and the proceeds
from the note offering were used to redeem all of AMHs preferred stock including accrued and
unpaid dividends, pay a dividend to AMHs common stockholders and pay a bonus to certain members of
the Companys senior management and a director. Through Holdings, AMH contributed $14.5 million to
AMI to pay the bonus. The completion of the aforementioned transactions constitute the March 2004
dividend recapitalization. On December 22, 2004, AMH completed a recapitalization transaction in which the then
outstanding capital stock of AMH was reclassified as a combination of voting and non-voting shares
of Class B common stock and shares of voting and non-voting convertible preferred stock. All of the
shares of the convertible preferred stock were immediately sold to affiliates of Investcorp for an
aggregate purchase price of $150 million, which was distributed
by the Company to existing shareholders. As a result of this
transaction, affiliates of Investcorp acquired a
50% equity interest in AMH and the existing shareholders, led by Harvest Partners, retained shares
of Class B common stock representing a 50% equity interest in
AMH, all on a fully diluted basis. Subsequent to the share
purchase by Investcorp, each of Investcorp and Harvest Partners, through their respective
affiliates, have a 21




---



##### Table of Contents



50% voting interest in AMH. Immediately following these transactions, on December 22, 2004,
the shareholders of AMH contributed their shares of the capital stock of AMH to AMH II, a Delaware
corporation formed for the purpose of becoming the direct parent company of AMH, in exchange for
shares of the capital stock of AMH II mirroring (in terms of type and class, voting rights,
preferences and other rights) the shares of AMH capital stock contributed by such shareholders. In
connection with this transaction, on December 22, 2004, the Company increased its senior credit
facility by $42 million and AMH II issued $75 million of 13 5/8% notes. AMH II then declared and
paid a dividend on shares of its Class B common stock in an aggregate amount of approximately $96.4
million, which included approximately $3.4 million in aggregate proceeds received by AMH II through
AMH upon the exercise of options to purchase AMH common stock. Of this $96.4 million dividend,
approximately $62.7 million was paid in cash and approximately $33.7 million was paid in the form
of promissory notes issued by AMH II to each of its Class B
common shareholders. In December of 2004, AMH made a payment to
AMH II for the proceeds received upon exercise of the options. In the first
quarter of 2005, AMI made an intercompany loan of $33.7 million to AMH II through its direct and
indirect parent companies. Subsequently, AMI and its direct and indirect parent companies declared
a dividend in forgiveness of the intercompany loan. On December 22, 2004, in connection with such transactions, AMI paid a bonus in the aggregate
amount of approximately $22.3 million to certain members of AMIs management and a director.
Approximately $14.3 million of the bonus, including payroll
taxes, was paid in cash on December 22, 2004, with promissory
notes issued by AMI for the remaining $8.0 million. These promissory notes were settled in cash
during the first quarter of fiscal year 2005. AMI incurred transaction related costs of $28.4 million, which includes $16.3 million paid for investment banking and legal expenses, which have been classified as
recapitalization transaction costs in the Companys statement of
operations and $12.1 million for financing related costs, which have been recorded in
other assets on the Companys balance sheet. AMI also recognized
stock compensation expense of $30.8 million, including payroll
taxes, related to stock options exercised in the transaction.
The completion of the aforementioned transactions constitute the December 2004 recapitalization
transaction. 22




---



##### Table of Contents



The following table sets forth for the periods indicated the results of the Companys
operations by segment: YEAR
    
    
    YEAR
    
    
    108 DAYS
    
    
    
    257 DAYS
    
    
    YEARENDED
    
    
    ENDED
    
    
    ENDED
    
    
    
    ENDED
    
    
    ENDEDJANUARY 1,
    
    
    JANUARY 3,
    
    
    APRIL 18,
    
    
    
    DECEMBER 31,
    
    
    DECEMBER 31,2005
    
    
    2004
    
    
    2002
    
    
    
    2002
    
    
    2002PREDECESSOR
    
    
    
    SUCCESSOR
    
    
    COMBINED(in thousands)Net salesBuilding products
    
    $
    1,093,959
    
    
    $
    779,836
    
    
    $
    161,959
    
    
    
    $
    449,324
    
    
    $
    611,283AmerCable
    
    
    
    
    
    
    
    
    
    
    18,271
    
    
    
    
    
    
    
    
    18,271Total
    
    
    1,093,959
    
    
    
    779,836
    
    
    
    180,230
    
    
    
    
    449,324
    
    
    
    629,554Gross profitBuilding products
    
    
    289,008
    
    
    
    218,311
    
    
    
    47,102
    
    
    
    
    132,247
    
    
    
    179,349AmerCable
    
    
    
    
    
    
    
    
    
    
    2,777
    
    
    
    
    
    
    
    
    2,777Total
    
    
    289,008
    
    
    
    218,311
    
    
    
    49,879
    
    
    
    
    132,247
    
    
    
    182,126Selling,
general and administrative expense

Building products
    
    
    184,524
    
    
    
    149,571
    
    
    
    41,080
    
    
    
    
    86,097
    
    
    
    127,177AmerCable
    
    
    
    
    
    
    
    
    
    
    2,192
    
    
    
    
    
    
    
    
    2,192Total
    
    
    184,524
    
    
    
    149,571
    
    
    
    43,272
    
    
    
    
    86,097
    
    
    
    129,369Transaction costs:Bonuses
    
    
    36,811
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock option compensation expense
    
    
    30,838
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Facility closure costs
    
    
    4,535
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from operationsBuilding products
    
    
    32,300
    
    
    
    68,740
    
    
    
    6,022
    
    
    
    
    46,150
    
    
    
    52,172AmerCable
    
    
    
    
    
    
    
    
    
    
    585
    
    
    
    
    
    
    
    
    585Total
    
    
    32,300
    
    
    
    68,740
    
    
    
    6,607
    
    
    
    
    46,150
    
    
    
    52,757Interest, net
    
    
    53,221
    
    
    
    27,369
    
    
    
    2,068
    
    
    
    
    16,850
    
    
    
    18,918Foreign currency (gain) loss
    
    
    387
    
    
    
    (548
    )
    
    
    
    
    
    
    
    
    
    
    
    Recapitalization transaction costs
    
    
    16,297
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Debt extinguishment costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,579
    
    
    
    7,579Merger transaction costs
    
    
    
    
    
    
    
    
    
    
    9,319
    
    
    
    
    
    
    
    
    9,319Income (loss) from continuing operations
before income taxes
    
    
    (37,605
    )
    
    
    41,919
    
    
    
    (4,780
    )
    
    
    
    21,721
    
    
    
    16,941Income taxes
    
    
    (10,379
    )
    
    
    17,388
    
    
    
    977
    
    
    
    
    9,016
    
    
    
    9,993Income (loss) from continuing operations
    
    
    (27,226
    )
    
    
    24,531
    
    
    
    (5,757
    )
    
    
    
    12,705
    
    
    
    6,948Loss from discontinued operations, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (521
    )
    
    
    (521
    )Net income (loss)
    
    $
    (27,226
    )
    
    $
    24,531
    
    
    $
    (5,757
    )
    
    
    $
    12,184
    
    
    $
    6,427OTHER DATA:EBITDA(1)(2)
    
    $
    36,548
    
    
    $
    85,403
    
    
    $
    1,257
    
    
    
    $
    46,380
    
    
    $
    47,637Adjusted EBITDA(1)(2)
    
    $
    125,416
    
    
    $
    86,257
    
    
    $
    9,356
    
    
    
    $
    55,210
    
    
    $
    64,566
 23




---



##### Table of Contents



YEAR ENDEDJANUARY 1,
    
    
    JANUARY 3,
    
    
    DECEMBER 31,2005
    
    
    2004
    
    
    2002% OF TOTAL
    
    
    
    
    
    
    % OF TOTAL
    
    
    
    
    
    
    % OF TOTALAMOUNT
    
    
    NET SALES
    
    
    AMOUNT
    
    
    NET SALES
    
    
    AMOUNT
    
    
    NET SALES(in thousands)BUILDING PRODUCTS:Net sales
    
    $
    1,093,959
    
    
    
    100.0
    %
    
    $
    779,836
    
    
    
    100.0
    %
    
    $
    611,283
    
    
    
    100.0
    %Gross profit
    
    
    289,008
    
    
    
    26.4
    
    
    
    218,311
    
    
    
    28.0
    
    
    
    179,349
    
    
    
    29.3Selling, general and administrative expenses(3)
    
    
    184,524
    
    
    
    16.9
    
    
    
    149,571
    
    
    
    19.2
    
    
    
    127,177
    
    
    
    20.8Transaction costs
    
    
    67,649
    
    
    
    6.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Facility closure costs
    
    
    4,535
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income from operations
    
    $
    32,300
    
    
    
    3.0
    %
    
    $
    68,740
    
    
    
    8.8
    %
    
    $
    52,172
    
    
    
    8.5
    %Depreciation and amortization
    
    $
    20,932
    
    
    
    
    
    
    $
    16,115
    
    
    
    
    
    
    $
    10,503Capital expenditures
    
    $
    18,741
    
    
    
    
    
    
    $
    12,689
    
    
    
    
    
    
    $
    10,974
 108 DAYS ENDEDAPRIL 18,2002% OF TOTALAMOUNT
    
    
    NET SALES(in thousands)AMERCABLE:Net sales
    
    $
    18,271
    
    
    
    100.0
    %Gross profit
    
    
    2,777
    
    
    
    15.2Selling, general and administrative expenses
    
    
    2,192
    
    
    
    12.0Income from operations
    
    $
    585
    
    
    
    3.2
    %Depreciation and amortization
    
    $
    635Capital expenditures
    
    $
    1,781
   (1)
    
    EBITDA is calculated as net income (loss) plus interest, taxes, depreciation and
amortization. Adjusted EBITDA excludes certain items and AmerCables operating results. The
Company considers adjusted EBITDA to be an important indicator of its operational strength and
performance of its business. The Company has included adjusted EBITDA because it is a key
financial measure used by management to (i) assess the Companys ability to service its debt
and/or incur debt and meet the Companys capital expenditure requirements; (ii) internally
measure the Companys operating performance; and (iii) determine the Companys incentive
compensation programs. In addition, the Companys credit facility has certain covenants that
use ratios utilizing this measure of adjusted EBITDA. The definition of EBITDA under the
Companys credit facility does not exclude the results of AmerCable. The Company has, however,
excluded the results of AmerCable when calculating adjusted EBITDA as AmerCable is not
included in the Companys continuing operations. The definition of EBITDA under the indentures
governing the 9 3/4% notes and 11 1/4% notes also excludes certain items. Adjusted EBITDA has
not been prepared in accordance with accounting principles generally accepted in the United
States. Adjusted EBITDA as presented by the Company may not be comparable to similarly titled
measures reported by other companies. As adjusted EBITDA is not a measure determined in
accordance with GAAP, it should not be considered as an alternative to, or more meaningful
than, net income (loss) (as determined in accordance with GAAP), as a measure of the Companys
operating results or cash flows from operations (as determined in accordance with GAAP) or as
a measure of the Companys liquidity. The reconciliation of net income (loss) to EBITDA and
adjusted EBITDA is as follows: 24




---



##### Table of Contents



YEAR
    
    
    YEAR
    
    
    108 DAYS
    
    
    
    257 DAYSENDED
    
    
    ENDED
    
    
    ENDED
    
    
    
    ENDED
    
    
    YEAR ENDEDJANUARY 1,
    
    
    JANUARY 3,
    
    
    APRIL 18,
    
    
    
    DECEMBER 31,
    
    
    DECEMBER 31,2005
    
    
    2004
    
    
    2002
    
    
    
    2002
    
    
    2002PREDECESSOR
    
    
    
    SUCCESSOR
    
    
    COMBINED(in thousands)Net income (loss)
    
    $
    (27,226
    )
    
    $
    24,531
    
    
    $
    (5,757
    )
    
    
    $
    12,184
    
    
    $
    6,427Interest  Continuing operations
    
    
    53,221
    
    
    
    27,369
    
    
    
    2,068
    
    
    
    
    16,850
    
    
    
    18,918 Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,213
    
    
    
    1,213Taxes   Continuing operations
    
    
    (10,379
    )
    
    
    17,388
    
    
    
    977
    
    
    
    
    9,016
    
    
    
    9,993 Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (370
    )
    
    
    (370
    )Depreciation and amortization
 Continuing operations
    
    
    20,932
    
    
    
    16,115
    
    
    
    3,969
    
    
    
    
    7,169
    
    
    
    11,138 Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    318
    
    
    
    318EBITDA
    
    
    36,548
    
    
    
    85,403
    
    
    
    1,257
    
    
    
    
    46,380
    
    
    
    47,637Foreign currency (gain) loss
    
    
    387
    
    
    
    (548
    )
    
    
    
    
    
    
    
    
    
    
    
    Transaction costs  bonuses (i)
    
    
    36,811
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transaction costs  stock option
compensation expense (ii)
    
    
    30,838
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recapitalization transaction costs (iii)
    
    
    16,297
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Facility closure costs (iv)
    
    
    4,535
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Debt extinguishment costs(v)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,579
    
    
    
    7,579AmerCables EBITDA(vi)
    
    
    
    
    
    
    
    
    
    
    (1,220
    )
    
    
    
    (640
    )
    
    
    (1,860
    )Merger transaction costs(vii)
    
    
    
    
    
    
    
    
    
    
    9,319
    
    
    
    
    
    
    
    
    9,319Cost of sales adjustments(viii)
    
    
    
    
    
    
    1,402
    
    
    
    
    
    
    
    
    1,891
    
    
    
    1,891Adjusted EBITDA
    
    $
    125,416
    
    
    $
    86,257
    
    
    $
    9,356
    
    
    
    $
    55,210
    
    
    $
    64,566
  (i)
    Represents bonuses paid to certain members of management and one director in
conjunction with the March 2004 dividend recapitalization and the December 2004
recapitalization transaction of $14.5 million and $22.3 million, respectively.(ii)
    Represents stock option compensation expense recognized in connection with the December
2004 recapitalization transaction resulting from the exercise and redemption of certain
stock options.(iii)
    Recapitalization transaction costs include $16.3 million of investment banking, legal
and other expenses incurred as a result of the December 2004 recapitalization transaction.(iv)
    Represents one-time costs associated with the closure of the Freeport, Texas
manufacturing facility consisting primarily of asset write-downs of $3.6 million, equipment
relocation costs of $0.4 million, severance benefits of $0.3 million and contract
termination costs of $0.2 million.(v)
    Debt extinguishment costs include $4.9 million for the extinguishment of substantially
all of the Successors assumed 9 1/4% notes and $2.7 million for the expense of financing
fees related to an interim credit facility utilized for the April 2002 merger transaction,
which was repaid shortly thereafter.(vi)
    AmerCables EBITDA is calculated as its net income plus interest, taxes, depreciation
and amortization. A reconciliation of AmerCables net income (loss) to EBITDA is as
follows: 108 DAYS
    
    
    
    257 DAYSENDED
    
    
    
    ENDED
    
    
    YEAR ENDEDAPRIL 18,
    
    
    
    DECEMBER 31,
    
    
    DECEMBER 31,2002
    
    
    
    2002
    
    
    2002PREDECESSOR
    
    
    
    SUCCESSOR
    
    
    COMBINED(in thousands)Net income (loss)
    
    $
    359
    
    
    
    $
    (521
    )
    
    $
    (162
    )Interest
    
    
    
    
    
    
    
    1,213
    
    
    
    1,213Taxes   Continuing operations
    
    
    226
    
    
    
    
    
    
    
    
    226 Discontinued operations
    
    
    
    
    
    
    
    (370
    )
    
    
    (370
    )Depreciation and amortization
 Continuing operations
    
    
    635
    
    
    
    
    
    
    
    
    635 Discontinued operations
    
    
    
    
    
    
    
    318
    
    
    
    318AmerCables EBITDA
    
    $
    1,220
    
    
    
    $
    640
    
    
    $
    1,860
 25




---



##### Table of Contents



(vii)
    Merger transaction costs include investment banking and legal fees incurred by the
Predecessor in conjunction with the strategic review process and subsequent April 2002
merger transaction.(viii)
    The cost of sales adjustment is the expense related to inventory fair value adjustments
recorded at the time of the April 2002 merger transaction totaling $1.9 million and at the
time of the Gentek acquisition totaling $1.4 million.  (2)
    The results of operations for the full year ended January 1, 2005 include the results of
Gentek. The results of operations for the year ended January 3, 2004 only includes the
results of Gentek for the period subsequent to its acquisition on August 29, 2003. As the
periods presented are not comparable, a reconciliation of Genteks net income to EBITDA and
adjusted EBITDA for the years ended January 1, 2005 and January 3, 2004 is provided below (in
thousands): YEAR
    
    
    YEARENDED
    
    
    ENDEDJANUARY 1,
    
    
    JANUARY 3,2005
    
    
    2004Net income
    
    $
    14,147
    
    
    $
    3,067Interest
    
    
    445
    
    
    
    436Taxes
    
    
    7,376
    
    
    
    1,644Depreciation and amortization
    
    
    7,240
    
    
    
    3,720EBITDA
    
    
    29,208
    
    
    
    8,867Foreign currency (gain) loss
    
    
    387
    
    
    
    (548
    )Cost of sales adjustment (see note (1)(viii) above)
    
    
    
    
    
    
    1,402Adjusted EBITDA
    
    $
    29,595
    
    
    $
    9,721
  (3)
    Includes corporate expenses of $1.3 million for the year ended December 31, 2002 associated
with the Companys Dallas, Texas corporate office, which was relocated to Cuyahoga Falls, Ohio
after the April 2002 merger transaction. YEAR ENDED JANUARY 1, 2005 COMPARED TO YEAR ENDED JANUARY 3, 2004 Net sales increased 40.3% to $1,094.0 million for the year ended January 1, 2005 compared to
$779.8 million for the same period in 2003, primarily driven by increased vinyl window, vinyl
siding and third party manufactured product sales along with a full year of net sales from Gentek.
Gentek contributed net sales of $327.9 million for the full year ended January 1, 2005 and $103.4
million for the year ended January 3, 2004 subsequent to the date of acquisition. The Company
believes its sales were also driven by strong industry dynamics, as indicated by the strength of
several key metrics that the Company believes are indicators of strength in the industry. These
metrics include existing home sales, single-family housing starts and mortgage interest rates.
Gross profit increased to $289.0 million, or 26.4% of net sales, for the year ended January 1, 2005
compared to $218.3 million, or 28.0% of net sales, for the same period in 2003. The decrease in
gross profit margin percentage was a result of the full year impact of results contributed by
Gentek as Genteks gross margin percentage is typically lower than Alsides as a larger proportion
of Genteks net sales are to independent distributors versus contractors through company-owned
distribution centers. Additionally, the decrease in margin percentage resulted from the impact of
significantly increased costs of vinyl resin, aluminum and steel, which were partially offset by
the impact of price increases. Selling, general and administrative expense increased to $184.5
million, or 16.9% of net sales, for the year ended January 1, 2005 compared to $149.6 million, or
19.2% of net sales, for the same period in 2003. The increase in selling, general and
administrative expense is primarily a result of the full year impact of the acquisition of Gentek,
as well as the impact of adding three new Alside and one new Gentek supply centers in 2004 along
with three new supply centers added in 2003, which had a full year of expense in 2004. During
2004, the Company incurred costs related to the March 2004 dividend recapitalization and the
December 2004 recapitalization transaction totaling $67.6 million, consisting of management and
director bonuses and stock option compensation expense. In addition, the Company recognized
facility closure costs of $4.5 million related to the closing of its Freeport, Texas manufacturing
facility. As a result, income from operations was $32.3 million for the year ended January 1, 2005
compared to $68.7 million for the same period in 2003. The $4.5 million charge for the closure of the Freeport, Texas manufacturing facility
consisted of asset write-downs of approximately $3.6 million, relocation costs for certain
employees and facility shut down costs of approximately $0.4 million, contract termination costs of
approximately $0.2 million and employee severance costs of approximately $0.3 million, of which
approximately 26




---



##### Table of Contents



$0.5 million for contract termination costs and employee severance costs were included in
accrued liabilities as of January 1, 2005. The Company anticipates the entire charge to be $7.5
million and that the closure and the remainder of the charge will be recorded in the first half of
2005. The plant shut down affected 92 employees. The plant was closed to rationalize production
capacity and reduce fixed costs. The Company believes it has sufficient capacity at its other
facilities to meet anticipated sales of vinyl siding and accessories. Furthermore, the Company
believes it can improve product quality and efficiency by upgrading equipment at its remaining
facilities. The Company incurred a net loss of $27.2 million for the year ended January 1, 2005 compared
to net income of $24.5 million for the year ended January 3, 2004. The decrease in net income is a
result of the costs incurred related to the March 2004 dividend recapitalization and the December
2004 recapitalization transaction totaling $67.6 million, consisting of management and director
bonuses and stock compensation expense and $16.3 million of recapitalization transaction costs,
including investment banking, legal and other expenses. In addition, the Company recognized
facility closure costs of $4.5 million. Interest
expense of $53.2 million, for
the year ended January 1, 2005 consisted primarily of accretion of
$24.6 million on the 11 1/4% notes, interest expense on the 9 3/4% notes, 11 1/4%
notes, term loan and revolving loans under the credit facility, amortization of deferred financing
fees and the write-off of $2.8 million of debt issuance costs as a result of amending and restating
the credit facility for the December 2004 recapitalization transaction. This compares to interest
expense of $27.4 million for the year ended January 3, 2004, which consisted primarily of interest
expense on the 9 3/4% notes, term loan and revolving loans under the credit facility, amortization
of deferred financing fees and the write-off of $3.9 million of debt issuance costs as a result of
amending and restating the credit facility for the acquisition of Gentek. The 2004 tax provision
reflects an effective income tax rate of 27.6%, while the 2003 provision reflects an effective
income tax rate of 41.5%. The 2004 effective income tax rate was impacted by $10.9 million of
recapitalization transaction costs which the Company believes to be non-deductible for income tax
purposes. Adjusted EBITDA for the year ended January 1, 2005 was $125.4 million compared to adjusted
EBITDA of $86.3 million for the same period in 2003. Gentek contributed $29.6 million and $9.7
million of adjusted EBITDA for the years ended January 1, 2005 and January 3, 2004, respectively.
As compared to EBITDA, adjusted EBITDA for the year ended January 1, 2005 excludes transaction
related costs, one-time facility closure costs of $4.5 million, and foreign currency losses of $0.4
million. Transaction costs for the year ended January 1, 2005 include bonuses paid to management
and a director of $14.5 million related to the March 2004 dividend recapitalization and December
2004 recapitalization transaction costs including bonuses paid to management and a director of
$22.3 million, stock option compensation expense of $30.8 million and investment banking and legal
expenses of $16.3 million. As compared to EBITDA, adjusted EBITDA for the year ended January 3,
2004 excludes a cost of sales expense of $1.4 million relating to an inventory fair value
adjustment recorded at the time of the acquisition of Gentek and foreign currency gains of $0.5
million. YEAR
ENDED JANUARY 3, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2002
(COMBINED SUCCESSOR 
     AND
PREDECESSOR RESULTS OF THE BUILDING PRODUCTS SEGMENT) Prior to the sale of AmerCable, the Company consisted of two operating divisions, Alside and
AmerCable, which were presented as building products and electrical cable products segments,
respectively. Subsequent to the sale of AmerCable, the Company is in the single business of
manufacturing and distributing exterior residential building products. Therefore, managements
discussion and analysis of the Companys results of operations focuses on the building products
segment. Net sales increased 27.6% to $779.8 million for the year ended January 3, 2004 compared to
$611.3 million for the same period in 2002, primarily driven by increased window sales at the
Alside division along with $103.4 million of net sales contributed from Gentek since the date of
its acquisition. Additionally, the Company believes its sales were driven by strong industry
dynamics, as indicated by the strength of several key metrics that the Company believes are
indicators of strength in the industry, which include existing home sales, single-family housing
starts and mortgage interest rates. Gross profit increased to $218.3 million, or 28.0% of net
sales, for the year ended January 3, 2004 compared to $179.3 million, or 29.3% of net sales, for
the same period in 2002. The decrease in gross profit margin percentage was a result of window
sales, which have a lower gross profit margin percentage, comprising a larger proportion of total
net sales in 2003. Additionally, the decrease in gross profit margin percentage was a result of the
impact of Gentek, which has a lower gross profit margin percentage than the Alside division.
Selling, general and administrative expense increased to $149.6 million, or 19.2% of net sales, for
the year ended January 3, 2004 compared to $127.2 million, or 20.8% of net sales, for the same
period in 2002. The increase in selling, general and administrative expense is primarily a result
of the three new supply centers added in 2003 along with the seven new supply centers added in
2002, which had a full year of expense in 2003, along with the acquisition of Gentek. Income from
operations was $68.7 million, or 8.8% of net sales, for the year ended January 3, 2004 compared to
$52.2 million, or 8.5% of net sales, for the same period in 2002. 27




---



##### Table of Contents



Net income increased to $24.5 million for the year ended January 3, 2004 compared to $6.4
million for the year ended December 31, 2002. The increase in net income is a result of the
increased income from operations, net of the impact of non-operating items discussed below. Interest expense of $27.4 million for the year ended January 3, 2004 consisted primarily of
interest expense on the 9 3/4% notes, term loan and revolving loans under the credit facility,
amortization of deferred financing fees and the write-off of $3.9 million of debt issuance costs as
a result of amending and restating the credit facility for the acquisition of Gentek. This compares
to interest expense of $18.9 million for the year ended December 31, 2002, which consisted
primarily of interest in the Successor period on the 9 3/4% notes, term loan and revolving loans
under the credit facility, interest on an interim credit facility temporarily utilized for the
April 2002 merger transaction, amortization of deferred financing fees, and interest in the
Predecessor period on the Companys then outstanding 9 1/4% notes. Income tax expense increased to
$17.4 million for the year ended January 3, 2004 compared to $10.0 million for the year ended
December 31, 2002. The 2003 provision reflects an effective income tax rate of 41.5%, while the
2002 provision reflects an effective rate of 59.0%. The 2002 provision reflects an effective income
tax rate of 41.5% for the Successor period, 38.5% for the Predecessor period, as well as an
estimate for $7.3 million of merger transaction costs that were considered to be non-deductible for
income tax purposes. As a result of relocating the Companys corporate office from Texas to Ohio,
the Companys state and local income tax rate increased, raising the Companys total effective tax
rate to 41.5% from 38.5%. The results for the year ended December 31, 2002 include $7.6 million of
debt extinguishment costs for a portion of the premium paid to extinguish $74.0 million of the
Successors assumed 9 1/4% notes and financing fees related to an interim credit facility utilized
for the April 2002 merger transaction, which was repaid shortly thereafter. Additionally, results
for the year ended December 31, 2002 include $9.3 million of transaction costs consisting of
investment banking and legal fees in conjunction with the strategic review process and subsequent
April 2002 merger transaction. Finally, the results for the year ended December 31, 2002 include a
loss from discontinued operations $0.5 million, net of tax, for the Successor period from the
Companys AmerCable division. Adjusted EBITDA for the year ended January 3, 2004 increased to $86.3 million compared to
$64.6 million for the year ended December 31, 2002. Adjusted EBITDA for the year ended January 3,
2004 includes $9.7 million of adjusted EBITDA contributed by Gentek. As compared to EBITDA,
adjusted EBITDA for the year ended January 3, 2004 excludes a cost of sales expense of $1.4 million
relating to an inventory fair value adjustment recorded at the time of the acquisition of Gentek
and foreign currency gains of $0.5 million. As compared to EBITDA, adjusted EBITDA for the year
ended December 31, 2002 excludes $1.9 million of EBITDA relating to the AmerCable division, merger
transaction costs of $9.3 million, debt extinguishment costs of $7.6 million and a cost of sales
expense of $1.9 million relating to an inventory fair value adjustment recorded at the time of the
April 2002 merger transaction. The increase in adjusted EBITDA is primarily a result of the
increased sales in the Companys core business as well as the acquisition of Gentek. QUARTERLY FINANCIAL DATA Because most of the Companys building products are intended for exterior use, sales and
operating profits tend to be lower during periods of inclement weather. Weather conditions in the
first quarter of each calendar year historically result in that quarter producing significantly
less sales revenue and operating results than in any other period of the year. As a result, the
Company has historically had small profits or losses in the first quarter and reduced profits in
the fourth quarter of each calendar year. Quarterly sales and operating profit data for the Company in 2004 and 2003 are shown in the
tables below: THREE MONTHS ENDEDAPRIL 3 (1)
    
    
    JULY 3
    
    
    OCTOBER 2
    
    
    JANUARY 1 (1)(IN THOUSANDS)2004Net sales
    
    $
    204,321
    
    
    $
    301,602
    
    
    $
    314,408
    
    
    $
    273,628Gross profit
    
    
    50,355
    
    
    
    83,325
    
    
    
    87,061
    
    
    
    68,267Income (loss) from operations
    
    
    (9,537
    )
    
    
    35,285
    
    
    
    38,345
    
    
    
    (31,793
    )Net income (loss)
    
    
    (10,703
    )
    
    
    11,744
    
    
    
    15,060
    
    
    
    (43,327
    )
 28




---



##### Table of Contents



THREE MONTHS ENDEDMARCH 29
    
    
    JUNE 28
    
    
    SEPTEMBER 27(2)
    
    
    JANUARY 3 (2)(IN THOUSANDS)2003Net sales
    
    $
    110,944
    
    
    $
    180,363
    
    
    $
    223,806
    
    
    $
    264,723Gross profit
    
    
    28,168
    
    
    
    56,800
    
    
    
    64,219
    
    
    
    69,124Income (loss) from operations
    
    
    (3,142
    )
    
    
    23,096
    
    
    
    25,949
    
    
    
    22,837Net income (loss)
    
    
    (5,020
    )
    
    
    10,304
    
    
    
    9,619
    
    
    
    9,628
   (1)
    
    The quarterly results for the quarters ended April 3, 2004 and January 1, 2005 include costs
incurred with the recapitalization transactions (see Note 2 to the financial statements).
During the quarter ended April 3, 2004 the Company incurred costs of $14.5 million for bonuses
paid to management and a director in conjunction with the March 2004 dividend
recapitalization. During the quarter ended January 1, 2005, the Company incurred expenses
related to the December 2004 recapitalization transaction. Costs related to the December 2004
recapitalization transaction include $30.8 million of stock option compensation expense
resulting from the exercise and redemption of certain stock options, $22.3 million of bonuses
paid to management and a director, and $16.3 million of investing banking, legal and other
related expenses. The results for the quarter ended January 1, 2005 also include the
write-off of $2.8 million of debt issuance costs as a result of amending and restating the
Companys credit facility as part of the December 2004 recapitalization transaction.
Additionally, for the quarter ended January 1, 2005 the Company incurred $4.5 million of
one-time costs associated with the closure of the Companys Freeport, Texas manufacturing
facility.(2)
    
    The quarterly results for the quarters ended September 27, 2003 and January 3, 2004 include
the results of Gentek subsequent to its acquisition on August 29, 2003. Additionally, the
results for the quarter ended September 27, 2003 include a $1.4 million cost of sales expense
related to an inventory fair value adjustment recorded at the time of the Gentek acquisition.
The results for the quarter ended September 27, 2003 also include the write-off of $3.9
million of debt issuance costs as a result of amending and restating the Companys credit
facility for the Gentek acquisition. LIQUIDITY AND CAPITAL RESOURCES The following sets forth a summary of the Companys cash flows for 2004, 2003 and 2002 (in
thousands): 108 DAYS
    
    
    
    257 DAYSYEAR ENDED
    
    
    ENDED
    
    
    
    ENDED
    
    
    YEAR ENDEDJANUARY 1,
    
    
    JANUARY 3,
    
    
    APRIL 18,
    
    
    
    DECEMBER 31,
    
    
    DECEMBER 31,2005
    
    
    2004
    
    
    2002
    
    
    
    2002
    
    
    2002PREDECESSOR
    
    
    
    SUCCESSOR
    
    
    COMBINEDCash provided by (used in) operating activities
    
    $
    21,005
    
    
    $
    55,976
    
    
    $
    (18,258
    )
    
    
    $
    42,577
    
    
    $
    24,319Cash used in investing activities
    
    
    (18,651
    )
    
    
    (123,510
    )
    
    
    (3,597
    )
    
    
    
    (346,993
    )
    
    
    (350,590
    )Cash provided by (used in) financing activities
    
    
    50,908
    
    
    
    58,738
    
    
    
    (245
    )
    
    
    
    311,745
    
    
    
    311,500
 CASH FLOWS At January 1, 2005, the Company had cash and cash equivalents of $58.1 million and available
borrowing capacity of approximately $74.0 million under the revolving loan portion of its second
amended and restated credit facility. Outstanding letters of credit as of January 1, 2005 totaled
$6.0 million securing various insurance letters of credit. Cash balances as of January 1, 2005 include $46.0 million of cash on hand to be used to fund
remaining payments related to the December 2004 recapitalization transaction, of which (i) $33.7
million was distributed in January 2005 as a loan from AMI, through its direct and indirect parent
companies, to AMH II for which a dividend was then declared by AMI and its direct and indirect
parent companies in forgiveness of the intercompany loan, (ii) $8.0 million was used to satisfy
promissory notes issued by AMI for management and a director bonus related to the transaction and
(iii) $4.3 million was used for transaction related fees. 29




---



##### Table of Contents



CASH FLOWS FROM OPERATING ACTIVITIES For
the year ended January 1, 2005, cash provided by operations was
$21.0 million. As compared to
the year ended January 3, 2004, cash flows from operations
declined $35.0 million reflecting the
use of cash for the period due to transaction related costs, higher working capital
requirements in 2004 and the reduction in Genteks working capital during the last four months of
2003, as Gentek was acquired at the time Genteks working
capital was at a seasonal high. For the year ended January 3, 2004, cash provided by operations was $56.0 million. As compared
to the year ended 2002 (Predecessor and Successor combined), cash flows from operations increased
$31.6 million reflecting the increased operating results for the period and the decrease in
Genteks working capital over the last four months of the year as Gentek was acquired at the time
Genteks working capital was at a seasonally high level. This was partially offset by increased
interest payments made under the Companys credit facility and 9 3/4% notes, as well as increased
income tax payments made throughout the year. CASH FLOWS FROM INVESTING ACTIVITIES For the year ended January 1, 2005, capital expenditures totaled $18.7 million. This compares
to capital expenditures for fiscal 2003 totaling $12.7 million. Capital expenditures for Gentek
were $2.3 million and $0.9 million in the 2004 and 2003 periods, respectively. Capital
expenditures in 2004 were primarily to increase extrusion capacity at the Companys West Salem,
Ohio manufacturing location and to increase capacity at two of the Companys window manufacturing
facilities to support the Companys continued growth in the Companys vinyl window product
offering. Capital expenditures in 2003 were primarily to replace vinyl siding extrusion and
handling equipment at the Companys Ennis, Texas manufacturing location and expenditures for
additional window manufacturing capacity. For the year ended January 3, 2004 cash flows from investing activities also included $113.3
million of cash for the acquisition of Gentek as well as cash received from the sale of assets of
approximately $2.1 million, including the sale of assets related to the Companys former vinyl
garage door product line. For the 257 days ended December 31, 2002, capital expenditures of the Successor totaled $8.9
million. The combined capital expenditures of the Predecessor and the Successor totaled $12.8
million, which includes $1.8 million of capital expenditures for AmerCable for the year ended
December 31, 2002. Capital expenditures in the 2002 period were primarily for production equipment
to enhance capacity and reduce costs. The Company believes that capital expenditures ranging from $18.0 million to $20.0 million
represent a base level of spending needed to maintain its manufacturing facilities as well as
provide for modest increases in capacity and further automation. Estimated capital expenditures
for 2005 are approximately $27 million, which includes approximately $6 million of equipment at a
new window manufacturing facility to be leased in Yuma, Arizona. CASH FLOWS FROM FINANCING ACTIVITIES Cash flows from financing activities for the year ended January 1, 2005 include $7.0 million
of term loan repayments and activities related to the 2004 transactions including (i) $258.3
million for the issuance of the senior discount notes, (ii)
$150.0 million from the December 2004
recapitalization transaction, which was immediately paid to AMHs shareholders as consideration for
the sale of convertible preferred stock to affiliates of Investcorp, (iii) $42.0 million of
incremental borrowings, which includes repayment of the Companys remaining $133.0 million term
loan and borrowings under the second amended and restated credit facility of $175.0 million (iv)
capital contributions from the Companys parent of
$14.0 million offset
by (i) financing costs of $22.5 million
and (ii) $57.7 million of common
stock dividends and $177.8 million for the redemption of
preferred stock, both related to the March 2004 dividend recapitalization. The capital
contributions were used by AMI to pay $14.5 million of bonuses to management and a director in connection
with the March 2004 dividend recapitalization. In addition, the capital contributions were used to
fund $30.8 million of cash payments made upon the exercise of certain stock options (net of
proceeds from option exercise) and $14.0 million of the $14.3 million of bonuses paid to management
and a director in connection with the December 2004 recapitalization transaction. In connection
with the December 2004 recapitalization transaction, the Company increased its borrowing
availability under the revolving loan portion of its credit facility by $10.0 million to $80.0
million. 30




---



##### Table of Contents



Cash flows from financing activities for the year ended January 3, 2004 include net borrowings
under term loans under the Companys amended and restated credit facility of $190.0 million used
for the acquisition of Gentek, as well as to repay the Companys then outstanding term loans of
$76.5 million and pay related financing fees of $3.9 million. Subsequent to the Gentek acquisition,
the Company permanently reduced borrowings under the term loan facility by $50.0 million using
operating cash flows. Additionally, cash flows from financing activities include the redemption of
the remaining outstanding 9 1/4% notes of $0.9 million. The $0.9 million of 9 1/4% notes were
redeemed at 104.625% of the principal amount of such notes plus accrued and unpaid interest through
the date of redemption. DESCRIPTION OF THE COMPANYS OUTSTANDING INDEBTEDNESS On March 4, 2004, AMH issued 11 1/4% senior discount notes in connection with the March 2004
dividend recapitalization. AMHs $446 million aggregate principal at maturity 11 1/4% senior
discount notes are due in 2014. AMH received total gross proceeds of $258.3 million in connection
with the issuance. Interest accrues at a rate of 11 1/4% on the notes in the form of an
increase in the accreted value of the notes prior to March 1, 2009. Thereafter, cash
interest of 11 1/4% on the notes accrues and is payable semi-annually in arrears on March 1 and
September 1 of each year, commencing on September 1, 2009. The 11 1/4% notes are structurally
subordinated to all existing and future debt and other liabilities of AMHs existing and future
subsidiaries, including AMI and Holdings. The indenture governing the 11 1/4% notes contains
restrictive covenants that, among other things, limit AMHs ability, and the ability of its
subsidiaries, to incur additional indebtedness, make certain restricted payments, pay dividends or
make other distributions or repurchase or redeem AMHs stock, make investments, sell assets, incur
liens (except with respect to its subsidiaries), issue capital stock of restricted subsidiaries,
enter into agreements restricting its subsidiaries ability to pay dividends, enter into
sale/leaseback transactions, enter into transactions with affiliates, and consolidate, merge or
sell all or substantially all of its assets. AMIs 9 3/4% notes due in 2012 pay interest semi-annually in April and October. In
conjunction with the December 2004 recapitalization transaction AMI entered into a second amended
and restated credit facility dated December 22, 2004 in which AMI increased its borrowings under
the term loan facility to $175 million and expanded its revolving facility from $70 million to $80
million of available borrowings including a $20 million Canadian subfacility. AMI used the
borrowings to repay the AMIs then outstanding term loans of $133 million and to partially fund the
December 2004 recapitalization transaction. The term loan facility is due through August 2010 with
minimum principal amortization of 1% per year beginning September 30, 2005 with quarterly payments
of the unamortized principal in the final year of the loan. The term facility bears interest at
London Interbank Offered Rates (LIBOR) plus 2.25% payable quarterly at the end of each calendar
quarter. The revolving credit facility was extended to April 2009 and bears interest at LIBOR plus
a margin of 3.00%, which can decline to as low as 2.25% based on the Companys leverage ratio, as
defined in the amended and restated credit facility. The 9 3/4% notes are general unsecured obligations of AMI subordinated in right of payment to
senior indebtedness and senior in right of payment to any current or future subordinated
indebtedness of AMI. AMIs payment obligations under the 9 3/4% notes are fully and
unconditionally guaranteed, jointly and severally on a senior subordinated basis, by its domestic
wholly-owned subsidiaries: Gentek Holdings, Inc., Gentek Building Products Inc. and Alside, Inc.
Alside, Inc. is a wholly owned subsidiary having no assets, liabilities or operations. Gentek
Building Products Limited is a Canadian company and does not guarantee the Companys 9 3/4% notes. The credit facility and the indenture governing the 9 3/4% notes contain restrictive covenants
that, among other things, limit AMIs ability to incur additional indebtedness, make loans or
advances to subsidiaries and other entities, invest in capital expenditures, sell its assets or
declare dividends. In addition, under the credit facility AMI is required to achieve certain
financial ratios relating to leverage, coverage of fixed charges and coverage of interest expense.
AMI was in compliance with its covenants as of January 1, 2005. On an annual basis, beginning with
the year ended December 31, 2005, AMI is required to make principal payments on the term loan under
its second amended and restated credit facility based on a percentage of excess cash flows as
defined in the credit facility. As of January 1, 2005, no principal payments were required to be
made under the excess cash flow provision. AMI records as a current liability those principal
payments that are estimated to be due within twelve months under the excess cash flow provision of
the credit facility when the likelihood of those payments becomes probable. AMI intends to repay
the term loan with cash from its operations. All obligations of AMI and Gentek under the credit facility are jointly and severally
guaranteed by AMH, Holdings and all of the AMIs direct and indirect wholly owned domestic
subsidiaries. In addition, all obligations of Gentek under the credit facility also are jointly
and severally guaranteed by Genteks wholly owned Canadian subsidiaries. All obligations of AMI
and Gentek under the 31




---



##### Table of Contents



credit facility are secured by a pledge of AMIs capital stock, the capital stock of Holdings
and the capital stock of AMIs domestic subsidiaries (and up to 66-2/3% of the voting stock of
first tier foreign subsidiaries), and a security interest in substantially all of AMIs owned
real and personal assets (tangible and intangible) and the owned real and personal assets (tangible
and intangible) of the domestic guarantors under the credit facility. In addition, all obligations
of Gentek under the credit facility are secured by the capital stock and owned real and personal
assets (tangible and intangible) owned by Gentek and its Canadian subsidiaries. The Companys parent company, AMH II, issued senior notes in connection with the December 2004
recapitalization transaction, which had an accreted value of $75.1 million on January 1, 2005. The
notes accrue interest at 13 5/8% payable semi-annually on July 30 and January 30. Through January
30, 2010, AMH II must pay a minimum of 10% interest on each semi-annual payment date in cash,
allowing the remaining 3 5/8% to accrue to the value of the note. On January 31, 2010, AMH II is
required to redeem a principal amount of notes that is equal to at least such principal amount as
is required to be paid in order to prevent the notes from being treated as having significant
original issue discount within the meaning of section 163(i)(2) of the Internal Revenue Code
(IRC). As of January 1, 2005 AMH and AMH II
had $282.8 million and $75.1 million, respectively, of
debt outstanding. AMI does not guarantee the 11 1/4% notes nor the 13 5/8% notes and has no
obligation to make any payments with respect thereto. As AMH and its parent company are holding
companies with no operations, they must receive distributions, payments or loans from AMI to
satisfy their debt obligations. AMI, may not have sufficient funds or assets to permit payments to
AMH (and AMH may not have sufficient funds to permit payments to AMH II) in amounts sufficient to
permit AMH or AMH II, as the case may be, to pay all or any portion of their respective
indebtedness. Furthermore, the terms of the indenture governing
AMIs 9 3/4% notes and senior credit
facility significantly restrict AMI and its subsidiaries from paying dividends and otherwise
transferring assets to AMH and the indenture governing AMHs 11 1/4% notes further restricts AMH
from making restricted payments. The 11 1/4% notes and the 13 5/8% notes also contain restrictive
covenants. The Company expects that it will be able to make sufficient distributions, payments or loans
to its parent companies to allow them to make required payments on their debt for the foreseeable
future. Because most of the Companys building products are intended for exterior use, sales tend to
be lower during periods of inclement weather. Weather conditions in the first quarter of each
calendar year usually result in that quarter producing significantly less net sales and net cash
flow from operations than in any other period of the year. Consequently, the Company has
historically had small profits or losses in the first quarter and reduced profits from operations
in the fourth quarter of each calendar year. To meet seasonal cash flow needs during the periods of
reduced sales and net cash flows from operations, the Company anticipates borrowing under the
revolving loan portion of its amended and restated credit facility. The Company believes that for
the foreseeable future cash flows from operations and its borrowing capacity under its amended and
restated credit facility will be sufficient to satisfy its obligations to pay principal and
interest on its outstanding debt, maintain current operations and provide sufficient capital for
presently anticipated capital expenditures. There can be no assurances, however, that the cash
generated by the Company and available under the amended and restated credit facility will be
sufficient for these purposes. In the first quarter of 2005, AMI made an intercompany loan of $33.7 million to AMH II through
its direct and indirect parent companies. Subsequently, AMI declared a dividend in forgiveness of
the intercompany loan. CONTRACTUAL OBLIGATIONS The Company has commitments for maturities of long-term debt and future minimum lease payments
under noncancelable operating leases, principally for manufacturing and distribution facilities and
certain equipment. The following summarizes certain of the Companys scheduled maturities of
long-term debt, scheduled interest payments on the 9 3/4% notes and
11 1/4% notes, and obligations for future minimum
lease payments under non-cancelable operating leases at January 1, 2005 and the effect such
obligations are expected to have on the Companys liquidity and cash flow in future periods (in
thousands): PAYMENTS DUE BY PERIODLESS THAN
    
    
    2-3
    
    
    4-5
    
    
    AFTERTOTAL
    
    
    1 YEAR
    
    
    YEARS
    
    
    YEARS
    
    
    5 YEARSLong-term debt(1)(2)
    
    $
    622,856
    
    
    $
    875
    
    
    $
    3,500
    
    
    $
    44,953
    
    
    $
    573,528Interest payments on 9 3/4% notes
    
    $
    120,657
    
    
    $
    16,088
    
    
    $
    32,175
    
    
    $
    32,175
    
    
    $
    40,219Interest payments on 11 1/4% notes
    
    $
    163,844
    
    
    $
    
    
    
    $
    
    
    
    $
    25,088
    
    
    $
    138,056Commitments (3)
    
    $
    6,000
    
    
    $
    6,000
    
    
    
    
    
    
    
    
    
    
    
    Operating leases(4)
    
    $
    87,979
    
    
    $
    24,191
    
    
    $
    34,678
    
    
    $
    19,806
    
    
    $
    9,304
 32




---



##### Table of Contents



(1)
    
    Represents principal amounts, but not interest. See Note 13 to the consolidated financial
statements.(2)
    
    The Companys long-term debt consists of the second amended and restated credit facility, the
9 3/4% notes and the 11 1/4% notes.(3)
    
    Represents amounts committed for the purchase of machinery and equipment for the Yuma,
Arizona window facility.(4)
    
    For additional information on the Companys operating leases, please see Note 14 to the
consolidated financial statements. There can be no assurance that the Companys cash flow from operations, combined with
additional borrowings under the Companys credit facility, will be available in an amount
sufficient to enable the Company to repay its indebtedness or to fund its other liquidity needs or
planned capital expenditures. The Company may need to refinance all or a portion of its
indebtedness on or before their respective maturities. There can be no assurance that the Company
will be able to refinance any of its indebtedness on commercially reasonable terms or at all. RELATED PARTY TRANSACTIONS In connection with the December 2004 recapitalization transaction, AMI entered into a
management advisory agreement with Investcorp International Inc. (III) for management advisory,
strategic planning and consulting services for which AMI paid III the total due under the agreement
of $6 million on December 22, 2004. As described in the Management Advisory Agreement with III, $4
million of this management fee relates to services to be provided during the first year of the
agreement, with $0.5 million related to services to be provided each year of the remaining four
year term of the agreement. Beginning in 2005, AMI will expense the prepaid management fee in
accordance with the services provided over the life of the agreement. In connection with the December 2004 recapitalization transaction, on December 5, 2004, AMI
entered into an agreement for financing advisory services with III (the Investcorp Financing
Advisory Agreement). Under the Investcorp Financing Advisory Agreement III, these affiliates will
provide AMI with financial advisory services relating to the arrangement of borrowing facilities in
connection with the December 2004 recapitalization transaction. For these services, AMI paid a
one-time fee of $7.5 million to III on December 22, 2004. The term of the Investcorp Financing
Advisory Agreement ended on December 23, 2004. AMI also entered into a merger and acquisitions advisory services agreement with III (the
Investcorp M&A Advisory Agreement). Under the Investcorp M&A Advisory Agreement, III will provide
the Company with advisory and strategic planning services. For these services, AMI paid a one-time
fee of $1.5 million to these affiliates on December 22, 2004. The Investcorp M&A Advisory
Agreement terminated on December 23, 2004. Total fees paid in connection with the Investcorp Financing Advisory Agreement, the Investcorp
M&A Advisory Agreement and IIIs out-of-pocket expenses were $9.1 million, of which $6.4 million
was paid in cash on December 22, 2004 and $2.7 million was paid in the form of a promissory note
issued by AMI. AMI settled the promissory note in the first quarter of 2005. In connection with the December 2004 recapitalization transaction, AMI entered into an amended
and restated management agreement with Harvest Partners. Pursuant to the amended agreement, AMI
paid a fee of $4.9 million to Harvest Partners in connection with the transaction, of which $4.0
million was paid in cash on December 22, 2004 and $0.9 million was paid in the form of a promissory
note issued by AMI. AMI settled the promissory note in cash in February 2005. The amended
agreement is substantially identical, in all material respects, to the original agreement, which
provided for Harvest Partners to receive a one-time fee of $5.0 million in connection with
structuring and implementing the April 2002 merger transaction. In addition, Harvest Partners
provides AMI with financial advisory and strategic planning services. For these services, Harvest
Partners receives an annual fee of approximately $0.8 million, payable on a quarterly basis in
advance, beginning on the date of execution of the original agreement. The fee is adjusted on a
yearly basis in accordance with the U.S. Consumer Price Index. The Company incurred approximately
$0.8 million of management fees paid to Harvest Partners for each of the years ended January 1,
2005 and January 3, 2004 and $0.6 million for the 257 days ended December 31, 2002 which are
included in selling, general and administrative expenses in the statement of operations. The
agreement also provides that Harvest Partners will receive transaction fees in connection with
financings, acquisitions and divestitures of the Company. Such fees will be a percentage of the
applicable transaction. In 2003, the Company paid Harvest Partners $1.1 million in connection with
the Companys acquisition of Gentek and in 2004, $1.3 million for financial advisory services 33




---



##### Table of Contents



in connection with the completion of the offering of the 11 1/4% notes and the related
transactions. In connection with the December 2004 recapitalization transaction, Harvest Partners
and III entered into an agreement pursuant to which they agreed that any transaction fee that
becomes payable under the amended management agreement after December 22, 2004 will be shared
equally by Harvest Partners and III. The Company reimburses Harvest Partners for all out-of-pocket expenses. The management
agreement has a term of five years from its date of execution and will automatically be renewed on
a yearly basis, beginning in 2004, unless otherwise specified by Harvest Partners. In connection with the March 2004 dividend recapitalization, AMI paid bonuses in the aggregate
amount of $14.5 million to certain members of management. In connection with the December 2004 recapitalization transaction, on December 22, 2004 the
Company paid bonuses in the aggregate amount of approximately $22.3 million to certain members of
management and a director of the Company. Approximately $14.3 million of the bonus was paid in cash
on December 22, 2004, with promissory notes issued by the Company for the remaining $8.0 million.
The promissory notes were settled in cash during the first quarter of fiscal year 2005. In connection with the March 2004 dividend recapitalization and the December 2004
recapitalization transaction, Mr. Vollmershausen, a director received bonuses of $125,000 and
$175,000, respectively. In connection with the recapitalization transactions, the Company recorded receivables from
its parent related to certain payments for fees made on behalf of AMIs indirect parent companies
totaling $1.2 million. On June 24, 2002, the Company completed the sale of its AmerCable division to AmerCable
Incorporated, a newly-formed entity controlled by members of AmerCable management and Wingate
Partners III, L.P., for net proceeds of approximately $28.3 million in cash and the assumption of
certain liabilities pursuant to an asset purchase agreement dated as of the same date. For additional information on related party transactions, please see Item 13. Certain
Relationships and Related Party Transactions and Note 4 to the consolidated financial statements
attached hereto. RETIREMENT PLANS Defined benefit pension plans are subject to additional minimum pension liability requirements
under Statement of Financial Accounting Standards (SFAS) No. 87, Employers Accounting for
Pensions. The Company recorded an additional minimum pension liability totaling approximately $2.3
million, net of tax and reduced its minimum pension liability by approximately $0.7 million, net of
tax, for its defined benefit pension plans at January 1, 2005 and January 3, 2004, respectively.
The adjustments were recorded to stockholders equity as a component of accumulated other
comprehensive income. EFFECTS OF INFLATION The Companys principal raw materials, vinyl resin, aluminum, and steel have historically been
subject to significant price changes. Raw material pricing on the Companys key commodities
increased significantly for the year ended January 1, 2005, with a majority of the impact in the
fourth quarter. All of the Companys key raw material commodities, vinyl resin, aluminum and
steel, are at their highest levels in several years and continue to increase. The Company
announced two vinyl siding and two aluminum price increases in 2004, which partially offset the raw
material inflation. Historically vinyl resin costs decrease in the fourth quarter of
the year as a result of reduced seasonal demand in the resin market; however, in the fourth quarter
of 2004, resin prices increased. The Company believes that due to the high price of oil and
natural gas, as well as expected continued strong demand, costs for vinyl resin, aluminum and steel
will continue to increase in 2005. The Company announced price increases on certain product
offerings in 2004, as well as announced price increases in the first quarter of 2005, which it
believes will partially offset the impact of the raw material inflation. While the Company is
optimistic that any additional significant raw material price increases in 2005 will be offset by
price increases to its customers, there can be no assurances that the Company will be able to
achieve any future price increases including the announced price
increases. In addition there may
be a delay from quarter to quarter. At January 1, 2005, the Company had no raw material hedge
contracts in place. 34




---



##### Table of Contents



FINANCIAL ACCOUNTING STANDARDS On January 1, 2003, the Company adopted the provisions of Financial Accounting Standards Board
(FASB) SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13, and Technical Corrections. The provisions of SFAS No. 145 related to the rescission of
SFAS No. 4 require that any gain or loss on extinguishment of debt that was classified as an
extraordinary item in prior periods be reclassified and no longer be presented as an extraordinary
item. As a result of adopting this standard, the Company reclassified debt extinguishment costs
recorded in the second quarter of 2002. The debt extinguishment costs include $4.9 million for the
premium paid to extinguish substantially all of the Successors assumed 9 1/4% notes and $2.7
million for the financing fees related to an interim credit facility utilized for the merger
transaction with Harvest Partners, which was repaid shortly thereafter. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS No. 150 requires that certain financial
instruments, which under previous guidance were accounted for as equity, must now be accounted for
as liabilities. The financial instruments affected include mandatorily redeemable preferred stock,
certain financial instruments that require or may require the issuer to buy back some of its shares
in exchange for cash or other assets and certain obligations that can be settled with shares of
stock. SFAS No. 150 is effective for all financial instruments entered into or modified after May
31, 2003 and must be applied to the Companys existing financial instruments effective July 1,
2003. On October 29, 2003, the FASB deferred the provisions of paragraphs 9 and 10 and related
guidance in the appendices of this pronouncement as they apply to mandatorily redeemable
noncontrolling interests. Adoption of the effective or deferred provisions of SFAS No. 150 did not
and are expected not to have a material effect on the Companys financial position, results of
operations or cash flows. In December 2003, the FASB issued SFAS No. 132 (Revised), Employers Disclosures about
Pensions and other Postretirement Benefits. SFAS No. 132 (Revised) was developed in response to
concerns expressed by users of financial statements about their need for more information about
pension plans. This standard retains the disclosures required by the original SFAS No. 132 and
requires additional disclosures describing plan assets, investment strategy, measurement date, plan
obligations, cash flows and components of net periodic benefit cost recognized during interim
periods. The Company adopted this standard effective for its fiscal year 2004. In November 2004, the FASB issued SFAS No. 151, Inventory Costs, and amendment of ARB 43,
Chapter 4. SFAS No. 151 requires certain inventory costs to be recognized as current period
expenses. This standard also provides guidance for the allocation of fixed production overhead
costs. This standard is effective for inventory costs incurred during the fiscal years beginning
after June 15, 2005. The Company will adopt this standard in fiscal 2006. The Company has not yet
determined the impact, if any, this standard will have on the financial statements of the Company. In December 2004, the FASB issued SFAS No. 123 (Revised), Share-Based Payment. This
standard revises SFAS No. 123, APB Opinion No. 25 and related accounting interpretations, and
eliminates the use of the intrinsic value method. The Company currently uses the intrinsic value
method of APB Opinion No. 25 to value stock options and accordingly, no compensation expense has
been recorded for stock options, except for compensation expense of $30.8 million recorded in
connection with the exercise of stock options in December 2004 (see Note 2 to the consolidated
financial statements). SFAS No. 123 (Revised) requires the expensing of all stock-based
compensation, including stock options, using a fair value based method. The Company will adopt
this standard effective July 1, 2005, expensing stock options using the modified prospective
transition method prescribed in SFAS No. 123 (Revised). The Company is in the process of
determining the impact this standard will have on its financial statements. In January 2003, the FASB issued FASB Interpretation No. 46, (FIN 46), Consolidation of
Variable Interest Entities. Companies were required to adopt the provisions of this interpretation
immediately for all new variable interest entities and at the end of the interim period beginning
after December 15, 2003 for all variable interest entities in which an enterprise acquired an
interest in that entity before February 1, 2003. As the Company does not have an interest in any
variable interest entities, the adoption of this interpretation did not have a material effect on
the Companys financial position, results of operations or cash flows. In October 2004, the American Jobs Creation Act of 2004 (Jobs Act) was signed into law. The
Jobs Act contains numerous corporate tax changes, including eliminating a tax benefit relating to
U.S. product exports, a lower U.S. tax rate on non-U.S. dividends and a new deduction relating to
domestic manufacturing. The Company is in the process of evaluating this legislation. However,
the Jobs Act is not anticipated to materially affect the Companys results of operations or
financial position. 35




---



##### Table of Contents



APPLICATION OF CRITICAL ACCOUNTING POLICIES General.The Companys discussion and analysis of its financial condition and results of
operations are based upon the Companys consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these consolidated financial
statements requires the Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. On an ongoing basis, the Company evaluates its
estimates, including those related to customer programs and incentives, bad debts, inventories,
warranties and pensions and benefits. The Company bases its estimates on historical experience and
on various other assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The Company believes the following critical accounting policies affect its more significant
judgments and estimates used in the preparation of its consolidated financial statements. Revenue Recognition. The Company primarily sells and distributes its products through two
channels: direct sales from its manufacturing facilities to independent distributors and dealers
and sales to contractors through its company-owned supply centers. Direct sales revenue is
recognized when the Companys manufacturing facility ships the product. Sales to contractors are
recognized either when the contractor receives product directly from the supply centers or when the
supply centers deliver the product to the contractors job site. A substantial portion of the
Companys sales is in the repair and replacement segment of the building products industry.
Therefore, vinyl windows are manufactured to specific measurement requirements received from the
Companys customers. Revenues are recorded net of estimated returns, customer incentive programs
and other incentive offerings including special pricing agreements, promotions and other
volume-based incentives. Revisions to these estimates are charged to income in the period in which
the facts that give rise to the revision become known. On contracts involving installation, revenue
is recognized when the installation is complete. Accounts Receivable. The Company records accounts receivable at selling prices which are
fixed based a purchase orders or contractual arrangements. The Company maintains an allowance for
doubtful accounts for estimated losses resulting from the inability of its customers to make
required payments. The allowance for doubtful accounts is based on review of the overall condition
of accounts receivable balances and review of significant past due accounts. If the financial
condition of the Companys customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required. Inventories. The Company values its inventories at the lower of cost (first-in, first-out) or
market. The Company writes down its inventory for estimated obsolescence or unmarketable inventory
equal to the difference between the cost of inventory and the estimated market value based upon
assumptions about future demand and market conditions. If actual market conditions are less
favorable than those projected by management, additional inventory write-downs may be required. Goodwill and Other Intangible Assets. The Company has accounted for the April 2002 merger
transaction and acquisition of Gentek using the purchase method of accounting. The purchase price
has been allocated to assets and liabilities based on the fair values of the assets acquired and
the liabilities assumed. The excess of cost over fair value of the new identifiable assets has been
recorded as goodwill. These allocations have been made based upon valuations and other studies. Under the provisions of SFAS No. 142  Goodwill and Other Intangible Assets, goodwill and
intangible assets with indefinite useful lives must be reviewed annually for impairment using a
fair-value based approach. As the Company does not have a market for its equity, management
performs the annual impairment analysis utilizing a discounted cash flow model, which considers
forecasted operating results discounted at an estimated weighted average cost of capital. Given the
significant amount of goodwill and other intangible assets as a result of the April 2002 merger
transaction and the acquisition of Gentek, any future impairment of the goodwill and other
intangible assets could have an adverse effect on the Companys results of operations and financial
position. Although management does not anticipate any significant impairment of these assets, the
extent of any such future impairment cannot be predicted at this time and is dependent on future
operating results. Pensions. The Companys pension costs are developed from actuarial valuations. Inherent in
these valuations are key assumptions including discount rates and expected return on plan assets.
In selecting these assumptions, management considers current market conditions, including changes
in interest rates and market returns on plan assets. Changes in the related pension benefit costs
may occur in the future due to changes in assumptions. Product Warranty Costs and Service Returns. Consistent with industry practice, the Company
provides to homeowners limited warranties on certain products, primarily related to window and
siding product categories. Warranties are of varying lengths of time from the date of purchase up
to and including lifetime. Warranties cover product failures such as stress cracks and seal
failures for windows and fading and peeling for siding products, as well as manufacturing defects. 36




---



##### Table of Contents



The Company has various options for remedying product warranty claims including repair,
refinishing or replacement and directly incurs the cost of these remedies. Warranties also become
reduced under certain conditions of time and change in ownership. Liabilities for future warranty
costs are provided annually based on managements estimates of such future costs using historical
trends and sales of products to which such costs relate. Certain metal coating suppliers provide
material warranties to the Company that mitigate the costs incurred by the Company. Warranty
reserves are based on past claims experiences, sales history and other factors. An independent
actuary assists the Company in determining reserve amounts related to significant product failures. CERTAIN FORWARD-LOOKING STATEMENTS All statements other than statements of historical facts included in this report constitute
forward-looking statements that are based on the belief of the Companys management, including but
not limited to statements regarding the prospects of the industry and the Companys prospects,
plans, financial position and business strategy. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as may, will, should, expect,
intend, estimate, anticipate, believe, predict, project, potential or continue or
the negatives of these terms or variations of them or similar terminology. By their nature, these
statements are subject to risk and uncertainty. Although the Company believes that the
expectations reflected in these forward-looking statements are reasonable, it does not assure that
these expectations will prove to be correct. The following factors are among those that may cause
actual results to differ materially from the forward-looking statements:  
    the Companys operations and results of operations;
    changes in home building industry, economic conditions, interest rates, foreign currency
exchange rates and other conditions;
    changes in availability of consumer credit, employment trends, levels of consumer confidence and consumer preferences;
    changes in raw material costs and availability;
    market acceptance of price increases;
    changes in national and regional trends in new housing starts;
    changes in weather conditions;
    the Companys ability to comply with certain financial covenants in the loan documents governing its indebtedness;
    increases in competition from other manufacturers of vinyl and metal exterior residential
building products as well as alternative building products;
    increases in capital expenditure requirements;
    shifts in market demand;
    increases in the Companys indebtedness;
    increases in costs of environmental compliance;
    potential conflict between existing Alside and new Gentek distribution channels;
    the achievement of anticipated synergies and operational efficiencies from the Gentek acquisition; and
    the other factors discussed under the heading Risk Factors and elsewhere in this report. All forward-looking statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements included in this report. These
forward-looking statements speak only as of the date of this report. The Company does not intend to
update these statements unless the securities laws require it to do so. 37




---



##### Table of Contents



ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK AMI has outstanding borrowings under the term loan portion of its second amended and restated
credit facility and may borrow under the revolving credit facility from time to time for general
corporate purposes, including working capital and capital expenditures. Interest under the credit
facility is based on the variable London Interbank Offered Rate (LIBOR). At January 1, 2005, AMI
had borrowings of $175.0 million under the term loan. The effect of a 1/8% increase or decrease in
interest rates would increase or decrease total interest expense for the year ended January 1, 2005
by approximately $0.2 million. AMH
has $282.8 million of senior discount notes due 2014 that bear a
fixed interest rate of 11 1/4%. AMI has $165.0 million of senior subordinated notes due 2012 that bear a fixed interest rate
of 9 3/4%. The fair value of the AMIs 9 3/4% notes is sensitive to changes in interest rates. In
addition, the fair value is affected by AMIs overall credit rating, which could be impacted by
changes in AMIs future operating results. The fair value of the 9 3/4% notes at January 1, 2005
was $184.4 million based upon their quoted market price. FOREIGN CURRENCY EXCHANGE RATE RISK The Companys revenues are primarily from domestic customers and are realized in U.S. dollars.
However, since the acquisition of Gentek, the Company now realizes revenues from sales made through
Genteks Canadian distribution centers in Canadian dollars. The Companys Canadian manufacturing
facilities acquire raw materials and supplies from U.S. vendors, which results in foreign currency
transactional gains and losses. However, payment terms among Canadian manufacturing facilities and
these vendors are short-term in nature. Accordingly, the Company believes its direct foreign
currency exchange rate risk is not material. At January 1, 2005 the Company had no currency hedges
in place. COMMODITY PRICE RISK See Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations  Effects of Inflation for a discussion of the market risk related to the Companys
principal raw materials, vinyl resin, aluminum, and steel. 38




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA AMH HOLDINGS, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGEReport of Independent Auditors
    
    40Consolidated Balance Sheets as of January 1, 2005 and January 3, 2004
    
    41Consolidated Statements of Operations
    
    42Years Ended January 1, 2005 and January 3, 2004Two hundred fifty-seven days ended December 31, 2002One hundred eight days ended April 18, 2002  PredecessorConsolidated Statements of Stockholders Equity and Comprehensive Income
    
    43Years Ended January 1, 2005 and January 3, 2004Two hundred fifty-seven days ended December 31, 2002One hundred eight days ended April 18, 2002  PredecessorConsolidated Statements of Cash Flows
    
    44Years Ended January 1, 2005 and January 3, 2004Two hundred fifty-seven days ended December 31, 2002One hundred eight days ended April 18, 2002  PredecessorNotes to Consolidated Financial Statements
    
    45
 39




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS The Board of Directors and Stockholder
AMH Holdings, Inc. We have audited the accompanying consolidated balance sheets of AMH Holdings, Inc. and
subsidiaries as of January 1, 2005 and January 3, 2004, and the related consolidated statements of
operations, stockholders equity and comprehensive income, and cash flows for the year ended
January 1, 2005, the year ended January 3, 2004, the two hundred fifty-seven day period ended
December 31, 2002 and the one hundred eight day period ended April 18, 2002. These financial
statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Companys internal control over
financial reporting. Our audit included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Companys internal control over
financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of AMH Holdings, Inc. and subsidiaries at
January 1, 2005 and January 3, 2004, and the consolidated results of their operations and their
cash flows for three years then ended in conformity with accounting principles generally accepted
in the United States. ERNST & YOUNG LLP Akron, Ohio
February 24, 2005 40




---



##### Table of Contents



AMH HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS JANUARY 1,
    
    
    JANUARY 3,2005
    
    
    2004(IN THOUSANDS, EXCEPTSHARE AND PER SHAREAMOUNTS)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    58,054
    
    
    $
    4,282Accounts receivable, net of allowance for doubtful accounts of $7,391
at January 1, 2005 and $7,942 at January 3, 2004
    
    
    125,666
    
    
    
    106,975Receivable from parent
    
    
    1,241
    
    
    
    Inventories
    
    
    114,787
    
    
    
    97,907Income taxes receivable
    
    
    9,210
    
    
    
    Deferred income taxes
    
    
    18,253
    
    
    
    7,019Other current assets
    
    
    12,938
    
    
    
    5,564Total current assets
    
    
    340,149
    
    
    
    221,747Property, plant and equipment, net
    
    
    138,697
    
    
    
    140,846Goodwill
    
    
    234,795
    
    
    
    230,283Other intangible assets, net
    
    
    113,044
    
    
    
    116,136Other assets
    
    
    29,169
    
    
    
    9,621Total assets
    
    $
    855,854
    
    
    $
    718,633LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    75,139
    
    
    $
    49,881Accrued liabilities
    
    
    54,379
    
    
    
    53,234Notes payable
    
    
    11,607
    
    
    
    Current portion of long-term debt
    
    
    875
    
    
    
    Income taxes payable
    
    
    
    
    
    
    4,934Total current liabilities
    
    
    142,000
    
    
    
    108,049Deferred income taxes
    
    
    53,883
    
    
    
    58,028Other liabilities
    
    
    44,058
    
    
    
    41,587Long-term debt
    
    
    621,981
    
    
    
    305,000Commitments and ContingenciesConvertible
preferred stock, $.01 par value
    
    
    150,000
    
    
    
    Series A cumulative redeemable preferred stock
    
    
    
    
    
    
    169,914Stockholders equity:Class A
common stock, $0.01 par value:Authorized
shares  0 and 2,500,000 at January 1, 2005 and
January 3, 2004, respectively; issued  0 and 1,629,951 at
January 1, 2005 and January 3, 2004, respectively
    
    
    
    
    
    
    16Class B
common stock, $0.01 par value:Authorized
shares  0 and 2,500,000 at January 1, 2005 and
January 3, 2004, respectively; issued  0 and 19,118 at
January 1, 2005 and January 3, 2004, respectively
    
    
    
    
    
    
    Class B Common stock, $0.01 par value:Series I; Authorized shares  2,583,801; issued shares  500,000
    
    
    5
    
    
    
    Series II;
Authorized shares  2,083,801; issued shares  1,234,190
    
    
    11
    
    
    
    Capital in excess of par
    
    
    
    
    
    
    21,500Accumulated other comprehensive income (loss)
    
    
    1,131
    
    
    
    (678
    )Retained earnings (deficit)
    
    
    (157,215
    )
    
    
    15,217Total stockholders equity (deficit)
    
    
    (156,068
    )
    
    
    36,055Total liabilities and stockholders equity
    
    $
    855,854
    
    
    $
    718,633
 See accompanying notes. 41




---



##### Table of Contents



AMH HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS YEAR
    
    
    YEAR
    
    
    257 DAYS
    
    
    
    108 DAYSENDED
    
    
    ENDED
    
    
    ENDED
    
    
    
    ENDEDJANUARY 1,
    
    
    JANUARY 3,
    
    
    DECEMBER 31,
    
    
    
    APRIL 18,2005 2005
    
    
    2004
    
    
    2002
    
    
    
    2002PREDECESSOR(IN THOUSANDS)Net sales
    
    $
    1,093,959
    
    
    $
    779,836
    
    
    $
    449,324
    
    
    
    $
    180,230Cost of sales
    
    
    804,951
    
    
    
    561,525
    
    
    
    317,077
    
    
    
    
    130,351Gross profit
    
    
    289,008
    
    
    
    218,311
    
    
    
    132,247
    
    
    
    
    49,879Selling, general and administrative expenses
    
    
    184,524
    
    
    
    149,571
    
    
    
    86,097
    
    
    
    
    43,272Transaction costs:Bonuses
    
    
    36,811
    
    
    
    
    
    
    
    
    
    
    
    
    Stock option compensation expense
    
    
    30,838
    
    
    
    
    
    
    
    
    
    
    
    
    Facility closure costs
    
    
    4,535
    
    
    
    
    
    
    
    
    
    
    
    
    Income from operations
    
    
    32,300
    
    
    
    68,740
    
    
    
    46,150
    
    
    
    
    6,607Interest expense, net
    
    
    53,221
    
    
    
    27,369
    
    
    
    16,850
    
    
    
    
    2,068Foreign currency (gain) loss
    
    
    387
    
    
    
    (548
    )
    
    
    
    
    
    
    
    Recapitalization transaction costs
    
    
    16,297
    
    
    
    
    
    
    
    
    
    
    
    
    Debt extinguishment costs
    
    
    
    
    
    
    
    
    
    
    7,579
    
    
    
    
    Merger transaction costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,319Income (loss) before income taxes
    
    
    (37,605
    )
    
    
    41,919
    
    
    
    21,721
    
    
    
    
    (4,780
    )Income taxes
    
    
    (10,379
    )
    
    
    17,388
    
    
    
    9,016
    
    
    
    
    977Income (loss) from continuing operations
    
    
    (27,226
    )
    
    
    24,531
    
    
    
    12,705
    
    
    
    
    (5,757
    )Loss from discontinued operations, net
    
    
    
    
    
    
    
    
    
    
    (521
    )
    
    
    
    Net income (loss)
    
    $
    (27,226
    )
    
    $
    24,531
    
    
    $
    12,184
    
    
    
    $
    (5,757
    )
 See accompanying notes. 42




---



##### Table of Contents



AMH HOLDINGS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME CLASS B
    
    
    
    
    
    
    
    
    
    
    CAPITAL IN
    
    
    
    
    
    
    TOTALCOMMON STOCK
    
    
    COMMON STOCK
    
    
    TREASURY STOCK
    
    
    EXCESS
    
    
    RETAINED
    
    
    STOCKHOLDERS'PREDECESSOR
    
    SHARES
    
    
    AMOUNT
    
    
    SHARES
    
    
    AMOUNT
    
    
    SHARES
    
    
    AMOUNT
    
    
    OF PAR
    
    
    EARNINGS
    
    
    EQUITY(IN THOUSANDS)Balance at December 31, 2001
    
    
    7,842
    
    
    $
    19
    
    
    
    
    
    
    $
    
    
    
    
    1,078
    
    
    $
    (14,476
    )
    
    $
    17,124
    
    
    $
    100,008
    
    
    $
    102,675Net income and total
comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,757
    )
    
    
    (5,757
    )Exercise of common stock
options and related tax
benefits
    
    
    404
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,325
    
    
    
    
    
    
    
    10,326Merger transaction with AMI
Holdings
    
    
    (8,246
    )
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    (1,078
    )
    
    
    14,476
    
    
    
    (27,449
    )
    
    
    (94,251
    )
    
    
    (107,244
    )Balance at April 18, 2002
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 ACCUMULATEDOTHERCAPITAL IN
    
    
    
    
    
    
    COMPREHENSIVE
    
    
    TOTALCOMMON
    
    
    EXCESS
    
    
    RETAINED
    
    
    INCOME
    
    
    STOCKHOLDER'S
    
    
    COMPREHENSIVESUCCESSOR
    
    STOCK
    
    
    OF PAR
    
    
    EARNINGS
    
    
    (LOSS)
    
    
    EQUITY
    
    
    INCOMEEquity contribution by Holdings
    
    $
    16
    
    
    $
    21,490
    
    
    $
    
    
    
    $
    
    
    
    $
    21,506
    
    
    $
    Issuance of common stock
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    12,184
    
    
    
    
    
    
    
    12,184
    
    
    
    12,184Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,347
    )
    
    
    (4,347
    )
    
    
    (4,347
    )Accrual of Series A preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    (8,572
    )
    
    
    
    
    
    
    (8,572
    )
    
    
    Balance at December 31, 2002
    
    
    16
    
    
    
    21,500
    
    
    
    3,612
    
    
    
    (4,347
    )
    
    
    20,781
    
    
    
    7,837Net income
    
    
    
    
    
    
    
    
    
    
    24,531
    
    
    
    
    
    
    
    24,531
    
    
    
    24,531Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    667
    
    
    
    667
    
    
    
    667Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,002
    
    
    
    3,002
    
    
    
    3,002Accrual of Series A preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    (12,926
    )
    
    
    
    
    
    
    (12,926
    )
    
    
    Balance at January 3, 2004
    
    $
    16
    
    
    $
    21,500
    
    
    $
    15,217
    
    
    $
    (678
    )
    
    $
    36,055
    
    
    $
    28,200Net loss
    
    
    
    
    
    
    
    
    
    
    (27,226
    )
    
    
    
    
    
    
    (27,226
    )
    
    
    (27,226
    )Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,316
    )
    
    
    (2,316
    )
    
    
    (2,316
    )Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,125
    
    
    
    4,125
    
    
    
    4,125Accrual of Series A preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    (2,353
    )
    
    
    
    
    
    
    (2,353
    )
    
    
    March 2004 dividend recapitalization:Stock option exercise of Roll-Over Options
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    124
    
    
    
    Transfer capital to Series A preferred stock
    
    
    
    
    
    
    (3,940
    )
    
    
    
    
    
    
    
    
    
    
    (3,940
    )
    
    
    Common stock dividends
    
    
    
    
    
    
    
    
    
    
    (57,684
    )
    
    
    
    
    
    
    (57,684
    )
    
    
    
    
    
    
    (3,816
    )
    
    
    (57,684
    )
    
    
    
    
    
    
    (61,500
    )
    
    
    Tax benefit on stock option exercise
    
    
    
    
    
    
    2,781
    
    
    
    
    
    
    
    
    
    
    
    2,781
    
    
    
    Stock option exercise, net of tax
    
    
    
    
    
    
    (65
    )
    
    
    
    
    
    
    
    
    
    
    (65
    )
    
    
    December 2004 recapitalization transaction:Proceeds from exercise of stock options/
payment to parent
    
    
    
    
    
    
    3,406
    
    
    
    (3,406
    )
    
    
    
    
    
    
    
    
    
    
    Distribution of Investcorp proceeds
    
    
    
    
    
    
    (68,237
    )
    
    
    (81,763
    )
    
    
    
    
    
    
    (150,000
    )
    
    
    Capital contribution from parent for payment of
management bonus paid in 2004
    
    
    
    
    
    
    14,025
    
    
    
    
    
    
    
    
    
    
    
    14,025
    
    
    
    Impact of stock option exercise
    
    
    
    
    
    
    30,406
    
    
    
    
    
    
    
    
    
    
    
    30,406
    
    
    
    
    
    
    
    (20,400
    )
    
    
    (85,169
    )
    
    
    
    
    
    
    (105,569
    )
    
    
    Balance at January 1, 2005
    
    $
    16
    
    
    $
    
    
    
    $
    (157,215
    )
    
    $
    1,131
    
    
    $
    (156,068
    )
    
    $
    (25,417
    )
 See accompanying notes. 43




---



##### Table of Contents



AMH HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS YEAR ENDED
    
    
    YEAR ENDED
    
    
    257 DAYS ENDED
    
    
    
    108 DAYS ENDEDJANUARY 1,
    
    
    JANUARY 3,
    
    
    DECEMBER 31,
    
    
    
    APRIL 18,2005
    
    
    2004
    
    
    2002
    
    
    
    2002PREDECESSOR(IN THOUSANDS)OPERATING ACTIVITIESIncome (loss) from continuing operations
    
    $
    (27,226
    )
    
    $
    24,531
    
    
    $
    12,705
    
    
    
    $
    (5,757
    )Adjustments to reconcile income (loss) from continuing
operations to net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    20,932
    
    
    
    16,115
    
    
    
    7,169
    
    
    
    
    3,969Deferred income taxes
    
    
    (12,444
    )
    
    
    524
    
    
    
    1,738
    
    
    
    
    783Provision for losses on accounts receivable
    
    
    1,283
    
    
    
    2,029
    
    
    
    1,240
    
    
    
    
    649(Gain) loss on sale of assets
    
    
    692
    
    
    
    20
    
    
    
    (3
    )
    
    
    
    38Write-down of fixed assets related to facility closure
    
    
    3,647
    
    
    
    
    
    
    
    
    
    
    
    
    Stock option compensation expense
    
    
    30,406
    
    
    
    
    
    
    
    
    
    
    
    
    Tax benefit from stock option exercises
    
    
    2,841
    
    
    
    
    
    
    
    
    
    
    
    
    113Cost of sales expense related to an inventory fair value
purchase accounting adjustment
    
    
    
    
    
    
    1,402
    
    
    
    1,891
    
    
    
    
    Debt extinguishment costs
    
    
    
    
    
    
    
    
    
    
    7,579
    
    
    
    
    Receivable from parent
    
    
    (1,241
    )
    
    
    
    
    
    
    
    
    
    
    
    Amortization of deferred financing costs and accretion
on senior discount notes
    
    
    29,747
    
    
    
    5,679
    
    
    
    1,565
    
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (18,649
    )
    
    
    3,938
    
    
    
    (6,028
    )
    
    
    
    (6,895
    )Inventories
    
    
    (15,024
    )
    
    
    (95
    )
    
    
    1,712
    
    
    
    
    (5,170
    )Other current assets
    
    
    (6,994
    )
    
    
    331
    
    
    
    (574
    )
    
    
    
    (739
    )Accounts payable
    
    
    24,389
    
    
    
    (9,155
    )
    
    
    3,220
    
    
    
    
    3,816Accrued liabilities
    
    
    13,011
    
    
    
    2,707
    
    
    
    5,575
    
    
    
    
    (8,142
    )Income taxes receivable/payable
    
    
    (14,999
    )
    
    
    8,756
    
    
    
    4,564
    
    
    
    
    (1,399
    )Other assets
    
    
    (2,410
    )
    
    
    22
    
    
    
    41
    
    
    
    
    (442
    )Other liabilities
    
    
    (6,956
    )
    
    
    (828
    )
    
    
    183
    
    
    
    
    918Net cash provided by (used in) operating activities
    
    
    21,005
    
    
    
    55,976
    
    
    
    42,577
    
    
    
    
    (18,258
    )INVESTING ACTIVITIESAdditions to property, plant and equipment
    
    
    (18,741
    )
    
    
    (12,689
    )
    
    
    (8,938
    )
    
    
    
    (3,817
    )Proceeds from sale of assets
    
    
    90
    
    
    
    2,104
    
    
    
    110
    
    
    
    
    220Other investing activities
    
    
    
    
    
    
    330
    
    
    
    
    
    
    
    
    Purchase of Gentek Holdings, Inc.
    
    
    
    
    
    
    (113,255
    )
    
    
    
    
    
    
    
    Acquisition of predecessors equity
    
    
    
    
    
    
    
    
    
    
    (366,497
    )
    
    
    
    Proceeds from sale of AmerCable
    
    
    
    
    
    
    
    
    
    
    28,332
    
    
    
    
    Net cash used in investing activities
    
    
    (18,651
    )
    
    
    (123,510
    )
    
    
    (346,993
    )
    
    
    
    (3,597
    )FINANCING ACTIVITIESMarch 2004 dividend recapitalization:Roll-Over Options exercised for preferred and common
shares
    
    
    1,760
    
    
    
    
    
    
    
    
    
    
    
    
    Proceeds
from issuance of 11 1/4% senior discount notes
    
    
    258,265
    
    
    
    
    
    
    
    
    
    
    
    
    Redemption of preferred stock
    
    
    (177,844
    )
    
    
    
    
    
    
    
    
    
    
    
    Common stock dividend
    
    
    (57,684
    )
    
    
    
    
    
    
    
    
    
    
    
    December 2004 recapitalization transaction:Proceeds from sale of convertible preferred stock to
Investcorp
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    
    Distribution of Investcorp proceeds to shareholders
    
    
    (150,000
    )
    
    
    
    
    
    
    
    
    
    
    
    Equity contribution from parent for payment of
management
bonus
    
    
    14,025
    
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from exercise of stock options
    
    
    3,406
    
    
    
    
    
    
    
    
    
    
    
    
    Payment of option proceeds to AMH II
    
    
    (3,406
    )
    
    
    
    
    
    
    
    
    
    
    
    Equity contribution from Holdings
    
    
    
    
    
    
    
    
    
    
    164,807
    
    
    
    
    Proceeds from issuance of 9 3/4% Senior Subordinated Notes
    
    
    
    
    
    
    
    
    
    
    165,000
    
    
    
    
    Proceeds from borrowings under term loan
    
    
    175,000
    
    
    
    190,000
    
    
    
    125,000
    
    
    
    
    Repayments of term loan
    
    
    (140,000
    )
    
    
    (126,500
    )
    
    
    (48,500
    )
    
    
    
    Net proceeds from issuance of common stock
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    
    Repayment of 9 1/4% Senior Subordinated Notes
    
    
    
    
    
    
    (908
    )
    
    
    (74,092
    )
    
    
    
    Debt extinguishments costs
    
    
    
    
    
    
    
    
    
    
    (7,579
    )
    
    
    
    Financing costs
    
    
    (22,488
    )
    
    
    (3,854
    )
    
    
    (12,991
    )
    
    
    
    Redemption of common stock
    
    
    (126
    )
    
    
    
    
    
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (339
    )Net cash provided by (used in) financing activities
    
    
    50,908
    
    
    
    58,738
    
    
    
    311,745
    
    
    
    
    (245
    )Net increase (decrease) in cash from continuing operations
    
    
    53,262
    
    
    
    (8,796
    )
    
    
    7,329
    
    
    
    
    (22,100
    )Effect of exchange rate changes on cash
    
    
    510
    
    
    
    56
    
    
    
    
    
    
    
    
    Net cash used in discontinued operations
    
    
    
    
    
    
    
    
    
    
    (1,076
    )
    
    
    
    Cash at beginning of period
    
    
    4,282
    
    
    
    13,022
    
    
    
    6,769
    
    
    
    
    28,869Cash at end of period
    
    $
    58,054
    
    
    $
    4,282
    
    
    $
    13,022
    
    
    
    $
    6,769Supplemental Information:Cash paid for interest
    
    $
    23,422
    
    
    $
    21,277
    
    
    $
    12,226
    
    
    
    $
    4,479Cash paid for income taxes
    
    $
    14,832
    
    
    $
    8,739
    
    
    $
    1,532
    
    
    
    $
    2,254
 See accompanying notes. 44




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES NATURE OF OPERATIONS AMH Holdings, Inc. (AMH) was incorporated in Delaware on February 19, 2004. AMH has no
material assets or operations other than its 100% ownership of Associated Material Holdings, Inc.
(Holdings), its direct subsidiary, which in turn has no material assets or operations other than
its 100% ownership of Associated Materials Incorporated (AMI), collectively referred to as the
Company.  As part of a restructuring agreement dated as of March 4, 2004, stockholders and option
holders of Holdings became stockholders and option holders of AMH and are no longer stockholders
and option holders of Holdings. AMI was incorporated in Delaware in 1983 and is a leading, vertically integrated manufacturer
and North American distributor of exterior residential building products. The Companys core
products are vinyl windows, vinyl siding, aluminum trim coil, aluminum and steel siding and
accessories, and vinyl fencing, decking and railing. BASIS OF PRESENTATION AMH is a wholly owned subsidiary of AMH Holdings II, Inc. (AMH II) which is controlled by
affiliates of Investcorp S.A. (Investcorp) and Harvest Partners, Inc. (Harvest Partners). AMH
and AMH II were incorporated in connection with the recapitalization transactions described in Note
2. AMH and AMH II do not have material assets or operations other than a direct or indirect
ownership of the common stock of AMI. The Companys 2003 results of operations include the results
of Gentek Holdings, Inc. subsequent to its acquisition on August 29, 2003 (see Note 3). The
Companys results of operations prior to the date of the April 2002 merger transaction (see Note 3)
are presented as the results of the Predecessor. As discussed in Note 3, the Company completed the
sale of its AmerCable division on June 24, 2002. AmerCables results through April 18, 2002 are
included in the results of continuing operations of the Predecessor. Subsequent to April 18, 2002,
AmerCables results are presented as discontinued operations of the Successor as it was the
Successors decision to divest this division. In 2003, the Company changed its fiscal year from a calendar year ending on December 31st to a
52/53 week fiscal year that ends on the Saturday closest to December 31st. The Companys 2004 and
2003 fiscal years ended on January 1, 2005 and January 3, 2004, respectively. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany transactions and balances are eliminated in
consolidation. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions regarding the
reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION The Company primarily sells and distributes its products through two channels: direct sales
from its manufacturing facilities to independent distributors and dealers and sales to contractors
through its Company owned supply centers. Direct sales revenue is recognized when the Companys
manufacturing facility ships the product. Sales to contractors are recognized either when the
contractor receives product directly from the supply centers or when the supply centers deliver the
product to the contractors job site. A substantial portion of the Companys sales is in the repair
and replacement segment of the building products industry. Therefore, vinyl windows are
manufactured to specific measurement requirements received from the Companys customers. Revenues
are recorded net of estimated returns, customer incentive programs and other incentive offerings
including special pricing agreements, 45




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) promotions and other volume-based incentives. Revisions to these estimates are charged to income in
the period in which the facts that give rise to the revision become known. On contracts involving
installation, revenue is recognized when the installation is complete. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with an original maturity of three months
or less to be cash equivalents. ACCOUNTS RECEIVABLE The Company records accounts receivable at selling prices which are fixed based on purchase
orders or contractual arrangements. The Company maintains an allowance for doubtful accounts for
estimated losses resulting from the inability of its customers to make required payments. The
allowance for doubtful accounts is based on review of the overall condition of accounts receivable
balances and review of significant past due accounts. If the financial condition of the Companys
customers were to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. INVENTORIES Inventories are valued at the lower of cost (first-in, first-out) or market. The Company
writes down its inventory for estimated obsolescence or unmarketable inventory equal to the
difference between the cost of inventory and the estimated market value based upon assumptions
about future demand and market conditions. If actual market conditions are less favorable than
those projected by management, additional inventory write-downs may be required. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. The cost of maintenance and repairs of
property, plant and equipment is charged to operations in the period incurred. Depreciation is
provided by the straight-line method over the estimated useful lives of the assets, which are as
follows: Building and improvements
    
    7 to 40 yearsComputer equipment
    
    3 to 5 yearsMachinery and equipment
    
    3 to 15 years
 LONG-LIVED ASSETS WITH DEPRECIABLE OR AMORTIZABLE LIVES The Company reviews long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of the asset to
undiscounted future net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Depreciation on assets held for
sale is discontinued and such assets are reported at the lower of the carrying amount or fair value
less costs to sell. GOODWILL AND OTHER INTANGIBLE ASSETS WITH INDEFINITE LIVES The Company reviews goodwill and other intangible assets with indefinite lives for impairment
on an annual basis or more frequently if events or circumstances change that would impact the value
of these assets in accordance with Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 142  Goodwill and Other Intangible Assets. The
impairment test is conducted using a fair-value based approach. As the Company does not have a
market for its equity, management performs the annual impairment analysis utilizing a discounted
cash flow model, which considers forecasted operating results discounted at an estimated weighted
average cost of capital. The Company conducted its impairment test as of October 1, 2004 noting no
impairment to its goodwill or other intangible assets with indefinite lives. 46




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) PENSIONS The Companys pension costs are developed from actuarial valuations. Inherent in these
valuations are key assumptions including discount rates and expected return on plan assets. In
selecting these assumptions, management considers current market conditions, including changes in
interest rates and market returns on plan assets. Changes in the related pension benefit costs may
occur in the future due to changes in assumptions. PRODUCT WARRANTY COSTS AND SERVICE RETURNS Consistent with industry practice, the Company provides to homeowners limited warranties on
certain products, primarily related to window and siding product categories. Warranties are of
varying lengths of time from the date of purchase up to and including lifetime. Warranties cover
product failures such as stress cracks and seal failures for windows and fading and peeling for
siding products, as well as manufacturing defects. The Company has various options for remedying product warranty claims including repair,
refinishing or replacement and directly incurs the cost of these remedies. Warranties also become
reduced under certain conditions of time and change in ownership. Liabilities for future warranty
costs are provided annually based on managements estimates of such future costs using historical
trends and sales of products to which such costs relate. Certain metal coating suppliers provide
warranties on materials sold to the Company that mitigate the costs incurred by the Company.
Warranty reserves are based on past claims experience, sales history and other factors. An
independent actuary assists the Company in determining reserve amounts related to significant
product failures. A reconciliation of warranty reserve activity is as follows for the years ended January 1,
2005 and January 3, 2004 (in thousands): January 1,
    
    
    January 3,2005
    
    
    2004Balance at the beginning of the year
    
    $
    15,979
    
    
    $
    1,854Provision for warranties issued
    
    
    7,016
    
    
    
    3,135Gentek warranties assumed
    
    
    6,673
    
    
    
    13,611Claims paid
    
    
    (8,089
    )
    
    
    (2,621
    )Balance at the end of the year
    
    $
    21,579
    
    
    $
    15,979
 INCOME TAXES The Company accounts for income taxes in accordance with SFAS No. 109  Accounting for
Income Taxes, which requires that deferred tax assets and liabilities be recognized for the effect
of temporary differences between the book and tax bases of recorded assets and liabilities. SFAS
No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more
likely than not that some portion or all of the deferred tax asset will not be realized. The
Company reviews the recoverability of any tax assets recorded on the balance sheet and provides any
necessary allowances as required. STOCK PLANS The Company measures stock-based compensation using the intrinsic value in accordance with
Accounting Principles Board (APB) Opinion No. 25  Accounting for Stock Issued to Employees.
The Company follows the disclosure provisions required under SFAS No. 123  Accounting for Stock
Based Compensation. Pro forma information regarding net income is required by SFAS No. 123, and
has been determined as if the Company had accounted for its stock options under the fair value
method of that statement using a minimum value approach for companies with private equity. The pro
forma effect on net income (loss) would have been (in thousands): 47




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) 257 DAYS
    
    
    
    108 DAYSYEAR ENDED
    
    
    YEAR ENDED
    
    
    ENDED
    
    
    
    ENDEDJANUARY 1,
    
    
    JANUARY 3,
    
    
    DECEMBER 31,
    
    
    
    APRIL 18,2005
    
    
    2004
    
    
    2002
    
    
    
    2002PREDECESSORNet income (loss) as reported
    
    $
    (27,226
    )
    
    $
    24,531
    
    
    $
    12,184
    
    
    
    $
    (5,757
    )Pro forma stock based employee compensation cost, net of tax
    
    
    (177
    )
    
    
    (132
    )
    
    
    (212
    )
    
    
    
    (65
    )Pro forma net income (loss)
    
    $
    (27,403
    )
    
    $
    24,399
    
    
    $
    11,972
    
    
    
    $
    (5,822
    )
 In accordance with the provisions of FASB Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensation  An Interpretation of APB Opinion No. 25, the Company
recorded $30.8 million of stock compensation expense for the year ended January 1, 2005 in
connection with the December 2004 recapitalization transaction (see Note 2). MARKETING AND ADVERTISING The Company expenses marketing and advertising costs as incurred. Marketing and advertising
expense was $14.2 million for the year ended January 1, 2005, $9.7 million for the year ended
January 3, 2004, $7.2 million for the 257 days ended December 31, 2002, and $3.8 million for the
108 days ended April 18, 2002. RECLASSIFICATIONS Certain prior period amounts have been reclassified to conform with the current period
presentation. NEW ACCOUNTING PRONOUNCEMENTS On January 1, 2003, the Company adopted the provisions of FASB SFAS No. 145, Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
The provisions of SFAS No. 145 related to the rescission of SFAS No. 4 require that any gain or
loss on extinguishment of debt that was classified as an extraordinary item in prior periods be
reclassified and no longer be presented as an extraordinary item. As a result of adopting this
standard, the Company reclassified debt extinguishment costs recorded in the second quarter of
2002. The debt extinguishment costs include $4.9 million for the premium paid to extinguish
substantially all of the Successors assumed 9 1/4% notes and $2.7 million for the financing fees
related to an interim credit facility utilized for the April 2002 merger transaction (see Note 3),
which was repaid shortly thereafter. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS No. 150 requires that certain financial
instruments, which under previous guidance were accounted for as equity, must now be accounted for
as liabilities. The financial instruments affected include mandatorily redeemable preferred stock,
certain financial instruments that require or may require the issuer to buy back some of its shares
in exchange for cash or other assets and certain obligations that can be settled with shares of
stock. SFAS No. 150 is effective for all financial instruments entered into or modified after May
31, 2003 and must be applied to the Companys existing financial instruments effective July 1,
2003. On October 29, 2003, the FASB deferred the provisions of paragraphs 9 and 10 and related
guidance in the appendices of this pronouncement as they apply to mandatorily redeemable
noncontrolling interests. Adoption of the effective or deferred provisions of SFAS No. 150 did not
and are expected not to have a material effect on the Companys financial position, results of
operations or cash flows. In December 2003, the FASB issued SFAS No. 132 (Revised), Employers Disclosures about
Pensions and other Postretirement Benefits. SFAS No. 132 (Revised) was developed in response to
concerns expressed by users of financial statements about their need for more information about
pension plans. This standard retains the disclosures required by the original SFAS No. 132 and
requires additional disclosures describing plan assets, investment strategy, measurement date, plan
obligations, cash flows and components of net periodic benefit cost recognized during interim
periods. The Company adopted this standard effective for its fiscal year 2004. 48




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) In November 2004, the FASB issued SFAS No. 151, Inventory Costs, and amendment of ARB 43,
Chapter 4. SFAS No. 151 requires certain inventory costs to be recognized as current period
expenses. This standard also provides guidance for the allocation of fixed production overhead
costs. This standard is effective for inventory costs incurred during the fiscal years beginning
after June 15, 2005. The Company will adopt this standard in fiscal 2006. The Company has not yet
determined the impact, if any, this standard will have on the financial statements of the Company. In December 2004, the FASB issued SFAS No. 123 (Revised), Share-Based Payment. This
standard revises SFAS No. 123, APB Opinion No. 25 and related accounting interpretations, and
eliminates the use of the intrinsic value method. The Company currently uses the intrinsic value
method under APB Opinion No. 25 to value stock options and accordingly, no compensation expense has
been recorded for stock options, except for stock compensation expense of $30.8 million recorded in
connection with the exercise of stock options in December 2004 (see Note 2). SFAS No. 123
(Revised) requires the expensing of all stock-based compensation, including stock options, using a
fair value based method. The Company will adopt this standard effective July 1, 2005, expensing
stock options using the modified prospective transition method prescribed in SFAS No. 123
(Revised). The Company is in the process of determining the impact this standard will have on its
financial statements. In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), Consolidation of
Variable Interest Entities. Companies were required to adopt the provisions of this interpretation
immediately for all new variable interest entities and at the end of the interim period beginning
after December 15, 2003 for all variable interest entities in which an enterprise acquired an
interest in that entity before February 1, 2003. As the Company does not have an interest in any
variable interest entities, the adoption of this interpretation did not have a material effect on
the Companys financial position, results of operations or cash flows. In October 2004, the American Jobs Creation Act of 2004 (Jobs Act) was signed into law. The
Jobs Act contains numerous corporate tax changes, including eliminating a tax benefit relating to
U.S. product exports, a lower U.S. tax rate on non-U.S. dividends and a new deduction relating to
domestic manufacturing. The Company is in the process of evaluating this legislation. However,
the Jobs Act is not anticipated to materially affect the Companys results of operations or
financial position. 2. RECAPITALIZATION TRANSACTIONS As part of a restructuring agreement dated as of March 4, 2004, stockholders and option
holders of Holdings became stockholders and option holders of AMH and are no longer stockholders
and option holders of Holdings. AMH has no material assets or operations other than its 100%
ownership of Holdings, AMIs direct parent company. On March 4, 2004, AMH completed an offering of
$446 million aggregate principal at maturity of 111/4% senior discount notes. The total gross
proceeds were approximately $258.3 million. In connection with the note offering, certain options
to acquire preferred and common shares were exercised and the proceeds from the note offering were
used to redeem all of AMHs preferred stock including accrued and unpaid dividends, pay a dividend
to AMHs common stockholders and pay a bonus to certain members of the Companys senior management
and a director. Through Holdings, AMH contributed $14.5 million to AMI to pay the bonus. The
completion of the aforementioned transactions constituted the March 2004 dividend recapitalization. On December 22, 2004, AMH completed a recapitalization transaction in which the then
outstanding capital stock of AMH was reclassified as a combination of voting and non-voting shares
of Class B common stock and shares of voting and non-voting convertible preferred stock. All of the
shares of the convertible preferred stock were immediately sold to affiliates of Investcorp for an
aggregate purchase price of $150 million, which was distributed by the Company to the existing
shareholders. As a result of this transaction, affiliates of Investcorp acquired a 50% equity
interest in AMH and the existing shareholders, led by Harvest Partners, retained shares of Class B
common stock representing a 50% equity interest in AMH, all on a
fully diluted basis. Each of Investcorp and Harvest Partners,
through their respective affiliates, have a 50% voting interest in AMH. Immediately following
these transactions, pursuant to a restructuring agreement, the shareholders of AMH contributed
their shares of the capital stock of AMH to AMH II, a Delaware corporation formed for the purpose
of becoming the direct parent company of AMH, in exchange for shares of the capital stock of AMH II
mirroring (in terms of type and class, voting rights, preferences and other rights) the shares of
AMH capital stock contributed by such shareholders. In connection with this transaction, on
December 22, 2004, the Company increased its senior credit facility by $42 million and AMH II
issued $75 million of 13 5/8% senior notes due 2014 (13 5/8% notes). AMH II then declared and
paid a dividend on shares of its Class B common stock in an aggregate amount of approximately $96.4
million, which included approximately $3.4 million in aggregate proceeds received by AMH II through
AMH, upon the exercise of options to purchase AMH common stock. Of this $96.4 million dividend,
approximately $62.7 million was paid in cash and approximately $33.7 million was paid in the form
of promissory notes issued by AMH II to each of its Class B common shareholders. In December of
2004, AMH made a payment to AMH II for the proceeds received upon exercise of the options. In the
first quarter of 2005, the AMI made an intercompany loan of $33.7 million to AMH II through its
direct and indirect parent companies. Subsequently, AMI and its direct and indirect companies
declared a dividend in forgiveness of the intercompany loan. On December 22, 2004, in connection with such transactions, AMI paid a bonus in the aggregate
amount of approximately $22.3 million to certain members of AMIs management and a director.
Approximately $14.3 million of the bonus, including payroll taxes, was paid in cash on December 22,
2004, with promissory notes issued by AMI for the remaining $8.0 million. These promissory notes
were settled in cash during the first quarter of fiscal year 2005. AMI incurred transaction
related costs of $28.4 million, which includes $16.3 million paid for investment banking and legal
expenses, which have been classified as recapitalization transaction costs in the Companys
statements of operations and $12.1 million for financing related
costs which have been recorded in other assets on the Companys
balance sheet. AMI also recognized stock
compensation expense of $30.8 million, including payroll taxes, related to stock options exercised
in the transaction. The completion of the aforementioned transactions constitute the December 2004
recapitalization transaction. 49




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) The following table summarizes the sources and uses of funds related to the December 2004
recapitalization transaction, which occurred at AMH, Holdings and AMI.
Transactions occurring at AMH II are not included in the table. With additional detail provided for the transactions which occurred
at the AMH, versus those which occurred at AMH II. AMH(in thousands)SourcesAdditional
borrowings under senior credit facility
    
    $
    42,000Cash on hand as of date of the December 2004 recapitalization transaction
    
    
    28,405Sale of convertible preferred stock to Investcorp
    
    
    150,000Capital
contribution from AMH II for payment of bonuses
    
    
    14,025Proceeds from exercise of stock options
    
    
    3,406Total sources
    
    $
    237,836UsesDistribution of proceeds from sale of convertible preferred stock to Investcorp
    
    $
    150,000Payment to AMH II for stock option proceeds  December 2004
    
    
    3,406Loan/Dividend to AMH II for payment on AMH II promissory notes  First quarter of 2005
    
    
    33,713Management bonus
    
    
    22,313Transaction and financing fees
    
    
    28,404Total uses
    
    $
    237,836
 3. ACQUISITIONS AND DIVESTITURES On August 29, 2003, the Company acquired all of the issued and outstanding shares of the
capital stock of Gentek Holdings, Inc., the parent Company of Gentek Building Products, Inc. and
Gentek Building Products Limited, collectively referred to as Gentek. Gentek manufactures and
distributes vinyl windows, vinyl siding, aluminum trim coil, and aluminum and steel siding and
accessories under the Revere® and Gentek® brand names. Gentek markets its products to
professional contractors on a wholesale basis through 11 company-owned distribution centers in the
mid-Atlantic region of the United States and 21 company-owned distribution centers in Canada, as
well as approximately 180 independent distributors in the United States. The acquisition was
completed to expand the Companys presence in the independent distributor market channel, to
capitalize on synergy opportunities related to the vertical integration of the metals products
manufactured by Gentek and sold in the Companys Alside supply centers, and to benefit from raw
material savings resulting from increased purchasing leverage. In connection with the Gentek acquisition, the Company amended and restated its existing
credit facility by adding a term loan facility to borrow an additional $113.5 million and expanding
the revolving credit facility from $40 million to $70 million, including a new Canadian subfacility
of $15 million. 50




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) The acquisition has been accounted for using the purchase method of accounting. The total
purchase price has been allocated to the tangible and intangible assets and liabilities acquired
based upon their estimated fair values as follows (in thousands): Cash
    
    $
    1,088Accounts receivable
    
    
    43,290Inventory
    
    
    38,020Other current assets
    
    
    3,947Deferred income taxes
    
    
    1,698Total current assets
    
    
    88,043Property, plant and equipment
    
    
    39,767Goodwill
    
    
    36,526Other intangible assets
    
    
    16,320Deferred income taxes
    
    
    7,039Other assets
    
    
    350Total assets
    
    $
    188,045Accounts payable
    
    $
    26,197Accrued liabilities
    
    
    15,151Income taxes payable
    
    
    1,434Total current liabilities
    
    
    42,782Other liabilities
    
    
    30,920Long-term debt
    
    
    7,500Stockholders equity
    
    
    106,843Total liabilities and stockholders equity
    
    $
    188,045
 The allocation of purchase price resulted in $36.5 million in goodwill and $16.3 million in
other intangible assets, including $4.5 million of customer base intangibles with estimated useful
lives ranging from 2 to 9 years, $1.1 million of order backlog, which was fully amortized in 2003
as the orders were fulfilled and $10.7 million assigned to trademarks of which $4.3 million have
remaining useful lives of 15 years and $6.4 million have indefinite lives (See Note 5). The purchase price allocation was finalized in 2004. The preliminary purchase price
allocation was adjusted primarily for liabilities associated with warranties of $6.7 million, net
of a deferred tax asset of $2.8 million. The purchase consideration of $113.3 million was financed
through additional term loans under the amended and restated credit facility. From the total
purchase consideration paid to the sellers, $7.0 million was retained in an escrow account for
certain items that were indemnified by the seller to the Company. In accordance with the stock
purchase agreement, $3.5 million of the escrow was returned to former Genstar shareholders in 2004,
resulting in a remaining balance in the escrow account of $3.5 million as of January 1, 2005. On March 16, 2002, the Company entered into a merger agreement (Merger Agreement) with
Holdings, Inc. and its wholly owned subsidiary, Simon Acquisition Corp. The Merger Agreement
provided for the acquisition of all shares of the Companys then outstanding common stock through a
cash tender offer for $50.00 per share. The Merger Agreement also required that the Company
commence a tender offer to purchase all of its then outstanding 9 1/4% senior subordinated notes
due March 1, 2008 (9 1/4% notes). On April 19, 2002, the cash tender offer for the Companys then outstanding common stock and
the cash tender offer for approximately $74.0 million of the Companys then outstanding 9 1/4%
notes was completed. Simon Acquisition Corp. was then merged with and into the Company with the
Company continuing as a privately held, wholly owned subsidiary of Holdings. The completion of the
aforementioned transactions constitute the April 2002 merger transaction. Following the completion
of the April 2002 merger transaction, the Companys then outstanding shares of common stock were
delisted from NASDAQ. 51




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) The April 2002 merger transaction has been accounted for using the purchase method of
accounting. The total purchase consideration has been allocated to tangible and intangible assets
acquired and liabilities assumed based on respective fair values at the date of acquisition, which
are based on valuation estimates and certain assumptions. The allocation of purchase price resulted
in $198.3 million in goodwill and $105.5 million in other intangibles, including $6.8 million of
patents with estimated useful lives of 10 years and $98.7 million assigned to trademarks of which
$24.0 million have remaining useful lives of 15 years and $74.7 million have indefinite lives (See
Note 5). The purchase consideration, financing costs, tender offer of the $74.0 million of 9 1/4%
notes, and debt extinguishment costs of $7.6 million were financed through: (1) the issuance of
$165 million of 9 3/4% senior subordinated notes due 2012 (9 3/4% notes), (2) $125 million from a
new $165 million credit facility (credit facility), (3) $164.8 million cash contribution from
Holdings and (4) cash of approximately $6.3 million, representing a portion of the Companys total
cash of $6.8 million on hand at the time of the acquisition. In connection with the April 2002 merger transaction, the Predecessor incurred merger related
costs, including legal and investment banking fees, which have been classified as merger
transaction costs in the Predecessors accompanying statements of operations. On June 24, 2002, the Company completed the sale of its AmerCable division to AmerCable
Incorporated, a newly formed entity controlled by Wingate Partners III, L.P. and members of
AmerCables management for net proceeds of approximately $28.3 million and the assumption of
certain liabilities pursuant to an asset purchase agreement. The Company used the net proceeds to
repay a portion of its credit facility. No gain or loss on the sale of AmerCable was recorded in
the statements of operations, as the fair value assigned to AmerCables net assets acquired in the
April 2002 merger transaction approximated the net proceeds received from the subsequent sale of
AmerCable. Operating results of discontinued operations for the period from April 19, 2002 to June
24, 2002 were as follows (in thousands): 257 DAYS ENDEDDECEMBER 31, 2002Net sales
    
    $
    8,197Income from operations
    
    
    322Interest allocated to discontinued operations
    
    
    1,213Net loss from discontinued operations
    
    $
    (521
    )
 Interest allocated to discontinued operations includes the interest on $28.3 million of
borrowings under the term loan for the period from April 19, 2002 to June 24, 2002 plus interest
expense related to the accelerated amortization of deferred financing fees of the Companys credit
facility related to the proceeds from the sale of AmerCable used to reduce the term loan. 4. RELATED PARTIES In connection with the December 2004 recapitalization transaction, AMI entered into a
management advisory agreement with Investcorp International Inc. (III) for management advisory,
strategic planning and consulting services for which AMI paid III the total due under the agreement
of $6 million on December 22, 2004. As described in the Management Advisory Agreement with III, $4
million of this management fee relates to services to be provided during the first year of the
agreement, with $0.5 million related to services to be provided each year of the remaining four
year term of the agreement. Beginning in 2005, AMI will expense the prepaid management fee in
accordance with the services provided over the life of the agreement. In connection with the December 2004 recapitalization transaction, on December 5, 2004, AMI
entered into an agreement for financing advisory services with III (the Investcorp Financing
Advisory Agreement). Under the Investcorp Financing Advisory Agreement, III will provide AMI with
financial advisory services relating to the arrangement of borrowing facilities in connection with
the December 2004 recapitalization transaction. For these services, AMI paid a one-time fee of
$7.5 million to III on December 22, 2004. The term of the Investcorp Financing Advisory Agreement
ended on December 23, 2004. 52




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) AMI also entered into a merger and acquisitions advisory services agreement with III (the
Investcorp M&A Advisory Agreement). Under the Investcorp M&A Advisory Agreement, III will provide
the Company with advisory and strategic planning services. For these services, AMI paid a one-time
fee of $1.5 million to these affiliates on December 22, 2004. The Investcorp M&A Advisory
Agreement terminated on December 22, 2004. Total fees paid in connection with the Investcorp Financing Advisory Agreement, the Investcorp
M&A Advisory Agreement and IIIs out of pocket expenses were $9.1 million, of which $6.4 million
was paid in cash on December 22, 2004 and $2.7 million was paid in the form of a promissory note
issued by AMI. AMI settled the promissory note in first quarter of 2005. In connection with the December 2004 recapitalization transaction, AMI entered into an amended and
restated management agreement with Harvest Partners. Pursuant to the amended agreement, AMI paid a
fee of $4.9 million to Harvest Partners in connection with the transaction, of which $4.0 million
was paid in cash on December 22, 2004 and $0.9 million was paid in the form of a promissory note
issued by AMI. AMI settled the promissory note in cash in February 2005. The amended agreement is
substantially identical, in all material respects, to the original agreement, which provided for
Harvest Partners to receive a one-time fee of $5.0 million in connection with structuring and
implementing the April 2002 merger transaction. In addition, Harvest Partners provides AMI with
financial advisory and strategic planning services. For these services, Harvest Partners receives
an annual fee of approximately $0.8 million, payable on a quarterly basis in advance, beginning on
the date of execution of the original agreement. The fee is adjusted on a yearly basis in
accordance with the U.S. Consumer Price Index. The Company incurred approximately $0.8 million of
management fees paid to Harvest Partners for each of the years ended January 1, 2005 and January 3,
2004 and $0.6 million for the 257 days ended December 31, 2002 which are included in selling,
general and administrative expenses in the statement of operations. The agreement also provides
that Harvest Partners will receive transaction fees in connection with financings, acquisitions and
divestitures of the Company. Such fees will be a percentage of the applicable transaction. In
connection with the December 2004 recapitalization transaction, Harvest Partners and III entered
into an agreement pursuant to which they agreed that any transaction fee that becomes payable under
the amended management agreement after December 22, 2004 will be shared equally by Harvest Partners
and III. In 2003, the Company paid Harvest Partners $1.1 million in connection with the Companys
acquisition of Gentek and in 2004, $1.3 million for financial advisory services in connection with
the completion of the offering of the 11 1/4% notes and the related transactions. The Company
reimburses Harvest Partners for all out-of-pocket expenses. The management agreement has a term of
five years from its date of execution and will automatically be renewed on a yearly basis,
beginning in 2004, unless otherwise specified by Harvest Partners. In connection with the 2004 recapitalization transactions, AMH recorded receivables from its
parent related to certain payments for fees made on behalf of AMHs parent company totaling $1.2
million. In connection with the December 2004 recapitalization transaction, on December 22, 2004 AMI
paid bonuses in the aggregate amount of approximately $22.3 million to certain members of
management and a director of AMI. The director bonus, paid to Mr. Vollershausen, was $125,000.
Approximately $14.3 million of the bonus was paid in cash on December 22, 2004, with promissory
notes issued by the AMI for the remaining $8.0 million. The promissory notes were settled in cash
during the first quarter of fiscal year 2005. In the connection with the March 2004 dividend recapitalization, AMI paid bonuses in the
aggregate amount of $14.5 million to certain members of management and a director of AMI. The
director bonus, paid to Mr. Vollershausen was $175,000. 53




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) 5. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill represents the purchase price in excess of the fair value of the tangible and
intangible net assets acquired and consists of $234.8 million including $198.3 million from the
purchase price for the April 2002 merger transaction and $36.5 million from the acquisition of
Gentek. None of the Companys goodwill is deductible for income tax purposes. The Companys other
intangible assets consist of the following (in thousands): AVERAGEAMORTIZATION
    
    JANUARY 1, 2005
    
    
    JANUARY 3, 2004PERIOD
    
    
    
    
    
    ACCUMULATED
    
    
    NET CARRYING
    
    
    
    
    
    
    ACCUMULATED
    
    
    NET CARRYING(IN YEARS)
    
    COST
    
    
    AMORTIZATION
    
    
    VALUE
    
    
    COST
    
    
    AMORTIZATION
    
    
    VALUETrademarks and
trade names
    
    15
    
    $
    109,280
    
    
    $
    4,712
    
    
    $
    104,568
    
    
    $
    109,280
    
    
    $
    2,844
    
    
    $
    106,436Patents
    
    10
    
    
    6,550
    
    
    
    1,763
    
    
    
    4,787
    
    
    
    6,550
    
    
    
    1,110
    
    
    
    5,440Customer base
    
    7
    
    
    4,762
    
    
    
    1,073
    
    
    
    3,689
    
    
    
    4,628
    
    
    
    368
    
    
    
    4,260Total other
intangible assets
    
    
    
    $
    120,592
    
    
    $
    7,548
    
    
    $
    113,044
    
    
    $
    120,458
    
    
    $
    4,322
    
    
    $
    116,136
 The Company has determined that trademarks and trade names totaling $81.1 million consisting
primarily of the Alside®, Revere®and Gentek® trade names have indefinite useful lives.
Additionally, the Company determined the value of Genteks order backlog at August 29, 2003 was
approximately $1.1 million. The backlog was fully amortized in 2003 as the orders were fulfilled.
Amortization expense related to other intangible assets was approximately $3.2 million and $3.8
million for years ended January 1, 2005 and January 3, 2004, respectively, and $1.8 million for the
257 days ended December 31, 2002. Amortization expense for fiscal years 2005, 2006, 2007, 2008 and
2009 is estimated to be approximately $3.2 million, $3.1 million, $3.1 million, $3.1 million and
$3.0 million, respectively. 6. PRO FORMA INFORMATION The following pro forma information for the years ended January 3, 2004 and December 31, 2002
was prepared as if the acquisition of Gentek occurred as of the beginning of each period presented
and the April 2002 merger transaction and sale of AmerCable occurred as of the beginning of 2002.
On a pro forma basis, the Company would have reported (in thousands): YEAR ENDED
    
    
    YEAR ENDEDJANUARY 3,
    
    
    DECEMBER 31,2004
    
    
    2002Net sales
    
    $
    969,876
    
    
    $
    867,275Net income
    
    $
    28,264
    
    
    $
    17,822
 The pro forma information is not necessarily indicative of the results that would have
occurred had the acquisition of Gentek, the April 2002 merger transaction and sale of AmerCable
occurred at the beginning of the periods presented, nor is it necessarily indicative of future
results. The pro forma results of operations include $1.4 million and $3.3 million of expenses
related to inventory fair value adjustments for the years ended January 3, 2004 and December 31,
2002, respectively. 7. INVESTMENT IN AMERCORD The Company owns a 9.9% interest in Amercord Inc. (Amercord), which manufactured and
marketed steel cord and bead wire to the tire manufacturing industry. During 2001, Amercord ceased
operations, and the Company wrote-off its remaining investment. The Company guaranteed $3.0 million of a secured note in connection with the sale of a portion of
the ownership interest in Amercord. Ivaco, Inc., pursuant to the terms of the note, agreed to
indemnify the Company for 50% of any loss under the guarantee. The guarantee was exercised by
Amercords lender and the Company paid approximately $1.2 million in 2003 for its portion of the 54




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) liability related to this guarantee. The Company has no further obligations under this guarantee.
The Company retains a right to any collateral proceeds that secure the note; however, the Company
has determined that the value of such collateral is not sufficient to cover any significant portion
of the Companys liability. 8. ALLOWANCE FOR DOUBTFUL ACCOUNTS Changes in the allowance for doubtful accounts on accounts receivable consist of (in
thousands): 257 DAYS
    
    
    
    108 DAYSYEAR ENDED
    
    
    YEAR ENDED
    
    
    ENDED
    
    
    
    ENDEDJANUARY 1,
    
    
    JANUARY 3,
    
    
    DECEMBER 31,
    
    
    
    APRIL 18,2005
    
    
    2004
    
    
    2002
    
    
    
    2002PREDECESSORBalance at beginning of period
    
    $
    7,942
    
    
    $
    5,552
    
    
    $
    5,486
    
    
    
    $
    5,117Provision for losses
    
    
    1,283
    
    
    
    2,029
    
    
    
    1,240
    
    
    
    
    649Losses sustained (net of recoveries)
    
    
    (1,834
    )
    
    
    (1,375
    )
    
    
    (653
    )
    
    
    
    (280
    )Allowance for Gentek receivables acquired
    
    
    
    
    
    
    1,736
    
    
    
    
    
    
    
    
    Allowance for AmerCable receivables sold.
    
    
    
    
    
    
    
    
    
    
    (521
    )
    
    
    
    Balance at end of period
    
    $
    7,391
    
    
    $
    7,942
    
    
    $
    5,552
    
    
    
    $
    5,486
 The Company maintains allowances for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. The allowance for doubtful accounts is based
on a review of the overall condition of accounts receivable balances and a review of significant
past due accounts. If the financial condition of the Companys customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional allowances may be
required. 9. INVENTORIES Inventories consist of (in thousands): JANUARY 1,
    
    
    JANUARY 3,2005
    
    
    2004Raw materials
    
    $
    27,127
    
    
    $
    24,586Work-in-progress
    
    
    9,570
    
    
    
    6,307Finished goods and purchased stock
    
    
    78,090
    
    
    
    67,014$
    114,787
    
    
    $
    97,907
 10. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of (in thousands): JANUARY 1,
    
    
    JANUARY 3,2005
    
    
    2004Land
    
    $
    4,668
    
    
    $
    4,146Buildings
    
    
    49,658
    
    
    
    49,472Construction in process
    
    
    2,623
    
    
    
    5,892Machinery and equipment
    
    
    113,660
    
    
    
    98,329170,609
    
    
    
    157,839Less accumulated depreciation
    
    
    31,912
    
    
    
    16,993$
    138,697
    
    
    $
    140,846
 55




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) Depreciation expense was approximately $17.7 million in 2004, $12.3 million in 2003, $5.4
million for the 257 days ended December 31, 2002 and $3.9 million for the 108 days ended April 18,
2002. 11. ACCRUED AND OTHER LIABILITIES Accrued liabilities consist of (in thousands): JANUARY 1,
    
    
    JANUARY 3,2005
    
    
    2004Employee compensation
    
    $
    16,888
    
    
    $
    18,639Sales promotions and incentives
    
    
    12,021
    
    
    
    11,138Warranty reserves
    
    
    6,500
    
    
    
    2,222Employee benefits
    
    
    6,435
    
    
    
    6,692Interest
    
    
    3,770
    
    
    
    3,794Taxes other than income
    
    
    2,972
    
    
    
    3,968Other
    
    
    5,793
    
    
    
    6,781$
    54,379
    
    
    $
    53,234
 Other liabilities consist of (in thousands): JANUARY 1,
    
    
    JANUARY 3,2005
    
    
    2004Pensions and other post-employment benefits
    
    $
    24,883
    
    
    $
    22,195Warranty reserves
    
    
    15,079
    
    
    
    13,757Other
    
    
    4,096
    
    
    
    5,635$
    44,058
    
    
    $
    41,587
 12. NOTES PAYABLE On December 22, 2004, in connection with the December 2004 recapitalization transaction, AMI
issued promissory notes totaling $11.6 million including $2.7 million and $0.9 million to
Investcorp and Harvest Partners, respectively, for transaction related services, and $8.0 million
to certain members of management and a director for bonuses to be paid in connection with the
December 2004 recapitalization transaction. The notes were settled in cash during the first
quarter of 2005. 13. LONG-TERM DEBT Long-term debt consists of (in thousands): JANUARY 1,
    
    
    JANUARY 3,2005
    
    
    20049 3/4% notes
    
    $
    165,000
    
    
    $
    165,00011 1/4% notes
    
    
    282,856
    
    
    
    Term loan under credit facility
    
    
    175,000
    
    
    
    140,000Total debt
    
    
    622,856
    
    
    
    305,000Less current portion
    
    
    875
    
    
    
    Long-term debt
    
    $
    621,981
    
    
    $
    305,000
 56




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) In connection with the April 2002 merger transaction, on April 23, 2002 AMI issued $165
million of 9 3/4% notes due in 2012 that pay interest semi-annually on April 15 and October 15. The
9 3/4% notes are general unsecured obligations of AMI subordinated in right of payment to senior
indebtedness and senior in right of payment to any current or future subordinated indebtedness of
AMI. AMIs payment obligations under the 9 3/4% notes are fully and unconditionally guaranteed,
jointly and severally (collectively, the Subsidiary Guarantees) on a senior subordinated basis,
by its domestic wholly-owned subsidiaries: Gentek Holdings, Inc., Gentek Building Products Inc. and
Alside, Inc. Alside, Inc. is a wholly owned subsidiary having no assets, liabilities or operations.
Gentek Building Products Limited is a Canadian company and does not guarantee the Companys 9 3/4%
notes. The fair value of the 9 3/4% notes was $184.4 million and $180.7 million at January 1, 2005
and January 3, 2004, respectively based upon their quoted market price. In conjunction with the April 2002 merger transaction, AMI entered into a $165 million credit
facility, which included $125 million of term loans due through 2009 that bear interest at the
London Interbank Offered Rate (LIBOR) plus 3.50%, payable quarterly, and up to $40 million of
available borrowings provided by revolving loans, which expire in 2007. In August 2003, in
connection with the acquisition of Gentek, AMI amended its credit facility to increase its
borrowing under term loans to $190 million due through August 2010, bearing interest at LIBOR plus
2.75%, and to expand its revolving facility from $40 million to $70 million, including a new
Canadian subfacility of $15 million. AMI used the borrowings for the Gentek acquisition and
repayment of AMIs $76.5 million of term loans outstanding at that time. In conjunction with the December 2004 recapitalization transaction AMI entered into a second
amended and restated credit facility dated December 22, 2004 in which AMI increased its borrowings
under the term loan facility to $175 million, and expanded its revolving facility from $70 million
to $80 million of available borrowings including a $20 million Canadian subfacility. AMI used the
borrowings to repay AMIs then outstanding term loans of $133 million and to partially fund the
December 2004 recapitalization transaction. The term loan facility is due through August 2010 with
minimum principal amortization of 1% per year beginning September 30, 2005 with quarterly payments
of the unamortized principal in the final year of the loan. The term facility bears interest at
LIBOR plus 2.25% payable quarterly at the end of each calendar quarter. The revolving credit
facility was extended to April 2009 and bears interest at LIBOR plus a margin of 3.00%, which can
decline to as low as 2.25% based on AMIs leverage ratio, as defined in the amended and restated
credit facility. The term loan under AMIs first and second amendment to the credit facility was, in each case,
considered to be substantially different as defined by FASB Emerging Issues Task Force (EITF)
96-19, Debtors Accounting for a Modification or Exchange of Debt Instruments as a result of
these amendments. AMI wrote-off previously capitalized deferred financing fees and certain
financing costs paid in conjunction with the amendments to the credit facility totaling $2.8
million and $3.9 million for the years ended January 1, 2005 and January 3, 2004, respectively,
which is included in interest expense for both years. At January 1, 2005, AMI had available borrowing capacity of approximately $74.0 million under
the revolving portion of its credit facility. The facility requires AMI to pay a commitment fee of
0.375% per annum on any unused amounts under the revolving portion of the facility. Outstanding
letters of credit at January 1, 2005 totaled approximately $6.0 million securing various insurance
letters of credit. Under the provisions of the amended and restated credit facility, on an annual basis beginning
with the year ended December 31, 2005, AMI is required to make principal payments on the term loan
under its credit facility based on a percentage of excess cash flows as defined in the amended and
restated credit facility. As of January 1, 2005, no principal payments were required to be made
under the excess cash flow provision. The
credit facility and the indentures governing the 9 3/4% notes and the
11 1/4% notes contain
restrictive covenants that, among other things, limit the Companys ability to incur additional
indebtedness, make loans or advances to subsidiaries and other entities, invest in capital
expenditures, sell its assets or declare dividends. In addition, under the credit facility the
Company is required to achieve certain financial ratios relating to leverage, coverage of fixed
charges and coverage of interest expense. The Company was in compliance with its covenants as of
January 1, 2005. 57




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) All obligations of AMI and Gentek under the credit facility are jointly and severally
guaranteed by AMH, Holdings and all of AMIs direct and indirect wholly owned domestic
subsidiaries. In addition, all obligations of Gentek under the credit facility also are jointly
and severally guaranteed by Genteks wholly owned Canadian subsidiaries. All obligations of AMI
and Gentek under the credit facility are secured by a pledge of AMIs capital stock, the capital
stock of Holdings and the capital stock of AMIs domestic subsidiaries (and up to 66-2/3% of the
voting stock of first tier foreign subsidiaries), and a security interest in substantially all of
AMIs owned real and personal assets (tangible and intangible) and the owned real and personal
assets (tangible and intangible) of the domestic guarantors under the credit facility. In
addition, all obligations of Gentek under the credit facility are secured by the capital stock and
owned real and personal assets (tangible and intangible) owned by Gentek and its Canadian
subsidiaries. In connection with the April 2002 merger transaction, on April 19, 2002 AMI completed a cash
tender offer for approximately $74.0 million of AMIs 9 1/4% notes. The tender offer premium paid
for the 9 1/4% notes was approximately $7.3 million, of which $4.9 million is included as debt
extinguishment costs representing the portion of the premium in excess of the fair market value of
the 9 1/4% notes. AMI was then obligated to make a change of control offer for the approximate $1.0
million of remaining outstanding 9 1/4% notes at a price of 101% of the principal amount thereof,
plus accrued and unpaid interest. The change of control offer was completed on June 21, 2002 with
approximately $0.1 million of 9 1/4% notes being tendered. In 2003, AMI redeemed all the remaining
approximate $0.9 million of 9 1/4% notes at 104.625% of the principal amount of such notes plus
accrued and unpaid interest through the date of redemption. The weighted average interest rate for borrowings under the credit facility was 4.5% and 5.9%
for the years ended January 1, 2005 and January 3, 2004, respectively. In connection with the March 2004 dividend recapitalization, AMH completed an offering of $446
million aggregate principal at maturity of 11 1/4% senior discount
notes (11 1/4% notes). The total
gross proceeds were approximately $258.3 million. Interest
accrues at a rate of 11 1/4% on the notes
in the form of an increase in the accreted value of the notes prior to March 1, 2009. Thereafter,
cash interest of 11 1/4% on the notes accrues and is payable semi-annually in arrears on March 1 and
September 1 of each year, commencing on September 1, 2009. The notes mature on March 1, 2014. The
notes are structurally subordinated to all existing and future debt and other liabilities of AMHs
existing and future subsidiaries, including AMI and Holdings. The notes are not guaranteed by
any of AMHs direct or indirect subsidiaries. The
fair value of the
111/4%
notes was $321.1 million at January 1, 2005 based upon the
quoted market price. In connection with the December 2004 recapitalization transaction, AMH II issued $75 million
of 13 5/8% senior notes (13 5/8% notes) which mature on December 1, 2014. The notes accrue
interest at 13 5/8% payable semi-annually on July 30 and January 30. Through January 30, 2010, AMH
II must pay a minimum of 10% interest on each semi-annual payment date in cash, allowing the
remaining 3.625% to accrue to the value of the note. On January 31, 2010, AMH II is required to
redeem a principal amount of notes that is equal to the least such principal amount as is required
to be paid in order to prevent the notes from being treated as having significant original issue
discount within the meaning of section 163(i)(2) of the Internal Revenue Code (IRC). The notes
are not guaranteed by any of AMH IIs direct or indirect subsidiaries and has no obligation to make
payments with respect thereto. The notes are structurally subordinated to all existing and future
debt and other liabilities of AMH IIs existing and future subsidiaries, including the AMI,
Holdings and AMH. The 11 1/4% and the 13 5/8% notes also contain restrictive covenants. 58




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) Because AMH and AMH II are holding companies with no operations, they must receive
distributions, payments or loans from subsidiaries to satisfy
obligations on the 11 1/4% notes and
the 13 5/8% notes. Total AMH II debt, including that of its consolidated subsidiaries, was $697.9
million as of January 1, 2005. 14. COMMITMENTS Commitments for future minimum lease payments under noncancelable operating leases,
principally for manufacturing and distribution facilities and certain equipment, are as follows (in
thousands): 2005
    
    $
    24,1912006
    
    
    19,3562007
    
    
    15,3222008
    
    
    11,6062009
    
    
    8,200Thereafter
    
    
    9,304Total future minimum lease payments
    
    $
    87,979
 Lease expense was approximately $27.9 million and $21.5 million for the years ended January 1,
2005 and January 3, 2004, respectively, $12.4 million for the 257 days ended December 31, 2002 and
$6.0 million for the 108 days ended April 18, 2002. The Companys lease agreements typically
contain renewal options. The Company is planning on expanding its window manufacturing capabilities by constructing a
manufacturing facility in Yuma, Arizona in 2005. The Company currently has purchase commitments of
approximately $6.0 million for machinery and equipment for this facility. As of January 1, 2005, approximately 20% of the Companys employees are covered by collective
bargaining agreements. Approximately 3% of the Companys employees are covered by collective
bargaining agreements that expire within one year. 15. INCOME TAXES Income tax expense (benefit) for the periods presented consists of (in thousands): YEAR ENDED
    
    
    YEAR ENDED
    
    
    257 DAYS ENDED
    
    
    
    108 DAYS ENDEDJANUARY 1, 2005
    
    
    JANUARY 3, 2004
    
    
    DECEMBER 31, 2002
    
    
    
    APRIL 18, 2002PREDECESSORCURRENT
    
    
    DEFERRED
    
    
    CURRENT
    
    
    DEFERRED
    
    
    CURRENT
    
    
    DEFERRED
    
    
    
    CURRENT
    
    
    DEFERREDFederal
    
    $
    (4,672
    )
    
    $
    (10,717
    )
    
    $
    10,756
    
    
    $
    1,325
    
    
    $
    6,127
    
    
    $
    1,151
    
    
    
    $
    177
    
    
    $
    711State
    
    
    793
    
    
    
    (1,636
    )
    
    
    3,520
    
    
    
    365
    
    
    
    781
    
    
    
    587
    
    
    
    
    17
    
    
    
    72Foreign
    
    
    5,945
    
    
    
    (92
    )
    
    
    1,583
    
    
    
    (161
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,066
    
    
    $
    (12,445
    )
    
    $
    15,859
    
    
    $
    1,529
    
    
    $
    6,908
    
    
    $
    1,738
    
    
    
    $
    194
    
    
    $
    783
 Income (loss) before taxes from the Companys U.S. entities and Canadian subsidiary totaled
($55.0) million and $17.4 million, respectively, for the year ended January 1, 2005. Income before
taxes from the Companys U.S. entities and Canadian subsidiary totaled $37.8 million and $4.1
million, respectively, for the year ended January 3, 2004. 59




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) Deferred income taxes reflect the net tax effects of temporary differences between the
carrying amount of assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. Significant components of the Companys deferred income taxes are as follows
(in thousands): JANUARY 1,
    
    
    JANUARY 3,2005
    
    
    2004Deferred tax assets:Medical benefits
    
    $
    2,732
    
    
    $
    2,846Bad debt expense
    
    
    3,096
    
    
    
    3,681Pension
    
    
    7,300
    
    
    
    5,864Inventory costs
    
    
    1,838
    
    
    
    1,005Interest
    
    
    10,322
    
    
    
    Warranty costs
    
    
    8,802
    
    
    
    6,394Net operating loss carryforward
    
    
    6,603
    
    
    
    6,603Accrued expenses and other
    
    
    4,029
    
    
    
    5,455Total deferred tax assets
    
    
    44,722
    
    
    
    31,848Deferred tax liabilities:Depreciation
    
    
    33,538
    
    
    
    33,919Intangible assets
    
    
    46,796
    
    
    
    48,125Other
    
    
    18
    
    
    
    813Total deferred tax liabilities
    
    
    80,352
    
    
    
    82,857Net deferred tax liabilities
    
    $
    (35,630
    )
    
    $
    (51,009
    )
 At January 1, 2005, the Company had unused federal and state net operating loss carryforwards,
the tax benefit of which would be $6.6 million at the current statutory rate. The federal net
operating loss carryforward benefits of $5.6 million begin to expire in 2017, however the Company
anticipates utilizing these over the next five years. The state net operating loss carryforward
benefits are $1.0 million. The reconciliation of the statutory rate to the Companys effective income tax rate for the
periods presented is as follows: 257 DAYS
    
    
    
    108 DAYSYEAR ENDED
    
    
    YEAR ENDED
    
    
    ENDED
    
    
    
    ENDEDJANUARY 1,
    
    
    JANUARY 3,
    
    
    DECEMBER 31,
    
    
    
    APRIL 18,2005
    
    
    2004
    
    
    2002
    
    
    
    2002PREDECESSORStatutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    
    (35.0
    )%State income tax, net of federal income tax benefit
    
    
    1.5
    
    
    
    6.2
    
    
    
    2.2
    
    
    
    
    (2.2
    )Non-deductible merger transaction costs
    
    
    (10.1
    )
    
    
    
    
    
    
    
    
    
    
    
    58.9Foreign rate differential
    
    
    0.7
    
    
    
    (.2
    )
    
    
    
    
    
    
    
    Other
    
    
    0.5
    
    
    
    .5
    
    
    
    4.3
    
    
    
    
    (1.3
    )Effective rate
    
    
    27.6
    %
    
    
    41.5
    %
    
    
    41.5
    %
    
    
    
    20.4
    %
 60




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) The 2004 effective income tax rate was impacted by $10.9 million of recapitalization
transaction costs which the Company believes to be non-deductible for income tax purposes.
Although the foreign statutory rate is lower than the US statutory rate, this rate differential
results in a positive effect on the tax provision for the year ended January 1, 2005 due to the
loss in that year. As a result of relocating the Companys corporate office from Texas to Ohio,
the Companys state and local income tax rate increased, raising the Companys total effective tax
rate to 41.5% from 38.5%. In addition, the Predecessors tax provision includes an estimate for
$7.3 million of merger transaction costs that the Company considers to be non-deductible for income
tax purposes. Income tax expense for the 257 days ended December 31, 2002 consists of a $9.0
million provision for continuing operations, net of a $0.4 million benefit from discontinued
operations. The cumulative amount of unremitted earnings of foreign subsidiaries was $14.3 million as of
January 1, 2005. Because these earnings have been indefinitely reinvested in foreign operations,
no provision has been made for U.S. income taxes. 16. PREFERRED STOCK
   Shares
    
    Shares Issued andAuthorized
    
    OutstandingVoting convertible preferred stock
    
    
    500,000
    
    
    
    500,000Non-voting convertible preferred stock
    
    
    1,614,019
    
    
    
    1,614,019  61




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) 17. STOCKHOLDERS EQUITY As discussed in Note 1, AMH is a wholly owned subsidiary of AMH II. AMH has the authority to
issue: (i) 500,000 shares of voting preferred stock, par value $0.01 per share, (ii) 1,614,019 shares of non-voting preferred stock, par value $0.01 per share, (iii) 2,114,019 shares of Class A voting common stock, par value $0.01 per share, (iv) 1,614,019 shares of Class A non-voting common stock, par value $0.01 per share, (v) 2,583,801 shares of Class B voting common stock, par value $0.01 per share, and (vi) 2,083,801 shares of Class B non-voting common stock, par value $0.01 per share As
of January 1, 2005, 500,000 shares of voting preferred stock,
1,614,019 shares of non-voting
preferred stock, 500,000 shares of class B voting common stock and 1,234,190 shares of class B
non-voting common stock were issued and outstanding at January 1, 2005, all of which are owned by
AMH II. No shares of Class A common stock were issued and outstanding. The Companys contributed
capital consists of $225.6 million of cash contributions and non-cash financing of approximately
$5.0 million representing the fair value of stock options of the Predecessor held by certain
employees that were converted into options of Holdings. The Company reports comprehensive income in its consolidated statement of stockholders equity
and comprehensive income. Comprehensive income includes net income and all other non-owner changes
in equity during the period. Comprehensive income for the year ended January 1, 2005 includes a
minimum pension liability adjustment of approximately $2.3 million, net of a related tax benefit of
approximately $1.6 million as well as foreign currency translation adjustments of approximately
$4.1 million. Comprehensive income for the year ended January 3, 2004 includes a minimum pension
liability adjustment of approximately $0.7 million, net of a related tax benefit of approximately
$0.5 million as well as foreign currency translation adjustments of approximately $3.0 million.
Comprehensive income for the 257 days ended December 31, 2002 includes a minimum pension liability
adjustment of approximately $4.3 million, net of a related tax benefit of approximately $3.1
million. The components of accumulated other comprehensive income are as follows (in thousands): JANUARY 1,
    
    
    JANUARY 3,
    
    
    DECEMBER 31,2005
    
    
    2004
    
    
    2002Minimum pension liability adjustments
    
    $
    (5,996
    )
    
    $
    (3,680
    )
    
    $
    (4,347
    )Foreign currency translation adjustments
    
    
    7,127
    
    
    
    3,002
    
    
    
    Accumulated other comprehensive income (loss)
    
    $
    1,131
    
    
    $
    (678
    )
    
    $
    (4,347
    )
 62




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) 18. STOCK PLANS In June 2002, Holdings adopted the Associated Materials Holdings Inc. 2002 Stock Option Plan
(the 2002 Plan). In conjunction with the March 2004 dividend recapitalization, AMH assumed the
2002 Plan and all outstanding options under the plan. Options under the 2002 Plan were converted
from the right to purchase shares of Holdings common stock into a right to purchase shares of AMH
common stock with each option providing for the same in number of shares and at the same exercise
price as the original options. The board of directors of AMH administers the 2002 Plan and selects
eligible executives, directors, employees and consultants of AMH and its affiliates, including the
Company, to receive options. The board of directors of AMH also will determine the number and type
of shares of stock covered by options granted under the plan, the terms under which options may be
exercised, the exercise price of the options and other terms and conditions of the options in
accordance with the provisions of the 2002 Plan. In 2002, the board of directors authorized 467,519
shares of common stock and 55,758 shares of preferred stock under this Plan. An option holder may
pay the exercise price of an option by any legal manner that the board of directors permits. Option
holders generally may not transfer their options except in the event of death. If AMH undergoes a
change in control, as defined in the 2002 Plan, all outstanding time-vesting options become
immediately fully exercisable, while the performance-based options may become immediately
exercisable upon achievement of certain specified criteria. The board of directors of AMH may
adjust outstanding options by substituting stock or other securities of any successor or another
party to the change in control transaction, or cash out such outstanding options, in any such case,
generally based on the consideration received by its stockholders in the transaction. Subject to
particular limitations specified in the 2002 Plan, the board of directors may amend or terminate
the plan. The 2002 Plan will terminate no later than 10 years following its effective date;
however, any options outstanding under the option plan will remain outstanding in accordance with
their terms. Options were granted at fair market value on the grant date and are exercisable under varying
terms for up to ten years. The options granted in 2002 through 2004, prior to the December 2004
recapitalization transaction, which were originally granted as options to purchase Holdings stock,
include the following:  
    Options to purchase shares of AMH common stock at the fair market value on the date of
grant, which will vest over time;
    Options to purchase shares of AMH common stock at the fair market value on the date of
grant, which will vest 100% on the eighth anniversary from the date of grant provided that
the option vesting may be accelerated upon the occurrence of a liquidity event, as defined
in the 2002 Plan, and the achievement of a specified internal rate of return on the funds
invested by Harvest Partners, Inc. and minimum aggregate proceeds for the investment by
Harvest Partners (performance-based options) and;
    Options to purchase shares of Holdings common stock and preferred stock as a unit,
comprised of one share of preferred stock and a specified fraction of a share of common
stock granted in exchange for a portion of the outstanding options to purchase shares of the
Predecessors common stock, which became fully vested upon completion of the April 2002
merger transaction (Roll-Over Options) These options were exercised for Holdings stock in
connection with the March 2004 dividend recapitalization with shares being exchanged for AMH
stock after exercise. The shares of AMH preferred stock were redeemed in connection with
the March 2004 dividend recapitalization. In connection with the December 2004 recapitalization transaction, AMH amended the 2002 Plan
to provide that each option that remains outstanding under the 2002 Plan following the completion
of the December 2004 recapitalization transaction will be exercisable for two shares of the Class B
non-voting common stock of AMH, to adjust for the dilution effected pursuant to the December 2004
recapitalization transaction. In addition, each holder of such options entered into an agreement
with AMH II whereby such option holders agreed, upon the exercise of any such options under the
2002 Plan, to automatically contribute to AMH II the AMH shares issued upon any such option
exercise, in exchange for an equivalent number and class of shares of AMH II. 63




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) Also, in connection with the December 2004 recapitalization transaction, in December 2004 AMH
II adopted the AMH Holdings II, Inc. 2004 Stock Option Plan (2004 Plan). The Compensation
Committee of the board of directors of AMH II administers the AMH II Plan and selects executives,
other employees, directors of and consultants of AMH II and its affiliates, including the Company,
to receive options. The Committee will also determine what form the option will take, the numbers
of shares, the exercise price (which shall not be less than fair market value), the periods for
which the options will be outstanding, terms, conditions, performance criteria as well as certain
other criteria. The total number of shares of common stock that may be delivered pursuant to
options granted under the plan is 469,782 shares of AMH II common stock. Option holders generally
may not transfer their options except in the event of their death. If AMH II undergoes a change in
control, as defined in the 2004 Plan, the Committee in its discretion may provide that any
outstanding option shall be accelerated and become immediately exercisable as to all or a portion
of the shares of common stock. The board of directors of AMH II may adjust outstanding options by
substituting stock or other securities of any successor or another party to the change in control
transaction, or cash out such outstanding options, in any such case, generally based on the
consideration received by its stockholders in the transaction. Subject to particular limitations
specified in the 2004 Plan, the board of directors may amend or terminate the 2004 Plan. The 2004
Plan will terminate no later than 10 years following its effective date; however, any options
outstanding under the option plan will remain outstanding in accordance with their terms. Options granted in 2004 under the 2004 Plan were granted at fair market value on the date of
grant. Options to purchase shares of AMH II common stock at the fair market value on the date of
grant, which will vest 100% on the eighth anniversary from the date of grant provided that the
option vesting may be accelerated upon the occurrence of a liquidity event, as defined in the plan,
and the achievement of a specified internal rate of return on the funds invested by Investcorp. Transactions during the years ended January 1, 2005, January 3, 2004 and 257 days ended
December 31, 2002 under these plans are summarized below: WEIGHTED AVERAGESHARES
    
    
    PRICE
    
    
    EXERCISE PRICEGranted
    
    
    506,450
    
    
    $
    5.85 to $22.65
    
    
    $
    11.75Expired or canceled
    
    
    (22,500
    )
    
    $
    5.85 to $18.00
    
    
    $
    14.78Options outstanding December 31, 2002
    
    
    483,950
    
    
    $
    10.00 to $22.65
    
    
    $
    11.61Granted
    
    
    10,628
    
    
    $
    18.29
    
    
    $
    18.29Options outstanding January 3, 2004
    
    
    494,578
    
    
    $
    10.00 to $22.65
    
    
    $
    11.75Granted under 2002 Plan
    
    
    36,757
    
    
    $
    66.17
    
    
    $
    66.17Exercised
    
    
    (333,350
    )
    
    $
    10.00 to $66.17
    
    
    $
    15.56Expired or canceled
    
    
    (8,070
    )
    
    $
    10.00
    
    
    $
    10.00Options outstanding prior to December 2004 recapitalization transaction
    
    
    189,915
    
    
    $
    10.00 to $66.17
    
    
    $
    15.67Options adjusted for December 2004 recapitalization transaction
    
    
    189,915
    
    
    $
    5.00 to $33.09
    
    
    $
    7.83Granted under 2004 Plan
    
    
    429,850
    
    
    $
    70.95
    
    
    $
    70.95Options outstanding January 1, 2005
    
    
    809,680
    
    
    $
    5.00 to $70.95
    
    
    $
    41.34
 Options to purchase 133,638 shares of AMH common stock were exercisable at January 1, 2005 and
the weighted average remaining contractual life was seven years. The weighted average fair value at date of grant for options granted during 2004, 2003 and
2002 using the minimum value method was $16.52, $4.41 and $3.57 per option, respectively. The fair
value of the options was estimated at the date of the grant using the minimum value method with the
following assumptions for 2004: dividend yield of 0.0% for options for common shares, a
weighted-average risk free interest rate of 3.59% and an expected life of the option of 8 years.
Assumptions for options granted in 2003 were: dividend yield of 0.0% for options for common shares,
a weighted-average risk free interest rate of 3.45% and an expected life of the option of 8 years.
Assumptions for options granted in 2002 were: dividend yield of 0.0% for options for common shares
and 8.00% for options for preferred shares, a weighted-average risk free interest rate of 5.02% and
an expected life of the option of 8 years. Stock based compensation would have reduced net income
by approximately $0.2 million, $0.1 million and $0.2 million for the years ended January 1, 2005,
January 3, 2004 and the 257 days ended December 31, 2002, respectively if the fair values of the
options granted had been recognized as compensation expense on a straight-line basis over the
vesting period of the grants. 64




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) 19. FACILITY CLOSURE On November 16, 2004, the Company committed to a plan to close its vinyl siding manufacturing
plant located in Freeport, Texas. The Company recorded $4.5 million in pre-tax charges during the
fourth quarter of 2004. The Company anticipates the total charge to be $7.5 million and that the
closure and remainder of the charge will be recorded in the first half of 2005. The plant was
closed to rationalize production capacity and reduce fixed costs. The plant closure costs in the fourth quarter of 2004 included asset write-downs of
approximately $3.6 million, relocation costs for certain equipment and employees and facility shut
down costs of approximately $0.4 million, contract termination costs of approximately $0.2 million
and employee severance costs of approximately $0.3 million, of which approximately $0.5 million was
included in accrued liabilities as of January 1, 2005, related to contract termination costs and
severance costs. The plant shut down affected 92 employees. 20. BUSINESS SEGMENTS Subsequent to the April 2002 merger transaction and sale of AmerCable, the Company is in the
single business of manufacturing and distributing exterior residential building products. The
Company operates principally in the United States and Canada. Revenue from external customers in
foreign countries was approximately $169 million and $51 million in 2004 and 2003, respectively,
and was primarily derived from customers in Canada. The Companys remaining 2004 and 2003 revenue
totaling $925 million and $729 million, respectively, was derived from U.S. customers. At January
1, 2005 and January 3, 2004, long-lived assets totaled approximately $34 million and $36 million,
respectively, in Canada and $472 million and $461 million, respectively, in the U.S. Neither
aggregate export sales nor sales to a single customer have accounted for 10% or more of
consolidated net sales in any of the years presented. PREDECESSOR Prior to the April 2002 merger transaction and sale of AmerCable, had two
reportable segments: building products and electrical cable products. The principal business
activities of the building products segment are the manufacture of vinyl windows, vinyl siding,
aluminum trim coil, aluminum and steel siding and accessories, and vinyl fencing, decking and
railing and the wholesale distribution of these and other complementary building products
principally to professional home remodeling and new construction contractors. The principal
business activity of the electrical cable segment was the manufacture and sale of jacketed
electrical cable. AMI had evaluated performance and allocated resources based on operating profit, which
is comprised of net sales less operating costs and expenses. 65




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) Financial data by reportable segment for the 108 days ended April 18, 2002 is as follows (in
thousands): 108 DAYSENDEDAPRIL 18,2002Net sales:Building products
    
    $
    161,959Electrical cable products
    
    
    18,271$
    180,230Operating profits (losses):Building products
    
    $
    7,328Electrical cable products
    
    
    585Corporate expense
    
    
    (1,306
    )$
    6,607Depreciation and amortization:Building products
    
    $
    3,253Electrical cable products
    
    
    635Corporate
    
    
    81$
    3,969Additions to property, plant and equipment:Building products
    
    $
    2,036Electrical cable products
    
    
    1,781$
    3,817
 66




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) 21. RETIREMENT PLANS The Companys Alside division sponsors a defined benefit pension plan which covers hourly
workers at its plant in West Salem, Ohio and a defined benefit retirement plan covering salaried
employees, which was frozen in 1998 and subsequently replaced with a defined contribution plan.
The Companys Gentek subsidiary sponsors a defined benefit pension plan for hourly union employees
at its Woodbridge, New Jersey plant (together with the Alside sponsored defined benefit plans, the
Domestic Plans) as well as a defined benefit pension plan covering Gentek Canadian salaried
employees and hourly union employees at the Lambeth, Ontario Canada plant, a defined benefit
pension plan for the hourly union employees at its Burlington, Ontario Canada plant and a defined
benefit pension plan for the hourly union employees at its Pointe Claire, Quebec Canada plant (the
Foreign Plans). Accrued pension liabilities are included in other liabilities in the
accompanying balance sheets. Gentek plan information for 2003 is presented subsequent to the date
of the acquisition. The actuarial valuation measurement date for the defined benefit pension plans
is December 31. Information regarding the Companys defined benefit plans is as follows (in
thousands): 2004
    
    
    2003DOMESTIC
    
    
    FOREIGN
    
    
    DOMESTIC
    
    
    FOREIGNPLANS
    
    
    PLANS
    
    
    PLANS
    
    
    PLANSACCUMULATED BENEFIT OBLIGATION
    
    $
    45,929
    
    
    $
    32,147
    
    
    $
    41,159
    
    
    $
    23,766CHANGE IN PROJECTED BENEFIT OBLIGATIONProjected benefit obligation at beginning of year
    
    $
    41,159
    
    
    $
    27,786
    
    
    $
    31,138
    
    
    $
    Gentek acquisition
    
    
    
    
    
    
    
    
    
    
    6,959
    
    
    
    24,935Service cost
    
    
    437
    
    
    
    1,139
    
    
    
    262
    
    
    
    427Interest cost
    
    
    2,565
    
    
    
    1,812
    
    
    
    2,201
    
    
    
    558Actuarial loss
    
    
    3,819
    
    
    
    2,253
    
    
    
    2,273
    
    
    
    Employee contributions
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    74Benefits paid
    
    
    (2,051
    )
    
    
    (1,056
    )
    
    
    (1,674
    )
    
    
    (110
    )Effect of foreign exchange
    
    
    
    
    
    
    2,382
    
    
    
    
    
    
    
    1,902Projected benefit obligation at end of year
    
    $
    45,929
    
    
    $
    34,566
    
    
    $
    41,159
    
    
    $
    27,786
 2004
    
    
    2003DOMESTIC
    
    
    FOREIGN
    
    
    DOMESTIC
    
    
    FOREIGNPLANS
    
    
    PLANS
    
    
    PLANS
    
    
    PLANSCHANGE IN PLAN ASSETSFair value of assets at beginning of year
    
    $
    33,148
    
    
    $
    21,358
    
    
    $
    24,521
    
    
    $
    Gentek acquisition
    
    
    
    
    
    
    
    
    
    
    4,749
    
    
    
    17,729Actual return on plan assets
    
    
    2,839
    
    
    
    1,570
    
    
    
    5,552
    
    
    
    1,177Employer contributions
    
    
    392
    
    
    
    2,416
    
    
    
    
    
    
    
    1,104Employee contributions
    
    
    
    
    
    
    251
    
    
    
    
    
    
    
    74Benefits paid
    
    
    (2,051
    )
    
    
    (1,056
    )
    
    
    (1,674
    )
    
    
    (110
    )Effect of foreign exchange
    
    
    
    
    
    
    1,818
    
    
    
    
    
    
    
    1,384Fair value of assets at end of year
    
    
    34,328
    
    
    
    26,357
    
    
    
    33,148
    
    
    
    21,358Funded status
    
    
    (11,601
    )
    
    
    (8,209
    )
    
    
    (8,011
    )
    
    
    (6,428
    )Unrecognized cumulative net loss (gain)
    
    
    9,462
    
    
    
    1,921
    
    
    
    5,989
    
    
    
    (678
    )Net amount recognized in consolidated balance sheets
    
    $
    (2,139
    )
    
    $
    (6,288
    )
    
    $
    (2,022
    )
    
    $
    (7,106
    )Amounts recognized in the consolidated balance sheets
consist of:Accrued benefit cost
    
    $
    (11,601
    )
    
    $
    (6,874
    )
    
    $
    (8,233
    )
    
    $
    (7,106
    )Cumulative other comprehensive loss
    
    
    9,462
    
    
    
    586
    
    
    
    6,211
    
    
    
    $
    (2,139
    )
    
    $
    (6,288
    )
    
    $
    (2,022
    )
    
    $
    (7,106
    )
 67




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) DECEMBER 31,
    
    
    DECEMBER 31,2004
    
    
    2003DOMESTIC
    
    
    FOREIGN
    
    
    DOMESTIC
    
    
    FOREIGNPLANS
    
    
    PLANS
    
    
    PLANS
    
    
    PLANSWEIGHTED AVERAGE
ASSUMPTIONS USED TO
DETERMINE BENEFIT
OBLIGATIONS AT DECEMBER
31Discount rate
    
    
    5.75
    %
    
    
    5.75
    %
    
    
    6.25
    %
    
    
    6.25
    %Salary increases
    
    
    
    
    
    
    3.50
    %
    
    
    
    
    
    
    3.50
    %
 In 2004 and 2003, the Company recognized in the statement of comprehensive income an
additional minimum pension liability of approximately $3.9 million ($2.3 million net of tax) and a
reduction of the minimum pension liability of $1.2 million ($0.7 million net of tax), respectively.
The additional liability is included in other liabilities in the balance sheet as of January 1,
2005 and January 3, 2004. Plan assets by category for the plans as of December 31, 2004 and 2003 are as follows: 2004
    
    
    2003DOMESTIC
    
    
    FOREIGN
    
    
    DOMESTICPLANS
    
    
    PLANS
    
    
    PLANSASSET ALLOCATIONSEquity securities
    
    
    68
    %
    
    
    58
    %
    
    
    69
    %Debt securities
    
    
    32
    %
    
    
    36
    %
    
    
    31
    %Other
    
    
    
    
    
    
    6
    %
    
    
    Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 Plan asset investment policies are based on target allocations. The target allocations for the
Domestic Plans are 60% to 65% equities and 35% to 40% debt securities. The target allocation for
the Foreign Plans is 55% to 60% equities, 35% to 40% debt securities and up to 10% short term fixed
securities. The portfolio is periodically rebalanced when significant differences occur from
target. 68




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) The net periodic pension cost for the years ended January 1, 2005, January 3, 2004 and
December 31, 2002, which includes net periodic pension costs for Gentek subsequent to the date of
acquisition, and the related weighted average assumptions used to determine such amounts are as
follows (in thousands): 2004
    
    
    2003
    
    
    2002DOMESTIC
    
    
    FOREIGN
    
    
    DOMESTIC
    
    
    FOREIGN
    
    
    DOMESTICPLANS
    
    
    PLANS
    
    
    PLANS
    
    
    PLANS
    
    
    PLANSNET PERIODIC PENSION (BENEFIT) COSTService cost
    
    $
    437
    
    
    $
    1,139
    
    
    $
    262
    
    
    $
    427
    
    
    $
    233Interest cost
    
    
    2,565
    
    
    
    1,812
    
    
    
    2,201
    
    
    
    558
    
    
    
    2,011Expected return on assets
    
    
    (2,818
    )
    
    
    (1,785
    )
    
    
    (2,268
    )
    
    
    (513
    )
    
    
    (2,560
    )Amortization of unrecognized:Transition obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Prior service costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Cumulative net loss (gain)
    
    
    327
    
    
    
    
    
    
    
    397
    
    
    
    
    
    
    
    Net periodic pension (benefit) cost
    
    $
    511
    
    
    $
    1,166
    
    
    $
    592
    
    
    $
    472
    
    
    $
    (311
    )WEIGHTED AVERAGE ASSUMPTIONS USED TO
DETERMINE NET PERIOD BENEFIT COST FOR
YEARS ENDED DECEMBER 31Discount rate
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.70
    %
    
    
    6.25
    %
    
    
    7.25
    %Long-term rate of return on assets
    
    
    8.75
    %
    
    
    8.00
    %
    
    
    8.98
    %
    
    
    8.00
    %
    
    
    9.00
    %Salary increases
    
    
    N/A
    
    
    
    3.50
    %
    
    
    N/A
    
    
    
    3.50
    %
    
    
    N/A
 In determining the expected long-term rate of return on assets, the Company considers the
historical market and portfolio rates of return, asset allocations and expectations on future rates
of return. The Company expects to make $0.5 million and $2.3 million of contributions to the Domestic and
Foreign Plans, respectively, in 2005. Estimated future benefit
payments are as follows (in thousands): DOMESTIC
    
    
    FOREIGNPLANS
    
    
    PLANS2005
    
    $
    1,899
    
    
    $
    5002006
    
    
    1,872
    
    
    
    5422007
    
    
    2,057
    
    
    
    6342008
    
    
    2,162
    
    
    
    7342009
    
    
    2,227
    
    
    
    8592010 - 2014
    
    
    13,585
    
    
    
    7,287
 The Company sponsors defined contribution plans, which are qualified as tax-exempt plans under
the Internal Revenue Code. The plans cover all full-time, non-union employees with matching
contributions up to 4% of eligible compensation in the United States and up to 4% in Canada,
depending on length of service and levels of contributions. The Companys pre-tax contributions to
this plan were approximately $3.0 million for the year ended January 1, 2005, $2.5 million for the
year ended January 3, 2004, $1.8 million for the 257 days ended December 31, 2002 and $1.0 million
for the 108 days ended April 18, 2002. 69




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) 22. SUBSIDIARY GUARANTORS AMIs payment obligations under the 9 3/4% notes are fully and unconditionally guaranteed,
jointly and severally (collectively, the Subsidiary Guarantees) on a senior subordinated basis,
by its domestic wholly-owned subsidiaries: Gentek Holdings, Inc., Gentek Building Products Inc. and
Alside, Inc. Alside, Inc. is a wholly owned subsidiary having no assets, liabilities or operations.
Gentek Building Products Limited (the Non-Guarantor Subsidiary) is a Canadian company and does
not guarantee the Companys 9 3/4% notes. The operations and cash flows of Gentek Holdings, Inc.,
Gentek Building Products, Inc. and Gentek Building Products Limited are presented since the date of
their acquisition on August 29, 2003. As such, no consolidating statements of operations or cash
flows are presented for any period prior to the acquisition, as the Companys only guaranteeing
subsidiary for those periods did not have any assets, liabilities or operations. The balance sheet
information includes all of AMIs subsidiaries as of January 1, 2005 and January 3, 2004. The
statement of operations and cash flows includes all of AMIs subsidiaries for the years ended
January 1, 2005 and January 3, 2004. In the opinion of management, separate financial statements
of the respective Guarantor Subsidiaries would not provide additional material information, which
would be useful in assessing the financial composition of the Guarantor Subsidiaries. None of the
Guarantor Subsidiaries has any significant legal restrictions on the ability of investors or
creditors to obtain access to its assets in event of default on the Subsidiary Guarantee other than
its subordination to senior indebtedness. ASSOCIATED MATERIALS INCORPORATED AND SUBSIDIARES
CONDENSED CONSOLIDATING BALANCE SHEET
JANUARY 1, 2005
(IN THOUSANDS) GUARANTOR
    
    
    NON-GUARANTOR
    
    
    RECLASSIFICATION/PARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    CONSOLIDATEDASSETSCurrent assets:Cash and cash equivalents
    
    $
    43,693
    
    
    $
    6,883
    
    
    $
    7,478
    
    
    $
    
    
    
    $
    58,054Accounts receivable, net
    
    
    88,930
    
    
    
    18,167
    
    
    
    18,569
    
    
    
    
    
    
    
    125,666Intercompany receivables
    
    
    
    
    
    
    (1,554
    )
    
    
    8,582
    
    
    
    (7,028
    )
    
    
    Receivable from parent
    
    
    3,490
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,490Inventories
    
    
    65,854
    
    
    
    19,435
    
    
    
    29,498
    
    
    
    
    
    
    
    114,787Deferred income taxes
    
    
    
    
    
    
    16,471
    
    
    
    3,393
    
    
    
    (1,611
    )
    
    
    18,253Income taxes receivable
    
    
    10,347
    
    
    
    
    
    
    
    
    
    
    
    (1,487
    )
    
    
    8,860Other current assets
    
    
    10,844
    
    
    
    1,302
    
    
    
    792
    
    
    
    
    
    
    
    12,938Total current assets
    
    
    223,158
    
    
    
    60,704
    
    
    
    68,312
    
    
    
    (10,126
    )
    
    
    342,048Property, plant and equipment, net
    
    
    100,184
    
    
    
    5,033
    
    
    
    33,480
    
    
    
    
    
    
    
    138,697Goodwill
    
    
    198,270
    
    
    
    36,526
    
    
    
    
    
    
    
    
    
    
    
    234,796Other intangible assets, net
    
    
    99,038
    
    
    
    12,510
    
    
    
    1,496
    
    
    
    
    
    
    
    113,044Investment in subsidiaries
    
    
    99,321
    
    
    
    59,996
    
    
    
    
    
    
    
    (159,317
    )
    
    
    Other assets
    
    
    19,460
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    19,634Total assets
    
    $
    739,431
    
    
    $
    174,769
    
    
    $
    103,462
    
    
    $
    (169,443
    )
    
    $
    848,219LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    41,446
    
    
    $
    13,753
    
    
    $
    19,940
    
    
    $
    
    
    
    $
    75,139Intercompany payables
    
    
    7,028
    
    
    
    
    
    
    
    
    
    
    
    (7,028
    )
    
    
    Accrued liabilities
    
    
    39,569
    
    
    
    7,146
    
    
    
    7,664
    
    
    
    
    
    
    
    54,379Notes payable
    
    
    11,607
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,607Current portion of long-term debt
    
    
    875
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    875Deferred income taxes
    
    
    1,611
    
    
    
    
    
    
    
    
    
    
    
    (1,611
    )
    
    
    Income taxes payable
    
    
    
    
    
    
    855
    
    
    
    632
    
    
    
    (1,487
    )
    
    
    Total current liabilities
    
    
    102,136
    
    
    
    21,754
    
    
    
    28,236
    
    
    
    (10,126
    )
    
    
    142,000Deferred income taxes
    
    
    50,264
    
    
    
    5,711
    
    
    
    6,745
    
    
    
    
    
    
    
    62,720Other liabilities
    
    
    19,150
    
    
    
    16,423
    
    
    
    8,485
    
    
    
    
    
    
    
    44,058Long-term debt
    
    
    339,125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339,125Stockholders equity
    
    
    228,756
    
    
    
    130,881
    
    
    
    59,996
    
    
    
    (159,317
    )
    
    
    260,316Total liabilities and stockholders equity
    
    $
    739,431
    
    
    $
    174,769
    
    
    $
    103,462
    
    
    $
    (169,443
    )
    
    $
    848,219
 70




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) ASSOCIATED MATERIALS INCORPORATED AND SUBSIDIARES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 1, 2005
(IN THOUSANDS) GUARANTOR
    
    
    NON-GUARANTOR
    
    
    RECLASSIFICATION/PARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATION
    
    
    CONSOLIDATEDNet sales
    
    $
    773,546
    
    
    $
    175,322
    
    
    $
    217,744
    
    
    $
    (72,653
    )
    
    $
    1,093,959Cost of sales
    
    
    550,177
    
    
    
    150,303
    
    
    
    177,124
    
    
    
    (72,653
    )
    
    
    804,951Gross profit
    
    
    223,369
    
    
    
    25,019
    
    
    
    40,620
    
    
    
    
    
    
    
    289,008Selling, general and administrative expense
    
    
    141,455
    
    
    
    20,714
    
    
    
    22,355
    
    
    
    
    
    
    
    184,524Transaction costs
    
    
    67,649
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,649Facility closure costs
    
    
    4,535
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,535Income from operations
    
    
    9,730
    
    
    
    4,305
    
    
    
    18,265
    
    
    
    
    
    
    
    32,300Interest expense
    
    
    27,337
    
    
    
    8
    
    
    
    439
    
    
    
    
    
    
    
    27,784Transaction costs
    
    
    16,297
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,297Foreign currency loss (gain)
    
    
    
    
    
    
    
    
    
    
    387
    
    
    
    
    
    
    
    387Income before income taxes
    
    
    (33,904
    )
    
    
    4,297
    
    
    
    17,439
    
    
    
    
    
    
    
    (12,168
    )Income taxes
    
    
    (8,700
    )
    
    
    1,615
    
    
    
    5,851
    
    
    
    
    
    
    
    (1,234
    )Income before equity income from
subsidiaries
    
    
    (25,204
    )
    
    
    2,682
    
    
    
    11,588
    
    
    
    
    
    
    
    (10,934
    )Equity income from subsidiaries
    
    
    14,270
    
    
    
    11,588
    
    
    
    
    
    
    
    (25,858
    )
    
    
    Net income (loss)
    
    $
    (10,934
    )
    
    $
    14,270
    
    
    $
    11,588
    
    
    $
    (25,858
    )
    
    $
    (10,934
    )
 71




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) ASSOCIATED MATERIALS
INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JANUARY 1, 2005
(IN THOUSANDS) GUARANTOR
    
    
    NON-GUARANTOR
    
    
    RECLASSIFICATIONPARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    /ELIMINATION
    
    
    CONSOLIDATEDNet cash provided by (used in)
operating activities
    
    $
    5,006
    
    
    $
    (742
    )
    
    $
    13,374
    
    
    $
    1,099
    
    
    $
    18,737INVESTING ACTIVITIESAdditions to property, plant and equipment
    
    
    (16,478
    )
    
    
    (1,431
    )
    
    
    (832
    )
    
    
    
    
    
    
    (18,741
    )Proceeds from sale of assets
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90Net cash provided by (used in) investing
activities
    
    
    (16,388
    )
    
    
    (1,431
    )
    
    
    (832
    )
    
    
    
    
    
    
    (18,651
    )FINANCING ACTIVITIESNet equity contributions
    
    
    60,691
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,691Distribution
of Investcorp proceeds to management shareholders
    
    
    (30,406
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,406
    )Proceeds from borrowings under term loan
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175,000Repayments of term loan
    
    
    (140,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140,000
    )Financing costs
    
    
    (12,008
    )
    
    
    
    
    
    
    (101
    )
    
    
    
    
    
    
    (12,109
    )Intercompany transactions
    
    
    (601
    )
    
    
    6,074
    
    
    
    (5,473
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    52,676
    
    
    
    6,074
    
    
    
    (5,574
    )
    
    
    
    
    
    
    53,176Net increase (decrease) in cash
    
    
    41,294
    
    
    
    3,901
    
    
    
    6,968
    
    
    
    1,099
    
    
    
    53,262Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    510
    
    
    
    
    
    
    
    510Cash at beginning of period
    
    
    2,399
    
    
    
    2,982
    
    
    
    
    
    
    
    (1,099
    )
    
    
    4,282Cash at end of period
    
    $
    43,693
    
    
    $
    6,883
    
    
    $
    7,478
    
    
    $
    
    
    
    $
    58,054
 72




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) ASSOCIATED MATERIALS
INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
JANUARY 3, 2004
(IN THOUSANDS) GUARANTOR
    
    
    NON-GUARANTOR
    
    
    RECLASSIFICATION/PARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATIONS
    
    
    CONSOLIDATEDASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,399
    
    
    $
    2,982
    
    
    $
    
    
    
    $
    (1,099
    )
    
    $
    4,282Accounts receivable, net
    
    
    75,533
    
    
    
    17,106
    
    
    
    14,336
    
    
    
    
    
    
    
    106,975Intercompany receivables
    
    
    
    
    
    
    4,116
    
    
    
    2,553
    
    
    
    (6,669
    )
    
    
    Inventories
    
    
    60,909
    
    
    
    14,418
    
    
    
    22,580
    
    
    
    
    
    
    
    97,907Deferred income taxes
    
    
    3,925
    
    
    
    3,094
    
    
    
    
    
    
    
    
    
    
    
    7,019Other current assets
    
    
    4,546
    
    
    
    650
    
    
    
    368
    
    
    
    
    
    
    
    5,564Total current assets
    
    
    147,312
    
    
    
    42,366
    
    
    
    39,837
    
    
    
    (7,768
    )
    
    
    221,747Property, plant and equipment, net
    
    
    99,750
    
    
    
    6,616
    
    
    
    34,480
    
    
    
    
    
    
    
    140,846Goodwill
    
    
    197,461
    
    
    
    32,822
    
    
    
    
    
    
    
    
    
    
    
    230,283Other intangible assets, net
    
    
    101,272
    
    
    
    13,201
    
    
    
    1,663
    
    
    
    
    
    
    
    116,136Investment in subsidiaries
    
    
    112,938
    
    
    
    44,671
    
    
    
    
    
    
    
    (157,609
    )
    
    
    Deferred income taxes
    
    
    
    
    
    
    5,798
    
    
    
    
    
    
    
    (5,798
    )
    
    
    Other assets
    
    
    9,503
    
    
    
    
    
    
    
    118
    
    
    
    
    
    
    
    9,621Total assets
    
    $
    668,236
    
    
    $
    145,474
    
    
    $
    76,098
    
    
    $
    (171,175
    )
    
    $
    718,633LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    30,045
    
    
    $
    10,213
    
    
    $
    10,722
    
    
    $
    (1,099
    )
    
    $
    49,881Intercompany payables
    
    
    6,669
    
    
    
    
    
    
    
    
    
    
    
    (6,669
    )
    
    
    Accrued liabilities
    
    
    36,241
    
    
    
    10,302
    
    
    
    6,691
    
    
    
    
    
    
    
    53,234Income taxes payable
    
    
    3,761
    
    
    
    389
    
    
    
    784
    
    
    
    
    
    
    
    4,934Total current liabilities
    
    
    76,716
    
    
    
    20,904
    
    
    
    18,197
    
    
    
    (7,768
    )
    
    
    108,049Deferred income taxes
    
    
    60,425
    
    
    
    
    
    
    
    3,401
    
    
    
    (5,798
    )
    
    
    58,028Other liabilities
    
    
    20,126
    
    
    
    11,632
    
    
    
    9,829
    
    
    
    
    
    
    
    41,587Long-term debt
    
    
    305,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    305,000Stockholders equity
    
    
    205,969
    
    
    
    112,938
    
    
    
    44,671
    
    
    
    (157,609
    )
    
    
    205,969Total liabilities and stockholders equity
    
    $
    668,236
    
    
    $
    145,474
    
    
    $
    76,098
    
    
    $
    (171,175
    )
    
    $
    718,633
 73




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) ASSOCIATED MATERIALS INCORPORATED AND SUBSIDIARES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 3, 2004
(IN THOUSANDS) GUARANTOR
    
    
    NON-GUARANTOR
    
    
    RECLASSIFICATION/PARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATION
    
    
    CONSOLIDATEDNet sales
    
    $
    676,473
    
    
    $
    55,303
    
    
    $
    65,822
    
    
    $
    (17,762
    )
    
    $
    779,836Cost of sales
    
    
    478,912
    
    
    
    45,594
    
    
    
    54,781
    
    
    
    (17,762
    )
    
    
    561,525Gross profit
    
    
    197,561
    
    
    
    9,709
    
    
    
    11,041
    
    
    
    
    
    
    
    218,311Selling, general and administrative expense
    
    
    133,468
    
    
    
    9,031
    
    
    
    7,072
    
    
    
    
    
    
    
    149,571Income from operations
    
    
    64,093
    
    
    
    678
    
    
    
    3,969
    
    
    
    
    
    
    
    68,740Interest expense
    
    
    26,933
    
    
    
    34
    
    
    
    402
    
    
    
    
    
    
    
    27,369Foreign currency loss (gain)
    
    
    
    
    
    
    34
    
    
    
    (582
    )
    
    
    
    
    
    
    (548
    )Income before income taxes
    
    
    37,160
    
    
    
    610
    
    
    
    4,149
    
    
    
    
    
    
    
    41,919Income taxes
    
    
    15,723
    
    
    
    221
    
    
    
    1,444
    
    
    
    
    
    
    
    17,388Income before equity income from
subsidiaries
    
    
    21,437
    
    
    
    389
    
    
    
    2,705
    
    
    
    
    
    
    
    24,531Equity income from subsidiaries
    
    
    3,094
    
    
    
    2,705
    
    
    
    
    
    
    
    (5,799
    )
    
    
    Net income (loss)
    
    $
    24,531
    
    
    $
    3,094
    
    
    $
    2,705
    
    
    $
    (5,799
    )
    
    $
    24,531
 74




---



##### Table of Contents



AMH HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED) ASSOCIATED MATERIALS INCORPORATED AND SUBSIDIARES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JANUARY 3, 2004
(IN THOUSANDS) GUARANTOR
    
    
    NON-GUARANTOR
    
    
    RECLASSIFICATION/PARENT
    
    
    SUBSIDIARIES
    
    
    SUBSIDIARY
    
    
    ELIMINATION
    
    
    CONSOLIDATEDNet cash provided by (used in)
operating activities
    
    $
    40,455
    
    
    $
    9,132
    
    
    $
    7,488
    
    
    $
    (1,099
    )
    
    $
    55,976INVESTING ACTIVITIESAcquisition of Gentek Holdings, net of
cash acquired
    
    
    (113,255
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (113,255
    )Additions to property, plant and equipment
    
    
    (11,746
    )
    
    
    (189
    )
    
    
    (754
    )
    
    
    
    
    
    
    (12,689
    )Proceeds from sale of assets
    
    
    2,104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,104Other investing activities
    
    
    
    
    
    
    369
    
    
    
    (39
    )
    
    
    
    
    
    
    330Net cash provided by (used in) investing
activities
    
    
    (122,897
    )
    
    
    180
    
    
    
    (793
    )
    
    
    
    
    
    
    (123,510
    )FINANCING ACTIVITIESProceeds from borrowings under term loan
    
    
    182,500
    
    
    
    
    
    
    
    7,500
    
    
    
    
    
    
    
    190,000Repayments of term loan
    
    
    (119,000
    )
    
    
    
    
    
    
    (7,500
    )
    
    
    
    
    
    
    (126,500
    )Redemption of 9 1/4% senior subordinated
notes
    
    
    (908
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (908
    )Financing costs
    
    
    (3,854
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,854
    )Intercompany transactions
    
    
    13,081
    
    
    
    (6,330
    )
    
    
    (6,751
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    71,819
    
    
    
    (6,330
    )
    
    
    (6,751
    )
    
    
    
    
    
    
    58,738Net increase (decrease) in cash
    
    
    (10,623
    )
    
    
    2,982
    
    
    
    (56
    )
    
    
    (1,099
    )
    
    
    (8,796
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    56Cash at beginning of period
    
    
    13,022
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,022Cash at end of period
    
    $
    2,399
    
    
    $
    2,982
    
    
    $
    
    
    
    $
    (1,099
    )
    
    $
    4,282
 23. CONTINGENCIES In the ordinary course of business, the Company is involved in various legal proceedings. The
Company is of the opinion that the ultimate resolution of these matters will not have a material
adverse effect on the results of operations or the financial position of the Company. 24. SUBSEQUENT EVENTS In
connection with the December 2004 recapitalization transaction,
AMH II, AMHs parent company, declared a
dividend of $96.4 million, of which $33.7 million was in the form of promissory notes. AMH II
repaid these promissory notes in January 2005, upon receipt of intercompany loans paid by AMI and
its intermediate holding companies totaling $33.7 million. Subsequently, a dividend was declared
by AMI and its intermediate holding companies in forgiveness of the intercompany loan. 75




---



##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 
 ITEM 9A. CONTROLS AND PROCEDURES The Companys Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of the Companys disclosure controls and procedures as of the end of the period
covered by this report (the Evaluation Date). Based on their evaluation as of the Evaluation
Date, the Chief Executive Officer and Chief Financial Officer have concluded that the Companys
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange
Act) are effective to ensure that information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is recorded, processed, summarized and reported
within required time periods. There has been no change to the Companys internal control over financial reporting during the
last fiscal quarter that has materially affected, or is reasonably likely to materially affect, its
internal control over financial reporting. Section 404 of the Sarbanes-Oxley Act requires Companys management to report on, and its
independent auditors to attest to, the Companys internal control over financial reporting as of
December 30, 2006. The Company is actively continuing its ongoing process, utilizing outside
assistance, of documenting, testing and evaluating the Companys internal control over financial
reporting. The process of documenting, testing and evaluating the Companys internal control over
financial reporting under the applicable guidelines is complex and time consuming, and available
internal and external resources necessary to assist the Company in the documentation and testing
required to comply with Section 404 are limited. While the Company currently believes it has
dedicated the appropriate resources and that it will be able to fully comply with Section 404 in
its annual report on Form 10-K for the year ending December 30, 2006, there can be no assurance
that the Company will ultimately be able to comply with Section 404 in its Annual Report on Form
10-K for the year ending December 30, 2006 or whether it will be able to conclude the Companys
internal control over financial reporting is effective as of December 30, 2006. 
 ITEM 9B. OTHER
INFORMATION None. 
 PART III 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth information about the board of directors and executive officers
for AMH and AMI. NAME
    
    AGE
    
    POSITION(S)Michael Caporale, Jr
    
    
    53
    
    
    Chairman of the Board, President and Chief Executive OfficerD. Keith LaVanway
    
    
    40
    
    
    Vice President-Chief Financial
Officer, Treasurer and SecretaryKenneth L. Bloom
    
    
    42
    
    
    President of Manufacturing and
Supply Chain ManagementRobert M. Franco
    
    
    51
    
    
    President of Alside Supply CentersJohn F. Haumesser
    
    
    40
    
    
    Vice President-Human ResourcesKevin M. Hayes
    
    
    36
    
    
    DirectorIra D. Kleinman
    
    
    48
    
    
    DirectorSimon Moore
    
    
    37
    
    
    DirectorDana R. Snyder
    
    
    58
    
    
    DirectorChristopher J. Stadler
    
    
    40
    
    
    DirectorDennis W. Vollmershausen
    
    
    61
    
    
    Director
 Set forth below is a brief description of the business experience of each of the Companys
directors and executive officers as of March 23, 2005. 76




---



##### Table of Contents



MICHAEL CAPORALE, JR., AGE 53. Mr. Caporale has been Chairman of the Board, President and
Chief Executive Officer of AMH and AMH II since December 2004. Mr. Caporale has been the President,
Chief Executive Officer and a director of AMH since March 2004. He has also been the President and
Chief Executive Officer of AMI and a director since 2002 and Chairman of the Board of Directors of
AMI since December 2004. In addition, Mr. Caporale has been President, Chief Executive Officer and
a director of Holdings since 2002. Mr. Caporale has been the President and Chief Executive Officer
of AMH and a director since 2002. Mr. Caporale has been President, Chief Executive Officer and a
director of AMH since March 2004 and he has been President, Chief Executive Officer and a director
of Holdings since 2002. Mr. Caporale was named Chief Executive Officer of the Alside division and
became a director in 2001. Mr. Caporale joined AMI in 2000 as President of the Alside Window
Company, became President and Chief Operating Officer of the Alside division in 2000 and was named
a Vice President of AMI in 2000. Prior to joining AMI, Mr. Caporale was the President of Great
Lakes Window, Inc., a subsidiary of Nortek, Inc., where he had been employed since 1995. D. KEITH LAVANWAY, AGE 40. Mr. LaVanway has been Vice President-Finance, Chief Financial
Officer, Assistant Treasurer and Assistant Secretary of AMH since March 2004 and Treasurer and
Secretary of AMH since December 2004. Mr. LaVanway has been Vice President-Chief Financial
Officer, Treasurer and Secretary of AMI since 2002 and he has been Vice President-Chief Financial
Officer, Treasurer and Secretary of AMH II since December 2004. He has also been Vice
President-Finance and Chief Financial Officer of Holdings since 2002 and Treasurer and Secretary of
Holdings since December 2004. Mr. LaVanway joined AMI in February 2001 as Vice President  Chief
Financial Officer of Alside and was also named a Vice President of the AMI. Prior to joining AMI,
Mr. LaVanway was employed by Nortek, Inc. from 1995 to 2001, where he served in various financial
positions. KENNETH L. BLOOM, AGE 42. Mr. Bloom joined the AMI in 2000 as Alsides Vice President of
Window Manufacturing. In 2001, Mr. Bloom was named President of Alside Window Company. Mr. Bloom
was named President of Alside Siding & Window Company in 2002. In February 2005, Mr. Bloom was
named President, Manufacturing and Supply Chain Management. Prior to joining the Company, Mr.
Bloom was Corporate Vice President of Field Container Co., L.P., where he had been employed since
1996. ROBERT M. FRANCO, AGE 51. Mr. Franco joined AMI in 2002 as President of Alside Supply
Centers. Prior to joining the Company, Mr. Franco was most recently Vice President of the Exterior
Systems Business of Owens-Corning, Inc., where he had worked in a variety of key management
positions for over twenty years. JOHN
F. HAUMESSER, AGE 40. Mr. Haumesser joined the AMI in
2001 as Alsides Vice President, Human
Resources. Prior to joining the AMI, Mr. Haumesser was most recently Director, Human Resources at
Pilkington Libbey-Owens-Ford, where he had been employed since 1997. KEVIN M. HAYES, AGE 36. Mr. Hayes has been a director of AMI since 2002. Mr. Hayes has also
been a director of Holdings since 2002, a director of AMH since March 2004 and a director of AMH II
since December 2004. He is a General Partner of Weston Presidio and has served in this position
since 1998. From 1996 to 1998, he was a Principal at Weston Presidio. IRA D. KLEINMAN, AGE 48. Mr. Kleinman has been chairman of the board of AMH from March 2004
until December 2004 and a director of AMH since December 2004. He has been a director of AMI and
Holdings since 2002. Since December 2004, Mr. Kleinman has been a director of AMH II. Mr. Kleinman
has been a General Partner of Harvest Partners for more than five years. Mr. Kleinman is also a
director for Global Power Equipment Inc. SIMON C. MOORE, AGE 37. Mr. Moore has been a director of AMI, Holdings, AMH and AMH II since
December 2004. Mr. Moore has been an executive of Investcorp or one or more of its
wholly-owned subsidiaries since 2001. Prior to joining Investcorp, Mr. Moore held positions at JP
Morgan Capital. DANA R. SNYDER, AGE 58. Mr. Snyder has been a director of AMI, Holdings, AMH and AMH II since
December 2004. Mr. Snyder is currently serving as a director of Werner Holding and as an
advisory director of Investcorp. Previously, Mr. Snyder was an executive with Ply Gem Industries,
Inc. and The Stolle Corporation. CHRISTOPHER J. STADLER, AGE 40. Mr. Stadler has been a director of AMI, Holdings, AMH and AMH
II since December 2004. Mr. Stadler has been an executive of Investcorp or one or more of its
wholly-owned subsidiaries since April of 1996. Mr. Stadler is head of Investcorp North American
corporate investment and is a member of Investcorps steering committee. Prior to joining
Investcorp, Mr., Stadler was a director with CS First Boston Corporation. Mr. Stadler is a
director of Werner Holding, US Unwired, Inc. and Saks Incorporated. 77




---



##### Table of Contents



DENNIS W. VOLLMERSHAUSEN, AGE 61. Mr. Vollmershausen has been a director of AMH since March
2004. Mr.
Vollmershausen has also been a director of Holdings since 2002, a director of AMI since 2002
and a director of AMH II since December 2004. He is the President, Chief Executive Officer and
director of Lund International Holdings, Inc., a manufacturer, marketer and distributor of
aftermarket accessories for the automotive market, which he joined at the end of 1997. He has also
been a director of Digital Technologies Group, Inc. since 2002 and a director of Wesruth
Investments Limited since 1990. From 1996 through the end of 1997, Mr. Vollmershausen worked at
Champion Road Machinery, Ltd., a manufacturer of construction equipment, as President and Chief
Executive Officer. Mr. Vollmershausen is the Chairman of the Board of London Machinery, Inc. The following individuals were directors during fiscal year 2004 but have since resigned: NAME
    
    POSITION(S)Thomas W. Arenz
    
    Director (from 2002 to December 2004)Jeffrey C. Moy
    
    Director (from 2003 to December 2004)
 All of the Companys directors are elected on an annual basis, with terms expiring as of the
annual meeting of stockholders. All of the officers serve at the discretion of the board of
directors. The boards of directors of AMI, Holdings, AMH and AMH II will each have the same
composition and are subject to the rules and operating procedures as set forth in the stockholders
agreement. AUDIT COMMITTEE The members of the audit committee are appointed by the Companys board of directors. The
Companys audit committee currently consists of Dennis Vollmershausen, Kevin Hayes and Simon Moore
(Chairman). None of the audit committee members meets the requirements for a financial expert under
the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the rules of the SEC, and none of
such directors is independent, as that term is defined under either the New York Stock Exchange or
The NASDAQ National Market listing requirements. The Company does not have a class of securities
listed on any national securities exchange. Nevertheless, the Company believes the experience and
education of the directors qualifies them to monitor the integrity of its financial statements,
compliance with legal and regulatory requirements, the public accountants qualifications and
independence, the Companys internal controls and procedures for financial reporting, and the
Companys compliance with the Sarbanes-Oxley Act and the rules and regulations thereunder. In
addition, the audit committee has the ability on its own to retain independent accountants,
financial advisors or other consultants, advisors and experts whenever it deems appropriate. The
Company believes the qualification and experience of the members of the audit committee, and the
ability to utilize outside advisors and experts as they consider appropriate, affords them
sufficient background and expertise to fulfill their obligations without the necessity of including
a financial expert at the present time. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Not applicable CODE OF ETHICS AMH
has adopted a code of ethics that applies to its principal executive officer, principal financial
officer, principal accounting officer or controller, and other persons performing similar functions.
Interested persons may obtain a copy of such code of ethics without charge by writing to AMH
Holdings, Inc., Attention: Corporate Secretary, 3773 State Road, Cuyahoga Falls, Ohio 44223. 78




---



##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth the annual compensation paid by AMI for services rendered in
2004, 2003 and 2002 by the chief executive officer and each of the other executive officers of AMI.
The following officers are also officers of AMH and Holdings. They received no separate
compensation for such service. LONG-TERMANNUAL COMPENSATION
    
    
    COMPENSATION AWARDSFISCAL
    
    
    
    
    
    
    
    
    
    
    OTHER ANNUAL
    
    
    SECURITIES UNDERLYING
    
    
    ALL OTHERNAME AND PRINCIPAL POSITION
    
    YEAR
    
    
    SALARY
    
    
    BONUS (1)
    
    
    COMPENSATION (2)
    
    
    OPTIONS/SARS (#) (3)
    
    
    COMPENSATIONMichael Caporale, Jr.
    
    
    2004
    
    
    $
    575,001
    
    
    $
    17,523,000
    (5)
    
    
    
    
    
    
    176,168
    (10)
    
    $
    10,431
    (21)Chairman, President and
    
    
    2003
    
    
    $
    500,004
    
    
    $
    1,000,000
    
    
    
    
    
    
    
    
    
    
    $
    109,932Chief Executive Officer
    
    
    2002
    
    
    $
    488,308
    
    
    $
    284,000
    
    
    
    
    
    
    
    411,784
    (11)
    
    $
    23,37846,415
    (11)D. Keith LaVanway
    
    
    2004
    
    
    $
    301,257
    
    
    $
    6,935,000
    (6)
    
    
    
    
    
    
    86,910
    (12)
    
    $
    9,070
    (21)Vice President, Chief
    
    
    2003
    
    
    $
    275,004
    
    
    $
    275,000
    
    
    
    
    
    
    
    
    
    
    $
    33,601Financial Officer
    
    
    2002
    
    
    $
    265,958
    
    
    $
    92,950
    
    
    
    
    
    
    
    133,962
    (13)
    
    $
    9,8674,678
    (13)Kenneth L. Bloom
    
    
    2004
    
    
    $
    271,254
    
    
    $
    5,210,000
    (7)
    
    
    
    
    
    
    70,467
    (14)
    
    $
    9,113
    (21)President, Manufacturing and
    
    
    2003
    
    
    $
    250,005
    
    
    $
    210,000
    
    
    
    
    
    
    
    
    
    
    $
    8,541Supply Chain Management
    
    
    2002
    
    
    $
    220,008
    
    
    $
    56,800
    
    
    
    
    
    
    
    112,966
    (15)
    
    $
    8,5004,665
    (15)Robert M. Franco (4)
    
    
    2004
    
    
    $
    267,501
    
    
    $
    1,765,000
    (8)
    
    
    
    
    
    
    58,723
    (16)
    
    $
    9,916
    (21)President, Supply Centers
    
    
    2003
    
    
    $
    257,505
    
    
    $
    165,000
    
    
    
    
    
    
    
    
    
    
    $
    84,6502002
    
    
    $
    102,407
    
    
    $
    165,000
    
    
    
    
    
    
    
    42,512
    (17)
    
    $
    25,523John F. Haumesser
    
    
    2004
    
    
    $
    185,256
    
    
    $
    1,970,000
    (9)
    
    
    
    
    
    
    23,489
    (18)
    
    $
    8,623
    (21)Vice President, Human
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,254
    (19)Resources
    
    
    2003
    
    
    $
    168,252
    
    
    $
    120,000
    
    
    
    
    
    
    
    
    
    
    $
    8,2942002
    
    
    $
    160,008
    
    
    $
    45,440
    
    
    
    
    
    
    
    21,254
    (20)
    
    $
    8,453
   (1)
    
    Bonuses paid include annual bonuses paid in connection with AMIs Incentive Bonus Plan
and bonuses paid in connection with the March 2004 dividend recapitalization and the
December 2004 recapitalization transaction. Bonuses paid in connection with the March 2004
dividend recapitalization were paid in recognition the successful acquisition of Gentek, the
AMIs performance since the April 2002 merger transaction
and the completion of the 11 1/4%
senior notes offering. The bonuses paid in connection with the December 2004
recapitalization transaction were paid in recognition of the Companys performance for 2004
and the completion of the related transaction.(2)
    
    Perquisites and other personal benefits received by the AMIs other executive officers
are not included in the Summary Compensation Table because the aggregate amount of this
compensation, if any, did not meet disclosure thresholds established under current SEC
regulations.(3)
    
    Options granted during 2002 through 2004 were granted in accordance with the Associated
Materials Holdings Inc. 2002 Stock Option Plan (the 2002 Plan). All such options were
granted prior to the March 2004 dividend recapitalization. The options granted include the
following:  
    Options to purchase shares of Holdings common stock at the fair market
value on the date of grant, which will vest over time (Time-Based Options). All
Time-Based Options granted to executives during September 2002 were immediately
vested 16% on the date of grant, representing 10% vesting upon grant plus four months
of vesting from May 2002 through August 2002, with remaining vesting of 1.5% per
month over 56 months. Options granted during February 2004 were immediately vested
11.5% on the date of grant, representing 10% vesting upon grant plus one month
vesting from January 2004 to February 2004, with remaining vesting of 1.5% per month
over 59 months;
    Options to purchase shares of Holdings common stock at the fair market
value on the date of grant, which will vest 100% on the eighth anniversary from the
date of grant, provided that the option vesting may be accelerated upon the
occurrence of a liquidity event and the achievement of a specified internal rate of
return (IRR) on the investment by Harvest Partners, Inc. in Holdings (IRR
Options). A liquidity event is defined as the occurrence of (a) a transaction or
series of transactions which results in the sale or transfer of (i) more than a
majority of the assets of Holdings and its subsidiaries or (ii) a majority of the
capital stock of Holdings or a widely distributed sale of the common stock of
Holdings in an underwritten public offering which yields a minimum required amount of
net proceeds to Holdings and (b) the funds of Harvest Partners, Inc. receive a
minimum required aggregate net cash proceeds for its investment in Holdings (2002
Plan Liquidity Event); 79




---



##### Table of Contents




    Options to purchase shares of Holdings common stock and preferred stock as
a unit, comprised of one share of preferred stock and a specified fraction of a share
of common stock (Roll-Over Options). These options were
granted in exchange for the outstanding options to purchase Associated Materials
Incorporated common stock (Predecessor Company Options). Roll-Over Options were
granted at an exercise price, which preserves the intrinsic value of the Predecessor
Company Options. Each Roll-Over Option grant was 100% vested as of the date of grant.  In connection with the March 2004 dividend recapitalization, all Roll-Over Options were
exercised for shares of Holdings preferred and common stock, which were then contributed to
AMH for equivalent shares of AMH stock. The shares of AMH preferred stock were redeemed
through proceeds from the AMH senior note offering. AMH assumed the 2002 Plan and all
outstanding Time-Based Options and IRR Options under the 2002 Plan were converted from the
right to purchase shares of Holdings common stock into the right to purchase shares of AMH
common stock with each option providing for the same number of shares at the same exercise
price as the original options.As part of the December 2004 recapitalization transaction, a portion of the Time-Based Options
and all of the IRR Options were exercised for shares of AMH common stock. Pursuant to an
amended and restated certificate of incorporation of AMH filed in connection with the December
2004 recapitalization transaction, each share of AMH common stock issued upon the exercise of
such options was then reclassified as two shares of non-voting preferred stock of AMH and then
immediately sold to affiliates of Investcorp. In order to preserve the economic value of the
options that remain outstanding under the 2002 Plan, the 2002 Plan was then amended by
resolution of the Board of Directors of AMH to provide that each of the Time-Based Options
that remain outstanding following the consummation of the December 2004 recapitalization
transaction are henceforward exercisable for two shares of Class B non-voting common stock of
AMH. In addition, each holder of such options entered into an agreement with AMH II whereby
such option holders agreed, upon the exercise of any such options under the 2002 Plan, to
automatically contribute to AMH II the shares of Class B non-voting common stock of AMH issued
upon any such option exercise, in exchange for an equivalent number of shares of Class B
non-voting common stock of AMH II. All option grants for common stock under the 2002 Plan
shown in the tables herein have been restated in order to reflect the number of securities
underlying such options after giving effect to the reclassification and the amendment to the
2002 Plan described above.Options granted in conjunction with the December 2004 recapitalization transaction were
granted in under the AMH Holdings II, Inc. 2004 Stock Option Plan (the 2004 Plan). The
option grants include the following:  
    Options to purchase shares of AMH II Class B non-voting common stock at the
fair market value on the date of grant, which will vest 100% on the eighth
anniversary from the date of grant, provided that the option vesting may be
accelerated upon the occurrence of a liquidity event and the achievement of a
specified internal rate of return on the investment by Investcorp S.A. in AMH II. A
liquidity event is defined as the occurrence of (a) a transaction or series of
transactions which results in the sale or transfer of (i) more than a majority of the
assets of AMH II and its subsidiaries or (ii) a majority of the capital stock of AMH
II or (b) a widely distributed sale of the common stock of AMH II in an underwritten
public offering which yields a minimum required amount of net proceeds to AMH II
(2004 Plan Liquidity Event).  (4)
    Mr. Franco joined AMI in August 2002.(5)
    The bonus amount shown includes $1,200,000 of annual bonus from the Executive Bonus Plan,
$6,323,000 of bonus paid in connection with the March 2004 dividend recapitalization and
$10,000,000 of bonus paid in connection with the December 2004 recapitalization transaction.(6)
    The bonus amount shown includes $310,000 of annual bonus from the Executive Bonus Plan,
$2,750,000 of bonus paid in connection with the March 2004 dividend recapitalization and
$3,875,000 of bonus paid in connection with the December 2004 recapitalization transaction.(7)
    The bonus amount shown includes $210,000 of annual bonus from the Executive Bonus Plan,
$2,000,000 of bonus paid in connection with the March 2004 dividend recapitalization and
$3,000,000 of bonus paid in connection with the December 2004 recapitalization transaction.(8)
    The bonus amount shown includes $165,000 of annual bonus from the Executive Bonus Plan,
$500,000 of bonus paid in connection with the March 2004 dividend recapitalization and
$1,100,000 of bonus paid in connection with the December 2004 recapitalization transaction. 80




---



##### Table of Contents



(9)
    The bonus amount shown includes $120,000 of annual bonus from the Executive Bonus Plan,
$750,000 of bonus paid in connection with the March 2004 dividend recapitalization and
$1,100,000 of bonus paid in connection with the December 2004 recapitalization transaction.(10)
    In December 2004, in accordance with the 2004 Plan, Mr. Caporale was granted an option to
purchase 176,168 shares of AMH II Class B non-voting common stock.(11)
    In September 2002, Mr. Caporale was granted an option to purchase 170,048 shares of
Holdings common stock. In conjunction with the December 2004 recapitalization transaction,
all of the IRR Options and a portion of the Time-Based Options were exercised, with the
remaining Time-Based options to purchase common stock of Holdings being converted into
options to purchase shares of AMH Class B non-voting stock, which, upon exercise, will be
contributed to AMH II in exchange for an equivalent number of shares of Class B non-voting
common stock of AMH II. In recognition of the dilutive effect of the December 2004
recapitalization transaction, the option grants presented below have been restated to
reflect that shares underlying each original option grant to purchase one common share of
Holdings is now the equivalent of an option grant to purchase two shares of AMH common
stock. As such Mr. Caporales options represent a grant to purchase 340,096 shares of AMH
Class B non-voting stock, which is comprised of the following (restated to reflect the
impact of the dilutive effect):  
    Time-Based Options granted with the option to purchase 212,560 shares of AMH common stock at $5 per share;
    IRR Options granted with the option to purchase 127,536 shares of AMH common stock at $5 per share;  In September 2002, Mr. Caporale was also granted Roll-Over Options. Shares underlying the
option grants are as follows:  
    Roll-Over Options granted with an option to purchase 23,221 shares of
preferred stock of Holdings and 17,781 shares of common stock of Holdings. These
options were exercised in connection with the March 2004 dividend recapitalization,
prior to the December 2004 recapitalization transaction. Each common share
underlying these option grants has been restated to reflect that each original option
grant to purchase one common share of Holdings is now the equivalent of an option
grant to purchase two shares of AMH common stock. As such the number of common
shares underlying the option grant has been restated to 35,562 shares of Class B
non-voting stock of AMH.
    Roll-Over Options granted with an option to purchase 23,194 shares of
preferred stock of Holdings and 18,063 shares of common stock of Holdings. These
options were exercised in connection with the March 2004 dividend recapitalization,
prior to the December 2004 recapitalization transaction. Each common share
underlying these option grants has been restated to reflect that each original option
grant to purchase one common share of Holdings is now the equivalent of an option
grant to purchase two shares of AMH common stock. As such the number of common
shares underlying the option grant has been restated to 36,126 shares of Class B
non-voting stock of AMH.  (12)
    In December 2004, in accordance with the 2004 Plan, Mr. LaVanway was granted an option to
purchase 86,910 shares of AMH II Class B non-voting common stock.(13)
    In September 2002, Mr. LaVanway was granted an option to purchase 63,768 shares of
Holdings common stock. In conjunction with the December 2004 recapitalization transaction,
all of the IRR Options and a portion of the Time-Based Options were exercised, with the
remaining Time-Based options to purchase common stock of Holdings being converted into
options to purchase shares of AMH Class B non-voting stock, which, upon exercise, will be
contributed to AMH II in exchange for an equivalent number of shares of Class B non-voting
common stock of AMH II. In recognition of the dilutive effect of the December 2004
recapitalization transaction, the option grants presented below have been restated to
reflect that shares underlying each original option grant to purchase one common share of
Holdings is now the equivalent of an option grant to purchase two shares of AMH common
stock. As such Mr. LaVanways options represent a grant to purchase 127,536 shares of AMH
Class B non-voting stock, which is comprised of the following (restated to reflect the
impact of the dilutive effect):  
    Time-Based Options granted with the option to purchase 79,710 shares of AMH common stock at $5 per share;
    IRR Options granted with the option to purchase 47,826 shares of AMH common stock at $5 per share; 81




---



##### Table of Contents



In September 2002, Mr. LaVanway was also granted Roll-Over Options. Shares underlying the
option grants are as follows:  
    Roll-Over Options granted with an option to purchase 4,678 shares of
preferred stock of Holdings and 3,213 shares of common stock of Holdings. These
options were exercised in connection with the March 2004 dividend recapitalization,
prior to the December 2004 recapitalization transaction. Each common share
underlying these option grants has been restated to reflect that each original option
grant to purchase one common share of Holdings is now the equivalent of an option
grant to purchase two shares of AMH common stock. As such the number of common
shares underlying the option grant has been restated to 6,426 shares of Class B
non-voting stock of AMH. For consistency purposes, each common share underlying
these option grants will be assumed to be exchanged for two shares of AMH stock.  (14)
    In December 2004, in accordance with the 2004 Plan, Mr. Bloom was granted an option to
purchase 70,467 shares of AMH II Class B non-voting common stock.  (15)
    In September 2002, Mr. Bloom was granted an option to purchase 53,139 shares of Holdings
common stock. In conjunction with the December 2004 recapitalization transaction, all of
the IRR Options and a portion of the Time-Based Options were exercised, with the remaining
Time-Based options to purchase common stock of Holdings being converted into options to
purchase shares of AMH Class B non-voting stock, which, upon exercise, will be contributed
to AMH II in exchange for an equivalent number of shares of Class B non-voting common stock
of AMH II. In recognition of the dilutive effect of the December 2004 recapitalization
transaction, the option grants presented below have been restated to reflect that shares
underlying each original option grant to purchase one common share of Holdings is now the
equivalent of an option grant to purchase two shares of AMH common stock. As such Mr.
Blooms options represent a grant to purchase 106,278 shares of AMH Class B non-voting
stock, which is comprised of the following (restated to reflect the impact of the dilutive
effect):  
    Time-Based Options granted with the option to purchase 66,424 shares of AMH common stock at $5 per share;
    IRR Options granted with the option to purchase 39,854 shares of AMH common stock at $5 per share;  In September 2002, Mr. Bloom was also granted Roll-Over Options. Shares underlying the
option grants are as follows:  
    Roll-Over Options granted with an option to purchase 4,665 shares of
preferred stock of Holdings and 3,344 shares of common stock of Holdings. These
options were exercised in connection with the March 2004 dividend recapitalization,
prior to the December 2004 recapitalization transaction. Each common share
underlying these option grants has been restated to reflect that each original option
grant to purchase one common share of Holdings is now the equivalent of an option
grant to purchase two shares of AMH common stock. As such the number of common
shares underlying the option grant has been restated to 6,688 shares of Class B
non-voting stock of AMH.  (16)
    In December 2004, in accordance with the 2004 Plan, Mr. Franco was granted an option to
purchase 58,723 shares of AMH II Class B non-voting common stock.  (17)
    In September 2002, Mr. Franco was granted an option to purchase 21,256 shares of Holdings
common stock. In conjunction with the December 2004 recapitalization transaction, all of the
IRR Options and a portion of the Time-Based Options were exercised, with the remaining
Time-Based options to purchase common stock of Holdings being converted into options to
purchase shares of AMH Class B non-voting stock, which, upon exercise, will be contributed to
AMH II in exchange for an equivalent number of shares of Class B non-voting common stock of
AMH II. In recognition of the dilutive effect of the December 2004 recapitalization
transaction, the option grants presented below have been restated to reflect that shares
underlying each original option grant to purchase one common share of Holdings is now the
equivalent of an option grant to purchase two shares of AMH common stock. As such Mr.
Francos options represent a grant to purchase 42,512 shares of AMH Class B non-voting stock,
which is comprised of the following (restated to reflect the impact of the dilutive effect):  
    Time-Based Options granted with the option to purchase 26,570 shares of AMH common stock at $5 per share;
    IRR Options granted with the option to purchase 15,942 shares of AMH common stock at $5 per share.  (18)
    In December 2004, in accordance with the 2004 Plan, Mr. Haumesser was granted an option to
purchase 23,489 shares of AMH II Class B non-voting common stock. 82




---



##### Table of Contents



(19)
    In February 2004, Mr. Haumesser was granted an option to purchase 10,627 shares of Holdings
common stock. In conjunction with the December 2004 recapitalization transaction, all of the
IRR Options and a portion of the Time-Based Options were exercised, with the remaining
Time-Based options to purchase common stock of Holdings being converted into options to
purchase shares of AMH Class B non-voting stock, which, upon exercise, will be contributed to
AMH II in exchange for an equivalent number of shares of Class B non-voting common stock of
AMH II. In recognition of the dilutive effect of the December 2004 recapitalization
transaction, the option grants presented below have been restated to reflect that shares
underlying each original option grant to purchase one common share of Holdings is now the
equivalent of an option grant to purchase two shares of AMH common stock. As such Mr.
Haumessers options represent a grant to purchase 21,254 shares of AMH Class B non-voting
stock, which is comprised of the following (restated to reflect the impact of the dilutive
effect):  
    Time-Based Options granted with the option to purchase 13,284 shares of AMH
common stock at $33.09 per share;
    IRR Options granted with the option to purchase 7,970 shares of AMH common
stock at $33.09 per share.  (20)
    In September 2002, Mr. Haumesser was granted an option to purchase 10,627 shares of Holdings
common stock. In conjunction with the December 2004 recapitalization transaction, all of the
IRR Options and a portion of the Time-Based Options were exercised, with the remaining
Time-Based options to purchase common stock of Holdings being converted into options to
purchase shares of AMH Class B non-voting stock, which, upon exercise, will be contributed to
AMH II in exchange for an equivalent number of shares of Class B non-voting common stock of
AMH II. In recognition of the dilutive effect of the December 2004 recapitalization
transaction, the option grants presented below have been restated to reflect that shares
underlying each original option grant to purchase one common share of Holdings is now the
equivalent of an option grant to purchase two shares of AMH common stock. As such Mr.
Haumessers options represent a grant to purchase 21,254 shares of AMH Class B non-voting
stock, which is comprised of the following (restated to reflect the impact of the dilutive
effect):  
    Time-Based Options granted with the option to purchase 13,284 shares of AMH common stock at $5 per share;
    IRR Options granted with the option to purchase 7,970 shares of AMH common stock at $5 per share.  (21)
    Includes amounts accrued or allocated under a defined contribution plan of $8,200 and imputed
income from group term life coverage provided by the Company in excess of $50,000. COMPENSATION AND INCENTIVE PROGRAMS INCENTIVE BONUS PLAN The Company maintains an Incentive Bonus Plan providing for annual bonus awards to certain key
employees, including each of the executive officers of the Company. Bonus amounts are based on
growth in the estimated equity value of AMH utilizing a calculation based on Adjusted EBITDA. This
plan is administered by the Companys board of directors. Mr. Caporale, a member of the board of
directors for the Company, is eligible for a bonus award under this plan. Bonus payments under the
Incentive Bonus Plan are not guaranteed. Cash bonuses accrued in 2004, 2003 and 2002 to each of the
Companys executive officers are set forth in the Summary Compensation Table. EMPLOYMENT AGREEMENTS Mr. Caporale entered into an employment agreement with AMI effective as of April 19, 2002,
which was amended and restated as of July 27, 2004. Under the terms of his employment agreement,
Mr. Caporale serves as AMIs President, Chief Executive Officer and a member of the board of
directors. Mr. Caporales employment agreement provides for a base salary of $600,000, an annual
incentive bonus based on growth in the earnings of AMH, certain perquisites and participation in
employee benefit plans made available to other executives. The initial term of the employment
agreement is three years. The terms of the employment agreement provide that on the first
anniversary of the equity tender offer completion date and each successive anniversary thereof, the
term of the employment agreement will automatically extend by one year unless AMI delivers to Mr.
Caporale a notice not to extend the employment term. The terms of the employment agreement provide
that if Mr. Caporales employment is involuntarily terminated by AMI without cause or if Mr.
Caporale resigns for good reason, he will be entitled to severance equal to $1,000,000 per year,
together 83




---



##### Table of Contents



with continued health and dental benefits, for two years, plus a pro rata incentive bonus for
the year of termination. The terms of the employment agreement also provide that if Mr. Caporales
employment is involuntarily terminated by AMI without cause or if Mr. Caporale elects to resign
upon the occurrence of certain specified events, in each case, within two years following a change
in control, Mr. Caporale will be entitled to the following severance compensation and benefits: (1)
two times Mr. Caporales base salary, (2) two times Mr. Caporales incentive pay (equal to the
highest amount of incentive pay earned in any year during the preceding three years), (3) if the
termination of employment occurs after June 30 in any year, a prorated portion of his incentive pay
for that calendar year, (4) continued medical, dental and life insurance benefits for 24 months,
subject to reduction to the extent comparable benefits are actually received by Mr. Caporale from
another employer during this period, (5) the cost of employee outplacement services equal to
$30,000, and (6) a two-year automobile allowance. Mr. LaVanway entered into an employment agreement with AMI effective as of April 19, 2002,
which was amended and restated as of July 27, 2004. Under the terms of his employment agreement,
Mr. LaVanway serves as AMIs Vice President  Chief Financial Officer. Mr. LaVanways employment
agreement provides for a base salary of $310,000, an annual incentive bonus based on growth in the
earnings of AMH, certain perquisites and participation in employee benefit plans made available to
other executives. The initial term of the employment agreement is two years. The terms of the
employment agreement provide that on the first anniversary of the equity tender offer completion
date and each successive anniversary thereof, the term of the employment agreement will
automatically extend by one year unless AMI gives to Mr. LaVanway a notice not to extend the
employment term. The employment agreement provides that if Mr. LaVanways employment is
involuntarily terminated by AMI without cause, he will be entitled to severance equal to his annual
base salary for twelve months or the remaining employment term, whichever is longer, plus a pro
rata bonus for the year of termination. The terms of the employment agreement also provide that if
Mr. LaVanways employment is involuntarily terminated by AMI without cause or if Mr. LaVanway
elects to resign upon the occurrence of certain specified events, in each case, within two years
following a change in control, Mr. LaVanway will be entitled to the following severance
compensation and benefits: (1) two times Mr. LaVanways base salary, (2) two times Mr. LaVanways
incentive pay (equal to the highest amount of incentive pay earned in any year during the preceding
three years), (3) if the termination occurs after June 30 in any year, a prorated portion of his
incentive pay for that calendar year, (4) continued medical, dental and life insurance benefits for
24 months, subject to reduction to the extent comparable benefits are actually received by Mr.
LaVanway during this period from another employer, (5) the cost of employee outplacement services
equal to $30,000, and (6) a two-year automobile allowance. Mr. Bloom entered into an employment agreement with AMI effective as of April 19, 2002, which
was amended and restated as of July 27, 2004. Under the terms of his employment agreement, Mr.
Bloom serves as the President of Alside Siding and Window Company. Mr. Blooms employment
agreement provides for a base salary of $275,000, an annual incentive bonus based on growth in the
earnings of AMH, certain perquisites and participation in employee benefit plans made available to
other executives. The initial term of the employment agreement is two years. The terms of the
employment agreement provide that on the first anniversary of the equity tender offer completion
date and each successive anniversary thereof, the term of the employment agreement will
automatically extend by one year unless AMI gives to Mr. Bloom a notice not to extend the
employment term. The employment agreement provides that if Mr. Blooms employment is involuntarily
terminated by AMI without cause, he will be entitled to severance equal to his annual base salary
for twelve months or the remaining employment term, whichever is longer, plus a pro rata bonus for
the year of termination. The terms of the employment agreement also provide that if Mr. Blooms
employment is involuntarily terminated by AMI without cause or if Mr. Bloom elects to resign upon
the occurrence of certain specified events, in each case, within two years following a change in
control, Mr. Bloom will be entitled to the following severance compensation and benefits: (1) two
times Mr. Blooms base salary, (2) two times Mr. Blooms incentive pay (equal to the highest amount
of incentive pay earned in any year during the preceding three years), (3) if the termination
occurs after June 30 in any year, a prorated portion of his incentive pay for that calendar year,
(4) continued medical, dental and life insurance benefits for 24 months, subject to reduction to
the extent comparable benefits are actually received by Mr. Bloom during this period from another
employer, (5) the cost of employee outplacement services equal to $30,000, and (6) a two-year
automobile allowance. Mr. Franco entered into an employment agreement with AMI effective as of April 19, 2002, which
was amended and restated as of July 27, 2004. Under the terms of his employment agreement, Mr.
Franco serves as the President of Alside Supply Centers. Mr. Francos employment agreement
provides for a base salary of $270,000, an annual incentive bonus based on growth in the earnings
of AMH. and participation in employee benefit plans made available to other executives. The initial
term of the employment agreement is two years. The terms of the employment agreement provide that
on the first anniversary of the equity tender offer completion date and each successive anniversary
thereof, the term of the employment agreement will automatically extend by one year unless AMI
gives Mr. Franco a notice not to extend the employment term. The employment agreement provides
that if Mr. Francos employment is involuntarily terminated by AMI without cause, he will be
entitled to severance equal to his annual base salary for twelve months or the remaining employment
term, whichever is longer, plus a pro rata bonus for the year of termination. The terms of the
Employment Agreement also provide that if Mr. Francos employment is involuntarily terminated by
AMI without cause or if Mr. Franco elects to 84




---



##### Table of Contents



resign upon the occurrence of certain specified events, in each case, within two years
following a change in control, Mr. Franco will be entitled to the following severance compensation
and benefits: (1) two times Mr. Francos base salary, (2) two times Mr. Francos incentive pay
(equal to the highest amount of incentive pay earned in any year during the preceding three years),
(3) if the termination occurs after June 30, in any year, a prorated portion of his incentive pay
for that calendar year, (4) continued medical, dental and life insurance benefits for 24 months,
subject to reduction to the extent comparable benefits are actually received by Mr. Franco during
this period from another employer, (5) the cost of employee outplacement services equal to $30,000,
and (6) a two-year automobile allowance. Mr. Haumesser entered into an employment agreement with AMI effective as of April 19, 2002,
which was amended and restated as of July 27, 2004. Under the terms of his employment agreement,
Mr. Haumesser serves as Vice President, Human Resources. Mr. Haumessers employment agreement
provides for a base salary of $190,000, an annual incentive bonus based on growth in the earnings
of AMH, certain perquisites and participation in employee benefit plans made available to other
executives. The initial term of the employment agreement is one year. The terms of the employment
agreement provide that on the first anniversary of the equity tender offer completion date and each
successive anniversary thereof, the term of the employment agreement will automatically extend by
one year unless AMI gives Mr. Haumesser a notice not to extend the employment term. The employment
agreement provides that if Mr. Haumessers employment is involuntarily terminated by AMI without
cause, he will be entitled to severance equal to his annual base salary for twelve months plus a
pro rata bonus for the year of termination. The terms of the employment agreement also provide
that if Mr. Haumessers employment is involuntarily terminated by AMI without cause or if Mr.
Haumesser elects to resign upon the occurrence of certain specified events, in each case, within
two years following a change in control, Mr. Haumesser will be entitled to the following severance
compensation and benefits: (1) two times Mr. Haumessers base salary, (2) two times Mr. Haumessers
incentive pay (equal to the highest amount of incentive pay earned in any year during the preceding
three years), (3) if such termination occurs after June 30 in any year, a prorated portion of his
incentive pay for that calendar year, (4) continued medical, dental and life insurance benefits for
24 months, subject to reduction to the extent comparable benefits are actually received by Mr.
Haumesser during this period from another employer, (5) the cost of employee outplacement services
equal to $30,000, and (6) a two-year automobile allowance. Each of the executive officers employment agreements includes non-competition,
non-solicitation, confidentiality and other restrictive covenants. ASSOCIATED MATERIALS HOLDINGS INC. 2002 STOCK OPTION PLAN In June 2002, Holdings adopted the Associated Materials Holdings Inc. 2002 Stock Option Plan
(the 2002 Plan). In conjunction with the March 2004 dividend recapitalization, AMH assumed the
2002 Plan and all outstanding options under the plan. Options under the 2002 Plan were converted
from the right to purchase shares of Holdings common stock into a right to purchase shares of AMH
common stock with each option providing for the same in number of shares and at the same exercise
price as the original options. The board of directors of AMH administers the 2002 Plan and selects
eligible executives, directors, employees and consultants of AMH and its affiliates, including the
Company, to receive options. The board of directors of AMH also will determine the number and type
of shares of stock covered by options granted under the plan, the terms under which options may be
exercised, the exercise price of the options and other terms and conditions of the options in
accordance with the provisions of the 2002 Plan. An option holder may pay the exercise price of an
option by any legal manner that the board of directors of AMH permits. Option holders generally may
not transfer their options except in the event of death. If AMH undergoes a change in control, as
defined in the 2002 Plan, all outstanding Time-Based Options become immediately fully exercisable,
while the IRR Options may become immediately exercisable upon achievement of certain specified
criteria. The board of directors of AMH may adjust outstanding options by substituting stock or
other securities of any successor or another party to the change in control transaction, or cash
out such outstanding options, in any such case, generally based on the consideration received by
its stockholders in the transaction. Subject to particular limitations specified in the 2002 Plan,
the board of directors may amend or terminate the plan. The 2002 Plan will terminate no later than
10 years following its effective date; however, any options outstanding under the option plan will
remain outstanding in accordance with their terms. In connection with the December 2004 recapitalization transaction, AMH amended the 2002 Plan
to provide that each option that remains outstanding under the 2002 Plan following the completion
of the December 2004 recapitalization transaction will be exercisable for two shares of the Class B
non-voting common stock of AMH, to adjust for the dilution effected pursuant to the December 2004
recapitalization transaction. In addition, each holder of such options entered into an agreement
with AMH II whereby such option holders agreed, upon the exercise of any such options under the
2002 Plan, to automatically contribute to AMH II the AMH shares issued upon any such option
exercise, in exchange for an equivalent number and class of shares of AMH II. 85




---



##### Table of Contents



AMH HOLDINGS II, INC. 2004 STOCK OPTION PLAN In December 2004, AMH II adopted the AMH Holdings II, Inc. 2004 Stock Option Plan (the 2004
Plan). The Compensation Committee of the board of directors of AMH II administers the 2004 Plan
and selects eligible executives, directors, employees and consultants of AMH II and its affiliates,
including the Company, to receive options to purchase AMH II Class B non-voting common stock. The
Compensation Committee also will determine the number of shares of stock covered by options granted
under the 2004 Plan, the terms under which options may be exercised, the exercise price of the
options and other terms and conditions of the options in accordance with the provisions of the 2004
Plan. An option holder may pay the exercise price of an option by any legal manner that the
Compensation Committee permits. Option holders generally may not transfer their options except in
the event of death. If AMH II undergoes a change of control, as defined in the 2004 Plan, the
Compensation Committee may accelerate the exercisability of all or a portion of the outstanding
options, adjust outstanding options by substituting stock, or cash out such outstanding options, in
any such case, generally based on the consideration received by its stockholders in the
transaction. Subject to particular limitations specified in the 2004 Plan, the board of directors
may amend or terminate the 2004 Plan. The 2004 Plan will terminate no later than 10 years
following its effective date; however, any options outstanding under the 2004 Plan will remain
outstanding in accordance with their terms. STOCK OPTION AWARD AGREEMENTS In connection with the December 2004 recapitalization transaction, certain members of senior
management of the Company received stock options to purchase shares of AMH II class B non-voting
common stock under the 2004 Plan pursuant to various Stock Option Award Agreements entered into on
December 22, 2004. In March 2005, certain other employees of the Company received stock options to
purchase shares of AMH II class B non-voting common stock under the 2004 Plan. For additional information on the stock options received by members of senior management,
please see Item 11 Executive Compensation  Option/SAR Grants in 2004. For additional information
on the performance based options, please see Note 18 to the consolidated financial statements
hereto. COMPENSATION COMMITTEE The Companys compensation committee consists of Ira Kleinman, Christopher Stadler and Dennis
Vollmershausen. The compensation committee determines the Companys compensation policies and forms
of compensation provided to its directors and officers. The compensation committee also reviews and
determines bonuses for the Companys officers and other employees. As described in Incentive Bonus
Plan above, the Company maintains an Incentive Bonus Plan providing for annual bonus awards to
certain key employees, including each of the executive officers of the Company. Bonus amounts are
based on growth in the estimated equity value of Holdings. In addition, the compensation committee
reviews and determines stock based compensation for the Companys directors, officers, employees
and consultants and administrators of Holdings stock incentive plan. CHIEF EXECUTIVE OFFICER COMPENSATION Mr. Caporales compensation in 2004 was governed by his employment agreement and his future
compensation will be determined in accordance with the conditions of his employment agreement. The
terms of Mr. Caporales employment agreement are set forth in the section  Employment
Agreements above. Mr. Caporale was also awarded an annual bonus award in 2004 of $1,200,000 under
the Incentive Bonus Plan, as described above. Mr. Caporale also received a bonus in the amount of
$6,323,000 million in connection with the March transaction and a bonus of $10,000,000 million in
connection with the December transaction. Amounts paid and granted to Mr. Caporale in 2004 are
disclosed in the Summary Compensation Table. 86




---



##### Table of Contents



COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION None of the members of the Companys compensation committee are current or former executive
officers or employees of the Company or any of its subsidiaries. DIRECTOR COMPENSATION AMI currently reimburses its non-employee directors for all out of pocket expenses incurred in the
performance of their duties as directors. The boards of directors of AMI, Holdings, AMH and AMH II
each have the same composition and are subject to the rules and operating procedures as set forth
in the stockholders agreement. They received no separate compensation for such service. In
addition the Company pays two of its directors, Dennis Vollmershausen and Dana Snyder, $5,000 for
each of their participation in each meeting of the board of directors. In connection with the March
2004 dividend recapitalization and the December 2004 recapitalization transaction, Mr.
Vollmershausen received a bonus of $125,000 and $175,000, respectively. None of the Companys
other directors currently receive any compensation for their services on the board of directors or
committee of the board of directors. OPTION/SAR GRANTS IN 2004 The following table provides information regarding the grant of Holdings stock options and
AMH II stock options to each of the Companys executive officers in 2004. Individual Grants (1)Potential Realizable ValueNumber of
    
    
    Percent of Total
    
    
    
    
    
    
    
    
    
    
    At Assumed Annual RatesSecurities
    
    
    Options / SARs
    
    
    
    
    
    
    
    
    
    
    Of Stock Price AppreciationUnderlying
    
    
    Granted to
    
    
    
    
    
    
    
    
    
    
    For Option Term (2)Options / SARs
    
    
    Employees in
    
    
    Exercise Price Per
    
    
    ExpirationName
    
    Granted
    
    
    2004
    
    
    Share
    
    
    Date
    
    5%
    
    
    10%Michael Caporale, Jr.(3)
    
    176,168 common
    
    
    36.0
    %
    
    $
    70.95
    
    
    December 22, 2014
    
    $
    7,860,629
    
    
    $
    19,920,378D. Keith LaVanway (3)
    
    86,910 common
    
    
    17.8
    %
    
    $
    70.95
    
    
    December 22, 2014
    
    $
    3,877,931
    
    
    $
    9,827,438Kenneth L. Bloom (3)
    
    70,467 common
    
    
    14.4
    %
    
    $
    70.95
    
    
    December 22, 2014
    
    $
    3,144,243
    
    
    $
    7,968,128Robert M. Franco (3)
    
    58,723 common
    
    
    12.0
    %
    
    $
    70.95
    
    
    December 22, 2014
    
    $
    2,620,225
    
    
    $
    6,640,164John F. Haumesser (4)
    
    23,489 common
    
    
    4.8
    %
    
    $
    70.95
    
    
    December 22, 2014
    
    $
    1,048,081
    
    
    $
    2,656,04321,254 common
    
    
    4.3
    %
    
    $
    33.09
    
    
    February 27, 2014
    
    $
    442,232
    
    
    $
    1,120,702
  (1)
    Options granted during 2004 included options granted in accordance with the Associated
Materials Holdings Inc. 2002 Stock Option Plan (the 2002 Plan) and the AMH Holdings II,
Inc. 2004 Stock Option Plan (the 2004 Plan).The options granted from the 2002 Plan include the following:  
    Options to purchase shares of Holdings common stock at the fair market
value on the date of grant, which will vest over time (Time-Based Options). All
Time-Based Options granted during 2004 under the plan were immediately vested 11.5%
on the date of grant, representing 10% vesting upon grant plus one month vesting from
January 2004 to February 2004, with remaining vesting of 1.5% per month over 59
months;
    Options to purchase shares of Holdings common stock at the fair market
value on the date of grant, which will vest 100% on the eighth anniversary from the
date of grant, provided that the option vesting may be accelerated upon the
occurrence of a liquidity event and the achievement of a specified internal rate of
return (IRR) on the investment by Harvest Partners, Inc. in Holdings (IRR
Options). A liquidity event is defined as the occurrence of (a) a transaction or
series of transactions which results in the sale or transfer of (i) more than a
majority of the assets of Holdings and its subsidiaries or (ii) a majority of the
capital stock of Holdings or a widely distributed sale of the common stock of
Holdings in an underwritten public offering which yields a minimum required amount of
net proceeds to Holdings and (b) the funds of Harvest Partners, Inc. receive a
minimum required aggregate net cash proceeds for its investment in Holdings (2002
Plan Liquidity Event). 87




---



##### Table of Contents



Subsequent to the March 2004 dividend recapitalization, AMH assumed the 2002 Plan and all
outstanding Time-Based Options and IRR Options under the 2002 Plan were converted from the
right to purchase shares of Holdings common stock into the right to purchase shares of AMH
common stock with each option providing for the same number of shares at the same exercise
price as the original options.As part of the December 2004 recapitalization transaction, a portion of the Time-Based Options
and all of the IRR Options were exercised for shares of AMH common stock. Pursuant to an
amended and restated certificate of incorporation of AMH filed in connection with the December
2004 recapitalization transaction, each share of AMH common stock issued upon the exercise of
such options was then reclassified as two shares of non-voting preferred stock of AMH and then
immediately sold to affiliates of Investcorp. In order to preserve the economic value of
the options that remain outstanding under the 2002 Plan, the 2002 Plan was then amended by
resolution of the Board of Directors of AMH to provide that each of the Time-Based Options
that remain outstanding following the consummation of the December 2004 recapitalization
transaction are henceforward exercisable for two shares of Class B non-voting common stock of
AMH. In addition, each holder of such options entered into an agreement with AMH II whereby
such option holders agreed, upon the exercise of any such options under the 2002 Plan, to
automatically contribute to AMH II the shares of Class B non-voting common stock of AMH issued
upon any such option exercise, in exchange for an equivalent number of shares of Class B
non-voting common stock of AMH II. All option grants under the 2002 Plan shown in the tables
herein have been restated in order to reflect the number of securities underlying such options
after giving effect to the reclassification and the amendment to the 2002 Plan described
above.The options granted under the 2004 Plan include the following:  
    Options to purchase shares of AMH II Class B non-voting common stock at the
fair market value on the date of grant, which will vest 100% on the eighth
anniversary from the date of grant, provided that the option vesting may be
accelerated upon the occurrence of a liquidity event and the achievement of a
specified internal rate of return on the investment by Investcorp S.A. in AMH II. A
liquidity event is defined as the occurrence of (a) a transaction or series of
transactions which results in the sale or transfer of (i) more than a majority of the
assets of AMH II and its subsidiaries or (ii) a majority of the capital stock of AMH
II or (b) a widely distributed sale of the common stock of AMH II in an underwritten
public offering which yields a minimum required amount of net proceeds to AMH II
(2004 Plan Liquidity Event).  (2)
    The potential realizable value set forth for common stock in the table above illustrates
the value that would be realized upon exercise of the option immediately prior to the
expiration of its term, assuming the specified compounded rates of appreciation on the
common stock over the term of the option. The use of the assumed 5% and 10% annual rates of
stock price appreciation are established by the Securities and Exchange Commission and is
not intended by the Company to forecast possible appreciation of the price of its common
stock.  (3)
    Options granted are from the 2004 Plan and represent options to buy shares of AMH II
common stock.  (4)
    In February 2004, Mr. Haumesser was granted options to purchase the following:  
    2002 Plan Time-Based Options to purchase 6,642 shares of Holdings common
stock at $66.17 per share, which subsequent to the March 2004 dividend
recapitalization and December 2004 recapitalization transaction, converted the grants
into an option to purchase 13,284 shares of AMH at $33.09 per share;
    2002 Plan IRR Options to purchase 3,985 shares of common stock at $10 per
share, which subsequent to the March 2004 dividend recapitalization and December 2004
recapitalization transaction, converted the grants into an option to purchase 7,970
shares of AMH at $33.09 per share;
    2004 Plan options to purchase 23,489 shares of AMH II common stock. 88




---



##### Table of Contents



AGGREGATED OPTION/SAR EXERCISES IN 2004
AND JANUARY 1, 2005 OPTION/SAR VALUES The following table provides information regarding the exercise of Holdings options during
2004 and unexercised options held as of January 1, 2005 for each of the Companys executive
officers. VALUE OF UNEXERCISEDNUMBER OF SECURITIES UNDERLYING
    
    
    IN-THE-MONEYUNEXERCISED OPTIONS/SARS AT
    
    
    OPTIONS/SARS ATSECURITIES
    
    
    
    
    
    
    JANUARY 1, 2005(1)
    
    
    JANUARY 1, 2005(2)ACQUIRED ON
    
    
    VALUENAME
    
    EXERCISE (#)(3)(4)
    
    
    REALIZED
    
    
    EXERCISABLE
    
    
    UNEXERCISABLE
    
    
    EXERCISABLE
    
    
    UNEXERCISABLEMichael Caporale, Jr
    
    46,415 preferred
    
    $
    3,832,855
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    277,580 common
    
    $
    16,180,558
    
    
    41,740 common
    
    268,632 common
    
    $
    2,752,753
    
    
    $
    6,098,001D. Keith LaVanway
    
    4,678 preferred
    
    $
    345,832
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,407 common
    
    $
    4,726,664
    
    
    25,881 common
    
    121,584 common
    
    $
    1,706,852
    
    
    $
    2,286,750Kenneth L. Bloom
    
    4,665 preferred
    
    $
    359,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,171 common
    
    $
    4,026,430
    
    
    20,900 common
    
    99,362 common
    
    $
    1,378,355
    
    
    $
    1,905,625Robert M. Franco
    
    21,256 common
    
    $
    1,436,055
    
    
    9,698 common
    
    70,281 common
    
    $
    639,583
    
    
    $
    762,250John F. Haumesser
    
    21,254 common
    
    $
    1,137,461
    
    
    5,711 common
    
    39,032 common
    
    $
    352,403
    
    
    $
    750,839
   (1)
    
    The Company has not granted stock appreciation rights.(2)
    
    The per share common equity value on January 1, 2005 was $70.95 per share, which was based on
the per share consideration paid by Investcorp in the December 2004 recapitalization
transaction. The value of unexercised common options was calculated by multiplying the per
share common stock value by the number of shares of common stock issuable upon exercise of
these options, less exercise price.(3)
    
    In connection with the March 2004 dividend recapitalization, all Roll-Over Options
outstanding from the 2002 Plan were exercised for shares of Holdings preferred and common
stock, which were then contributed to AMH for equivalent shares of AMH stock. The shares of
preferred AMH stock were redeemed through proceeds from the AMH senior note offering. AMH
assumed the 2002 Plan and all outstanding Time-Based Options and IRR Options under the 2002
Plan were converted from the right to purchase shares of Holdings common stock into the right
to purchase shares of AMH common stock with each option providing for the same number of
shares at the same exercise price as the original options.As part of the December 2004 recapitalization transaction, a portion of the Time-Based Options
and all of the IRR Options were exercised for shares of AMH common stock. Pursuant to an amended
and restated certificate of incorporation of AMH filed in connection with the December 2004
recapitalization transaction, each share of AMH common stock issued upon the exercise of such
options was then reclassified as two shares of non-voting preferred stock of AMH and then
immediately sold to affiliates of Investcorp. The value recognized includes the price paid by
Investcorp of $70.95 per share plus $1.61 per share reflecting the allocation among shareholders
of the total exercise price paid by option holders in conjunction with the December 2004
recapitalization transaction. In order to preserve the economic value of the options that remain
outstanding under the 2002 Plan, the 2002 Plan was then amended by resolution of the Board of
Directors of AMH to provide that each of the Time-Based Options that remain outstanding following
the consummation of the December 2004 recapitalization transaction are henceforward exercisable
for two shares of Class B non-voting common stock of AMH. In addition, each holder of such
options entered into an agreement with AMH II whereby such option holders agreed, upon the
exercise of any such options under the 2002 Plan, to automatically contribute to AMH II the
shares of Class B non-voting common stock of AMH issued upon any such option exercise, in
exchange for an equivalent number of shares of Class B non-voting common stock of AMH II. All
option grants for common stock under the 2002 Plan shown in the tables herein have been restated
in order to reflect the number of securities underlying such options after giving effect to the
reclassification and the amendment to the 2002 Plan described above. 89




---



##### Table of Contents



(4)
    
    Options outstanding as of January 1, 2005 include those options granted from the 2002 Plan
and the 2004 Plan. The number of
options shown has been adjusted to reflect that each option grant from the 2002 Plan is currently
exercisable for two shares of common stock of AMH. 
 ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT On February 19, 2004, AMH was created to be the direct parent company of Holdings, AMIs
direct parent. AMH has no material assets or operations other than its 100% ownership of Holdings.
Stockholders and option holders of Holdings became stockholders and option holders of AMH on March
4, 2004. In connection with the December 2004 recapitalization transaction, on December 22, 2004, all
of the outstanding IRR Options and a portion of the Time-Based Options were exercised for shares of
common stock of AMH. Also on December 22, 2004, AMH filed an amended and restated certificate of
incorporation of AMH with the Secretary of State of the State of Delaware, resulting in the
reclassification of all of the outstanding shares of AMH common stock as shares of (a) class B,
series I (voting) common stock, (b) class B, series II (non-voting) common stock, (c) voting
preferred stock and (d) non-voting preferred stock. The amended and restated certificate of
incorporation also authorized the issuance of shares of (i) class A, series I (voting) common
stock, which are reserved for issuance upon conversion of the voting preferred stock and (ii) class
A, series II (non-voting) common stock, which are reserved for issuance upon conversion of the
non-voting preferred stock. AMH also filed with the Secretary of State of the State of Delaware a
Certificate of Designations to establish the rights, preferences and privileges pertaining to the
preferred stock. Immediately following these transactions, on December 22, 2004, all of the shares of preferred
stock of AMH were sold to affiliates of Investcorp and, immediately following the sale of the
preferred stock to affiliates of Investcorp, pursuant to a restructuring agreement, all
shareholders of AMH (including such affiliates of Investcorp), contributed their shares of capital
stock of AMH to AMH II, a Delaware corporation incorporated on December 2, 2004 for the purpose of
becoming the direct parent of AMH. In exchange for such contribution, AMH II issued to such former
shareholders of AMH, shares of capital stock of AMH II which mirror (with respect to class, type,
voting rights, preferences, etc.) the AMH shares contributed by such shareholders. As a result of
this restructuring, AMH II became the direct parent company of AMH, and AMH II has no material
assets or operations other than its ownership of 100% of the capital stock of AMH. The former
stockholders of AMH became the stockholders of AMH II, holding shares of class B, series I (voting)
common stock, class B, series II (non-voting) common stock, voting preferred stock and non-voting
preferred stock in the same respective amounts in which such stockholders previously held shares of
the capital stock of AMH. All of the voting common stock of AMH II is held by affiliates of Harvest Partners and all of
the preferred stock of AMH II (a portion of which is voting preferred stock) is held by affiliates
of Investcorp, with the result that such affiliates of Harvest Partners, and Investcorp,
respectively, each hold 50% of the voting capital stock of AMH II. As a result of their ownership
of voting capital stock and a stockholders agreement, affiliates of Investcorp and Harvest Partners
will have the ability to designate a majority of the board of directors of AMH II and all of its
subsidiaries and to control action to be taken by AMH II and its subsidiaries and their respective
boards of directors, including amendments to their respective certificates of incorporation and
by-laws and approval of significant corporate transactions, including mergers and sales of
substantially all of the assets of AMH II and any of its subsidiaries. The following table sets forth certain information as of March 15, 2005 regarding the
beneficial ownership of AMH II:  
    each person known by the Company to own beneficially 5% or more of the outstanding voting common stock of AMH II;
    the directors and named executive officers of the Company; and
    all directors and named executive officers of the Company as a group. The Company determined beneficial ownership in accordance with the rules of the Commission,
which generally require inclusion of shares over which a person has voting or investment power.
Share ownership in each case includes shares that may be acquired within sixty days through the
exercise of any options. Except as otherwise indicated, the address for each of the named
individuals is c/o Associated Materials Incorporated, 3773 State
Road, Cuyahoga Falls, Ohio 44223. 90




---



##### Table of Contents



Class A Preferred Stock
    
    
    Class B Common StockNumber of
    
    
    
    
    
    
    Number ofShares - Series I
    
    
    % of
    
    
    Shares - Series I
    
    
    % of(voting)
    
    
    Class
    
    
    (voting)
    
    
    ClassInvestcorp S.A. (1)
    
    
    500,000
    
    
    
    100
    %
    
    
    
    
    
    
    Sipco Limited (2)
    
    
    500,000
    
    
    
    100
    %
    
    
    
    
    
    
    AM Equity Limited (3)
    
    
    105,001
    
    
    
    21
    %
    
    
    
    
    
    
    AM Investments Limited (4)
    
    
    105,001
    
    
    
    21
    %
    
    
    
    
    
    
    Associated Equity Limited (5)
    
    
    105,001
    
    
    
    21
    %
    
    
    
    
    
    
    Associated Investments Limited (6)
    
    
    105,001
    
    
    
    21
    %
    
    
    
    
    
    
    Harvest Funds (7)(8)(9)
    
    
    
    
    
    
    
    
    
    
    500,000
    
    
    
    100
    %
 Class B Common Stock
    
    
    Class B Common StockNumber of
    
    
    
    
    
    
    Number ofShares - Series I
    
    
    % of
    
    
    Shares - Series II
    
    
    % of(voting)
    
    
    Class
    
    
    (non-voting)
    
    
    ClassExecutive Officers and DirectorsMichael Caporale, Jr. (10)
    
    
    
    
    
    
    
    
    
    
    126,182
    
    
    
    9.8
    %D. Keith LaVanway (11)
    
    
    
    
    
    
    
    
    
    
    37,089
    
    
    
    2.9
    %Kenneth L. Bloom (12)
    
    
    
    
    
    
    
    
    
    
    31,574
    
    
    
    2.5
    %Robert M. Franco (13)
    
    
    
    
    
    
    
    
    
    
    11,292
    
    
    
    *John F. Haumesser (14)
    
    
    
    
    
    
    
    
    
    
    7,305
    
    
    
    *Kevin M. Hayes (15)
    
    
    
    
    
    
    
    
    
    
    228,719
    
    
    
    18.5
    %Ira D. Kleinman (16)
    
    
    500,000
    
    
    
    100
    %
    
    
    
    
    
    
    Simon C. Moore
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dana R. Snyder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Christopher J. Stadler
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dennis W. Vollmershausen (17)
    
    
    
    
    
    
    
    
    
    
    1,797
    
    
    
    *All directors and executive
officers as a group
    
    
    500,000
    
    
    
    100
    %
    
    
    443,958
    
    
    
    32.6
    %
   *
    
    less than 1%(1)
    
    Investcorp S.A. does not directly own any shares of stock of AMH II. The number of
shares listed includes 46,633 shares of Series I Class A Preferred Stock held by an indirect
subsidiary of Investcorp S.A. and 33,333 shares of Series I Class A Preferred Stock held by
a limited partnership in which an indirect subsidiary of Investcorp S.A. is the general
partner. The balance of the shares of Series I Class A Preferred Stock is owned by AM
Equity Limited, AM Investments Limited, Associated Equity Limited and Associated Investments
Limited (collectively, the AMH Investors). Investcorp S.A. does not own any of the shares
of the AMH Investors. Investcorp may be deemed to share beneficial ownership of the shares
of Series I Class A Preferred Stock held by the AMH Investors because the owners of the
voting stock of the AMH Investors have entered into revocable management services or similar
agreements with an affiliate of Investcorp S.A. pursuant to which each of the entities
owning the voting stock of the AMH Investors, or such entities stockholders, has granted
such affiliate the authority to direct the voting and disposition of the voting shares
issued by such entity, which permits Investcorp S.A. to control the voting and disposition
of the Series I Class A Preferred Stock owned by each AMH Investor for so long as such
agreements are in effect. The address for Investcorp Bank S.A. is 6 rue Adolphe Fischer,
Luxembourg.(2)
    
    Sipco Limited may be deemed to control Investcorp S.A. through its ownership of a
majority of a companys stock that indirectly owns a majority of Investcorp S.A.s shares.
Sipco Limited is a Cayman Islands corporation with its address at P.O. Box 1111, West Wind
Building, Georgetown, Grand Cayman, Cayman Islands.(3)
    
    AM Equity Limited is a Cayman Islands corporation with its address at P.O. Box 2197, West
Wind Building, Georgetown, Grand Cayman, Cayman Islands. 91




---



##### Table of Contents



(4)
    
    AM Investments Limited is a Cayman Islands corporation with its address at P.O. Box 2197,
West Wind Building, Georgetown, Grand Cayman, Cayman Islands.(5)
    
    Associated Equity Limited is a Cayman Islands corporation with its address at P.O. Box
2197, West Wind Building, Georgetown, Grand Cayman, Cayman Islands.(6)
    
    Associated Investments Limited is a Cayman Islands corporation with its address at P.O.
Box 2197, West Wind Building, Georgetown, Grand Cayman, Cayman Islands.(7)
    
    Harvest Funds are Harvest Partners III, L.P., Harvest Partners III
Beteilingungsgesellschaft Burgerlichen Rechts (mit Haftungsbeschrankung) (Harvest Partners
III, GbR), Harvest Partners IV, L.P. and Harvest Partners IV GmbH & Co. KG (Harvest
Partners IV KG). Harvest Associates III, L.L.C., which has six members, is the general
partner of Harvest Partners III, L.P. and Harvest Partners III, GbR. Harvest Associates IV,
L.L.C., which has six members, is the general partner of Harvest Partners IV, L.P. and
Harvest Partners IV KG. Harvest Partners, Inc. provides management services for Harvest
Associates III, L.L.C. in connection with Harvest Partners III, L.P. and Harvest Partners
III, GbR and for Harvest Associates IV, L.L.C. in connection with Harvest Partners IV, L.P.
and Harvest Partners IV KG.(8)
    
    Includes 131,978 shares of Class B Series I (voting) common stock owned by Harvest
Partners III, L.P. and 18,022 shares of Class B Series I (voting) common stock owned by
Harvest Partners III, GbR for each of which Harvest Associates III, L.L.C. is the general
partner. Harvest Associates III, L.L.C. has six members, each of whom has equal voting
rights and who may be deemed to share beneficial ownership of the
shares of Class B common stock of
AMH. The six members are Ira Kleinman, Harvey Mallement, Stephen Eisenstein, Harvey
Wertheim, William Kane and Thomas Arenz. Mr. Kleinman is on the
boards of directors of AMI, Holdings, AMH and AMH II. Each of Messrs. Kleinman, Mallement, Eisenstein, Wertheim, Kane and
Arenz disclaims beneficial ownership of the shares of Class A common stock owned by Harvest
Partners III, L.P. and Harvest Partners III GbR.(9)
    
    Includes 286,465 shares of Class B Series I (voting) common stock owned by Harvest
Partners IV, L.P. and 63,535 shares of Class B Series I (voting) common stock owned by
Harvest Partners IV KG, for each of which Harvest Associates IV, L.L.C. is the general
partner. Harvest Associates IV, L.L.C. has six members, each of whom has equal voting rights
and who may be deemed to share beneficial ownership of the shares of
Class B common stock of
AMH beneficially owned by it. The six members are Ira Kleinman, Harvey Mallement, Stephen
Eisenstein, Harvey Wertheim, William Kane and Thomas Arenz.
Mr. Kleinman is on the boards of directors of AMI, Holdings, AMH
and AMH II. Each of Messrs. Kleinman, Mallement, Eisenstein,
Wertheim, Kane and Arenz disclaims beneficial ownership of the shares of Class A common
stock owned by Harvest Partners IV, L.P., Harvest Partners IV KG. Harvest Partners III,
L.P., Harvest Partners III GbR, Harvest Partners IV, L.P. and Harvest Partners IV KG are
collectively referred to as the Harvest Funds. The address of the named entities is 280
Park Avenue, 33rd Floor, New York, New York 10017.(10)
    
    Includes 71,688 shares of Class B Series II (non-voting) common stock owned by Mr. Caporale
and options to purchase 54,494 shares of Class B Series II (non-voting) common stock.(11)
    
    Includes 6,426 shares of Class B Series II (non-voting) common stock owned by Mr. LaVanway
and options to purchase 30,663 shares of Class B Series II (non-voting) common stock.(12)
    
    Includes 6,688 shares of Class B Series II (non-voting) common stock owned by Mr. Bloom and
options to purchase 24,886 shares of Class B Series II (non-voting) common stock.(13)
    
    Includes options to purchase 11,292 shares of Class B Series II (non-voting) common stock.(14)
    
    Includes options to purchase 7,305 shares of Class B Series II (non-voting) common stock.(15)
    
    Mr. Hayes is a director for AMH II, AMH, Holdings and AMI, representing four of AMH IIs
stockholders, Weston Presidio Capital III, L.P., Weston Presidio Capital IV, L.P., WPC
Entrepreneur Fund, L.P. and WPC Entrepreneur Fund II, L.P., which are collectively referred to
as the Weston Funds. Mr. Hayes election as a director is prescribed by the stockholders
agreement. See Item 13. Certain Relationships and Related Transactions  The Stockholders
Agreement. The shares included in the table above includes shares held by the Weston Funds as
follows: Weston Presidio Capital III, L.P. holds 65,992 shares of Class B Series II
(non-voting) common stock; Weston Presidio Capital IV holds 156,986 shares of Class B Series
II (non-voting) 92




---



##### Table of Contents



common stock; WPC Entrepreneur Fund, L.P. holds 3,256 shares of Class B Series II (non-voting)
common stock; and WPC Entrepreneur Fund II, L.P. holds 2,485 shares of Class B Series II
(non-voting) common stock. Mr. Hayes is a member or partner, as the case may be, of the general
partner of the Weston Funds. Mr. Hayes disclaims beneficial ownership of the shares held by the
Weston Funds, except to the extent of his pecuniary interest therein.(16)
    
    Includes shares of Class B Series I
(voting) common stock owned by Harvest Partners III, L.P. and shares of
Class B Series I
(voting) common stock owned by Harvest Partners III GbR, for each of which Harvest Associates
III, L.L.C. is the general partner. Also includes shares of Class B Series I
(voting) common stock owned by
Harvest Partners IV, L.P. and Harvest Partners IV KG, for each of which Harvest Partners IV,
L.L.C. is the general partner. Mr. Kleinman is a member of Harvest Associates, III, L.L.C. and
Harvest Partners IV, L.L.C. and may be deemed to share beneficial ownership of the shares of
common stock of AMH beneficially owned by them. Mr. Kleinman disclaims beneficial ownership of
common shares owned by Harvest Partners III, L.P., Harvest Partners III GbR, Harvest Partners
IV, L.P. and Harvest Partners IV KG.(17)
    
    Includes 1,319 shares of Class B Series II (non-voting) common stock owned through a personal
holding company in the name of 3755428 Canada Inc., a Canadian corporation. Mr. Vollmershausen
is the sole shareholder of this corporation. Mr. Vollmershausen also holds options to purchase
478 shares of Class B Series II (non-voting) common stock. CHANGES IN CONTROL Stockholders Agreement In connection with the December 2004 recapitalization transaction, on December 22, 2004, all
of the stockholders of AMH II entered into a stockholders agreement which grants stockholders of
AMH II the right, under certain conditions, to cause AMH II to enter into transactions that may be
deemed to cause a change of control of the Company. The terms of the stockholders agreement are
more fully described below under Item 13. Pledge and Security Agreement Contemporaneously with AMIs entering into the amended and restated senior credit facility in
connection with the December 2004 recapitalization transaction, AMH entered into a Superholdco
Pledge and Security Agreement, pursuant to which, among other things, AMH pledged all of the
capital stock of Holdings to the lenders under the AMIs senior credit agreement, as collateral for
the performance of the Companys obligations thereunder. Upon the occurrence of an event of
default under the Companys senior credit agreement, the administrative agent thereunder is
entitled under such pledge and security agreement to transfer all or any part of the collateral
thereunder (including the pledged capital stock of Holdings) into the name of the administrative
agent, on behalf of the lenders under the senior credit agreement, and to sell or otherwise dispose
of such collateral (including the pledged capital stock of Holdings) in any manner permitted by law
and by the terms of such pledge and security agreement. The occurrence of such an event of default
and the exercise by the administrative agent of such remedies under the pledge and security
agreement could result in a change of control of AMH, Holdings and AMI. 
 ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS THE RESTRUCTURING AGREEMENTS On March 4, 2004, AMH, Holdings and the stockholders of Holdings entered into a restructuring
agreement pursuant to which all of the stockholders of Holdings contributed their capital stock in
Holdings to AMH in exchange for equivalent capital stock in AMH. Subsequently, AMH contributed all
of the capital stock of Holdings which was contributed to it back to Holdings, in exchange for
1,000 shares of class A common stock of Holdings. Following this exchange, all of the former
stockholders of Holdings became the stockholders of AMH, and AMH became the sole stockholder of
Holdings. Holdings continued to be the sole stockholder of AMI. In connection with the recapitalization transaction, on December 22, 2004, the stockholders of
AMH entered into a restructuring agreement pursuant to which such stockholders contributed their
shares of the capital stock of AMH to AMH II in exchange for shares of the capital stock of AMH II
mirroring (in terms of type and class, voting rights, preferences and other rights) the shares of
AMH capital stock contributed by such shareholders. Following this exchange, all of the former
stockholders of AMH became the stockholders of AMH II, and AMH II became the sole stockholder of
AMH. 93




---



##### Table of Contents



THE STOCKHOLDERS AGREEMENT In connection with the December 2004 recapitalization transaction, on December 22, 2004, the
stockholders of AMH II entered into a stockholders agreement which will govern certain
relationships among, and contains certain rights and obligations of, such stockholders. The
stockholders agreement (1) limits the ability of the stockholders to transfer their shares in AMH
II except in certain permitted transfers as defined therein; (2) provides for certain tag-along
obligations and certain drag-along rights; (3) provides for certain registration rights; and (4)
provides for certain preemptive rights. The AMH II stockholders agreement is substantially the same as the AMH stockholders agreement,
dated March 4, 2004, which governed the relationship among, and contained certain rights and
obligations of, the AMH stockholders. As a result of the December 2004 recapitalization
transaction, the stockholders of AMH agreed to terminate the AMH stockholders agreement and enter
into the AMH II stockholders agreement. Pursuant to the stockholders agreement, Harvest Partners has the right to designate three
members of a seven member board of directors of AMH II and Investcorp has the right to designate
three of the seven members of the board of directors of AMH II. An additional board seat will be
occupied by the chief executive officer of AMI, who is currently Michael Caporale, Jr. The boards
of directors of AMH, Holdings and AMI will have the same composition and are subject to the same
rules and operating procedures as set forth in the stockholders agreement. The number of directors
that each of Investcorp and Harvest can designate to the board of directors is reduced as their
equity ownership in AMH II is reduced below specified percentages. Funds managed by Harvest
Partners and Investcorp, each hold 50% of the voting capital stock of AMH II. All decision making
by the board of directors will generally require the affirmative vote of a majority of the members
of the entire board of directors. In addition, certain matters, such as issuing additional equity
securities, new debt financings, acquisitions and related transactions, and other significant
transactions, require the affirmative vote of at least one director nominated by Harvest and one
director nominated by Investcorp (a Special Board Approval). The number of matters that require
a Special Board Approval is reduced as the equity ownership of each of Harvest and Investcorp falls
below certain stated thresholds. The stockholders agreement prohibits transfers of securities of AMH II except: (i) to certain
Permitted Transferees (as defined in the stockholders agreement), (ii) in a registered public
offering, (iii) pursuant to certain drag-along rights that would require stockholders to sell all
or part of their equity interest in AMH II to third parties along with certain sales by
stockholders holding a majority of the outstanding shares of common stock or a majority of the
outstanding shares of convertible preferred stock and on the same terms, and subject to the same
conditions, as such sales, and (iv) pursuant to certain preemptive and tag-along rights that would
require a stockholder wishing to sell all or part of its equity interest in AMH II to first offer
its shares on the same terms to AMH II and the other stockholders of AMH II party to the
stockholders agreement, and if not purchased by AMH II or such stockholders, to include shares of
such stockholders, at their option, in the event of a sale to a third party. The stockholders agreement provides stockholders certain rights with respect to registration
under the Securities Act of 1933, as amended (the Securities Act), either upon the occurrence of
the initial public offering or registration of AMH II of its securities under the Securities Act
for its own account or account of another person. The stockholders agreement also provides
stockholders with certain preemptive rights to purchase AMH II securities upon the issuance of new
AMH II securities, and subject to certain other conditions. The stockholders agreement provides Investcorp (together with their Permitted Transferees, the
Investcorp Investors) with the following additional rights: (i) at any time after December 22,
2006, the Investcorp Investors may demand that an independent valuation of AMH II be performed by
an independent investment banking or valuation firm and, in the event that the valuation is less
than the Threshold Amount (as defined in the stockholders agreement), and subject to certain
other conditions, the Investcorp Investors may make changes to the executive officers of AMH II and
its subsidiaries, including the Chief Executive Officer (who shall be reasonably acceptable to the
stockholders party thereto affiliated with Harvest Partners (together with their Permitted
Transferees, the Harvest Funds)); (ii) if for the period from January 1, 2005 through December
31, 2008, the Adjusted Cash Flow (as defined in the stockholders agreement) of AMH II and its
subsidiaries is less than 70% of the Projected Adjusted Cash Flow (as defined in the stockholders
agreement) of AMH II and its subsidiaries, the Investcorp Investors may notify AMH II that they
intend to initiate a process that could result in the exercise by the Investcorp Investors of their
drag-along rights and, if the Investcorp Investors opt to pursue the exercise of their drag-along
rights, for a period of 60 days after notice thereof is given to AMH II, the Harvest Funds and AMH
II shall have the right, but not the obligation, to purchase all, but not less than all, of the
outstanding preferred stock and common stock held by the Investcorp Investors; and (iii) at any
time after July 15, 2007, the Investcorp Investors may notify AMH II that they intend to cause AMH
II to initiate a process that could result in a recapitalization of AMH II, in accordance with
certain conditions (as further described in the stockholders agreement, an Approved
Recapitalization). In each of (i) and (ii), at the earlier of such time as (a) 75% or more of the
preferred stock of AMH II acquired by the Investcorp Investors pursuant to the Restructuring 94




---



##### Table of Contents



Agreement has been repurchased by AMH II or converted into common stock of AMH II and (b) the
Investcorp Investors hold less than 20% of AMH IIs outstanding capital stock, then the rights
under (i) and (ii) described herein will terminate. In addition, each of the rights granted under
(i), (ii) and (iii) are exercisable only once during the term of the Stockholders Agreement.
Subject to certain conditions, the other stockholders (other than the Investcorp Investors) party
to the stockholders agreement shall also have the right to initiate an Approved Recapitalization at
any time after July 15, 2007, if the Equity Value (as defined in the Stockholders Agreement) of AMH
II exceeds $815.0 million. Also, at any time after December 22, 2009, each of Investcorp and
Harvest Funds may notify the Company and the other stockholders that they intend to initiate a
process that could result in the exercise of their respective drag-along rights. In March 2004, the stockholders of AMH entered into a stockholders agreement, at the time
which governed certain relationships among, and contained certain rights and obligations of, such
stockholders. The stockholders agreement, among other things; (1) limited the ability of the
stockholders to transfer their shares in AMH except in certain permitted transfers as defined
therein; (2) provided for certain tag-along obligations and certain bring-along rights; (3)
provided for certain registration rights; and (4) provided for certain preemptive rights. The AMH stockholders agreement was substantially the same as the prior Holdings stockholder
agreement, dated April 19, 2002, which governed the relationships among, and contained certain
rights and obligations of, the Holdings stockholders. The stockholders agreement dated December 22, 2004 terminated and superseded the existing and
amended and restated stockholders agreement dated March 4, 2004 by and among AMH and the existing
stockholders of AMH. MANAGEMENT AGREEMENT See Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations  Related Party Transactions for a discussion of AMIs management agreement with
Investcorp and Harvest Partners. Under the Investcorp Financing and M&A Advisory Agreement,
affiliates of Investcorp received $9.1 million for management and financial advisory services in
connection with the December 2004 recapitalization transaction. Additionally, AMI entered into an
agreement with Investcorp for management advisory, strategic planning and consulting services for
which AMI paid Investcorp a total of $6 million on December 22, 2004. As described in the
management services agreement with Investcorp, $4 million of this management fee relates to
services to be provided during the first year of the agreement, with $0.5 million related to
services to be provided each year of the remaining four year term of the agreement. In connection
with the December 2004 recapitalization transaction, AMI entered into an amended and restated
management agreement with Harvest Partners. Pursuant to the amended agreement, Harvest Partners
received $4.9 million in connection with the December 2004 recapitalization transaction.
Additionally, Harvest Partners received approximately $0.8 million for management fees for 2004 and
$1.3 million in financial advisory services in connection with the completion of the offering of
AMHs 11 1/4% notes and the related transactions. MANAGEMENT BONUS Upon the completion of the offer by AMH of its 11 1/4% notes in March 2004, AMH paid 17
members of its and AMIs senior management and a director a bonus of $14.5 million, of which
approximately $12.3 million was paid to five executive officers, in recognition of their effort
with respect to the acquisition of Gentek, AMIs performance since the April 2002 merger
transaction, as well as the completion of the offering of AMHs 11 1/4% notes. Upon the completion of the December 2004 recapitalization transaction with Investcorp, AMH II
paid 26 members of the Companys senior management and a director a bonus of $22.3 million, of
which approximately $19.4 million was paid to five executive officers, in recognition of their
effort with respect to the transaction. At January 1, 2005, $8.0 million of the $22.3 million
bonus amount was recorded as a promissory note. The note was paid in cash during the first quarter
of 2005. 95




---



##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The following table sets forth the aggregate fees billed to the Company by the independent
accountants, Ernst & Young LLP, for services rendered during fiscal years 2004 and 2003 (in
thousands): 2004
    
    
    2003Audit Fees
    
    $
    1,108
    
    
    $
    728Audit-Related Fees
    
    
    35
    
    
    
    489Tax Fees
    
    
    361
    
    
    
    320Total Fees
    
    $
    1,504
    
    
    $
    1,537
 AMHs audit committee adopted a policy in March 2004 to pre-approve all audit and non-audit
services provided by its independent public accountants prior to the engagement of its independent
public accountants with respect to such services. Under such policy, the audit committee may
delegate one or more members who are independent directors of the board of directors to pre-approve
the engagement of the independent public accountants. Such member must report all such
pre-approvals to its entire audit committee at the next committee meeting. AUDIT FEES Audit Fees principally constitute fees billed for professional services rendered by Ernst &
Young LLP for the audit of the Companys consolidated financial statements for each of the fiscal
years 2004 and 2003 and the reviews of the consolidated financial statements included in the
Companys quarterly reports on Form 10-Q filed during fiscal years 2004 and 2003. AUDIT-RELATED FEES Audit-related fees constitute fees billed for assurance and related services by Ernst & Young
LLP that are reasonably related to the performance of the audit or review of the Companys
consolidated financial statements, other than the services reported above under Audit Fees, in
each of the fiscal years 2004 and 2003. In fiscal year 2004 audit-related fees principally
consisted of fees for acquisition due diligence. Fees for 2003 related to fees for acquisition due
diligence and fees related to the audit of employee benefit plans. The Audit Committee pre-approved
100% of the audit-related fees subsequent to its formation in 2003 and 2004. TAX FEES Tax fees constitute fees billed for professional services rendered by Ernst & Young LLP for
tax compliance, tax advice and tax planning in each of the fiscal years 2004 and 2003. In fiscal
year 2004 and 2003, tax fees principally consisted of fees for tax compliance and review of
transaction related fees. The Audit Committee pre-approved 100% of the tax fees subsequent to its
formation in 2003 and 2004. 
 PART IV 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K The following documents are included in this report. (A)(1) FINANCIAL STATEMENTS See Index to Financial Statements at Item 8 on Page 39 of this report. (A)(2) FINANCIAL STATEMENT SCHEDULES All financial statement schedules have been omitted due to the absence of conditions under
which they are required or because the information required is included in the consolidated
financial statements or the notes thereto. 96




---



##### Table of Contents



(C) EXHIBITS EXHIBITNUMBER
    
    DESCRIPTION2.1
    
    Agreement and Plan of Merger, dated as of March 16, 2002, by and among
Associated Materials Holdings Inc. (formerly known as Harvest/AMI Holdings
Inc.), Simon Acquisition Corp. and AMI (incorporated by reference to Exhibit 2.1
to AMHs Registration Statement on Form S-4, Commission File No. 333-115543,
filed on May 14, 2004).3.1
    
    AMH and Restated Certificate of Incorporation of AMH (incorporated by reference
to Exhibit 3.1 to AMHs Current Report on Form 8-K/A, filed with the Securities
and Exchange Commission on December 23, 2004).3.2
    
    By-Laws of AMH (incorporated by reference to Exhibit 3.2 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).3.3
    
    Certificate of Designations, Preferences and Rights pertaining to the Preferred
Stock of AMH, as filed with the Secretary of State of Delaware on December 22,
2004 (incorporated by reference to Exhibit 3.2 to AMHs Current Report on Form
8-K/A, filed with the Securities and Exchange Commission on December 23, 2004).4.1
    
    Indenture governing AMHs
11 1/4% Senior Discount Notes due 2014, dated as of March
4, 2004, between AMH and Wilmington Trust Company (incorporated by reference to
Exhibit 4.2 to AMHs Registration Statement on Form S-4, Commission File No.
333-115543, filed on May 14, 2004).4.2
    
    Form of 11 1/4% Senior Discount Notes due 2014 (included in Exhibit 4.1).4.3
    
    Indenture governing AMIs 9 3/4% Senior Subordinated Notes Due 2012, dated as of
April 23, 2002, by and among AMI, AMI Management Company and Wilmington Trust
Company (incorporated by reference to Exhibit 4.4 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).4.4
    
    Supplemental Indenture governing AMIs 9 3/4% Senior Subordinated Notes Due
2012, dated as of May 10, 2002 by and among AMI, AMI Management Company, Al
side, Inc. and Wilmington Trust Company (incorporated by reference to Exhibit
4.5 to AMHs Registration Statement on Form S-4, Commission File No. 333-115543,
filed on May 14, 2004).4.5
    
    Second Supplemental Indenture, dated as of August 29, 2003, among AMI, Al side,
Inc., Gentek Holdings, Inc., Gentek Building Products, Inc. and Wilmington Trust
Company (incorporated by reference to Exhibit 4.6 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).4.6
    
    Form of AMIs 9 3/4% Senior Subordinated Note Due 2012 (incorporated by
reference to Exhibit 4.7 to AMHs Registration Statement on Form S-4, Commission
File No. 333-115543, filed on May 14, 2004).10.1
    
    Second Amended and Restated Credit
Agreement (Credit Agreement), dated December 22, 2004, among
Associated Materials Incorporated and Gentek Building Products Limited, as
borrowers, AMH Holdings, Inc. and Associated Materials Holdings, Inc., as
guarantors, the lenders party thereto, UBS AG, Stamford Branch, as the U.S.
Administrative Agent, Canadian Imperial Bank of Commerce, as the Canadian
Administrative Agent, Citigroup Global Markets Inc., as syndication agent,
General Electric Capital Corporation and National City Bank, as Co-Documentation
Agents, and UBS Securities, LLC and Citigroup Global Markets Inc., as joint lead
arrangers (incorporated by reference to Exhibit 10.3 to AMHs Current Report on
Form 8-K/A, filed with the Securities and Exchange Commission on December 23,
2004).10.2
    
    Borrower Security and Pledge Agreement of AMI, dated as of April 19, 2002, by
AMI, in favor of UBS AG, Stamford Branch, as administrative agent (incorporated
by reference to Exhibit 10.3 to AMHs Registration Statement on Form S-4,
Commission File No. 333-115543, filed on May 14, 2004).10.3
    
    Form of Subsidiary Security and Pledge Agreement, by each subsidiary of AMI from
time to time party thereto in favor of UBS AG, Stamford Branch, as
administrative agent, on behalf of the Secured Parties (as defined in the Credit
Agreement) (incorporated by reference to Exhibit 10.4 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).10.4
    
    Form of Subsidiary Guaranty, by each subsidiary of AMI from time to time party
thereto in favor of UBS AG, Stamford Branch, as administrative agent, on behalf
of the Secured Parties (as defined in the Credit Agreement) (incorporated by
reference to Exhibit 10.5 to AMHs Registration Statement on Form S-4,
Commission File No. 333-115543, filed on May 14, 2004).10.5
    
    Assumption Agreement, dated as of April 19, 2002, by and among AMI and AMI
Management Company, as guarantors (incorporated by reference to Exhibit 10.6 to
AMHs Registration Statement on Form S-4, Commission File No. 333-115543, filed
on May 14, 2004).10.6
    
    Agreement of Sale, dated as of January 30, 1984, between USX Corporation
(formerly United States Steel Corporation) (USX) and AMI (incorporated by
reference to Exhibit 10.7 to AMHs Registration Statement on Form S-4,
Commission File No. 333-115543, filed on May 14, 2004).10.7
    
    Amendment Agreement, dated as of February 29, 1984, between USX and AMI
(incorporated by reference to Exhibit 10.8 to AMHs Registration Statement on
Form S-4, Commission File No. 333-115543, filed on May 14, 2004).
 97




---



##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION10.8
    
    Form of Indemnification Agreement between AMI and each of the directors and
executive officers of the AMI (incorporated by reference to Exhibit 10.9 to
AMHs Registration Statement on Form S-4, Commission File No. 333-115543, filed
on May 14, 2004).10.9
    
    Amended and Restated Management Agreement, dated December 22, 2004, by and
between Harvest Partners, Inc. and Associated Materials Incorporated
(incorporated by reference to Exhibit 10.7 to AMHs Current Report on Form 8-K,
filed with the Securities and Exchange Commission on December 23, 2004).10.10
    
    Asset Purchase Agreement, dated as of June 24, 2002, between AMI and Amer Cable
Incorporated (incorporated by reference to Exhibit 10.12 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).10.11
    
    Associated Materials Holdings Inc. 2002 Stock Option Plan (incorporated by
reference to Exhibit 10.13 to AMHs Registration Statement on Form S-4,
Commission File No. 333-115543, filed on May 14, 2004).10.12
    
    Amended and Restated Employment Agreement, dated as of July 31, 2004, between
AMI and Michael Caporale, Jr. (incorporated by reference to Exhibit 10.14 to
AMHs Registration Statement on Form S-4/A, Commission File No. 333-115543,
filed on September 22, 2004).10.13
    
    Amended and Restated Employment Agreement, dated as of July 31, 2004, between
AMI and D. Keith LaVanway (incorporated by reference to Exhibit 10.15 to AMHs
Registration Statement on Form S-4/A, Commission File No. 333-115543, filed on
September 22, 2004).10.14
    
    Associated Materials Holding Inc. Stock Option Award Agreement, dated September
4, 2002, between Associated Materials Holdings Inc. and Michael Caporale, Jr.
(incorporated by reference to Exhibit 10.19 to AMHs Registration Statement on
Form S-4, Commission File No. 333-115543, filed on May 14, 2004).10.15
    
    Associated Materials Holding Inc. Stock Option Award Agreement, dated September
4, 2002, between Associated Materials Holdings Inc. and Michael Caporale, Jr.
(incorporated by reference to Exhibit 10.20 to AMHs Registration Statement on
Form S-4, Commission File No. 333-115543, filed on May 14, 2004).10.16
    
    Amended and Restated Employment Agreement, dated as of July 31, 2004, between
AMI and Kenneth L. Bloom (incorporated by reference to Exhibit 10.16 to AMHs
Registration Statement on Form S-4/A, Commission File No. 333-115543, filed on
September 22, 2004).10.17
    
    Amended and Restated Employment Agreement, dated as of July 31, 2004, between
AMI and Robert M. Franco (incorporated by reference to Exhibit 10.17 to AMHs
Registration Statement on Form S-4/A, Commission File No. 333-115543, filed on
September 22, 2004).10.18
    
    Amended and Restated Employment Agreement, dated as of July 31, 2004, between
AMI and John F. Haumesser (incorporated by reference to Exhibit 10.18 to AMHs
Registration Statement on Form S-4/A, Commission File No. 333-115543, filed on
September 22, 2004).10.19
    
    Stock Purchase Agreement (the Stock Purchase Agreement), dated July 31, 2003,
by and among AMI, Gentek Holdings, Inc., Gentek Building Products, Inc., Gentek
Building Products Limited, The Sherwin-Willliams Claims Trust, Genstar Capital
Corporation, Ontario Teachers Pension Plan Board and other stockholders listed
therein (incorporated by reference to Exhibit 10.21 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).10.20
    
    Amendment No. 1 to the Stock Purchase Agreement, dated as of August 29, 2003, by
and among AMI, Gentek Holdings, Inc., Gentek Building Products, Inc., Gentek
Building Products Limited, The Sherwin-Willliams Claims Trust, Genstar Capital
Corporation, Ontario Teachers Pension Plan Board and other stockholders listed
therein (incorporated by reference to Exhibit 10.22 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).10.21
    
    Amendment Agreement, dated December 22, 2004, by and between Associated
Materials Incorporated, Gentek Building Products Limited, as borrowers, AMH
Holdings, Inc. and Associated Materials Holdings, Inc., the lenders party
thereto, UBS AG, Stamford Branch, as the U.S. Administrative Agent, Canadian
Imperial Bank of Commerce, as the Canadian Administrative Agent, Citigroup
Global Markets Inc., as syndication agent, and UBS Securities, LLC and Citigroup
Global Markets Inc., as joint lead arrangers (incorporated by reference to
Exhibit 10.4 to AMHs Current Report on Form 8-K/A, filed with the Securities
and Exchange Commission on December 23, 2004).10.22
    
    Management Advisory Agreement, dated December 22, 2004, by and between
Investcorp International, Inc. and Associated Materials Incorporated
(incorporated by reference to Exhibit 10.8 to AMHs Current Report on Form
8-K/A, filed with the Securities and Exchange Commission on December 23, 2004).10.23
    
    Financing Advisory Agreement, dated December 5, 2004, by and between Investcorp
International, Inc. and Associated Materials Incorporated (incorporated by
reference to Exhibit 10.9 to AMHs Current Report on Form 8-K/A, filed with the
Securities and Exchange Commission on December 23, 2004).10.24
    
    M&A Advisory Services Agreement, dated December 5, 2004, by and between
Investcorp International, Inc. and Associated Materials Incorporated
(incorporated by reference to Exhibit 10.10 to AMHs Current Report on Form
8-K/A, filed with the Securities and Exchange Commission on December 23, 2004)
 98




---



##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION10.25
    
    AMH Holdings II, Inc. 2004 Stock Option Plan (incorporated by reference to
Exhibit 10.11 to AMHs Current Report on Form 8-K/A, filed with the Securities
and Exchange Commission on December 23, 2004)10.26
    
    Superholdco Pledge and Security Agreement, dated December 22, 2004, by and
between AMH, as Pledgor, in favor of UBS AG, Stamford Branch, as the
Administrative Agent (incorporated by reference to Exhibit 10.5 to AMHs Current
Report on Form 8-K/A, filed with the Securities and Exchange Commission on
December 23, 2004).10.27
    
    Form of Superholdco Guaranty, dated December 22, 2004, by and between AMH, as
the Guarantor, in favor of UBS AG, Stamford Branch, as the Administrative Agent
(incorporated by reference to Exhibit 10.6 to AMHs Current Report on Form
8-K/A, filed with the Securities and Exchange Commission on December 23, 2004).10.28
    
    Stock Purchase Agreement, dated December 5, 2004, by and between AMH and the
other parties signatory hereto (incorporated by reference to Exhibit 2.1 to the
Companys Current Report on Form 8-K/A, filed with the Securities and Exchange
Commission on December 7, 2004).10.29
    
    Stockholders Agreement, dated December 22, 2004, by and between the stockholders
of AMH (incorporated by reference to Exhibit 10.2 to the AMHs Current Report on
Form 8-K/A, filed with the Securities and Exchange Commission on December 23,
2004).10.30
    
    Tax Sharing Agreement, dated March 4, 2004, by and among AMH, Holdings and AMI.21.1
    
    Subsidiaries of AMH.31.1
    
    Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or
15d-14(a) of the Exchange Act, as adopted, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Principal Financial Officer pursuant to Rule 13a-14 or
15d-14(a) of the Exchange Act, as adopted, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the 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 the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
 99




---



##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. AMH HOLDINGS, INC.By:
    /s/ MICHAEL CAPORALE, JR.Michael Caporale, Jr.Chairman, President and Chief Executive Officer
(Principal Executive Officer) By:
    /s/ D. KEITH LAVANWAYD. Keith LaVanwayVice President-Chief Financial Officer,
Treasurer and Secretary
(Principal Financial Officer and
Principal Accounting Officer)Date: April 1, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated. SIGNATURE
    
    TITLE
    
    DATE/s/ MICHAEL CAPORALE, JR.

Michael Caporale, Jr.
    
    Chairman, President and Chief Executive Officer
(Principal Executive Officer)
    
    April 1, 2005/s/ D. KEITH LAVANWAY

D. Keith LaVanway
    
    Vice President-Chief Financial Officer,
Treasurer and Secretary
(Principal Financial Officer and
Principal Accounting Officer)
    
    April 1, 2005/s/ KEVIN M. HAYES

Kevin M. Hayes
    
    Director
    
    April 1, 2005/s/ IRA D. KLEINMAN

Ira D. Kleinman
    
    Director
    
    April 1, 2005/s/ SIMON C. MOORE

Simon C. Moore
    
    Director
    
    April 1, 2005/s/ DANA R. SNYDER

Dana R. Snyder
    
    Director
    
    April 1, 2005/s/ CHRISTOPHER J. STADLER

Christopher J. Stadler
    
    Director
    
    April 1, 2005/s/ DENNIS W. VOLLMERSHAUSEN

Dennis W. Vollmershausen
    
    Director
    
    April 1, 2005
 SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY
REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT No annual report or proxy material has been sent to security holders covering fiscal 2004. 100




---



##### Table of Contents



EXHIBIT INDEX EXHIBITNUMBER
    
    DESCRIPTION2.1
    
    Agreement and Plan of Merger, dated as of March 16, 2002, by and among
Associated Materials Holdings Inc. (formerly known as Harvest/AMI Holdings
Inc.), Simon Acquisition Corp. and AMI (incorporated by reference to Exhibit 2.1
to AMHs Registration Statement on Form S-4, Commission File No. 333-115543,
filed on May 14, 2004).3.1
    
    AMH and Restated Certificate of Incorporation of AMH (incorporated by reference
to Exhibit 3.1 to AMHs Current Report on Form 8-K/A, filed with the Securities
and Exchange Commission on December 23, 2004).3.2
    
    By-Laws of AMH (incorporated by reference to Exhibit 3.2 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).3.3
    
    Certificate of Designations, Preferences and Rights pertaining to the Preferred
Stock of AMH, as filed with the Secretary of State of Delaware on December 22,
2004 (incorporated by reference to Exhibit 3.2 to AMHs Current Report on Form
8-K/A, filed with the Securities and Exchange Commission on December 23, 2004).4.1
    
    Indenture governing AMHs
11 1/4% Senior Discount Notes due 2014, dated as of March
4, 2004, between AMH and Wilmington Trust Company (incorporated by reference to
Exhibit 4.2 to AMHs Registration Statement on Form S-4, Commission File No.
333-115543, filed on May 14, 2004).4.2
    
    Form of 11 1/4% Senior
Discount Notes due 2014 (included in Exhibit 4.1).4.3
    
    Indenture governing AMIs 9 3/4% Senior Subordinated Notes Due 2012, dated as of
April 23, 2002, by and among AMI, AMI Management Company and Wilmington Trust
Company (incorporated by reference to Exhibit 4.4 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).4.4
    
    Supplemental Indenture governing AMIs 9 3/4% Senior Subordinated Notes Due
2012, dated as of May 10, 2002 by and among AMI, AMI Management Company, Al
side, Inc. and Wilmington Trust Company (incorporated by reference to Exhibit
4.5 to AMHs Registration Statement on Form S-4, Commission File No. 333-115543,
filed on May 14, 2004).4.5
    
    Second Supplemental Indenture, dated as of August 29, 2003, among AMI, Al side,
Inc., Gentek Holdings, Inc., Gentek Building Products, Inc. and Wilmington Trust
Company (incorporated by reference to Exhibit 4.6 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).4.6
    
    Form of AMIs 9 3/4% Senior Subordinated Note Due 2012 (incorporated by
reference to Exhibit 4.7 to AMHs Registration Statement on Form S-4, Commission
File No. 333-115543, filed on May 14, 2004).10.1
    
    Second Amended and Restated Credit Agreement, dated December 22, 2004, among
Associated Materials Incorporated and Gentek Building Products Limited, as
borrowers, AMH Holdings, Inc. and Associated Materials Holdings, Inc., as
guarantors, the lenders party thereto, UBS AG, Stamford Branch, as the U.S.
Administrative Agent, Canadian Imperial Bank of Commerce, as the Canadian
Administrative Agent, Citigroup Global Markets Inc., as syndication agent,
General Electric Capital Corporation and National City Bank, as Co-Documentation
Agents, and UBS Securities, LLC and Citigroup Global Markets Inc., as joint lead
arrangers (incorporated by reference to Exhibit 10.3 to AMHs Current Report on
Form 8-K/A, filed with the Securities and Exchange Commission on December 23,
2004).10.2
    
    Borrower Security and Pledge Agreement of AMI, dated as of April 19, 2002, by
AMI, in favor of UBS AG, Stamford Branch, as administrative agent (incorporated
by reference to Exhibit 10.3 to AMHs Registration Statement on Form S-4,
Commission File No. 333-115543, filed on May 14, 2004).10.3
    
    Form of Subsidiary Security and Pledge Agreement, by each subsidiary of AMI from
time to time party thereto in favor of UBS AG, Stamford Branch, as
administrative agent, on behalf of the Secured Parties (as defined in the Credit
Agreement) (incorporated by reference to Exhibit 10.4 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).10.4
    
    Form of Subsidiary Guaranty, by each subsidiary of AMI from time to time party
thereto in favor of UBS AG, Stamford Branch, as administrative agent, on behalf
of the Secured Parties (as defined in the Credit Agreement) (incorporated by
reference to Exhibit 10.5 to AMHs Registration Statement on Form S-4,
Commission File No. 333-115543, filed on May 14, 2004).10.5
    
    Assumption Agreement, dated as of April 19, 2002, by and among AMI and AMI
Management Company, as guarantors (incorporated by reference to Exhibit 10.6 to
AMHs Registration Statement on Form S-4, Commission File No. 333-115543, filed
on May 14, 2004).10.6
    
    Agreement of Sale, dated as of January 30, 1984, between USX Corporation
(formerly United States Steel Corporation) (USX) and AMI (incorporated by
reference to Exhibit 10.7 to AMHs Registration Statement on Form S-4,
Commission File No. 333-115543, filed on May 14, 2004).
 101




---



##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION10.7
    
    Amendment Agreement, dated as of February 29, 1984, between USX and AMI
(incorporated by reference to Exhibit 10.8 to AMHs Registration Statement on
Form S-4, Commission File No. 333-115543, filed on May 14, 2004).10.8
    
    Form of Indemnification Agreement between AMI and each of the directors and
executive officers of the AMI (incorporated by reference to Exhibit 10.9 to
AMHs Registration Statement on Form S-4, Commission File No. 333-115543, filed
on May 14, 2004).10.9
    
    Amended and Restated Management Agreement, dated December 22, 2004, by and
between Harvest Partners, Inc. and Associated Materials Incorporated
(incorporated by reference to Exhibit 10.7 to AMHs Current Report on Form 8-K,
filed with the Securities and Exchange Commission on December 23, 2004).10.10
    
    Asset Purchase Agreement, dated as of June 24, 2002, between AMI and Amer Cable
Incorporated (incorporated by reference to Exhibit 10.12 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).10.11
    
    Associated Materials Holdings Inc. 2002 Stock Option Plan (incorporated by
reference to Exhibit 10.13 to AMHs Registration Statement on Form S-4,
Commission File No. 333-115543, filed on May 14, 2004).10.12
    
    Amended and Restated Employment Agreement, dated as of July 31, 2004, between
AMI and Michael Caporale, Jr. (incorporated by reference to Exhibit 10.14 to
AMHs Registration Statement on Form S-4/A, Commission File No. 333-115543,
filed on September 22, 2004).10.13
    
    Amended and Restated Employment Agreement, dated as of July 31, 2004, between
AMI and D. Keith LaVanway (incorporated by reference to Exhibit 10.15 to AMHs
Registration Statement on Form S-4/A, Commission File No. 333-115543, filed on
September 22, 2004).10.14
    
    Associated Materials Holding Inc. Stock Option Award Agreement, dated September
4, 2002, between Associated Materials Holdings Inc. and Michael Caporale, Jr.
(incorporated by reference to Exhibit 10.19 to AMHs Registration Statement on
Form S-4, Commission File No. 333-115543, filed on May 14, 2004).10.15
    
    Associated Materials Holding Inc. Stock Option Award Agreement, dated September
4, 2002, between Associated Materials Holdings Inc. and Michael Caporale, Jr.
(incorporated by reference to Exhibit 10.20 to AMHs Registration Statement on
Form S-4, Commission File No. 333-115543, filed on May 14, 2004).10.16
    
    Amended and Restated Employment Agreement, dated as of July 31, 2004, between
AMI and Kenneth L. Bloom (incorporated by reference to Exhibit 10.16 to AMHs
Registration Statement on Form S-4/A, Commission File No. 333-115543, filed on
September 22, 2004).10.17
    
    Amended and Restated Employment Agreement, dated as of July 31, 2004, between
AMI and Robert M. Franco (incorporated by reference to Exhibit 10.17 to AMHs
Registration Statement on Form S-4/A, Commission File No. 333-115543, filed on
September 22, 2004).10.18
    
    Amended and Restated Employment Agreement, dated as of July 31, 2004, between
AMI and John F. Haumesser (incorporated by reference to Exhibit 10.18 to AMHs
Registration Statement on Form S-4/A, Commission File No. 333-115543, filed on
September 22, 2004).10.19
    
    Stock Purchase Agreement (the Stock Purchase Agreement), dated July 31, 2003,
by and among AMI, Gentek Holdings, Inc., Gentek Building Products, Inc., Gentek
Building Products Limited, The Sherwin-Willliams Claims Trust, Genstar Capital
Corporation, Ontario Teachers Pension Plan Board and other stockholders listed
therein (incorporated by reference to Exhibit 10.21 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).10.20
    
    Amendment No. 1 to the Stock Purchase Agreement, dated as of August 29, 2003, by
and among AMI, Gentek Holdings, Inc., Gentek Building Products, Inc., Gentek
Building Products Limited, The Sherwin-Willliams Claims Trust, Genstar Capital
Corporation, Ontario Teachers Pension Plan Board and other stockholders listed
therein (incorporated by reference to Exhibit 10.22 to AMHs Registration
Statement on Form S-4, Commission File No. 333-115543, filed on May 14, 2004).10.21
    
    Amendment Agreement, dated December 22, 2004, by and between Associated
Materials Incorporated, Gentek Building Products Limited, as borrowers, AMH
Holdings, Inc. and Associated Materials Holdings, Inc., the lenders party
thereto, UBS AG, Stamford Branch, as the U.S. Administrative Agent, Canadian
Imperial Bank of Commerce, as the Canadian Administrative Agent, Citigroup
Global Markets Inc., as syndication agent, and UBS Securities, LLC and Citigroup
Global Markets Inc., as joint lead arrangers (incorporated by reference to
Exhibit 10.4 to AMHs Current Report on Form 8-K/A, filed with the Securities
and Exchange Commission on December 23, 2004).10.22
    
    Management Advisory Agreement, dated December 22, 2004, by and between
Investcorp International, Inc. and Associated Materials Incorporated
(incorporated by reference to Exhibit 10.8 to AMHs Current Report on Form
8-K/A, filed with the Securities and Exchange Commission on December 23, 2004).10.23
    
    Financing Advisory Agreement, dated December 5, 2004, by and between Investcorp
International, Inc. and Associated Materials Incorporated (incorporated by
reference to Exhibit 10.9 to AMHs Current Report on Form 8-K/A, filed with the
Securities and Exchange Commission on December 23, 2004).10.24
    
    M&A Advisory Services Agreement, dated December 5, 2004, by and between
Investcorp International, Inc. and Associated Materials Incorporated
(incorporated by reference to Exhibit 10.10 to AMHs Current Report on Form
8-K/A, filed with the Securities and Exchange Commission on December 23, 2004)
 102




---



##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION10.25
    
    AMH Holdings II, Inc. 2004 Stock Option Plan (incorporated by reference to
Exhibit 10.11 to AMHs Current Report on Form 8-K/A, filed with the Securities
and Exchange Commission on December 23, 2004)10.26
    
    Superholdco Pledge and Security Agreement, dated December 22, 2004, by and
between AMH, as Pledgor, in favor of UBS AG, Stamford Branch, as the
Administrative Agent (incorporated by reference to Exhibit 10.5 to AMHs Current
Report on Form 8-K/A, filed with the Securities and Exchange Commission on
December 23, 2004).10.27
    
    Form of Superholdco Guaranty, dated December 22, 2004, by and between AMH, as
the Guarantor, in favor of UBS AG, Stamford Branch, as the Administrative Agent
(incorporated by reference to Exhibit 10.6 to AMHs Current Report on Form
8-K/A, filed with the Securities and Exchange Commission on December 23, 2004).10.28
    
    Stock Purchase Agreement, dated December 5, 2004, by and between AMH and the
other parties signatory hereto (incorporated by reference to Exhibit 2.1 to the
Companys Current Report on Form 8-K/A, filed with the Securities and Exchange
Commission on December 7, 2004).10.29
    
    Stockholders Agreement, dated December 22, 2004, by and between the stockholders
of AMH (incorporated by reference to Exhibit 10.2 to the AMHs Current Report on
Form 8-K/A, filed with the Securities and Exchange Commission on December 23,
2004).10.30
    
    Tax Sharing Agreement, dated March 4, 2004, by and among AMH, Holdings and AMI.21.1
    
    Subsidiaries of AMH.31.1
    
    Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or
15d-14(a) of the Exchange Act, as adopted, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Principal Financial Officer pursuant to Rule 13a-14 or
15d-14(a) of the Exchange Act, as adopted, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the 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 the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
 103