**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 
| **ý** | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934**                                                                                                                                                |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                                                                                                                                                              |
|       | **For the quarterly period  ended  March 26, 2004**                                                                                                                                                                                |
|       |                                                                                                                                                                                                                                              |
| **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  333-05978**                                                                                                                                                                                                   |

#### ** **

#### **EURAMAX INTERNATIONAL, INC.**

(Exact name of registrant as specified in itscharter)

 
| **Delaware**                                                              |   | **58-2502320**                       |
|---------------------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of  incorporation or organization)           |   | (I.R.S. Employer Identification No.) |
|                                                                      |   |                                 |
| **5445 Triangle Parkway, Suite 350,  Norcross, Georgia**                  |   | **30092**                            |
| (Address of principal executive offices)                                  |   | (Zip Code)                           |
|                                                                      |   |                                 |
| Registrant’s telephone number, including  area code **770-449-7066** |

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Actof 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

 

ý Yes  o No

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Exchange Rule 12b-2).

 

o Yes  ý No

 

As of May 7, 2004, Registrant had 322,815.17 shares of Class A commonstock outstanding and no shares of Class B common stock outstanding.

 

 

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**PartI - Financial Information**

 

**Item 1.  Financial Statements**

 

**Euramax International, Inc. and Subsidiaries**

**Condensed Consolidated Statements of Earnings**

**(Thousands of U.S. Dollars)**

**(Unaudited)**

 
|                          |   | **Successor**                                  |    | **Predecessor**                                |   |
|-------------------------------|--------|------------------------------------------------|---------|------------------------------------------------|--------|
|                          |   | **Three  months  ended  March 26,  2004** |    | **Three  months  ended  March 28,  2003** |   |
|                          |   |                                           |    |                                           |   |
| Net sales                     |   | $                                              | 195,403 |                                           | $      | 146,158 |   |
|                          |   |                                           |    |                                           |   |
| Costs and expenses:           |   |                                           |    |                                           |   |
| Cost of goods sold            |   | 156,883                                        |    | 117,566                                        |   |
| Selling and general           |   | 19,876                                         |    | 15,590                                         |   |
| Depreciation and amortization |   | 5,115                                          |    | 3,745                                          |   |
| Earnings from operations      |   | 13,529                                         |    | 9,257                                          |   |
|                          |   |                                           |    |                                           |   |
| Interest expense, net         |   | (5,757                                         | )       | (5,448                                         | )      |
| Other income, net             |   | 771                                            |    | 214                                            |   |
| Earnings before income taxes  |   | 8,543                                          |    | 4,023                                          |   |
| Provision for income taxes    |   | 2,944                                          |    | 1,581                                          |   |
| Net earnings                  |   | $                                              | 5,599   |                                           | $      | 2,442 |   |

 

The accompanying notes are an integral partof these condensed consolidated financial statements.

 

2

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**Euramax International, Inc. and Subsidiaries**

**Condensed Consolidated Balance Sheets**

**(Thousands of U.S. Dollars)**

**(Unaudited)**

 
|                                            |   | **Successor**            |    |
|-------------------------------------------------|--------|--------------------------|---------|
|                                            |   | **March 26,  2004** |    | **December 26,  2003** |   |
| **ASSETS**                                      |   |                     |    |   |   |
| Current assets:                                 |   |                     |    |   |   |
| Cash and cash equivalents                       |   | $                        | 30,582  |   | $ | 48,227 |   |
| Accounts receivable, net                        |   | 137,651                  |    | 121,689 |   |
| Inventories                                     |   | 104,104                  |    | 89,543 |   |
| Other current assets                            |   | 10,640                   |    | 8,188 |   |
| Total current assets                            |   | 282,977                  |    | 267,647 |   |
| Property, plant and equipment, net              |   | 137,685                  |    | 141,437 |   |
| Goodwill, net                                   |   | 175,723                  |    | 176,394 |   |
| Deferred income taxes                           |   | 4,460                    |    | 3,595 |   |
| Other assets                                    |   | 19,603                   |    | 19,756 |   |
|                                            |   | $                        | 620,448 |   | $ | 608,829 |   |
|                                            |   |                     |    |   |   |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**   |   |                     |    |   |   |
| Current liabilities:                            |   |                     |    |   |   |
| Cash overdrafts                                 |   | $                        | 499     |   | $ | 436 |   |
| Accounts payable                                |   | 95,014                   |    | 91,689 |   |
| Accrued expenses and other current  liabilities |   | 45,940                   |    | 51,239 |   |
| Current maturities of long-term debt            |   | 8,183                    |    | 7,487 |   |
| Total current liabilities                       |   | 149,636                  |    | 150,851 |   |
| Long-term debt, less current maturities         |   | 241,914                  |    | 231,807 |   |
| Deferred income taxes                           |   | 28,875                   |    | 29,282 |   |
| Other liabilities                               |   | 27,681                   |    | 26,939 |   |
| Total liabilities                               |   | 448,106                  |    | 438,879 |   |
| Shareholders’ equity:                      |   |                     |    |   |   |
| Common stock                                    |   | 500                      |    | 500 |   |
| Additional paid-in capital                      |   | 155,495                  |    | 155,495 |   |
| Treasury stock                                  |   | (1,964                   | )       | (1,964 | ) |
| Restricted stock                                |   | (3,190                   | )       | (3,381 | ) |
| Retained earnings                               |   | 20,355                   |    | 14,756 |   |
| Accumulated other comprehensive loss            |   | 1,146                    |    | 4,544 |   |
| Total shareholders’ equity                 |   | 172,342                  |    | 169,950 |   |
|                                            |   | $                        | 620,448 |   | $ | 608,829 |   |

 

The accompanying notes are an integral partof these condensed consolidated financial statements.

 

3

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**Euramax International, Inc. and Subsidiaries**

**Condensed Consolidated Statements of CashFlows**

**(Thousands of U.S. Dollars)**

**(Unaudited)**

 
|                                             |   | **Successor**                                  |    | **Predecessor**                                |   |
|--------------------------------------------------|--------|------------------------------------------------|---------|------------------------------------------------|--------|
|                                             |   | **Three  months  ended  March 26,  2004** |    | **Three  months  ended  March 28,  2003** |   |
|                                             |   |                                           |    |                                           |   |
| Net cash used in operating activities            |   | $                                              | (24,979 | )                                              | $      | (826 | ) |
|                                             |   |                                           |    |                                           |   |
| Cash flows from investing activities:            |   |                                           |    |                                           |   |
| Proceeds from sales of assets                    |   | 40                                             |    | 45                                             |   |
| Purchases of businesses                          |   | (1,219                                         | )       | —                                         |   |
| Capital expenditures                             |   | (1,270                                         | )       | (3,026                                         | )      |
| Net cash used in investing activities            |   | (2,449                                         | )       | (2,981                                         | )      |
|                                             |   |                                           |    |                                           |   |
| Cash flows from financing activities:            |   |                                           |    |                                           |   |
| Net borrowings on revolving credit facility      |   | 11,404                                         |    | 5,444                                          |   |
| Repayment of long-term debt                      |   | (1,449                                         | )       | —                                         |   |
| Changes in cash overdrafts                       |   | 64                                             |    | (510                                           | )      |
| Expenses relating to the 2003 Stock  Transaction |   | (463                                           | )       | —                                         |   |
| Repurchase of treasury stock                     |   | —                                         |    | (1,404                                         | )      |
| Deferred finance fees                            |   | (434                                           | )       | (116                                           | )      |
| Net cash provided by financing activities        |   | 9,122                                          |    | 3,414                                          |   |
|                                             |   |                                           |    |                                           |   |
| Effect of exchange rate changes on cash          |   | 661                                            |    | 263                                            |   |
|                                             |   |                                           |    |                                           |   |
| Net decrease in cash and cash equivalents        |   | (17,645                                        | )       | (130                                           | )      |
| Cash and cash equivalents at beginning of period |   | 48,227                                         |    | 11,646                                         |   |
| Cash and cash equivalents at end of period       |   | $                                              | 30,582  |                                           | $      | 11,516 |   |

 

The accompanying notes are an integral partof these condensed consolidated financial statements.

 

4

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**Euramax International, Inc. and Subsidiaries**

**Notes to Condensed Consolidated FinancialStatements**

**(Thousands of U.S. Dollars)**

**(Unaudited)**

 

**1.   Basis of Presentation:**

 

For purposes of this report the terms “Company” and “Euramax” refer toEuramax International, Inc. and its subsidiaries, collectively.

 

The condensed consolidated financial statements of the Company havebeen prepared in accordance with accounting principles generally accepted inthe United States for interim financial information and with the rules andregulations of the Securities and Exchange Commission (the “SEC”). Accordingly,they do not include all of the information and footnotes required by accountingprinciples generally accepted in the United States for complete financialstatements. In the opinion of the management of the Company, these statementsinclude all adjustments necessary for a fair presentation of the results of allinterim periods reported herein. All adjustments are of a normal recurringnature, except for the 2003 Stock Transaction described in Note 2, unlessotherwise disclosed. Management believes that the disclosures made are adequatefor a fair presentation of results of operations, financial position and cashflows. These condensed consolidated financial statements should be read inconjunction with the year-end consolidated financial statements andaccompanying notes included in the Company’s Annual Report on Form 10-K for theyear ended December 26, 2003.

 

The Company’s sales are somewhat seasonal, with the second and third quarterstypically accounting for the highest sales volumes. Operating results for theperiod ended March 26, 2004, are not necessarily indicative of futureresults that may be expected for the year ending December 31, 2004.

 

Per share data has not been presented since such data provides nouseful information, as the shares of the Company are closely held.

 

Certain 2003 amounts have been reclassified to conform to current yearpresentation.

 

**2.  2003 Stock Transaction**

 

On April 15, 2003, Citigroup Venture Capital Equity Partners, L.P.(“CVCEP”) and Citigroup Venture Capital Ltd. (“CVC”), entered into a definitivepurchase agreement with CVC European Equity Partners, L.P. and CVC EuropeanEquity Partners (Jersey), L.P. (collectively “CVC Europe”), BNP Paribas,independent directors and certain members of management to purchase, forapproximately $106.0 million, all of the shares of the Company held by CVCEurope and BNP Paribas, and a portion of the shares held by independentdirectors and management (“2003 Stock Transaction”). The 2003 Stock Transactionwas completed on June 12, 2003, with CVCEP purchasing 265,762.48 shares ofthe Company’s Class A common stock. For accounting purposes, the Company hasused May 23, 2003, its May month-end, as the transaction date. After thecompletion of this transaction CVCEP and CVC collectively owned approximately88.5% of the issued and outstanding shares of the Company, with management ofCVCEP and directors and management of the Company holding the remaining shares.Prior to the 2003 Stock Transaction, CVC owned approximately 34.5% of theissued and outstanding shares of the Company. CVCEP is ultimately controlled byCitigroup, Inc. through limited and general partnership interests owned by itssubsidiaries. CVC Europe is a group of limited partnerships in which Citigroup,Inc. owns a minority interest, but does not have management rights or controlrights.

 

This substantial change in ownership arising from CVCEP’s acquisitionof the Company’s stock, together with the Company’s subsequent issuance ofsenior subordinated notes, required that the purchase price paid in excess ofthe book value of the Company’s equity acquired be allocated under the purchasemethod of accounting to the assets 

 

5

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and liabilities of the Company based upon a percentage of their fairvalues proportional to the percentage of the ownership change. The allocationwas based upon preliminary estimates by management of the fair market values ofidentifiable assets and liabilities, with the remainder allocated to goodwill.The liabilities assumed included approximately $3.8 million of fees related tothe transaction, which were paid by the Company on behalf of its shareholders.The Company is currently completing valuations of its property, plant andequipment and intangible assets. The final allocation of the purchase price maymaterially differ from the preliminary estimates. The goodwill generated fromthis transaction is not deductible for income tax purposes. The purchase pricehas been allocated as follows:

 
| Purchase price                                                                     |   | $      | 105,981 |   |
|------------------------------------------------------------------------------------|--------|--------|---------|--------|
| Less: Company equity acquired                                                      |   | 53,628 |    |
| Increase in basis                                                                  |   | $      | 52,353  |   |
|                                                                               |   |   |    |
| Allocation of increase in basis:                                                   |   |   |    |
| Record fair value of inventories                                                   |   | $      | 4,000   |   |
| Record fair value of property, plant and  equipment                                |   | 16,000 |    |
| Record fair value of senior subordinated  notes                                    |   | (2,040 | )       |
| Record fair value of deferred financing  fees                                      |   | (1,000 | )       |
| Record fair value of patent (15 year life)                                         |   | 2,500  |    |
| Transaction fees                                                                   |   | (3,835 | )       |
| Record income taxes for effect of step-up  in basis of assets and transaction fees |   | (6,270 | )       |
| Increase to goodwill, net                                                          |   | 42,998 |    |
|                                                                               |   | $      | 52,353  |   |

 

The following unaudited pro-forma information presents the results ofoperations of the Company as if the 2003 Stock Transaction had occurred as ofthe beginning of the period presented. The pro-forma information is notnecessarily indicative of what would have occurred had the 2003 StockTransaction been completed at that time, nor is it indicative of future resultsof operations. The pro-forma amounts give effect to appropriate adjustments forthe fair value of the assets acquired, liabilities assumed, amortization ofproperty, plant and equipment, intangibles and restricted stock, incurrence ofthe advisory fees owed to CVC Management and income taxes.

 
|                   |   | **Successor**                                  |    | **Predecessor**                                |   |
|------------------------|--------|------------------------------------------------|---------|------------------------------------------------|--------|
|                   |   | **Three  months  ended  March 26,  2004** |    | **Three  months  ended  March 28,  2003** |   |
|                   |   |                                           |    |                                           |   |
| Pro-forma net sales    |   | $                                              | 195,403 |                                           | $      | 146,158 |   |
| Pro-forma net earnings |   | 5,599                                          |    | 2,120                                          |   |
|                        |        |                                                |         |                                                |        |  |  |

 

**3.  Summary of Significant Accounting Policies:**

 

For information regarding significant accounting policies, see Note 2to the consolidated financial statements of the Company for the year endedDecember 26, 2003, set forth in the Company’s Annual Report on Form 10-K.

 

6

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*Goodwill*

The change in goodwill, net from December 26, 2003 toMarch 26, 2004 is a result of the change in foreign exchange rates used inconverting the local currency goodwill balance into U.S. Dollars.

 

*Stock BasedCompensation*

As permitted by SFAS No. 123, “Accounting for Stock-BasedCompensation”, as amended by SFAS No. 148, the Company has elected to apply APBNo. 25, “Accounting for Stock Issued to Employees” and related interpretationsin accounting for stock options issued under its equity compensation plan. Hadcompensation expense related to these stock options been determined based uponthe fair value method under SFAS No. 123, net income would have been impactedas follows:

 

 
|                                                                                                                                                                |   | **Successor**                                  |   | **Predecessor**                                |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|--------|------------------------------------------------|--------|
|                                                                                                                                                                |   | **Three  months  ended  March 26,  2004** |   | **Three  months  ended  March 28,  2003** |   |
|                                                                                                                                                                |   |                                           |   |                                           |   |
| Net income, as reported                                                                                                                                             |   | $                                              | 5,599  |                                           | $      | 2,442 |   |
| Add:       Stock-based employee  compensation cost included in reported net income, net of related tax effects                        |   | —                                         |   | —                                         |   |
| Less:      Total stock-based employee  compensation expense determined under fair value method for all awards, net  of related tax effects |   | (46                                            | )      | —                                         |   |
|                                                                                                                                                                |   |                                           |   |                                           |   |
| Pro forma net income                                                                                                                                                |   | $                                              | 5,553  |                                           | $      | 2,442 |   |

 

The fair value of each option was estimated using the Black-Scholesoption-pricing model using a risk free interest rate of 3.20%, an expectedoption life of 5 years, no volatility and no dividends.

 

*Recent AccountingPronouncements*

InApril 2003, the FASB issued Statement No. 149, “Amendment of Statement 133on Derivative Instruments and Hedging Activities”, or SFAS No. 149. SFAS No.149 clarifies under what circumstances a contract with an initial netinvestment meets the characteristics of a derivative, amends the definition ofan underlying contract and clarifies when a derivative contains a financingcomponent in order to increase the comparability of accounting practices underSFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”.SFAS No. 149 is effective for contracts entered into or modified after June 30,2003, and for hedging relationships designated after June 30, 2003. Theadoption of SFAS No. 149 did not have an impact on the Company’s financialposition or results of operations.

 

**4.  Acquisitions**

 

OnNovember 18, 2003, pursuant to a tender offer, Amerimax Pennsylvania,Inc., a wholly owned subsidiary of Euramax, acquired 93% of Berger Holdings’outstanding common shares for $3.90 per share. The acquisition of BergerHoldings was completed on November 25, 2003 by the merger of AmerimaxPennsylvania, Inc. into Berger Holdings, with Berger Holdings as the survivorcorporation. As a result of the merger, each common share of Berger Holdingsnot owned by Euramax was converted into the right to receive $3.90 per share incash, 

 

7

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subjectto dissenters’ rights. The total purchase price of this acquisition wasapproximately $36.8 million. The Company has allocated the purchase price inexcess of the net assets acquired to Berger Holdings’ assets and liabilitiesunder the purchase method of accounting based on preliminary estimates bymanagement of fair market values of identifiable assets and liabilities, withthe remainder allocated to goodwill. The Company is currently completingvaluations of Berger Holdings’ assets, including property, plant and equipmentand intangible assets, and liabilities. The final allocation of the purchaseprice may materially differ from the preliminary allocation. Berger Holdingsmanufactures metal roof drainage products and roofing accessories as well asresidential and commercial snow guards and is included in our U.S. FabricationRoof Drainage segment. The results of operations of Berger Holdings areincluded in the Company’s consolidated statement of earnings from the acquisitiondate.

 

**5.  Inventories:**

 

Inventories were comprised of:

 
|              |   | **Successor**            |    |
|-------------------|--------|--------------------------|---------|
|              |   | **March 26,  2004** |    | **December 26,  2003** |   |
|              |   |                     |    |   |   |
| Raw materials     |   | $                        | 70,676  |   | $ | 61,832 |   |
| Work in process   |   | 8,408                    |    | 8,075 |   |
| Finished products |   | 25,020                   |    | 19,636 |   |
|              |   | $                        | 104,104 |   | $ | 89,543 |   |

 

Inventories are net of related reserves totaling $3.5 million atMarch 26, 2004 and $3.6 million at December 26, 2003.

 

**6.  Long-Term Obligations:**

 

Long-term obligations consisted of the following:

 
|                                     |   | **Successor**            |    |
|------------------------------------------|--------|--------------------------|---------|
|                                     |   | **March 26,  2004** |    | **December 26,  2003** |   |
| Senior Secured Credit Facility:          |   |                     |    |   |   |
| Revolving Credit Facility                |   | $                        | 11,334  |   | $ | — |   |
| Term Loans                               |   | 36,136                   |    | 36,559 |   |
| 8.50% Senior Subordinated Notes due 2011 |   | 200,000                  |    | 200,000 |   |
| Mortgage Note Payable                    |   | 2,210                    |    | 2,252 |   |
| Capital Lease Obligations                |   | 417                      |    | 483 |   |
|                                     |   | 250,097                  |    | 239,294 |   |
| Less current maturities                  |   | (8,183                   | )       | (7,487 | ) |
|                                     |   | $                        | 241,914 |   | $ | 231,807 |   |

 

As of March 26, 2004, an undrawn amount of $98.7 million wasavailable under the revolving credit facility.

 

8

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As required under a registration rights agreement executed as part ofthe offering of the 8.50% senior subordinated notes due 2011 (the “8.50%Notes”), the Company commenced an offer to exchange the 8.50% Notes for newnotes (the “New Notes”), with terms substantially identical to the 8.50% Notes,except that  the transfer restrictionsand registration rights applicable to the 8.50% Notes do not apply to the NewNotes. The Securities and Exchange Commission declared the Company’sregistration statement on Form S-4 relating to the offer to exchange the 8.50%Notes for the New Notes effective on March 1, 2004. The offer to exchangethe 8.50% Notes for the New Notes was completed on March 29, 2004, onceall of the outstanding 8.50% Notes were exchanged for New Notes.

 

**7.  Financial Instruments:**

 

In connection with the Company’s risk management strategy, the Companyenters into currency agreements and interest rate agreements for other thantrading purposes with major financial institutions to reduce the impact of exchangerate and/or interest rate fluctuations related to debt payments. InMarch 2004, the Company entered into three Euro swaps (the “Euro Swaps”)with substantially equivalent terms. The terms of the Euro Swaps expire onAugust 15, 2011, and require the Company to pay approximately 49.3 millionEuros with semi-annual payments at a weighted average interest rate of 8.81% inexchange for $60.0 million with semi-annual interest payments of 8.50%. TheEuro Swaps were designated as cash flow hedges that effectively converted $60.0million of the 8.50% senior subordinated notes due 2011 on the books of aNetherlands subsidiary into a fixed-rate Euro loan, which is expected to reducethe impact of foreign exchange rate changes on the principal and interest paymentson the loan. The effectiveness of the Euro Swaps is being assessed using thehypothetical derivative method, which compares the change in the fair value ofthe Euro Swaps to the change in the value of a hypothetical derivative withterms that exactly match the critical terms of the foreign-currency denominatedloan.

 

**8.  Commitments and Contingencies:**

 

**Raw MaterialCommitments**

 

To assure continuity of supply, the Company negotiates contracts forminimum annual purchases of aluminum from several suppliers. Commitments forminimum annual purchases are typically at an agreed upon cost to convertaluminum ingot into coil. In addition, to ensure a margin on specific sales,the Company may commit to purchase aluminum ingot or coil at a fixed marketprice for future delivery. For further discussion of the Company’s raw materialcommitments, see Note 14 to the consolidated financial statements of theCompany for the year ended December 26, 2003, set forth in the Company’sAnnual Report on Form 10-K.

 

**Litigation**

 

The Company is subject to legal proceedings and claims that have arisenin the ordinary course of business. Although occasional adverse decisions or settlements may occur, it isthe opinion of the Company’s management, based upon information available atthis time, that the expected outcome of these matters is not estimableindividually or in the aggregate, but would not reasonably be expected to havea material adverse effect on the consolidated financial position, results ofoperations or cash flows of the Company and its subsidiaries taken as a whole.

 

9

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**Environmental Matters**

 

TheCompany’s operations are subject to federal, state, local and Europeanenvironmental laws and regulations concerning the management of pollution andhazardous substances.

 

TheCompany has been named as a potentially responsible party in state and Federaladministrative and judicial proceedings seeking contribution for costsassociated with the investigation, analysis, correction and remediation ofenvironmental conditions at various hazardous waste disposal sites. The Companycontinues to monitor these actions and proceedings and to vigorously defendboth its own interests as well as the interests of its affiliates. The Company’sultimate liability in connection with present and future environmental claimswill depend on many factors, including its volumetric share of the waste at agiven site, the remedial action required, the total cost of remediation, andthe financial viability and participation of the other entities that also sentwaste to the site. Once it becomes probable that the Company will incur costsin connection with remediation of a site and such costs can be reasonablyestimated, the Company establishes or adjusts its reserve for its projectedshare of these costs. Based upon current law and information known to theCompany concerning the size of the sites known to it, anticipated costs, theiryears of operations and the number of other potentially responsible parties,management believes that the Company’s potential share of the estimatedaggregate liability for the costs of remedial actions and related costs andexpenses are not material. In addition, the Company establishes reserves forremedial measures required from time to time at its own facilities.** **Management believes that thereasonably probable outcomes of these matters will not be material. TheCompany’s reserves, expenditures and expenses for all environmental exposureswere not significant for any of the dates or periods presented.

 

Inconnection with the acquisition of the Company from Alumax Inc. (which hassince been acquired by Aluminum Company of America in May 1998, and hereafterreferred to as “Alumax”) on September 25, 1996, the Company was indemnifiedby Alumax for substantially all of its costs, if any, related to specificallyidentified environmental matters arising prior to the closing date of theacquisition during the period of time it was owned directly or indirectly byAlumax. Such indemnification includes costs that may ultimately be incurred tocontribute to the remediation of certain specified existing National PrioritiesList (“NPL”) sites for which the Company had been named a potentiallyresponsible party under the federal Comprehensive Environmental Response,Compensation, and Liability Information System (“CERCLA”) as of the closingdate of the acquisition, as well as certain potential costs for sites listed onstate hazardous cleanup lists. The Company does not believe that it has anysignificant probable liability for environmental claims. Further, the Companybelieves it to be unlikely that the Company would be required to bearenvironmental costs in excess of its pro rata share of such costs as apotentially responsible party at any site.

 

Thefacility that Berger Bros Company (“Berger”), an operating subsidiary acquiredas part of the Berger Holdings acquisition, leases in Ivyland, Pennsylvania hascontaminated groundwater resulting from the migration of contaminants from anadjacent property which was formerly the Naval Air Warfare Center, currently anNPL site under CERCLA. The United States Navy is conducting a clean-up of theNaval Air Warfare Center NPL site under the Environmental Protection Agency’ssupervision. The owner/landlord of the Berger property obtained liabilityprotection under Pennsylvania’s Brownfield Law by demonstrating to theCommonwealth of Pennsylvania that the contamination is from an off-site source,and under Pennsylvania law that protection benefits the tenant as well.Moreover, under Berger’s lease, the landlord retained any liability for thiscontamination. Accordingly, although the facility leased by Berger is on an NPLsite, the effects of this contamination would not reasonably be expected tohave a material adverse effect on our consolidated financial position, resultsof operations or cash flows.

 

10

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**Product Warranties**

 

The Company provides warranties on certain products. The warrantyperiods differ depending on the product, but generally range from one year tolimited lifetime warranties. The Company provides accruals for warranties basedon historical experience and expectations of future occurrence. A summary ofthe changes in the product warranty accrual follows:

 
|                                                          |   | **Successor**                                  |   | **Predecessor**                                |   |
|---------------------------------------------------------------|--------|------------------------------------------------|--------|------------------------------------------------|--------|
|                                                          |   | **Three  months  ended  March 26,  2004** |   | **Three  months  ended  March 28,  2003** |   |
|                                                          |   |                                           |   |                                           |   |
| Beginning balance                                             |   | $                                              | 3,993  |                                           | $      | 2,809 |   |
| Payments made or service provided                             |   | (729                                           | )      | (463                                           | )      |
| Warranty expense                                              |   | 728                                            |   | 672                                            |   |
| Change related to changes in foreign  currency exchange rates |   | (20                                            | )      | 27                                             |   |
|                                                          |   |                                           |   |                                           |   |
| Ending balance                                                |   | $                                              | 3,972  |                                           | $      | 3,045 |   |

 

**9.  Comprehensive Income:**

 
|                                           |   | **Successor**                                  |   | **Predecessor**                                |   |
|------------------------------------------------|--------|------------------------------------------------|--------|------------------------------------------------|--------|
|                                           |   | **Three  months  ended  March 26,  2004** |   | **Three  months  ended  March 28,  2003** |   |
|                                           |   |                                           |   |                                           |   |
| Net earnings                                   |   | $                                              | 5,599  |                                           | $      | 2,442 |   |
| Other comprehensive earnings (loss):           |   |                                           |   |                                           |   |
| Foreign currency translation adjustment        |   | (1,903                                         | )      | 1,922                                          |   |
| Gain (loss) on derivative instruments, net:    |   |                                           |   |                                           |   |
| Net changes in fair value of derivatives       |   | (997                                           | )      | 303                                            |   |
| Net gains reclassified from OCI into  earnings |   | (498                                           | )      | (336                                           | )      |
|                                           |   |                                           |   |                                           |   |
| Comprehensive income                           |   | $                                              | 2,201  |                                           | $      | 4,331 |   |

 

**10.  Income Taxes:**

 

The income tax provision for the three months ended March 26, 2004and March 28, 2003, is computed at the effective rate expected to be applicablein each respective full year using the statutory rates on a country by countrybasis, adjusted for changes in valuation allowances relating to the Company’sstate NOL carryforwards and capital loss carryforwards.

 

11

----

 

**11.  Employee Retirement Plans:**

 

Net periodic pension costs for the Company’s non-contributory definedbenefit pension plan covering substantially all U.S. hourly employees includethe following components:

 
|                                         |   | **Successor**                                  |   | **Predecessor**                                |   |
|----------------------------------------------|--------|------------------------------------------------|--------|------------------------------------------------|--------|
|                                         |   | **Three  months  ended  March 26,  2004** |   | **Three  months  ended  March 28,  2003** |   |
| **Components of net  periodic pension cost** |   |                                           |   |                                           |   |
| Service cost                                 |   | $                                              | 102    |                                           | $      | 86 |   |
| Interest cost                                |   | 54                                             |   | 46                                             |   |
| Expected return on assets                    |   | (55                                            | )      | (46                                            | )      |
| Amortization of prior service cost           |   | —                                         |   | 6                                              |   |
| Recognized actuarial net loss                |   | —                                         |   | 20                                             |   |
| Net periodic pension cost                    |   | $                                              | 101    |                                           | $      | 112 |   |

 

**12.  Segment Information:**

 

The Company’s acquisition of Berger Holdings, Ltd. onNovember 25, 2003 led to an assessment of operating segments that resultedin the Company’s identification of the U.S. Fabrication Roof Drainage operatingsegment. The business activities included in the U.S. Fabrication Roof Drainageoperating segment were previously included in the U.S. Fabrication segment.Accordingly, segment information has been revised to conform to the Company’srevised segments.  The Company’sreportable segments are as follows:

 

*EuropeanRoll Coating* – The European Roll Coating segment facilitiesprimarily roll coat aluminum and steel sheet and coil for RV, transportationand building panel manufacturers.

 

*U.S.Fabrication Roof Drainage* – The U.S. Fabrication Roof Drainage segmentfacilities primarily fabricate coated aluminum and steel coil to producegutters, downspouts, soffit, fascia, gutter accessories and other products.Such products are primarily sold to home centers, distributors and homeimprovement contractors.

 

*U.S.Fabrication Building Materials* – The U.S. Fabrication Building Materialssegment facilities primarily fabricate coated aluminum and steel coil toproduce roofing and siding panels, doors, windows, vehicle sidewalls and otherproducts. Such products are primarily sold to RV manufacturers, ruralcontractors, home improvement contractors, industrial and architecturalcontractors and manufactured housing producers.

 

*EuropeanFabrication* – The European Fabrication segment facilities primarily fabricatealuminum extrusions and glass to produce windows, doors, shower enclosures,sunroofs and other products. Such products are primarily sold to transportationmanufacturers, distributors, home centers and industrial and architecturalcontractors.

 

The accounting policies of the segments are the same asthose described in Note 2 tothe consolidated financial statements of the Company for the year ended December 26,2003, set forth in the Company’s Annual Report on Form 10-K. Segment data includes intersegment revenues. TheCompany evaluates the performance of its segments and allocates resources tothem based primarily on EBITDA.

 

12

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The Company is organized primarily on thebasis of seven operating segments. Certain operating segments with similareconomic characteristics have been aggregated according to similarity ofproducts, nature of production processes, types of customers and productdistribution methods. Two European subsidiaries have been aggregated into theEuropean Roll Coating segment, two U.S. subsidiaries have been aggregated intothe U.S. Fabrication Building Materials segment and two European subsidiarieshave been aggregated into the European Fabrication segment. The U.S.Fabrication Roof Drainage operating segment is reported separately. The tablebelow presents information about reported segments as of and for the threemonths ended March 26, 2004 and March 28, 2003. Expenses, income andassets that are not segment specific relate to holding company and businessdevelopment activities conducted for the overall benefit of the Company and,accordingly, are not attributable to the Company’s segments.

 
|                                           |   | **Successor**                                  |    | **Predecessor**                                |   |
|------------------------------------------------|--------|------------------------------------------------|---------|------------------------------------------------|--------|
|                                           |   | **Three  months  ended  March 26,  2004** |    | **Three  months  ended  March 28,  2003** |   |
|                                           |   |                                           |    |                                           |   |
| **Sales**                                      |   |                                           |    |                                           |   |
| U.S. Fabrication Roof Drainage                 |   | $                                              | 43,339  |                                           | $      | 27,013 |   |
| U.S. Fabrication Building Materials            |   | 71,133                                         |    | 59,571                                         |   |
| European Roll Coating                          |   | 49,522                                         |    | 36,663                                         |   |
| European Fabrication                           |   | 32,856                                         |    | 24,116                                         |   |
| Total segment sales                            |   | 196,850                                        |    | 147,363                                        |   |
|                                           |   |                                           |    |                                           |   |
| Eliminations                                   |   | (1,447                                         | )       | (1,205                                         | )      |
| Consolidated net sales                         |   | $                                              | 195,403 |                                           | $      | 146,158 |   |
|                                           |   |                                           |    |                                           |   |
| **EBITDA**                                     |   |                                           |    |                                           |   |
| U.S. Fabrication Roof Drainage                 |   | $                                              | 2,159   |                                           | $      | 1,535 |   |
| U.S. Fabrication Building Materials            |   | 3,091                                          |    | 2,443                                          |   |
| European Roll Coating                          |   | 8,796                                          |    | 6,119                                          |   |
| European Fabrication                           |   | 4,132                                          |    | 2,846                                          |   |
| Total EBITDA for reportable segments           |   | 18,178                                         |    | 12,943                                         |   |
|                                           |   |                                           |    |                                           |   |
| Income that is not segment specific            |   | 1,237                                          |    | 273                                            |   |
| Depreciation and amortization                  |   | (5,115                                         | )       | (3,745                                         | )      |
| Interest expense, net                          |   | (5,757                                         | )       | (5,448                                         | )      |
| Consolidated net earnings before income  taxes |   | $                                              | 8,543   |                                           | $      | 4,023 |   |

 

13

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|                                 |   | **Successor**            |    |
|--------------------------------------|--------|--------------------------|---------|
|                                 |   | **March 26,  2004** |    | **December 26,  2003** |   |
|                                 |   |                     |    |   |   |
| **Assets**                           |   |                     |    |   |   |
| U.S. Fabrication Roof Drainage       |   | $                        | 175,390 |   | $ | 163,870 |   |
| U.S. Fabrication Building Materials  |   | 162,323                  |    | 153,513 |   |
| European Roll Coating                |   | 154,908                  |    | 153,921 |   |
| European Fabrication                 |   | 101,281                  |    | 96,107 |   |
| Assets that are not segment specific |   | 26,546                   |    | 41,418 |   |
|                                 |   |                     |    |   |   |
| Total assets                         |   | $                        | 620,448 |   | $ | 608,829 |   |

 

14

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The following table reflects revenues fromexternal customers by markets for the periods indicated. Revenues from externalcustomers by groups of similar products have not been provided as it isimpracticable for the Company to do so.

 
|                  |   |                               |   | **Successor**                                    |    | **Predecessor**                                  |   |
|-----------------------|--------|------------------------------------|--------|--------------------------------------------------|---------|--------------------------------------------------|--------|
| **Customers/Markets** |   | **Primary  Products**              |   | **Three  months****ended  March 26,  2004** |    | **Three  months****ended  March 28,  2003** |   |
|                  |   |                               |   |                                             |    |                                             |   |
| Original Equipment    |   | Painted  aluminum sheet and coil;  |   | $                                                | 92,755  |                                             | $      | 72,737 |   |
| Manufacturers         |   | fabricated painted aluminum,       |   |                                             |    |                                             |   |
| (“OEMs”)    |   | laminated and fiberglass panels;   |   |                                             |    |                                             |   |
|                  |   | RV doors, windows and              |   |                                             |    |                                             |   |
|                  |   | roofing; and composite building    |   |                                             |    |                                             |   |
|                  |   | panels                             |   |                                             |    |                                             |   |
|                  |   |                               |   |                                             |    |                                             |   |
| Rural Contractors     |   | Steel  and aluminum roofing and    |   | 25,274                                           |    | 20,088                                           |   |
|                  |   | siding                             |   |                                             |    |                                             |   |
|                  |   |                               |   |                                             |    |                                             |   |
| Home Centers          |   | Raincarrying  systems, roofing     |   | 30,159                                           |    | 25,466                                           |   |
|                  |   | accessories, windows, doors        |   |                                             |    |                                             |   |
|                  |   | and shower enclosures              |   |                                             |    |                                             |   |
|                  |   |                               |   |                                             |    |                                             |   |
| Manufactured          |   | Steel  siding and trim components  |   | 5,235                                            |    | 4,505                                            |   |
| Housing               |   |                               |   |                                             |    |                                             |   |
|                  |   |                               |   |                                             |    |                                             |   |
| Distributors          |   | Metal  coils, raincarrying systems |   | 18,354                                           |    | 6,252                                            |   |
|                  |   | and roofing accessories            |   |                                             |    |                                             |   |
|                  |   |                               |   |                                             |    |                                             |   |
| Industrial and        |   | Standing  seam panels and siding   |   | 7,251                                            |    | 5,297                                            |   |
| Architectural         |   | and roofing accessories            |   |                                             |    |                                             |   |
| Contractors           |   |                               |   |                                             |    |                                             |   |
|                  |   |                               |   |                                             |    |                                             |   |
| Home Improvement      |   | Vinyl  replacement windows;        |   | 16,375                                           |    | 11,813                                           |   |
| Contractors           |   | metal coils, raincarrying systems; |   |                                             |    |                                             |   |
|                  |   | metal roofing and insulated        |   |                                             |    |                                             |   |
|                  |   | roofing panels; shower, patio      |   |                                             |    |                                             |   |
|                  |   | and entrance doors; and awnings    |   |                                             |    |                                             |   |
|                  |   |                               |   | $                                                | 195,403 |                                             | $      | 146,158 |   |

 

15

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**13.  Subsequent Events:**

 

On March 31, 2004, the Company repurchased 55% of its outstandingcommon stock held by Court Square Capital Limited, or 93,324.34 shares, for anaggregate repurchase price of approximately $37.3 million. On April 30,2004, the Company repurchased the remaining 45% of its outstanding common stockheld by Court Square Capital Limited, or 76,356.28 shares, for an aggregaterepurchase price of approximately $30.5 million. These repurchases were fundedwith borrowings under the Company’s revolving credit facility.

 

**14.   Supplemental Condensed ConsolidatingFinancial Statements:**

 

On August 6, 2003, Euramax International, Inc. and EuramaxInternational Holdings B.V. (each a “Co-Obligor”) issued $200.0 million of8.50% senior subordinated notes due 2011, which were subsequently exchanged fornew notes with substantially identical terms. Each of the domestic restrictedsubsidiaries, as defined in the related bond indenture (the “GuarantorSubsidiaries”), fully and unconditionally guarantee the obligations of the Co-Obligors.The following supplemental condensed consolidating financial statements as ofMarch 26, 2004 and December 26, 2003 and for the three months endedMarch 26, 2004 and March 28, 2003, reflect the financial position,results of operations, and cash flows of each of the Co-Obligors, and suchcombined information of the Guarantor Subsidiaries and the non-guarantorsubsidiaries (the “Non-Guarantor Subsidiaries”), as if the guarantor structureof the $200.0 million of 8.50% senior subordinated notes due 2011 had beenoutstanding for each period. Euramax International Holdings B.V. was notacquired until July 17, 2003, had no assets or liabilities untilAugust 6, 2003 and has no operations other than equity interests inconsolidated subsidiaries that were acquired on March 16, 2004.

 

16

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|                                    |   | **Successor  three months ended March 26, 2004** |   |
|-----------------------------------------|--------|--------------------------------------------------|--------|
|                                    |   | **Euramax  International  Inc.  (Co-Obligor)**   |   | **Euramax  International  Holdings  BV  (Co-Obligor)** |   | **Guarantor  Subsidiaries** |   | **Non-  Guarantor  Subsidiaries** |   | **Eliminations** |   | **Consolidated  Totals** |   |
|                                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Net sales                               |   | $                                                | — |   | $ | — |   | $ | 113,838 |   | $ | 81,668 |   | $ | (103 | ) | $ | 195,403 |   |
|                                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Costs and expenses:                     |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Cost of goods sold                      |   | —                                           |   | — |   | 94,371 |   | 62,615 |   | (103 | ) | 156,883 |   |
| Selling and general                     |   | 633                                              |   | — |   | 12,975 |   | 6,268 |   | — |   | 19,876 |   |
| Depreciation and amortization           |   | —                                           |   | — |   | 2,701 |   | 2,414 |   | — |   | 5,115 |   |
| (Loss) earnings from operations         |   | (633                                             | )      | — |   | 3,791 |   | 10,371 |   | — |   | 13,529 |   |
|                                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Equity in earnings of subsidiaries      |   | 7,581                                            |   | 2,152 |   | — |   | — |   | (9,733 | ) | — |   |
| Interest expense, net                   |   | (3,343                                           | )      | (1,500 | ) | (274 | ) | (640 | ) | — |   | (5,757 | ) |
| Internal interest income (expense), net |   | 9                                                |   | 1,022 |   | (1,588 | ) | 557 |   | — |   | — |   |
| Other income (expense), net             |   | 718                                              |   | (13 | ) | 743 |   | (677 | ) | — |   | 771 |   |
| Earnings before income taxes            |   | 4,332                                            |   | 1,661 |   | 2,672 |   | 9,611 |   | (9,733 | ) | 8,543 |   |
| (Benefit) provision for income taxes    |   | (1,267                                           | )      | (169 | ) | 1,071 |   | 3,309 |   | — |   | 2,944 |   |
|                                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Net earnings                            |   | $                                                | 5,599  |   | $ | 1,830 |   | $ | 1,601 |   | $ | 6,302 |   | $ | (9,733 | ) | $ | 5,599 |   |

 

17

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** **
|                                    |   | **Predecessor  three months ended March 28, 2003** |   |
|-----------------------------------------|--------|----------------------------------------------------|--------|
|                                    |   | **Euramax  International  Inc.  (Co-Obligor)**     |   | **Euramax  International  Holdings  BV  (Co-Obligor)** |   | **Guarantor  Subsidiaries** |   | **Non-  Guarantor  Subsidiaries** |   | **Eliminations** |   | **Consolidated  Totals** |   |
|                                    |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Net sales                               |   | $                                                  | — |   | $ | — |   | $ | 85,957 |   | $ | 60,290 |   | $ | (89 | ) | $ | 146,158 |   |
|                                    |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Costs and expenses:                     |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Cost of goods sold                      |   | —                                             |   | — |   | 71,308 |   | 46,347 |   | (89 | ) | 117,566 |   |
| Selling and general                     |   | 237                                                |   | — |   | 10,252 |   | 5,101 |   | — |   | 15,590 |   |
| Depreciation and amortization           |   | —                                             |   | — |   | 1,981 |   | 1,764 |   | — |   | 3,745 |   |
| (Loss) earnings from operations         |   | (237                                               | )      | — |   | 2,416 |   | 7,078 |   | — |   | 9,257 |   |
|                                    |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Equity in earnings of subsidiaries      |   | 3,616                                              |   | — |   | — |   | 15 |   | (3,631 | ) | — |   |
| Interest expense, net                   |   | (1,046                                             | )      | — |   | (846 | ) | (3,556 | ) | — |   | (5,448 | ) |
| Internal interest (expense) income, net |   | (478                                               | )      | — |   | (1,564 | ) | 2,042 |   | — |   | — |   |
| Other income, net                       |   | —                                             |   | — |   | 60 |   | 154 |   | — |   | 214 |   |
| Earnings before income taxes            |   | 1,855                                              |   | — |   | 66 |   | 5,733 |   | (3,631 | ) | 4,023 |   |
| (Benefit) provision for income taxes    |   | (587                                               | )      | — |   | 228 |   | 1,940 |   | — |   | 1,581 |   |
|                                    |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Net earnings (loss)                     |   | $                                                  | 2,442  |   | $ | — |   | $ | (162 | ) | $ | 3,793 |   | $ | (3,631 | ) | $ | 2,442 |   |

 

18

----

 
|                                            |   | **Successor  as of March 26, 2004**            |    |
|-------------------------------------------------|--------|------------------------------------------------|---------|
|                                            |   | **Euramax  International  Inc.  (Co-Obligor)** |    | **Euramax  International  Holdings  BV  (Co-Obligor)** |   | **Guarantor  Subsidiaries** |   | **Non-  Guarantor  Subsidiaries** |   | **Eliminations** |   | **Consolidated  Totals** |   |
| **ASSETS**                                      |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Current assets:                                 |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                       |   | $                                              | 1       |   | $ | 21 |   | $ | 3,430 |   | $ | 27,130 |   | $ | — |   | $ | 30,582 |   |
| Accounts receivable, net                        |   | —                                         |    | — |   | 63,245 |   | 74,406 |   | — |   | 137,651 |   |
| Inventories                                     |   | —                                         |    | — |   | 73,278 |   | 30,826 |   | — |   | 104,104 |   |
| Other current assets                            |   | 111                                            |    | — |   | 8,795 |   | 1,734 |   | — |   | 10,640 |   |
| Total current assets                            |   | 112                                            |    | 21 |   | 148,748 |   | 134,096 |   | — |   | 282,977 |   |
| Property, plant and equipment, net              |   | —                                         |    | — |   | 63,174 |   | 74,511 |   | — |   | 137,685 |   |
| Amounts due from affiliates                     |   | 125,541                                        |    | 1,362 |   | 21,486 |   | 75,856 |   | (224,245 | ) | — |   |
| Goodwill, net                                   |   | —                                         |    | — |   | 127,457 |   | 48,266 |   | — |   | 175,723 |   |
| Investment in consolidated subsidiaries         |   | 248,853                                        |    | 87,486 |   | — |   | 1,110 |   | (337,449 | ) | — |   |
| Deferred income taxes                           |   | 74                                             |    | 778 |   | 4 |   | 3,604 |   | — |   | 4,460 |   |
| Other assets                                    |   | 6,013                                          |    | 2,919 |   | 9,108 |   | 1,563 |   | — |   | 19,603 |   |
|                                            |   | $                                              | 380,593 |   | $ | 92,566 |   | $ | 369,977 |   | $ | 339,006 |   | $ | (561,694 | ) | $ | 620,448 |   |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**   |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Current liabilities:                            |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Cash overdrafts                                 |   | $                                              | —  |   | $ | — |   | $ | 499 |   | $ | — |   | $ | — |   | $ | 499 |   |
| Accounts payable                                |   | —                                         |    | — |   | 47,819 |   | 47,195 |   | — |   | 95,014 |   |
| Accrued expenses and other current  liabilities |   | (3,566                                         | )       | 434 |   | 26,182 |   | 22,890 |   | — |   | 45,940 |   |
| Current maturities of long-term debt            |   | —                                         |    | — |   | 420 |   | 7,763 |   | — |   | 8,183 |   |
| Total current liabilities                       |   | (3,566                                         | )       | 434 |   | 74,920 |   | 77,848 |   | — |   | 149,636 |   |
| Long-term debt, less current maturities         |   | 137,255                                        |    | 62,745 |   | 12,207 |   | 29,707 |   | — |   | 241,914 |   |
| Amounts due to affiliates                       |   | 75,215                                         |    | 235 |   | 122,346 |   | 26,449 |   | (224,245 | ) | — |   |
| Deferred income taxes                           |   | —                                         |    | 388 |   | 13,975 |   | 14,512 |   | — |   | 28,875 |   |
| Other liabilities                               |   | —                                         |    | 1,523 |   | 3,805 |   | 22,353 |   | — |   | 27,681 |   |
| Total liabilities                               |   | 208,904                                        |    | 65,325 |   | 227,253 |   | 170,869 |   | (224,245 | ) | 448,106 |   |
| Shareholders’equity:                       |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Common stock                                    |   | 500                                            |    | 21 |   | 1 |   | 35,023 |   | (35,045 | ) | 500 |   |
| Additional paid-in capital                      |   | 155,866                                        |    | 28,159 |   | 125,681 |   | 104,158 |   | (258,369 | ) | 155,495 |   |
| Treasury stock                                  |   | (1,964                                         | )       | — |   | — |   | — |   | — |   | (1,964 | ) |
| Restricted stock                                |   | (3,190                                         | )       | — |   | — |   | — |   | — |   | (3,190 | ) |
| Retained earnings                               |   | 20,355                                         |    | 2,431 |   | 17,069 |   | 5,856 |   | (25,356 | ) | 20,355 |   |
| Accumulated other comprehensive income  (loss)  |   | 122                                            |    | (3,370 | ) | (27 | ) | 23,100 |   | (18,679 | ) | 1,146 |   |
| Total shareholders’ equity                 |   | 171,689                                        |    | 27,241 |   | 142,724 |   | 168,137 |   | (337,449 | ) | 172,342 |   |
|                                            |   | $                                              | 380,593 |   | $ | 92,566 |   | $ | 369,977 |   | $ | 339,006 |   | $ | (561,694 | ) | $ | 620,448 |   |

 

19

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|                                            |   | **Successor  as of December 26, 2003**         |    |
|-------------------------------------------------|--------|------------------------------------------------|---------|
|                                            |   | **Euramax  International  Inc.  (Co-Obligor)** |    | **Euramax  International  Holdings  BV  (Co-Obligor)** |   | **Guarantor  Subsidiaries** |   | **Non-  Guarantor  Subsidiaries** |   | **Eliminations** |   | **Consolidated  Totals** |   |
| **ASSETS**                                      |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Current assets:                                 |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                       |   | $                                              | —  |   | $ | 21 |   | $ | 19,408 |   | $ | 28,798 |   | $ | — |   | $ | 48,227 |   |
| Accounts receivable, net                        |   | —                                         |    | — |   | 56,753 |   | 64,936 |   | — |   | 121,689 |   |
| Inventories                                     |   | —                                         |    | — |   | 59,249 |   | 30,294 |   | — |   | 89,543 |   |
| Other current assets                            |   | 111                                            |    | — |   | 7,204 |   | 873 |   | — |   | 8,188 |   |
| Total current assets                            |   | 111                                            |    | 21 |   | 142,614 |   | 124,901 |   | — |   | 267,647 |   |
| Property, plant and equipment, net              |   | —                                         |    | — |   | 64,865 |   | 76,572 |   | — |   | 141,437 |   |
| Amounts due from affiliates                     |   | 144,695                                        |    | 62,932 |   | 21,792 |   | 37,924 |   | (267,343 | ) | — |   |
| Goodwill, net                                   |   | —                                         |    | — |   | 127,457 |   | 48,937 |   | — |   | 176,394 |   |
| Investment in consolidated subsidiaries         |   | 277,405                                        |    | — |   | — |   | 1,110 |   | (278,515 | ) | — |   |
| Deferred income taxes                           |   | 75                                             |    | — |   | 3 |   | 3,517 |   | — |   | 3,595 |   |
| Other assets                                    |   | 5,723                                          |    | 2,866 |   | 9,478 |   | 1,689 |   | — |   | 19,756 |   |
|                                            |   | $                                              | 428,009 |   | $ | 65,819 |   | $ | 366,209 |   | $ | 294,650 |   | $ | (545,858 | ) | $ | 608,829 |   |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**   |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Current liabilities:                            |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Cash overdrafts                                 |   | $                                              | —  |   | $ | — |   | $ | 436 |   | $ | — |   | $ | — |   | $ | 436 |   |
| Accounts payable                                |   | —                                         |    | — |   | 49,817 |   | 41,872 |   | — |   | 91,689 |   |
| Accrued expenses and other current  liabilities |   | 539                                            |    | 2,021 |   | 29,912 |   | 18,767 |   | — |   | 51,239 |   |
| Current maturities of long-term debt            |   | —                                         |    | — |   | 436 |   | 7,051 |   | — |   | 7,487 |   |
| Total current liabilities                       |   | 539                                            |    | 2,021 |   | 80,601 |   | 67,690 |   | — |   | 150,851 |   |
| Long-term debt, less current maturities         |   | 137,255                                        |    | 62,745 |   | 2,299 |   | 29,508 |   | — |   | 231,807 |   |
| Amounts due to affiliates                       |   | 121,004                                        |    | 2 |   | 122,504 |   | 23,833 |   | (267,343 | ) | — |   |
| Deferred income taxes                           |   | —                                         |    | 398 |   | 14,308 |   | 14,576 |   | — |   | 29,282 |   |
| Other liabilities                               |   | —                                         |    | — |   | 5,355 |   | 21,584 |   | — |   | 26,939 |   |
| Total liabilities                               |   | 258,798                                        |    | 65,166 |   | 225,067 |   | 157,191 |   | (267,343 | ) | 438,879 |   |
| Shareholders’equity:                       |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Common stock                                    |   | 500                                            |    | 21 |   | 1 |   | 35,000 |   | (35,022 | ) | 500 |   |
| Additional paid-in capital                      |   | 155,866                                        |    | — |   | 125,681 |   | 78,066 |   | (204,118 | ) | 155,495 |   |
| Treasury stock                                  |   | (1,964                                         | )       | — |   | — |   | — |   | — |   | (1,964 | ) |
| Restricted stock                                |   | (3,381                                         | )       | — |   | — |   | — |   | — |   | (3,381 | ) |
| Retained earnings                               |   | 14,756                                         |    | 601 |   | 15,468 |   | 10,266 |   | (26,335 | ) | 14,756 |   |
| Accumulated other comprehensive income  (loss)  |   | 3,434                                          |    | 31 |   | (8 | ) | 14,127 |   | (13,040 | ) | 4,544 |   |
| Total shareholders’ equity                 |   | 169,211                                        |    | 653 |   | 141,142 |   | 137,459 |   | (278,515 | ) | 169,950 |   |
|                                            |   | $                                              | 428,009 |   | $ | 65,819 |   | $ | 366,209 |   | $ | 294,650 |   | $ | (545,858 | ) | $ | 608,829 |   |

 

20

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|                                                  |   | **Successor  three months ended March 26, 2004** |   |
|-------------------------------------------------------|--------|--------------------------------------------------|--------|
|                                                  |   | **Euramax  International  Inc.  (Co-Obligor)**   |   | **Euramax  International  Holdings  BV  (Co-Obligor)** |   | **Guarantor  Subsidiaries** |   | **Non-  Guarantor  Subsidiaries** |   | **Eliminations** |   | **Consolidated  Totals** |   |
|                                                  |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Net cash provided by (used in)operating  activities   |   | $                                                | 54,890 |   | $ | (2,603 | ) | $ | (24,057 | ) | $ | 7,872 |   | $ | (61,081 | ) | $ | (24,979 | ) |
|                                                  |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                 |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sales of assets                         |   | —                                           |   | — |   | 32 |   | 8 |   | — |   | 40 |   |
| Purchases of businesses                               |   | —                                           |   | — |   | (1,219 | ) | — |   | — |   | (1,219 | ) |
| Contributed capital to subsidiaries                   |   | (28,262                                          | )      | — |   | — |   | — |   | 28,262 |   | — |   |
| Transfer of businesses between affiliates             |   | —                                           |   | (88,262 | ) | — |   | 88,262 |   | — |   | — |   |
| Capital expenditures                                  |   | —                                           |   | — |   | (908 | ) | (362 | ) | — |   | (1,270 | ) |
| Net cash (used in) provided by investing  activities  |   | (28,262                                          | )      | (88,262 | ) | (2,095 | ) | 87,908 |   | 28,262 |   | (2,449 | ) |
|                                                  |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                 |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Net borrowings on revolving credit facility           |   | —                                           |   | — |   | 10,000 |   | 1,404 |   | — |   | 11,404 |   |
| Repayment of long-term debt                           |   | —                                           |   | — |   | (109 | ) | (1,340 | ) | — |   | (1,449 | ) |
| Change in cash overdrafts                             |   | —                                           |   | — |   | 64 |   | — |   | — |   | 64 |   |
| Dividends paid                                        |   | —                                           |   | — |   | — |   | (61,081 | ) | 61,081 |   | — |   |
| Expenses relating to the 2003 Stock  Transaction      |   | (463                                             | )      | — |   | — |   | — |   | — |   | (463 | ) |
| Deferred financing fees                               |   | (249                                             | )      | (112 | ) | (52 | ) | (21 | ) | — |   | (434 | ) |
| Contributed capital from parent                       |   | —                                           |   | 28,262 |   | — |   | — |   | (28,262 | ) | — |   |
| Due to/from affiliates                                |   | (25,915                                          | )      | 62,248 |   | 271 |   | (36,604 | ) | — |   | — |   |
| Net cash (used in) provided by financing  activities  |   | (26,627                                          | )      | 90,398 |   | 10,174 |   | (97,642 | ) | 32,819 |   | 9,122 |   |
|                                                  |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Effect of exchange rate changes on cash               |   | —                                           |   | 467 |   | — |   | 194 |   | — |   | 661 |   |
|                                                  |   |                                             |   |   |   |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash and cash  equivalents |   | 1                                                |   | — |   | (15,978 | ) | (1,668 | ) | — |   | (17,645 | ) |
| Cash and cash equivalents at beginning of  period     |   | —                                           |   | 21 |   | 19,408 |   | 28,798 |   | — |   | 48,227 |   |
| Cash and cash equivalents at end of period            |   | $                                                | 1      |   | $ | 21 |   | $ | 3,430 |   | $ | 27,130 |   | $ | — |   | $ | 30,582 |   |

 

21

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|                                                      |   | **Predecessor  three months ended March 28, 2003** |   |
|-----------------------------------------------------------|--------|----------------------------------------------------|--------|
|                                                      |   | **Euramax  International  Inc.  (Co-Obligor)**     |   | **Euramax  International  Holdings  BV  (Co-Obligor)** |   | **Guarantor  Subsidiaries** |   | **Non-  Guarantor  Subsidiaries** |   | **Eliminations** |   | **Consolidated  Totals** |   |
|                                                      |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Net cash (used in) provided by operating  activities      |   | $                                                  | (523   | ) | $ | — |   | $ | (4,055 | ) | $ | 66,005 |   | $ | (62,253 | ) | $ | (826 | ) |
|                                                      |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                     |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sales of assets                             |   | —                                             |   | — |   | 7 |   | 38 |   | — |   | 45 |   |
| Capital expenditures                                      |   | —                                             |   | — |   | (1,658 | ) | (1,368 | ) | — |   | (3,026 | ) |
| Net cash used in investing activities                     |   | —                                             |   | — |   | (1,651 | ) | (1,330 | ) | — |   | (2,981 | ) |
|                                                      |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                     |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Net borrowings (repayments) on revolving  credit facility |   | —                                             |   | — |   | 7,300 |   | (1,856 | ) | — |   | 5,444 |   |
| Change in cash overdrafts                                 |   | —                                             |   | — |   | (510 | ) | — |   | — |   | (510 | ) |
| Repurchase of treasury stock                              |   | (1,404                                             | )      | — |   | — |   | — |   | — |   | (1,404 | ) |
| Deferred financing fees                                   |   | —                                             |   | — |   | (71 | ) | (45 | ) | — |   | (116 | ) |
| Dividend paid                                             |   | —                                             |   | — |   | (62,253 | ) | — |   | 62,253 |   | — |   |
| Due to/from affiliates                                    |   | 1,927                                              |   | — |   | 61,330 |   | (63,257 | ) | — |   | — |   |
| Net cash provided by (used in) financing  activities      |   | 523                                                |   | — |   | 5,796 |   | (65,158 | ) | 62,253 |   | 3,414 |   |
|                                                      |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Effect of exchange rate changes on cash                   |   | —                                             |   | — |   | — |   | 263 |   | — |   | 263 |   |
|                                                      |   |                                               |   |   |   |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash and cash  equivalents     |   | —                                             |   | — |   | 90 |   | (220 | ) | — |   | (130 | ) |
| Cash and cash equivalents at beginning of  period         |   | —                                             |   | — |   | 560 |   | 11,086 |   | — |   | 11,646 |   |
| Cash and cash equivalents at end of period                |   | $                                                  | — |   | $ | — |   | $ | 650 |   | $ | 10,866 |   | $ | — |   | $ | 11,516 |   |

 

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**Item 2. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations**

 

# **Business Overview**

 

The following discussion shouldbe read in conjunction with the condensed consolidated financial statementsincluded elsewhere in this document, as well as the year-end consolidatedfinancial statements and Management’s Discussion and Analysis included in theCompany’s Annual Report on Form 10-K for the year ended December 26, 2003.

 

Euramax is an internationalproducer of value-added aluminum, steel, vinyl and fiberglass fabricatedproducts, with facilities located in all major regions of the United States(“U.S.”), as well as the United Kingdom (“U.K.”), The Netherlands and France.Our manufacturing and distribution network consists of 43 strategically locatedfacilities, of which 37 are located in the U.S. and 6 are located in Europe. Wesell our products principally to two markets, the building and constructionmarket and the transportation market. Our core products include specialtycoated coils, aluminum recreational vehicle (“RV”) sidewalls, RV doors, farmand agricultural panels, roofing accessories, metal and vinyl raincarryingsystems, soffit and fascia systems, and vinyl replacement windows. In addition,we sell an extensive line of accessory products, including roofing and sidinghardware, trim parts and roof drainage accessories. Our customers includeoriginal equipment manufacturers (“OEMs”) such as RV, commercial panel andtransportation industry manufacturers; rural contractors; home centers; homeimprovement contractors; distributors; industrial and architecturalcontractors; and manufactured housing producers.

 

Our results of operations havebeen separated into the predecessor period and successor period as a result ofthe application of purchase accounting in connection with the 2003 StockTransaction described in Note 2 to our condensed consolidated financialstatements.

 

**Results of Operations**

 

**Three Months EndedMarch 26, 2004 as Compared to Three Months Ended March 28, 2003**

 

The following table sets forth the Company’s Statements of EarningsData expressed as a percentage of net sales:

 
|                             |   | **Successor**                               |   | **Predecessor**                             |   |
|----------------------------------|--------|---------------------------------------------|--------|---------------------------------------------|--------|
|                             |   | **Three  months****ended  March 26,  2004** |   | **Three  months****ended  March 28,  2003** |   |
| **Statements of Earnings Data:** |   |                                        |   |                                        |   |
| Net sales                        |   | 100.0                                       | %      | 100.0                                       | %      |
| Costs and expenses:              |   |                                        |   |                                        |   |
| Cost of goods sold               |   | 80.3                                        |   | 80.4                                        |   |
| Selling and general              |   | 10.2                                        |   | 10.7                                        |   |
| Depreciation and amortization    |   | 2.6                                         |   | 2.6                                         |   |
| Earnings from operations         |   | 6.9                                         |   | 6.3                                         |   |
| Interest expense, net            |   | (2.9                                        | )      | (3.7                                        | )      |
| Other income, net                |   | 0.4                                         |   | 0.2                                         |   |
| Earnings before income taxes     |   | 4.4                                         |   | 2.8                                         |   |
| Provision for income taxes       |   | 1.5                                         |   | 1.1                                         |   |
| Net earnings                     |   | 2.9                                         | %      | 1.7                                         | %      |

 

23

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|                                |   | **Net Sales**                                       |    | **Earnings  from Operations**                         |   |
|-------------------------------------|--------|-----------------------------------------------------|---------|-------------------------------------------------------|--------|
| **In  thousands**                   |   | **Successor  three months  ended  March 26,  2004** |    | **Predecessor  three months  ended  March 28,  2003** |   | **Increase** |   | **Successor  three months  ended  March 26,  2004** |   | **Predecessor  three months  ended  March 28,  2003** |   | **Increase** |   |
|                                |   |                                                |    |                                                  |   |   |   |   |   |   |   |   |   |
| U.S. Fabrication Roof Drainage      |   | $                                                   | 42,718  |                                                  | $      | 26,386 |   | 61.9 | % | $ | 898 |   | $ | 761 |   | 18.0 | % |
| U.S. Fabrication Building Materials |   | 71,106                                              |    | 59,556                                                |   | 19.4 | % | 1,941 |   | 1,280 |   | 51.6 | % |
| European Roll Coating               |   | 48,722                                              |    | 36,100                                                |   | 35.0 | % | 7,387 |   | 4,941 |   | 49.5 | % |
| European Fabrication                |   | 32,857                                              |    | 24,116                                                |   | 36.2 | % | 3,303 |   | 2,275 |   | 45.2 | % |
| Totals                              |   | $                                                   | 195,403 |                                                  | $      | 146,158 |   | 33.7 | % | $ | 13,529 |   | $ | 9,257 |   | 46.1 | % |

 

*Net Sales.*For the three months ended March 26, 2004,net sales were $195.4 million compared to $146.2 million for the three monthsended March 28, 2003, an increase of $49.2 million or 33.7%. Net sales in theU.S. increased 32.4% to $113.8 million for the three months ended March 26,2004, from $85.9 million for the three months ended March 28, 2003. Thisincrease in net sales in the U.S. includes an increase in the U.S. FabricationRoof Drainage segment of $16.3 million or 61.9% and an increase in the U.S.Fabrication Building Materials segment of $11.6 million or 19.4%. Net sales inthe U.S. Fabrication Roof Drainage segment increased primarily as a result ofhigher sales volumes of raincarrying products to distributors, home centers andhome improvement contractors, the acquisition of Berger Holdings in November2003, together with higher selling prices resulting from rising aluminum andsteel costs.  Berger Holdings net salesin the three months ended March 28, 2003, prior to being acquired by Euramax,were $8.8 million. Net sales in the U.S. Fabrication Building Materials segmentincreased primarily as a result of higher sales volumes of fabricated aluminumand steel roofing and siding to rural and industrial and architecturalcontractors, manufactured housing producers and home centers, higher salesvolumes of painted aluminum coil to external customers from our Helena,Arkansas paintline, and higher sales volumes of patio awning products and vinylwindows to home improvement contractors, together with higher selling pricesresulting from rising aluminum and steel costs.

 

Net sales in Europe increased 35.5% to $81.6million for the three months ended March 26, 2004, from $60.2 million for thethree months ended March 28, 2003. This increase in net sales in Europeincludes an increase in the European Roll Coating segment of $12.6 million or35.0%, and an increase in the European Fabrication segment of $8.7 million or36.2%. Approximately $6.7 million and $4.4 million of the increase in theEuropean Roll Coating segment and the European Fabrication segment,respectively, were a result of the strengthening of the Euro and British Poundagainst the U.S. Dollar. The balance of the increase in the European RollCoating segment primarily resulted from higher sales volumes of paintedaluminum and steel coil to European OEMs (excluding RV manufacturers) and toEuropean RV manufacturers. The balance of the increase in the EuropeanFabrication segment resulted primarily from higher sales volumes to theEuropean automotive industry, together with higher sales volumes of fabricateddoors and windows to European RV manufacturers.

 

*Cost of goods sold.*Costof goods sold, as a percentage of net sales, were 80.3% for the three months endedMarch 26, 2004, compared to 80.4% for the three months ended March 28, 2003.The decrease as a percentage of net sales is largely attributable to highersales volumes, partially offset by lower margins on aluminum products. Lowermargins on aluminum products resulted from higher aluminum costs, partiallyoffset by higher aluminum selling prices. Aluminum and steel raw materialpurchase prices increased significantly during the first quarter of 2004 andhave continued to escalate in the second quarter of 2004. Rising aluminum andsteel prices are evidenced by an increase in the quarterly average aluminumLondon Metal Exchange price from $0.63/lb. in the first quarter of 2003 to$0.75/lb. in the first quarter of 2004, and widely publicized increases in steelprices resulting from strengthening world demand and industry consolidation inthe U.S. While we have obtained

 

24

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selling price increases andannounced future price increases, we do not have agreements with our customerswho purchase aluminum or steel products from us that obligates them to payhigher prices when the cost of aluminum or steel rises.  Therefore, if aluminum or steel pricescontinue to rise and we are unable to pass any or all of these increasesthrough to our customers, our gross profit will  be adversely affected.

 

*Selling and general.*Sellingand general expenses, as a percentage of net sales, were 10.2% for the threemonths ended March 26, 2004, compared to 10.7% for the three months ended March28, 2003. Selling and general expenses increased to $19.9 million in the threemonths ended March 26, 2004, from $15.6 million in the three months ended March28, 2003. This increase resulted primarily from higher net sales in the threemonths ended March 26, 2004, compared to the three months ended March 28, 2003,the acquisition of Berger Holdings in November 2003, in addition to a strongerEuro and Pound Sterling against the U.S. Dollar in the three months ended March26, 2004, used in converting local currency into U.S. Dollars.

 

*Depreciation and amortization.*Depreciationand amortization was $5.1 million for the three months ended March 26, 2004,compared to $3.7 million for the three months ended March 28, 2003. Thisincrease primarily resulted from the acquisition of Berger Holdings in November2003, a stronger Euro and Pound Sterling compared to the U.S. Dollar in 2004,in addition to additional expense resulting from the step-up in basis of ourproperty, plant and equipment and intangible assets associated with the 2003Stock Transaction.

 

*Earnings from operations.*Earningsfrom operations were $13.5 million for the three months ended March 26, 2004,compared to $9.3 million for the three months ended March 28, 2003. Operatingmargin increased to 6.9% for the three months ended March 26, 2004, compared to6.3% for the three months ended March 28, 2003.

 

Earnings from operations in theU.S. Fabrication Roof Drainage segment were $0.9 million for the three monthsended March 26, 2004, compared to $0.8 million for the three months ended March28, 2003.  Operating margin decreased to2.1% for the three months ended March 26, 2004, from 2.9% for the three monthsended March 28, 2003, primarily resulting from lower margins on aluminumproducts due to higher aluminum costs, partially offset by higher aluminumselling prices. Berger Holdings is included in the U.S. Fabrication RoofDrainage segment’s results for the three months ended March 26, 2004.  The U.S. Fabrication Roof Drainage segment’ssales volumes are typically slower in the first quarter than in the second,third and fourth quarters, historically resulting in lower operating margins inthe first quarter.

 

Earnings from operations in theU.S. Fabrication Building Materials segment were $1.9 million for the threemonths ended March 26, 2004, compared to $1.3 million for the three monthsended March 28, 2003. Operating margin increased to 2.7% for the three monthsended March 26, 2004, compared to 2.1% in the three months ended March 28, 2003,primarily resulting from higher sales volumes, partially offset by lowermargins on aluminum products. Lower margins on aluminum products primarilyresulted from higher aluminum costs, partially offset by higher aluminumselling prices. The U.S. Fabrication Building Materials segment’s sales volumesare typically slower in the first quarter than in the second, third and fourthquarters, historically resulting in lower operating margins in the firstquarter.

 

Earnings from operations in theEuropean Roll Coating segment were $7.4 million for the three months endedMarch 26, 2004, compared to $4.9 million for the three months ended March 28,2003. Operating margin increased to 15.2% for the three months ended March 26,2004, compared to 13.7% for the three months ended March 28, 2003, primarilyresulting from higher sales volumes, together with operational improvements atour Corby, England paintline. The strengthening of the Euro and British Poundagainst the U.S. Dollar increased the European Roll Coating segment’s earningsfrom operations by $1.1 million.

 

Earnings from operations in theEuropean Fabrication segment were $3.3 million for the three months ended March26, 2004, compared to $2.3 million for the three months ended March 28, 2003.Operating margin increased to 10.1% for the three months ended March 26, 2004,compared to 9.4% for the three months ended March 28, 2003, primarily resultingfrom higher sales volumes, together with a more profitable product mix. The

 

25

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strengthening of the Euro andBritish Pound against the U.S. Dollar increased the European Fabricationsegment’s earnings from operations by $0.5 million.

 

*Interest expense, net.*Net interest expense was $5.8 million for the three months ended March 26,2004, compared to $5.4 million for the three months ended March 28, 2003. Theincrease in net interest expense is a result of a higher deferred finance feeamortization expense in the three months ended March 26, 2004, together with ahigher outstanding average debt balance during the three months ended March 26,2004. On August 6, 2003 we issued $200.0 million 8.50% senior subordinatednotes. The proceeds from this issuance were used to purchase our outstanding$135.0 million 11.25% senior subordinated notes. The average outstandingbalance under our senior secured credit facility was $45.6 million at anaverage interest rate of 6.4% for the three months ended March 26, 2004,compared to $73.4 million at an average interest rate of 5.6% for the threemonths ended March 28, 2003.

 

*Other income, net.*Otherincome was $0.8 million for the quarter ended March 26, 2004, compared to $0.2million for the quarter ended March 28, 2003. Other income, net in both periodsprimarily resulted from foreign exchange gains on unhedged assets andliabilities remeasured into the local currency.

 

*Provision for income taxes.*Theincome tax provision for the period is based on the effective tax rate expectedto be applicable for the full year. The effective rate for the provision forincome taxes decreased to 34.4% from 39.3% for the three months ended March 26,2004 and March 28, 2003, respectively. The decrease in the effective tax rateis primarily due to a greater expected proportion of earnings in fiscal year 2004in Europe, where the Company has a lower effective tax rate, together with ahigher valuation allowance in 2003 due to the uncertainty of the future benefitof U.S. state net operating loss carryforwards.

 

**Liquidity and Capital Resources**

 

*Liquidity*. Ourprimary liquidity needs arise from debt service and the funding of capitalexpenditures. Our liquidity sources at March 26, 2004 include $30.6 million incash and cash equivalents and an undrawn amount of $98.7 million under ourrevolving credit facility, subject to borrowing base limitations. At March 26,2004, the entire $98.7 million of the undrawn amount was available.

 

On March 31, 2004, we repurchased 55% of our outstanding common stockheld by Court Square Capital Limited, or 93,324.34 shares, for an aggregaterepurchase price of approximately $37.3 million. On April 30, 2004, werepurchased the remaining 45% of our outstanding common stock held by CourtSquare Capital Limited, or 76,356.28 shares, for an aggregate repurchase priceof $30.5 million. These repurchases were funded with borrowings under ourrevolving credit facility.

 

Our leveraged financialposition requires that a substantial portion of our cash flow from operationsbe used to pay interest on the senior subordinated notes, principal andinterest under our senior secured credit facility and other indebtedness.Significant increases in the floating interest rates on borrowings under oursenior secured credit facility would result in increased debt servicerequirements, which may reduce the funds available for capital expenditures andother operational needs. In addition, our leveraged position may impede ourability to obtain financing in the future for working capital, capitalexpenditures and general corporate purposes. Further, our leveraged positionmay make us more vulnerable to economic downturns, may limit our ability towithstand competitive pressures, and may limit our ability to comply withrestrictive financial covenants required under our senior secured creditfacility.

 

Our primary source of liquidityis funds generated from operations, which are supplemented by borrowings underour senior secured credit facility. Net cash used by operating activities forthe three months ended March 26, 2004 and March 28, 2003, were $25.0 millionand $0.8 million, respectively. In addition to cash generated from

 

26

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earnings, key components of ourcash flow from operations are changes in our working capital accounts. Thethree months ended March 26, 2004 include a use of cash resulting from anincrease in accounts receivable and inventories of $16.3 million and $14.8million, respectively, and a decrease in accounts payable and other accruedliabilities of $1.8 million. The three months ended March 28, 2003 include ause of cash resulting from an increase in accounts receivable and inventoriesof $10.8 million and $8.6 million, respectively. Partially offsetting this useof cash was cash provided by an increase in accounts payable and other accruedliabilities of $13.7 million. See discussion of working capital below.

 

Net cash used in investingactivities decreased to $2.4 million for the three months ended March 26, 2004,from $3.0 million for the three months ended March 28, 2003. This decrease isthe result of lower capital expenditures in the three months ended March 26,2004, compared to the three months ended March 28, 2003.  The three months ended March 26, 2004include a use of cash of $1.2 million for costs associated with the acquisitionof Berger Holdings on November 25, 2003.

 

Net cash provided by financingactivities increased to $9.1 million for the three months ended March 26, 2004,from $3.4 million for the three months ended March 28, 2003. During the threemonths ended March 26, 2004, the Company borrowed $11.4 million under itsrevolving credit facility, compared to $5.4 million in the three months endedMarch 28, 2003. These borrowings were primarily used to fund working capitalneeds. Additionally, during the three months ended March 26, 2004, the Companyrepaid long-term debt of $1.4 million. During the three months ended March 28,2003, the Company repurchased Euramax International Class A common stock for$1.4 million in connection with the retirement of a key employee.

 

The above-noted sources areexpected to provide the liquidity required, if necessary, to supplement cashfrom operations, although no assurance to that effect can be given.

 

*Capital Expenditures.*Our capital expenditures were $1.3 million and $3.0 million for the threemonths ended March 26, 2004 and March 28, 2003, respectively. Capitalexpenditures in 2004 include approximately $0.1 million for improvements to thepaintlines in Helena, Arkansas; Corby, England; and Roermond, The Netherlands;and approximately $0.2 million for several projects related to businessexpansion. Capital expenditures in 2003 included approximately $0.3 million forimprovements to the paintlines in Helena, Arkansas; Corby, England; andRoermond, The Netherlands; and approximately $1.7 million for several projectsrelated to business expansion. The balance of capital expenditures in bothperiods related to purchases and upgrades of fabricating equipment,transportation and material moving equipment, and information systems.

 

We have made and will continueto make capital expenditures to comply with environmental laws. We estimatethat our environmental capital expenditures for 2004 will approximate $0.5million.

 

*Working CapitalManagement.* Working capital was $133.3 million as ofMarch 26, 2004, compared to $116.8 million as of December 26, 2003. Thisincrease in working capital is largely attributable to higher accountsreceivable and inventories, partially offset by lower cash and cash equivalentsas of March 26, 2004. Seasonal demands of the business result in substantialincreases from year end in trade accounts receivable and inventories.

 

Accounts receivable of $137.7 million as of March 26, 2004, increased$16.0 million, from $121.7 million as of December 26, 2003. The primary reasonfor this increase was an 8.4% increase in net sales in the two months endedMarch 26, 2004, compared to the two months ended December 26, 2003. Themajority of outstanding accounts receivable at the end of each period aregenerated from net sales in the preceding two months. As of March 26, 2004,days sales outstanding in accounts receivable were 64.1 days, compared to 53.9days as of December 26, 2003 and 61.9 days as of March 28, 2003. The timing ofnet sales during the quarter typically results in higher days sales outstandingin accounts receivable at the end of March compared to the end of December.

 

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Inventories of $104.1 million as of March 26, 2004, increased $14.6million, from $89.5 million as of December 26, 2003. As of March 26, 2004, dayssales in inventories was 57.0 days, compared to 51.9 days as of December 26,2003 and 61.3 days as of March 28, 2003. Seasonal demands typically result inhigher inventory balances at the end of March compared to the end of December.Additionally, higher aluminum and steel raw material costs increased inventorybalances as of March 26, 2004, compared to December 26, 2003.

 

# **Environmental Matters**

 

Our exposure to environmentalmatters has not changed significantly from the year ended December 26, 2003.For detailed information regarding environmental matters, see “Management’sDiscussion and Analysis — Risk Management” set forth in our Annual Report onForm 10-K for the year ended December 26, 2003.

 

**Note Regarding Forward-Looking Statements:**  The Management’s Discussion and Analysis andother sections of this Form 10-Q may contain forward-looking statements thatare based on current expectations, estimates and projections about theindustries in which we operate, and management’s beliefs and assumptions. Suchforward-looking statements include terminology such as “may”, “will”, “should”,“expects”, “anticipates”, “intends”, “plans”, “believes”, “contemplates”,“projects”, “predicts”, “estimates”, or variations of such words and similarexpressions regarding beliefs, plans, expectations or intentions regarding thefuture. Forward-looking statements in this report include, but are not limitedto: (1) statements regarding our expectation that our sources of liquidity willprovide the liquidity required, if necessary, to supplement lower cash flowsfrom operations; (2) statements regarding management’s expectation that theoutcome of legal proceedings and claims that have arisen in the ordinary courseof business would not reasonably be expected to have a material adverse effecton our consolidated financial position, results of operations or cash flows;(3) statements regarding management’s belief that our potential share of theestimated aggregate liability for the costs of remedial actions and relatedcosts and expenses at various hazardous waste disposal sites in which we havebeen named as a defendant in lawsuits or as a potentially responsible party arenot material and that the reasonably probable outcome of these matters will notmaterially exceed established reserves and will not have a material impact onour future financial position, net earnings or cash flows; and (4) statementsregarding the effect rising aluminum and steel costs may have on gross profit.  These forward-looking statements are basedon a number of assumptions that could ultimately prove inaccurate, and,therefore, there can be no assurance that they will prove to be accurate.  All such forward-looking statements aresubject to the safe harbor created by the Private Securities Litigation ReformAct of 1995. Important factors that could cause future financial performance todiffer materially and significantly from past results and from those expressedor implied in this document include, without limitation, the risks ofacquisition of businesses (including limited knowledge of the businessesacquired and misrepresentations by sellers), changes in business strategy ordevelopment plans, the cyclical demand for our products, the supply and/orprice of aluminum and other raw materials, currency exchange rate fluctuations,environmental regulations, availability of financing, competition, reliance onkey management personnel, ability to manage growth, loss of customers, and avariety of other factors. For further information on these and other risks, seethe “Risk Factors” section of Item 1 of our Annual Report on Form 10-K for theyear ended December 26, 2003, as well as our other filings with the Securitiesand Exchange Commission. We assume no obligation to update publicly ourforward-looking statements, whether as a result of new information, futureevents or otherwise.

 

**Item 3. Quantitative and Qualitative Disclosures about Market Risk**

 

The following discussion aboutthe Company’s risk management activities includes forward-looking statementsthat involve risk and uncertainties. Actual results could differ materiallyfrom those projected in the forward-looking statement. See “Note RegardingForward Looking Statements” for additional information regarding the PrivateSecurities Litigation Reform Act. The Company’s management of market risk fromchanges in interest rates, exchange rates and commodity prices has not changedfrom the year ended December 26, 2003, except as

 

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follows. In March 2004, theCompany entered into three Euro swaps (the “Euro Swaps”) with substantiallyequivalent terms. The terms of the Euro Swaps expire on August 15, 2011, andrequire the Company to pay approximately 49.3 million Euros with semi-annualpayments at a weighted average interest rate of 8.81% in exchange for $60.0million with semi-annual interest payments of 8.50%. The Euro Swaps weredesignated as cash flow hedges that effectively converted $60.0 million of the8.50% senior subordinated notes due 2011 on the books of a Netherlandssubsidiary into a fixed-rate Euro loan, which is expected to reduce the impactof foreign exchange rate changes on the principal and interest payments on theloan. For detailed information regarding the Company’s risk management, see“Management’s Discussion and Analysis — Risk Management” and “Item 7A.Quantitative and Qualitative Disclosures about Market Risk” set forth in theCompany’s Annual Report on Form 10-K for the year ended December 26, 2003.

 

**Interest Rate Risk**

 

This analysis presents the hypothetical increase in interest expenseand increase in other expense related to those financial instruments andderivative instruments held by us at March 26, 2004, that are sensitive tochanges in interest rates. A hypothetical 10 percent increase in interest ratesfor one year on our variable rate financial instruments would increase interestexpense by approximately $0.3 million as calculated at March 26, 2004, ascompared to a hypothetical increase in interest expense of approximately $0.2million as calculated at December 26, 2003.

 

A hypothetical 10 percent decrease in interest rates for one year onour derivative instruments would increase other expense by approximately $0.2million as calculated at March 26, 2004, compared to a hypothetical increase inother expense of approximately $0.1 million as calculated at December 26, 2003.

 

**Foreign CurrencyExchange Risk**

 

This analysis presents the hypothetical increase in foreign exchangeloss and increase in interest expense related to those financial instrumentsand derivative instruments held by us at March 26, 2004, that are sensitive tochanges in foreign currency exchange risks. A hypothetical 10 percent increasein the British Pound compared to the U.S. Dollar would increase our foreignexchange loss by approximately $3.8 million as calculated at March 26, 2004,compared to a hypothetical increase in foreign exchange loss of approximately$2.1 million as calculated at December 26, 2003.  A hypothetical 10 percent decrease in the Euro compared to theU.S. Dollar would increase our foreign exchange loss by approximately $0.3million as calculated at March 26, 2004, compared to a hypothetical increase inforeign exchange loss of approximately $1.2 million as calculated at December26, 2003.

 

All other factors remaining unchanged, a hypothetical 10 percentincrease in foreign currency exchange rates for one year would increaseinterest expense by approximately $0.2 million as calculated at March 26, 2004,for those financial instruments and derivative instruments affected by foreigncurrency exchange fluctuations, as compared to a hypothetical increase ininterest expense of approximately $0.2 million as calculated at December 26,2003.

 

**Item 4. Controls and Procedures**

 

As of March 26, 2004, based upon an evaluation of the effectiveness ofthe design and operation of the Company’s disclosure controls and procedures,the Company’s Chief Executive Officer and the Company’s Chief Financial Officerconcluded that as of the evaluation date, the Company’s disclosure controls andprocedures (1) are effective in timely alerting them to material informationrelating to the Company (including its consolidated subsidiaries) required tobe included in the Company’s reports that it files or submits under theSecurities and Exchange Act of 1934 (the “Exchange Act”) and (2) are adequateto ensure that information required to be disclosed by the Company in thereports filed or submitted by the Company under the Exchange Act is recorded,processed and summarized and reported within the time periods specified in theSEC’s rules and forms. Further, there were no changes in the Company’s internalcontrols over financial reporting identified in connection with that evaluationthat occurred during the quarter ended March 26, 2004, that have materially

 

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affected or would be reasonably likely to materially affect theCompany’s internal control over financial reporting.

 

**Part II - Other Information**

 

# **Item 1. Legal Proceedings.**

 

We are not currently parties to any pendinglegal procedures other than such proceedings occurring in the ordinary courseof business. We believe that such proceedings would not, individually or in theaggregate, reasonably be expected to have a material adverse effect on ourconsolidated financial position, results of operations or cash flows.

 

**Item 2.  Changes inSecurities, Use of Proceeds and Issuer Purchases of Equity Securities**

 

None.

 

**Item 3.  Defaults UponSenior Securities.**

 

None.

 

**Item 4.  Submission ofMatters to a Vote of Security Holders.**

 

None

 

**Item 5.  OtherInformation.**

 

None.

# ** **

# **Item 6. Exhibits and Reports on Form 8-K**

 

(a)                                  Exhibits:

 

The exhibits listed in the Exhibit Index immediately preceding theexhibits are filed or incorporated by reference as part of this QuarterlyReport on Form 10-Q.

 

(b)           Reports on Form 8-K:

 

On March 24,2004, the Company filed a report on Form 8-K relating to its financialinformation for the full year and fourth quarter ended December 26, 2003, aspresented in a press release dated March 24, 2004.

 

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**SIGNATURES**

 

**Pursuant to therequirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934,Euramax International, Inc. has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.**

 

###### **EURAMAXINTERNATIONAL, INC.**

 
| **Signature**        |   | **Title**                             |   | **Date**    |
|----------------------|--------|---------------------------------------|--------|-------------|
|                 |   |                                  |   |        |
| /s/ J. DAVID SMITH   |   | Chairman, Chief Executive Officer     |   | May 7, 2004 |
| J. David Smith       |   | and President                         |   |        |
|                 |   |                                  |   |        |
|                 |   |                                  |   |        |
| /s/ R. SCOTT VANSANT |   | Chief Financial Officer and Secretary |   | May 7, 2004 |
| R. Scott Vansant     |   |                                  |   |        |

 

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**Exhibit Index**

 
| **Exhibit********Number** |   | **Description**                                                                                                                                                                                                                                                                                             |
|---------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                       |   | Certificate of Incorporation  of Euramax International, Inc. (f/k/a Amerimax Holdings, Inc.). (Incorporated  by reference to the Exhibit with the same number in Euramax International,  Inc.’s Registrations Statement on Form S-4 (Reg. No. 333-05978) which became  effective on February 7, 1997.) |
| 3.2                       |   | Bylaws of Euramax  International, Inc. (f/k/a Amerimax Holdings, Inc.). (Incorporated by  reference to the Exhibit with the same number in Euramax International,  Inc.’s Registration Statement on Form S-4 (Ref. No. 333-05978) which became  effective on February 7, 1997.)                        |
| 31.1                      |   | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                        |
| 31.2                      |   | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                        |
| 32.1                      |   | Certification of Chief  Executive Officer pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                                               |
| 32.2                      |   | Certification of Chief  Financial Officer pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                                               |

 

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