** **

**UNITED STATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM10-Q**

 
| **ý**                            | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                  |
|---------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                            | ** **                                                                                                                                                                                                    |
| ** **                            | **For the quarterly period  ended  *  *June  25, 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.**

(Exactname of registrant as specified in its charter)

 
| **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 checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

 

ý Yes  oNo

 

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

 

o Yes  ýNo

 

As of August 9, 2004, Registrant had 322,815.17 shares of Class Acommon stock outstanding and no shares of Class B common stock outstanding.

 

 

----

 

**Part I - Financial Information**

 

**Item 1. Financial Statements**

 

**Euramax International, Inc. and Subsidiaries**

**CondensedConsolidated Statements of Earnings**

**(Thousandsof U.S. Dollars)**

**(Unaudited)**

 
|                           |       | **Successor**                           |       | **Predecessor**                      |       | **Successor**                        |       | **Successor**                         |       | **Predecessor**                       |       | **Successor**                        |       |
|--------------------------------|------------|-----------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| ** **                     | ** ** | **Three months  ended  June 25,  2004** | ** ** | **Two months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** | **Six months  ended  June 25,  2004** | ** ** | **Five months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** |
|                           |       |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Net sales                      |       | $                                       | 250,487    |                                 | $          | 114,457                              |       | $                                     | 77,194     |                                  | $          | 445,890                              |       | $ | 260,615 |   | $ | 77,194 |   |
|                           |       |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Costs and  expenses:           |       |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Cost of goods  sold            |       | 193,723                                 |       | 90,854                               |       | 63,904                               |       | 350,606                               |       | 208,420                               |       | 63,904                               |       |
| Selling and  general           |       | 21,399                                  |       | 10,563                               |       | 8,159                                |       | 41,275                                |       | 26,153                                |       | 8,159                                |       |
| Depreciation and  amortization |       | 3,850                                   |       | 2,531                                |       | 1,571                                |       | 8,965                                 |       | 6,276                                 |       | 1,571                                |       |
| Earnings from  operations      |       | 31,515                                  |       | 10,509                               |       | 3,560                                |       | 45,044                                |       | 19,766                                |       | 3,560                                |       |
|                           |       |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Interest  expense, net         |       | (6,022                                  | )          | (3,678                               | )          | (1,843                               | )          | (11,779                               | )          | (9,126                                | )          | (1,843                               | )          |
| Other income  (expense), net   |       | 585                                     |       | 292                                  |       | (26                                  | )          | 1,356                                 |       | 506                                   |       | (26                                  | )          |
| Earnings before  income taxes  |       | 26,078                                  |       | 7,123                                |       | 1,691                                |       | 34,621                                |       | 11,146                                |       | 1,691                                |       |
| Provision for  income taxes    |       | 9,319                                   |       | 2,673                                |       | 562                                  |       | 12,263                                |       | 4,254                                 |       | 562                                  |       |
| Net earnings                   |       | $                                       | 16,759     |                                 | $          | 4,450                                |       | $                                     | 1,129      |                                  | $          | 22,358                               |       | $ | 6,892 |   | $ | 1,129 |   |

 

The accompanyingnotes are an integral part of these condensed consolidated financialstatements.

 

2

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**Euramax International, Inc. and Subsidiaries**

**CondensedConsolidated Balance Sheets**

**(Thousandsof U.S. Dollars)**

**(Unaudited)**

 
| ** **                                      | ** ** | **Successor**      | ** ** |
|-------------------------------------------------|------------|--------------------|------------|
| ** **                                      | ** ** | **June 25,  2004** | ** ** | **December 26,  2003** | ** ** |
| **ASSETS**                                      |       |               |       |   |   |
| Current assets:                                 |       |               |       |   |   |
| Cash and cash  equivalents                      |       | $                  | 35,802     |   | $ | 48,227 |   |
| Accounts  receivable, net                       |       | 151,061            |       | 121,689 |   |
| Inventories                                     |       | 117,729            |       | 89,543 |   |
| Other current  assets                           |       | 10,320             |       | 8,188 |   |
| Total current  assets                           |       | 314,912            |       | 267,647 |   |
| Property, plant  and equipment, net             |       | 155,644            |       | 141,437 |   |
| Goodwill, net                                   |       | 137,613            |       | 176,394 |   |
| Intangible  assets, net                         |       | 45,930             |       | 2,492 |   |
| Deferred income  taxes                          |       | 5,361              |       | 3,595 |   |
| Other assets                                    |       | 15,735             |       | 17,264 |   |
|                                            |       | $                  | 675,195    |   | $ | 608,829 |   |
|                                            |       |               |       |   |   |
| **LIABILITIES AND SHAREHOLDERS’  EQUITY**  |       |               |       |   |   |
| Current  liabilities:                           |       |               |       |   |   |
| Cash overdrafts                                 |       | $                  | 2,285      |   | $ | 436 |   |
| Accounts payable                                |       | 112,015            |       | 91,689 |   |
| Accrued expenses  and other current liabilities |       | 61,081             |       | 51,239 |   |
| Current  maturities of long-term debt           |       | 8,769              |       | 7,487 |   |
| Total current  liabilities                      |       | 184,150            |       | 150,851 |   |
| Long-term debt,  less current maturities        |       | 289,270            |       | 231,807 |   |
| Deferred income  taxes                          |       | 51,630             |       | 29,282 |   |
| Other  liabilities                              |       | 30,006             |       | 26,939 |   |
| Total liabilities                               |       | 555,056            |       | 438,879 |   |
| Shareholders’  equity:                     |       |               |       |   |   |
| Common stock                                    |       | 500                |       | 500 |   |
| Additional  paid-in capital                     |       | 155,495            |       | 155,495 |   |
| Treasury stock                                  |       | (69,836            | )          | (1,964 | ) |
| Restricted stock                                |       | (2,999             | )          | (3,381 | ) |
| Retained  earnings                              |       | 37,114             |       | 14,756 |   |
| Accumulated other  comprehensive (loss) income  |       | (135               | )          | 4,544 |   |
| Total  shareholders’ equity                |       | 120,139            |       | 169,950 |   |
|                                            |       | $                  | 675,195    |   | $ | 608,829 |   |

 

The accompanying notesare an integral part of these condensed consolidated financial statements.

 

3

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**Euramax International, Inc. and Subsidiaries**

**CondensedConsolidated Statements of Cash Flows**

**(Thousandsof U.S. Dollars)**

**(Unaudited)**

 
| ** **                                                | ** ** | **Successor**                         | ** ** | **Predecessor**                       | ** ** | **Successor**                        | ** ** |
|-----------------------------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| ** **                                                | ** ** | **Six months  ended  June 25,  2004** | ** ** | **Five months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** |
|                                                      |       |                                  |       |                                  |       |                                 |       |
| Net cash  provided by (used in) operating activities      |       | $                                     | 1,376      |                                  | $          | (12,045                              | )          | $ | 11,924 |   |
|                                                      |       |                                  |       |                                  |       |                                 |       |
| Cash flows from  investing activities:                    |       |                                  |       |                                  |       |                                 |       |
| Proceeds from  sales of assets                            |       | 1,043                                 |       | 35                                    |       | 44                                   |       |
| Purchases of  businesses                                  |       | (1,172                                | )          | —                                |       | —                               |       |
| Capital  expenditures                                     |       | (3,654                                | )          | (4,944                                | )          | (789                                 | )          |
| Net cash used in  investing activities                    |       | (3,783                                | )          | (4,909                                | )          | (745                                 | )          |
|                                                      |       |                                  |       |                                  |       |                                 |       |
| Cash flows from  financing activities:                    |       |                                  |       |                                  |       |                                 |       |
| Net borrowings  (repayments) on revolving credit facility |       | 61,663                                |       | 18,264                                |       | (11,153                              | )          |
| Repayment of  long-term debt                              |       | (2,898                                | )          | —                                |       | —                               |       |
| Changes in cash  overdrafts                               |       | 1,850                                 |       | 2,603                                 |       | (2,995                               | )          |
| Expenses  relating to the 2003 Stock Transaction          |       | (554                                  | )          | —                                |       | —                               |       |
| Issuance of  common stock from shares held in treasury    |       | —                                |       | —                                |       | 353                                  |       |
| Purchase of  treasury stock                               |       | (67,872                               | )          | (2,556                                | )          | (80                                  | )          |
| Deferred finance  fees                                    |       | (889                                  | )          | (116                                  | )          | (242                                 | )          |
| Net cash (used  in) provided by financing activities      |       | (8,700                                | )          | 18,195                                |       | (14,117                              | )          |
|                                                      |       |                                  |       |                                  |       |                                 |       |
| Effect of  exchange rate changes on cash                  |       | (1,318                                | )          | 778                                   |       | 191                                  |       |
|                                                      |       |                                  |       |                                  |       |                                 |       |
| Net (decrease)  increase in cash and cash equivalents     |       | (12,425                               | )          | 2,019                                 |       | (2,747                               | )          |
| Cash and cash  equivalents at beginning of period         |       | 48,227                                |       | 11,646                                |       | 13,665                               |       |
| Cash and cash  equivalents at end of period               |       | $                                     | 35,802     |                                  | $          | 13,665                               |       | $ | 10,918 |   |

 

The accompanying notesare an integral part of these condensed consolidated financial statements.

 

4

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**Euramax International, Inc. and Subsidiaries**

**Notes to Condensed Consolidated Financial Statements**

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

**(Unaudited)**

 

**1.   Basisof Presentation:**

 

For purposes of thisreport the “Company” and “Euramax” refers to Euramax International, Inc. andsubsidiaries, collectively.

 

The condensedconsolidated financial statements of the Company have been prepared inaccordance with accounting principles generally accepted in the United Statesfor interim financial information and with the rules and regulations of theSecurities and Exchange Commission (the “SEC”). Accordingly, they do notinclude all of the information and footnotes required by accounting principlesgenerally accepted in the United States for complete financial statements. Inthe opinion of the management of the Company, these statements include alladjustments necessary for a fair presentation of the results of all interimperiods reported herein. All adjustments are of a normal recurring nature,except for the 2003 Stock Transaction described in Note 2, unless otherwisedisclosed. Management believes that the disclosures made are adequate for afair presentation of results of operations, financial position and cash flows.These condensed consolidated financial statements should be read in conjunctionwith the year-end consolidated financial statements and accompanying notesincluded in the Company’s Annual Report on Form 10-K for the year endedDecember 26, 2003.

 

The Company’s sales aresomewhat seasonal, with the second and third quarters typically accounting forthe highest sales volumes. Operating results for the period ended June 25,2004, are not necessarily indicative of future results that may be expected forthe 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 CapitalEquity Partners, L.P. (“CVCEP”) and Citigroup Venture Capital Ltd. (“CVC”),entered into a definitive purchase agreement with CVC European Equity Partners,L.P. and CVC European Equity Partners (Jersey), L.P. (collectively “CVCEurope”), BNP Paribas, independent directors and certain members of managementto purchase, for approximately $106.0 million, all of the shares of the Companyheld by CVC Europe and BNP Paribas, and a portion of the shares held byindependent directors and management (“2003 Stock Transaction”). The 2003 StockTransaction was completed on June 12, 2003, with CVCEP purchasing 265,762.48shares of the Company’s Class A common stock. For accounting purposes, theCompany has used May 23, 2003, its May month-end, as the transaction date.After the completion of this transaction CVCEP and CVC collectively ownedapproximately 88.5% of the issued and outstanding shares of the Company, withmanagement of CVCEP and directors and management of the Company holding theremaining shares. Prior to the 2003 Stock Transaction, CVC owned approximately34.5% of the issued and outstanding shares of the Company. CVCEP is ultimatelycontrolled by Citigroup, Inc. through limited and general partnership interestsowned by its subsidiaries. CVC Europe is a group of limited partnerships inwhich Citigroup, Inc. owns a minority interest, but does not have management orcontrol rights.

 

5

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The change in ownership, together with theCompany’s subsequent issuance of senior subordinated notes, required that thepurchase price paid in excess of the book value of the Company’s equityacquired be allocated under the purchase method of accounting to the assets andliabilities of the Company based upon a percentage of their fair valuesproportional to the percentage of the ownership change. The preliminary allocationwas based upon 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.During the three months ended June 25, 2004, the Company finalized its estimateof the fair market values of its property, plant and equipment and intangibleassets as of the transaction date.  TheCompany revised its preliminary allocation based upon this final valuation. Thepreliminary and final allocation of the purchase price is detailed below. Thegoodwill generated from this transaction is not deductible for income taxpurposes.

 
| Purchase price                 |   | $      | 105,981 |   |   |   |
|--------------------------------|--------|--------|---------|--------|--------|--------|
| Less: Company  equity acquired |   | 53,628 |    |   |   |
| Increase in  basis             |   | $      | 52,353  |   |   |   |

 
| ** **                                                                         | ** ** | **Preliminary  Allocation** | ** ** | **Final  Allocation** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------|------------|
| Record fair  value of inventories                                                  |       | $                           | 4,000      |                  | $          | 4,000 |   |
| Record fair  value of property, plant and equipment                                |       | 16,000                      |       | 28,112                |       |
| Record fair  value of senior subordinated notes                                    |       | (2,040                      | )          | (2,040                | )          |
| Record fair  value of deferred financing fees                                      |       | (1,000                      | )          | (1,000                | )          |
| Record fair  value of patent (15 year life)                                        |       | 2,500                       |       | 714                   |       |
| Record fair  value of customer relationships (12 year life)                        |       | —                      |       | 42,869                |       |
| Transaction fees                                                                   |       | (3,835                      | )          | (3,835                | )          |
| Record income  taxes for effect of step-up in basis of assets and transaction fees |       | (6,270                      | )          | (26,050               | )          |
| Increase to  goodwill, net                                                         |       | 42,998                      |       | 9,583                 |       |
|                                                                               |       | $                           | 52,353     |                  | $          | 52,353 |   |

 

Adjustments to reflect changes from the preliminary allocation to thefinal allocation were recorded in the three months ended June 25, 2004. Suchadjustments included recording $5.8 million of amortization of the customerrelationships intangible asset and a $5.7 million reduction of depreciationexpense. The reduction in depreciation expense resulted from differences in theestimates of fair values and remaining useful lives of property, plant andequipment between the preliminary and final valuations. Such adjustments didnot have a material affect on the Company’s financial position as of June 25,2004 or its results of operations for the three and six months ended June 25,2004.

 

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.

 

6

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| ** **              | ** ** | **Successor**                           | ** ** | **Predecessor**                      | ** ** | **Successor**                        | ** ** | **Successor**                         | ** ** | **Predecessor**                       | ** ** | **Successor**                        | ** ** |
|-------------------------|------------|-----------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| ** **              | ** ** | **Three months  ended  June 25,  2004** | ** ** | **Two months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** | **Six months  ended  June 25,  2004** | ** ** | **Five months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** |
|                    |       |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Pro-forma net  sales    |       | $                                       | 250,487    |                                 | $          | 114,457                              |       | $                                     | 77,194     |                                  | $          | 445,890                              |       | $ | 260,615 |   | $ | 77,194 |   |
| Pro-forma net  earnings |       | 16,759                                  |       | 4,262                                |       | 1,129                                |       | 22,358                                |       | 6,421                                 |       | 1,129                                |       |
|                         |            |                                         |            |                                      |            |                                      |            |                                       |            |                                       |            |                                      |            |  |  |  |  |  |  |

 

**3.  Summaryof 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.

 

*Property, Plant and Equipment*

In connection with the Company's finalization of the fair market valuesof its property, plant and equipment, the Company reevaluated the useful livesover which its assets are to be depreciated. The estimated useful lives of these assets was determined to range from2 to 13 years for equipment and from 17 to 20 years for buildings.

 

*Intangible Assets*

The Company records intangible assets acquired in business combinationsor in the 2003 Stock Transaction at fair value on the date of the transaction.The Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”,effective December 29, 2001. Under SFAS No. 142, indefinite lived intangibleassets are not amortized, but are reviewed at least annually forimpairment.  The Company reviews itsindefinite lived intangible assets for impairment on the first day of itsfiscal fourth quarter. The Company amortizes its intangible assets with finitelives over their useful lives based upon the pattern in which the economicbenefits of the intangible asset are recognized. If that pattern cannot bedetermined, a straight-line amortization method is used.  Intangible assets with finite lives are nottested for impairment annually, but when indicators exist that the carryingamount of an intangible asset is not recoverable and its carrying amountexceeds its fair value.

 

*StockBased Compensation*

As permitted by SFAS No.123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148, theCompany has elected to apply APB No. 25, “Accounting for Stock Issued toEmployees” and related interpretations in accounting for stock options issuedunder its equity compensation plan. Had compensation expense related to thesestock options been determined based upon the fair value method under SFAS No.123, net income would have been impacted as follows:

 

7

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| ** **               | ** **                                  | **Successor**                           | ** ** | **Predecessor**                      | ** ** | **Successor**                        | ** ** | **Successor**                         | ** ** | **Predecessor**                       | ** ** | **Successor**                        | ** ** |
|--------------------------|---------------------------------------------|-----------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| ** **               | ** **                                  | **Three months  ended  June 25,  2004** | ** ** | **Two months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** | **Six months  ended  June 25,  2004** | ** ** | **Five months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** |
|                     |                                        |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Net income, as  reported |                                        | $                                       | 16,759     |                                 | $          | 4,450                                |       | $                                     | 1,129      |                                  | $          | 22,358                               |       | $ | 6,892 |   | $ | 1,129 |   |
| Add:                     | Stock-based  employee compensation          |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |   |
|                     | cost included in  reported net income,      |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |   |
|                     | net of related  tax effects                 |                                    | —     |                                 | —     |                                 | 143        |                                  | —     |                                  | —     |                                 | 143        |   |
| Less:                    | Total  stock-based employee compensation    |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |   |
|                     | expense  determined under fair value method |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |   |
|                     | for all awards,  net of related tax effects |                                    | (46        | )                                    | —     |                                 | (159       | )                                     | (92        | )                                     | —     |                                 | (159       | ) |
|                     |                                        |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |   |
| Pro forma net  income    |                                        | $                                       | 16,713     |                                 | $          | 4,450                                |       | $                                     | 1,113      |                                  | $          | 22,266                               |       | $ | 6,892 |   | $ | 1,113 |   |

 

The fair value of eachoption was estimated using the Black-Scholes option-pricing model using a riskfree interest rate of 3.20%, an expected option life of 5 years, no volatilityand no dividends.

 

**4. Acquisitions**

 

On November 18, 2003, pursuant to a tenderoffer, 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 Berger Holdings was completed on November 25, 2003 by themerger of Amerimax Pennsylvania, Inc. into Berger Holdings, with BergerHoldings as the survivor corporation. As a result of the merger, each commonshare of Berger Holdings not owned by Euramax was converted into the right toreceive $3.90 per share in cash, subject to dissenters’ rights. The totalpurchase price of this acquisition was approximately $36.8 million. The Companypreliminarily allocated the purchase price in excess of the net assets acquiredto Berger Holdings’ assets and liabilities under the purchase method of accountingbased on estimates by management of fair market values of identifiable assetsand liabilities, with the remainder allocated to goodwill. During the threemonths ended June 25, 2004, the Company revised the allocation of the purchaseprice to reflect final asset and liability valuations. The adjustments torecord the final asset and liability valuations did not have a material affecton the Company’s financial position as of June 25, 2004 or its results ofoperations for the three and six months ended June 25, 2004. 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 theacquisition date.

 

**5. Inventories:**

 

Inventories werecomprised of:

 

8

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| ** **         | ** ** | **Successor**      | ** ** |
|--------------------|------------|--------------------|------------|
| ** **         | ** ** | **June 25,  2004** | ** ** | **December 26,  2003** | ** ** |
|               |       |               |       |   |   |
| Raw materials      |       | $                  | 80,583     |   | $ | 61,832 |   |
| Work in process    |       | 8,706              |       | 8,075 |   |
| Finished  products |       | 28,440             |       | 19,636 |   |
|               |       | $                  | 117,729    |   | $ | 89,543 |   |

 

Inventories are net ofrelated reserves totaling $3.3 million at June 25, 2004 and $3.6 million atDecember 26, 2003.

 

**6.  Long-Term Obligations:**

 

Long-term obligationsconsisted of the following:

 
| ** **                                | ** ** | **Successor**      | ** ** |
|-------------------------------------------|------------|--------------------|------------|
| ** **                                | ** ** | **June 25,  2004** | ** ** | **December 26,  2003** | ** ** |
| Senior Secured  Credit Facility:          |       |               |       |   |   |
| Revolving Credit  Facility                |       | $                  | 60,519     |   | $ | — |   |
| Term Loans                                |       | 35,004             |       | 36,559 |   |
| 8.50% Senior  Subordinated Notes due 2011 |       | 200,000            |       | 200,000 |   |
| Mortgage Note  Payable                    |       | 2,168              |       | 2,252 |   |
| Capital Lease  Obligations                |       | 348                |       | 483 |   |
|                                      |       | 298,039            |       | 239,294 |   |
| Less current  maturities                  |       | (8,769             | )          | (7,487 | ) |
|                                      |       | $                  | 289,270    |   | $ | 231,807 |   |

 

As of June 25,2004, an undrawn amount of $49.5 million was available under the revolvingcredit facility.

 

**7.  Goodwill:**

 

A summary of changes in the Company’s goodwill by segment for the sixmonths ended June 25, 2004 is as follows:

 

9

----

 
| ** **                                                                  | ** ** | **U.S. Fabrication  Roof  Drainage** | ** ** | **U.S. Fabrication  Building  Materials** | ** ** | **European  Roll  Coating** | ** ** | **European  Fabrication** | ** ** | **Total** | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------------|------------|-----------------------------|------------|---------------------------|------------|-----------|------------|
|                                                                        |       |                                 |       |                                      |       |                        |       |                      |       |      |       |
| Successor  balance at December 26, 2003                                     |       | $                                    | 78,479     |                                      | $          | 48,977                      |       | $                         | 36,969     |      | $          | 11,969 |   | $ | 176,394 |   |
|                                                                        |       |                                 |       |                                      |       |                        |       |                      |       |      |       |
| Adjustment for  final allocation relating to the 2003 Stock Transaction     |       | (11,587                              | )          | (15,592                                   | )          | (6,693                      | )          | 457                       |       | (33,415   | )          |
| Adjustment for  final allocation relating to acquisition of Berger Holdings |       | (4,838                               | )          | —                                    |       | —                      |       | —                    |       | (4,838    | )          |
| Foreign exchange  translation                                               |       | —                               |       | —                                    |       | (842                        | )          | 314                       |       | (528      | )          |
| Successor  balance at June 25, 2004                                         |       | $                                    | 62,054     |                                      | $          | 33,385                      |       | $                         | 29,434     |      | $          | 12,740 |   | $ | 137,613 |   |

 

**8.  Commitments and Contingencies:**

 

**Raw Material Commitments**

 

To assure continuity of supply, the Company negotiates contracts for minimumannual purchases of aluminum from several suppliers. Commitments for minimumannual purchases are typically at an agreed upon cost to convert aluminum ingotinto coil. In addition, to ensure a margin on specific sales, the Company maycommit to purchase aluminum ingot or coil at a fixed market price for futuredelivery. For further discussion of the Company’s raw material commitments, seeNote 14 to the consolidated financial statements of the Company for the yearended December 26, 2003, set forth in the Company’s annual report on Form 10-K.

 

**Litigation**

 

The Company is subject tolegal proceedings and claims that have arisen in the ordinary course ofbusiness.  Although occasional adversedecisions or settlements may occur, it is the opinion of the Company’smanagement, based upon information available at this time, that the expectedoutcome of these matters is not estimable individually or in the aggregate, butwould not reasonably be expected to have a material adverse effect on theconsolidated financial position, results of operations or cash flows of theCompany and its subsidiaries taken as a whole.

 

**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

 

10

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participationof the other entities that also sent waste to the site. Once it becomesprobable that the Company will incur costs in connection with remediation of asite and such costs can be reasonably estimated, the Company establishes oradjusts its reserve for its projected share of these costs. Based upon currentlaw and information known to the Company concerning the size of the sites knownto it, anticipated costs, their years of operations and the number of otherpotentially responsible parties, management believes that the Company’spotential share of the estimated aggregate liability for the costs of remedialactions and related costs and expenses are not material. In addition, the Companyestablishes reserves for remedial measures required from time to time at itsown facilities.** **Managementbelieves that the reasonably probable outcomes of these matters will not bematerial. The Company’s reserves, expenditures and expenses for all environmentalexposures were 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 indemnified byAlumax 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.

 

The facility that Berger Bros Company(“Berger”), an operating subsidiary acquired as part of the Berger Holdingsacquisition, leases in Ivyland, Pennsylvania has contaminated groundwater resultingfrom the migration of contaminants from an adjacent property which was formerlythe Naval Air Warfare Center, currently an NPL site under CERCLA. The UnitedStates Navy is conducting a clean-up of the Naval Air Warfare Center NPL siteunder the Environmental Protection Agency’s supervision. The owner/landlord ofthe Berger property obtained liability protection under Pennsylvania’sBrownfield Law by demonstrating to the Commonwealth of Pennsylvania that thecontamination is from an off-site source, and under Pennsylvania law thatprotection benefits the tenant as well. Moreover, under Berger’s lease, thelandlord retained any liability for this contamination. Accordingly, althoughthe facility leased by Berger is on an NPL site, the effects of this contaminationwould not reasonably be expected to have a material adverse effect on ourconsolidated financial position, results of operations or cash flows.

 

**Product Warranties**

 

The Company provideswarranties on certain products. The warranty periods differ depending on theproduct, but generally range from one year to limited lifetime warranties. TheCompany provides accruals for warranties based on historical experience andexpectations of future occurrence. A summary of the changes in the product warrantyaccrual follows:

 

11

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| ** **                                                    | ** ** | **Successor**                           | ** ** | **Predecessor**                      | ** ** | **Successor**                        | ** ** | **Successor**                         | ** ** | **Predecessor**                       | ** ** | **Successor**                        | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| ** **                                                    | ** ** | **Three months  ended  June 25,  2004** | ** ** | **Two months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** | **Six months  ended  June 25,  2004** | ** ** | **Five months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** |
|                                                          |       |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Beginning  balance                                            |       | $                                       | 3,972      |                                 | $          | 3,045                                |       | $                                     | 3,394      |                                  | $          | 3,993                                |       | $ | 2,809 |   | $ | 3,394 |   |
| Payments made or  service provided                            |       | (710                                    | )          | (257                                 | )          | (240                                 | )          | (1,439                                | )          | (720                                  | )          | (240                                 | )          |
| Warranty expense                                              |       | 571                                     |       | 447                                  |       | 429                                  |       | 1,299                                 |       | 1,119                                 |       | 429                                  |       |
| Change related  to changes in foreign currency exchange rates |       | 10                                      |       | 159                                  |       | (47                                  | )          | (10                                   | )          | 186                                   |       | (47                                  | )          |
|                                                          |       |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Ending balance                                                |       | $                                       | 3,843      |                                 | $          | 3,394                                |       | $                                     | 3,536      |                                  | $          | 3,843                                |       | $ | 3,394 |   | $ | 3,536 |   |

 

**9.  Comprehensive Income:**

 
| ** **                                     | ** ** | **Successor**                           | ** ** | **Predecessor**                      | ** ** | **Successor**                        | ** ** | **Successor**                         | ** ** | **Predecessor**                       | ** ** | **Successor**                        | ** ** |
|------------------------------------------------|------------|-----------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| ** **                                     | ** ** | **Three months  ended  June 25,  2004** | ** ** | **Two months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** | **Six months  ended  June 25,  2004** | ** ** | **Five months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** |
|                                           |       |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Net earnings                                   |       | $                                       | 16,759     |                                 | $          | 4,450                                |       | $                                     | 1,129      |                                  | $          | 22,358                               |       | $ | 6,892 |   | $ | 1,129 |   |
| Other  comprehensive earnings (loss):          |       |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Foreign currency  translation adjustment       |       | 232                                     |       | 5,000                                |       | (2,638                               | )          | (1,671                                | )          | 6,922                                 |       | (2,638                               | )          |
| Gain (loss) on  derivative instruments, net:   |       |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Net changes in  fair value of derivatives      |       | (1,574                                  | )          | (627                                 | )          | (228                                 | )          | (2,571                                | )          | (324                                  | )          | (228                                 | )          |
| Net gains  reclassified from OCI into earnings |       | 61                                      |       | 759                                  |       | 136                                  |       | (437                                  | )          | 423                                   |       | 136                                  |       |
|                                           |       |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Comprehensive  income (loss)                   |       | $                                       | 15,478     |                                 | $          | 9,582                                |       | $                                     | (1,601     | )                                     | $          | 17,679                               |       | $ | 13,913 |   | $ | (1,601 | ) |

 

**10.  Income Taxes:**

 

The income taxprovision for the six months ended June 25, 2004, the five months ended May 23,2003 and the one month ended June 27, 2003, is computed at the effective rateexpected to be applicable in each respective full year using the statutoryrates on a country by country basis, adjusted for changes in valuationallowances relating to the Company’s state NOL carryforwards and capital losscarryforwards.

 

**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:

 

12

----

 
| ** **                                   | ** ** | **Successor**                           | ** ** | **Predecessor**                      | ** ** | **Successor**                        | ** ** | **Successor**                         | ** ** | **Predecessor**                       | ** ** | **Successor**                        | ** ** |
|----------------------------------------------|------------|-----------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| ** **                                   | ** ** | **Three months  ended  June 25,  2004** | ** ** | **Two months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** | **Six months  ended  June 25,  2004** | ** ** | **Five months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** |
| **Components  of net periodic pension cost** |       |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Service cost                                 |       | $                                       | 94         |                                 | $          | 57                                   |       | $                                     | 29         |                                  | $          | 196                                  |       | $ | 143 |   | $ | 29 |   |
| Interest cost                                |       | 59                                      |       | 30                                   |       | 15                                   |       | 113                                   |       | 76                                    |       | 15                                   |       |
| Expected return on  assets                   |       | (63                                     | )          | (31                                  | )          | (16                                  | )          | (118                                  | )          | (77                                   | )          | (16                                  | )          |
| Amortization of  prior service cost          |       | 1                                       |       | 4                                    |       | —                               |       | 1                                     |       | 10                                    |       | —                               |       |
| Recognized  actuarial net loss               |       | —                                  |       | 14                                   |       | —                               |       | —                                |       | 34                                    |       | —                               |       |
| Net periodic  pension cost                   |       | $                                       | 91         |                                 | $          | 74                                   |       | $                                     | 28         |                                  | $          | 192                                  |       | $ | 186 |   | $ | 28 |   |

 

Net periodic pension costs for the Company’s single employee pensionplan covering the employees of Euramax Coated Products Limited and EllbeeLimited include the following components:

 
| ** **                                   | ** ** | **Successor**                           | ** ** | **Predecessor**                      | ** ** | **Successor**                        | ** ** | **Successor**                         | ** ** | **Predecessor**                       | ** ** | **Successor**                        | ** ** |
|----------------------------------------------|------------|-----------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| ** **                                   | ** ** | **Three months  ended  June 25,  2004** | ** ** | **Two months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** | **Six months  ended  June 25,  2004** | ** ** | **Five months  ended  May 23,  2003** | ** ** | **One month  ended  June 27,  2003** | ** ** |
| **Components  of net periodic pension cost** |       |                                    |       |                                 |       |                                 |       |                                  |       |                                  |       |                                 |       |
| Service cost                                 |       | $                                       | 271        |                                 | $          | 137                                  |       | $                                     | 68         |                                  | $          | 546                                  |       | $ | 342 |   | $ | 68 |   |
| Interest cost                                |       | 454                                     |       | 243                                  |       | 121                                  |       | 916                                   |       | 608                                   |       | 121                                  |       |
| Expected return  on assets                   |       | (345                                    | )          | (156                                 | )          | (78                                  | )          | (695                                  | )          | (390                                  | )          | (78                                  | )          |
| Recognized  actuarial net loss               |       | —                                  |       | 110                                  |       | —                               |       | —                                |       | 274                                   |       | —                               |       |
| Net periodic  pension cost                   |       | $                                       | 380        |                                 | $          | 334                                  |       | $                                     | 111        |                                  | $          | 767                                  |       | $ | 834 |   | $ | 111 |   |

 

**12.  SegmentInformation:**

 

TheCompany’s acquisition of Berger Holdings, Ltd. on November 25, 2003 led to anassessment of operating segments that resulted in the Company’s identificationof the U.S. Fabrication Roof Drainage operating segment. The businessactivities included in the U.S. Fabrication Roof Drainage operating segmentwere previously included in the U.S. Fabrication segment. Accordingly, priorperiod segment information has been revised to conform to the Company’s revisedsegments. The Company’s reportable segments are as follows:

 

*EuropeanRoll Coating* – The European Roll Coatingsegment facilities primarily roll coat aluminum and steel sheet and coil forRV, transportation and building panel manufacturers.

 

*U.S.Fabrication Roof Drainage* – The U.S. FabricationRoof Drainage segment facilities primarily fabricate coated aluminum and steelcoil to produce gutters, downspouts, soffit, fascia, gutter accessories andother products. Such products are primarily sold to home centers, distributorsand home improvement contractors.

 

*U.S.Fabrication Building Materials* – TheU.S. Fabrication Building Materials segment facilities primarily fabricatecoated aluminum and steel coil to produce roofing and siding panels, doors,windows, vehicle sidewalls and other products. Such products are primarily soldto RV manufacturers, rural contractors, home improvement contractors,industrial and architectural contractors and manufactured housing producers.

 

*European Fabrication* – The European Fabrication segment facilitiesprimarily fabricate aluminum extrusions and glass to produce windows, doors,shower enclosures, sunroofs and other products. Such products are primarilysold to transportation manufacturers, distributors, home centers and industrialand architectural contractors.

 

The accounting policiesof the segments are the same as those described in Note 2 to the consolidated financial statements ofthe Company for the year ended December 26, 2003, set forth in the Company’sAnnual Report on Form 10-K. Segment dataincludes intersegment revenues. The Company evaluates the performance of itssegments and allocates resources to them based primarily on EBITDA.

 

13

----

 

The Company is organized primarily on the basisof seven operating segments. Certain operating segments with similar economiccharacteristics have been aggregated according to similarity of products,nature of production processes, types of customers and product distributionmethods. Two European subsidiaries have been aggregated into the European RollCoating segment, two U.S. subsidiaries have been aggregated into the U.S.Fabrication Building Materials segment and two European subsidiaries have beenaggregated into the European Fabrication segment. The U.S. Fabrication RoofDrainage operating segment is reported separately. The table below presentsinformation about reported segments for the periods indicated. Expenses, incomeand assets 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**                | ** ** | **Successor**                  | ** ** | **Successor**                   | ** ** | **Predecessor**                 | ** ** | **Successor**                  | ** ** |
|------------------------------------------------|------------|-----------------------------------|------------|--------------------------------|------------|--------------------------------|------------|---------------------------------|------------|---------------------------------|------------|--------------------------------|------------|
| ** **                                     | ** ** | **Three months  ended  June 25,** | ** ** | **Two months  ended  May 23,** | ** ** | **One month  ended  June 27,** | ** ** | **Six months  ended  June 25,** | ** ** | **Five months  ended  May 23,** | ** ** | **One month  ended  June 27,** | ** ** |
| ** **                                     | ** ** | **2004**                          | ** ** | **2003**                       | ** ** | **2003**                       | ** ** | **2004**                        | ** ** | **2003**                        | ** ** | **2003**                       | ** ** |
|                                           |       |                              |       |                           |       |                           |       |                            |       |                            |       |                           |       |
| **Sales**                                      |       |                              |       |                           |       |                           |       |                            |       |                            |       |                           |       |
| U.S. Fabrication  Roof Drainage                |       | $                                 | 67,441     |                           | $          | 27,402                         |       | $                               | 20,317     |                            | $          | 110,780                        |       | $ | 54,415 |   | $ | 20,317 |   |
| U.S. Fabrication  Building Materials           |       | 102,501                           |       | 48,046                         |       | 32,148                         |       | 173,634                         |       | 107,617                         |       | 32,148                         |       |
| European Roll  Coating                         |       | 51,425                            |       | 24,056                         |       | 15,660                         |       | 100,947                         |       | 60,719                          |       | 15,660                         |       |
| European  Fabrication                          |       | 30,366                            |       | 15,797                         |       | 9,723                          |       | 63,223                          |       | 39,913                          |       | 9,723                          |       |
| Total segment  sales                           |       | 251,733                           |       | 115,301                        |       | 77,848                         |       | 448,584                         |       | 262,664                         |       | 77,848                         |       |
|                                           |       |                              |       |                           |       |                           |       |                            |       |                            |       |                           |       |
| Eliminations                                   |       | (1,246                            | )          | (844                           | )          | (654                           | )          | (2,694                          | )          | (2,049                          | )          | (654                           | )          |
| Consolidated net  sales                        |       | $                                 | 250,487    |                           | $          | 114,457                        |       | $                               | 77,194     |                            | $          | 445,890                        |       | $ | 260,615 |   | $ | 77,194 |   |
|                                           |       |                              |       |                           |       |                           |       |                            |       |                            |       |                           |       |
| **EBITDA**                                     |       |                              |       |                           |       |                           |       |                            |       |                            |       |                           |       |
| U.S. Fabrication  Roof Drainage                |       | $                                 | 12,117     |                           | $          | 4,366                          |       | $                               | 3,017      |                            | $          | 14,276                         |       | $ | 5,901 |   | $ | 3,017 |   |
| U.S. Fabrication  Building Materials           |       | 11,293                            |       | 3,417                          |       | 1,381                          |       | 14,384                          |       | 5,860                           |       | 1,381                          |       |
| European Roll  Coating                         |       | 8,659                             |       | 3,389                          |       | 1,487                          |       | 17,455                          |       | 9,508                           |       | 1,487                          |       |
| European  Fabrication                          |       | 4,374                             |       | 1,643                          |       | 1,140                          |       | 8,506                           |       | 4,489                           |       | 1,140                          |       |
| Total EBITDA for  reportable segments          |       | 36,443                            |       | 12,815                         |       | 7,025                          |       | 54,621                          |       | 25,758                          |       | 7,025                          |       |
|                                           |       |                              |       |                           |       |                           |       |                            |       |                            |       |                           |       |
| (Expense) income  that is not segment specific |       | (493                              | )          | 517                            |       | (1,920                         | )          | 744                             |       | 790                             |       | (1,920                         | )          |
| Depreciation and  amortization                 |       | (3,850                            | )          | (2,531                         | )          | (1,571                         | )          | (8,965                          | )          | (6,276                          | )          | (1,571                         | )          |
| Interest expense,  net                         |       | (6,022                            | )          | (3,678                         | )          | (1,843                         | )          | (11,779                         | )          | (9,126                          | )          | (1,843                         | )          |
| Consolidated net  earnings before income taxes |       | $                                 | 26,078     |                           | $          | 7,123                          |       | $                               | 1,691      |                            | $          | 34,621                         |       | $ | 11,146 |   | $ | 1,691 |   |

 

14

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| ** **                            | ** ** | **Successor**      | ** ** |
|---------------------------------------|------------|--------------------|------------|
| ** **                            | ** ** | **June 25,  2004** | ** ** | **December 26,  2003** | ** ** |
|                                  |       |               |       |   |   |
| **Assets**                            |       |               |       |   |   |
| U.S. Fabrication  Roof Drainage       |       | $                  | 191,717    |   | $ | 163,870 |   |
| U.S. Fabrication  Building Materials  |       | 184,001            |       | 153,513 |   |
| European Roll  Coating                |       | 168,656            |       | 153,921 |   |
| European  Fabrication                 |       | 106,940            |       | 96,107 |   |
| Assets that are  not segment specific |       | 23,881             |       | 41,418 |   |
|                                  |       |               |       |   |   |
| **Total  assets**                     |       | $                  | 675,195    |   | $ | 608,829 |   |

 

15

----

 

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**                        | ** ** | **Successor**                          | ** ** | **Successor**                           | ** ** | **Predecessor**                         | ** ** | **Successor**                          | ** ** |
|-----------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|----------------------------------------|------------|
| **Customers/Markets**                               | ** ** | **Primary Products**                                                                                                                                          | ** ** | **Three months****ended  June 25,  2004** | ** ** | **Two months****ended  May 23,  2003** | ** ** | **One month****ended  June 27,  2003** | ** ** | **Six months****ended  June 25,  2004** | ** ** | **Five months****ended  May 23,  2003** | ** ** | **One month****ended  June 27,  2003** | ** ** |
|                                                |       |                                                                                                                                                          |       |                                      |       |                                   |       |                                   |       |                                    |       |                                    |       |                                   |       |
| Original Equipment Manufacturers (“OEMs”) |       | Painted aluminum sheet and coil; fabricated painted aluminum,  laminated and fiberglass panels; RV doors, windows and roofing; and composite  building panels |       | $                                         | 97,478     |                                   | $          | 47,552                                 |       | $                                       | 29,649     |                                    | $          | 190,233                                |       | $ | 120,289 |   | $ | 29,649 |   |
|                                                |       |                                                                                                                                                          |       |                                      |       |                                   |       |                                   |       |                                    |       |                                    |       |                                   |       |
| Rural Contractors                                   |       | Steel and aluminum roofing and siding                                                                                                                         |       | 41,746                                    |       | 18,892                                 |       | 12,796                                 |       | 67,020                                  |       | 38,980                                  |       | 12,796                                 |       |
|                                                |       |                                                                                                                                                          |       |                                      |       |                                   |       |                                   |       |                                    |       |                                    |       |                                   |       |
|                                                |       |                                                                                                                                                          |       |                                      |       |                                   |       |                                   |       |                                    |       |                                    |       |                                   |       |
| Home Centers                                        |       | Raincarrying systems, roofing accessories, windows and doors                                                                                                  |       | 47,501                                    |       | 23,964                                 |       | 17,995                                 |       | 74,593                                  |       | 46,499                                  |       | 17,995                                 |       |
|                                                |       |                                                                                                                                                          |       |                                      |       |                                   |       |                                   |       |                                    |       |                                    |       |                                   |       |
| Manufactured Housing                                |       | Steel siding and trim components                                                                                                                              |       | 6,650                                     |       | 3,526                                  |       | 3,076                                  |       | 11,885                                  |       | 8,031                                   |       | 3,076                                  |       |
|                                                |       |                                                                                                                                                          |       |                                      |       |                                   |       |                                   |       |                                    |       |                                    |       |                                   |       |
| Distributors                                        |       | Metal coils, raincarrying systems, roofing accessories and shower  enclosures                                                                                 |       | 26,541                                    |       | 7,531                                  |       | 4,693                                  |       | 47,962                                  |       | 16,714                                  |       | 4,693                                  |       |
|                                                |       |                                                                                                                                                          |       |                                      |       |                                   |       |                                   |       |                                    |       |                                    |       |                                   |       |
| Industrial and Architectural Contractors            |       | Standing seam panels and siding and roofing accessories                                                                                                       |       | 8,399                                     |       | 3,886                                  |       | 2,822                                  |       | 15,650                                  |       | 9,183                                   |       | 2,822                                  |       |
|                                                |       |                                                                                                                                                          |       |                                      |       |                                   |       |                                   |       |                                    |       |                                    |       |                                   |       |
| Home Improvement Contractors                        |       | Vinyl replacement windows; metal coils, raincarrying systems; metal  roofing and insulated roofing panels; shower, patio and entrance doors; and  awnings     |       | 22,172                                    |       | 9,106                                  |       | 6,163                                  |       | 38,547                                  |       | 20,919                                  |       | 6,163                                  |       |
|                                                |       |                                                                                                                                                          |       | $                                         | 250,487    |                                   | $          | 114,457                                |       | $                                       | 77,194     |                                    | $          | 445,890                                |       | $ | 260,615 |   | $ | 77,194 |   |

 

16

----

 

**13.  Common Stock:**

 

On March 31, 2004,the Company repurchased 55% of its outstanding common stock held by CourtSquare Capital Limited, or 93,324.34 shares, for an aggregate repurchase priceof approximately $37.3 million. On April 30, 2004, the Company repurchased theremaining 45% of its outstanding common stock held by Court Square CapitalLimited, or 76,356.28 shares, for an aggregate repurchase price ofapproximately $30.5 million. These repurchases were funded with borrowingsunder the Company’s revolving credit facility. After completing theserepurchases, the Company had 322,815.17 shares of Class A common stockoutstanding.

 

**14.   Supplemental Condensed ConsolidatingFinancial Statements:**

 

On August 6, 2003,Euramax International, Inc. and Euramax International Holdings B.V. (each a“Co-Obligor”) issued $200.0 million of 8.50% senior subordinated notes due2011, which were subsequently exchanged for new notes with substantiallyidentical terms. Each of the domestic restricted subsidiaries, as defined inthe related bond indenture (the “Guarantor Subsidiaries”), fully andunconditionally guarantee the obligations of the Co-Obligors. The followingsupplemental condensed consolidating financial statements as of June 25, 2004and December 26, 2003 and for the three and six months ended June 25, 2004, thetwo and five months ended May 23, 2003 and the one month ended June 27, 2003,reflect the financial position, results of operations, and cash flows of eachof the Co-Obligors, and such combined information of the Guarantor Subsidiariesand the non-guarantor subsidiaries (the “Non-Guarantor Subsidiaries”), as ifthe guarantor structure of the $200.0 million of 8.50% senior subordinatednotes due 2011 had been outstanding for each period. Euramax InternationalHoldings B.V. was not acquired until July 17, 2003, had no assets orliabilities until August 6, 2003 and has no operations other than equityinterests in consolidated subsidiaries that were acquired on March 16, 2004.

 

17

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| ** **                               | ** ** | **Successor three months ended June 25, 2004** | ** ** |
|------------------------------------------|------------|------------------------------------------------|------------|
| ** **                               | ** ** | **Euramax  International  Inc.  (Co-Obligor)** | ** ** | **Euramax  International  Holdings  BV  (Co-Obligor)** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  Totals** | ** ** |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net sales                                |       | $                                              | —     |   | $ | — |   | $ | 168,946 |   | $ | 81,548 |   | $ | (7 | ) | $ | 250,487 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Costs and  expenses:                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Cost of goods  sold                      |       | —                                         |       | — |   | 130,778 |   | 62,952 |   | (7 | ) | 193,723 |   |
| Selling and general                      |       | (388                                           | )          | 3 |   | 15,494 |   | 6,290 |   | — |   | 21,399 |   |
| Depreciation and  amortization           |       | —                                         |       | — |   | 4,063 |   | (213 | ) | — |   | 3,850 |   |
| Earnings (loss)  from operations         |       | 388                                            |       | (3 | ) | 18,611 |   | 12,519 |   | — |   | 31,515 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Equity in  earnings of subsidiaries      |       | 18,952                                         |       | 5,299 |   | — |   | 6 |   | (24,257 | ) | — |   |
| Interest  expense, net                   |       | (3,126                                         | )          | (1,474 | ) | (844 | ) | (578 | ) | — |   | (6,022 | ) |
| Internal  interest income (expense), net |       | 430                                            |       | 21 |   | (1,576 | ) | 1,125 |   | — |   | — |   |
| Other (expense)  income, net             |       | (1,288                                         | )          | 20 |   | 519 |   | 1,334 |   | — |   | 585 |   |
| Earnings before  income taxes            |       | 15,356                                         |       | 3,863 |   | 16,710 |   | 14,406 |   | (24,257 | ) | 26,078 |   |
| (Benefit)  provision for income taxes    |       | (1,403                                         | )          | (495 | ) | 6,492 |   | 4,725 |   | — |   | 9,319 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net earnings                             |       | $                                              | 16,759     |   | $ | 4,358 |   | $ | 10,218 |   | $ | 9,681 |   | $ | (24,257 | ) | $ | 16,759 |   |

 

18

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| ** **                               | ** ** | **Predecessor two months ended May 23, 2003**  | ** ** |
|------------------------------------------|------------|------------------------------------------------|------------|
| ** **                               | ** ** | **Euramax  International  Inc.  (Co-Obligor)** | ** ** | **Euramax  International  Holdings  BV  (Co-Obligor)** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  Totals** | ** ** |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net sales                                |       | $                                              | —     |   | $ | — |   | $ | 75,108 |   | $ | 39,561 |   | $ | (212 | ) | $ | 114,457 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Costs and  expenses:                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Cost of goods  sold                      |       | —                                         |       | — |   | 59,641 |   | 31,425 |   | (212 | ) | 90,854 |   |
| Selling and  general                     |       | 156                                            |       | — |   | 7,221 |   | 3,186 |   | — |   | 10,563 |   |
| Depreciation and  amortization           |       | —                                         |       | — |   | 1,326 |   | 1,205 |   | — |   | 2,531 |   |
| (Loss) earnings  from operations         |       | (156                                           | )          | — |   | 6,920 |   | 3,745 |   | — |   | 10,509 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Equity in  earnings of subsidiaries      |       | 5,364                                          |       | — |   | — |   | (68 | ) | (5,296 | ) | — |   |
| Interest  expense, net                   |       | (699                                           | )          | — |   | (620 | ) | (2,359 | ) | — |   | (3,678 | ) |
| Internal  interest (expense) income, net |       | (642                                           | )          | — |   | (1,367 | ) | 2,009 |   | — |   | — |   |
| Other income,  net                       |       | —                                         |       | — |   | 43 |   | 249 |   | — |   | 292 |   |
| Earnings before  income taxes            |       | 3,867                                          |       | — |   | 4,976 |   | 3,576 |   | (5,296 | ) | 7,123 |   |
| (Benefit)  provision for income taxes    |       | (583                                           | )          | — |   | 2,025 |   | 1,231 |   | — |   | 2,673 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net earnings                             |       | $                                              | 4,450      |   | $ | — |   | $ | 2,951 |   | $ | 2,345 |   | $ | (5,296 | ) | $ | 4,450 |   |

 

19

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| ** **                               | ** ** | **Successor one month ended June 27, 2003**    | ** ** |
|------------------------------------------|------------|------------------------------------------------|------------|
| ** **                               | ** ** | **Euramax  International  Inc.  (Co-Obligor)** | ** ** | **Euramax  International  Holdings  BV  (Co-Obligor)** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  Totals** | ** ** |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net sales                                |       | $                                              | —     |   | $ | — |   | $ | 52,237 |   | $ | 25,140 |   | $ | (183 | ) | $ | 77,194 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Costs and  expenses:                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Cost of goods  sold                      |       | —                                         |       | — |   | 43,178 |   | 20,909 |   | (183 | ) | 63,904 |   |
| Selling and  general                     |       | 463                                            |       | — |   | 5,963 |   | 1,733 |   | — |   | 8,159 |   |
| Depreciation and  amortization           |       | —                                         |       | — |   | 726 |   | 845 |   | — |   | 1,571 |   |
| (Loss) earnings  from operations         |       | (463                                           | )          | — |   | 2,370 |   | 1,653 |   | — |   | 3,560 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Equity in  earnings of subsidiaries      |       | 2,190                                          |       | — |   | — |   | 108 |   | (2,298 | ) | — |   |
| Interest  expense, net                   |       | (349                                           | )          | — |   | (276 | ) | (1,218 | ) | — |   | (1,843 | ) |
| Internal  interest (expense) income, net |       | (463                                           | )          | — |   | (608 | ) | 1,071 |   | — |   | — |   |
| Other income  (expense), net             |       | —                                         |       | — |   | 22 |   | (48 | ) | — |   | (26 | ) |
| Earnings before  income taxes            |       | 915                                            |       | — |   | 1,508 |   | 1,566 |   | (2,298 | ) | 1,691 |   |
| (Benefit)  provision for income taxes    |       | (214                                           | )          | — |   | 186 |   | 590 |   | — |   | 562 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net earnings                             |       | $                                              | 1,129      |   | $ | — |   | $ | 1,322 |   | $ | 976 |   | $ | (2,298 | ) | $ | 1,129 |   |

 

20

----

 
| ** **                               | ** ** | **Successor six months ended June 25, 2004**   | ** ** |
|------------------------------------------|------------|------------------------------------------------|------------|
| ** **                               | ** ** | **Euramax  International  Inc.  (Co-Obligor)** | ** ** | **Euramax  International  Holdings  BV  (Co-Obligor)** | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-  Guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Consolidated  Totals** | ** ** |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net sales                                |       | $                                              | —     |   | $ | — |   | $ | 282,784 |   | $ | 163,216 |   | $ | (110 | ) | $ | 445,890 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Costs and  expenses:                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Cost of goods  sold                      |       | —                                         |       | — |   | 225,149 |   | 125,567 |   | (110 | ) | 350,606 |   |
| Selling and  general                     |       | 245                                            |       | 3 |   | 28,469 |   | 12,558 |   | — |   | 41,275 |   |
| Depreciation and  amortization           |       | —                                         |       | — |   | 6,764 |   | 2,201 |   | — |   | 8,965 |   |
| (Loss) earnings  from operations         |       | (245                                           | )          | (3 | ) | 22,402 |   | 22,890 |   | — |   | 45,044 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Equity in  earnings of subsidiaries      |       | 26,533                                         |       | 7,451 |   | — |   | 6 |   | (33,990 | ) | — |   |
| Interest  expense, net                   |       | (6,469                                         | )          | (2,974 | ) | (1,118 | ) | (1,218 | ) | — |   | (11,779 | ) |
| Internal interest  income (expense), net |       | 439                                            |       | 1,043 |   | (3,164 | ) | 1,682 |   | — |   | — |   |
| Other (expense)  income, net             |       | (570                                           | )          | 7 |   | 1,262 |   | 657 |   | — |   | 1,356 |   |
| Earnings before  income taxes            |       | 19,688                                         |       | 5,524 |   | 19,382 |   | 24,017 |   | (33,990 | ) | 34,621 |   |
| (Benefit)  provision for income taxes    |       | (2,670                                         | )          | (664 | ) | 7,563 |   | 8,034 |   | — |   | 12,263 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net earnings                             |       | $                                              | 22,358     |   | $ | 6,188 |   | $ | 11,819 |   | $ | 15,983 |   | $ | (33,990 | ) | $ | 22,358 |   |

 

21

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| ** **                               | ** ** | **Predecessor five months ended May 23, 2003** | ** ** |
|------------------------------------------|------------|------------------------------------------------|------------|
| ** **                               | ** ** | **Euramax  International  Inc.**               | ** ** | **Euramax  International  Holdings  BV** | ** ** | **Non-  Guarantor** | ** ** | **Guarantor** | ** ** | ** ** | ** ** | **Consolidated** | ** ** |
| ** **                               | ** ** | **(Co-Obligor)**                               | ** ** | **(Co-Obligor)** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries** | ** ** | **Eliminations** | ** ** | **Totals** | ** ** |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net sales                                |       | $                                              | —     |   | $ | — |   | $ | 161,065 |   | $ | 99,851 |   | $ | (301 | ) | $ | 260,615 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Costs and  expenses:                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Cost of goods  sold                      |       | —                                         |       | — |   | 130,949 |   | 77,772 |   | (301 | ) | 208,420 |   |
| Selling and  general                     |       | 393                                            |       | — |   | 17,473 |   | 8,287 |   | — |   | 26,153 |   |
| Depreciation and  amortization           |       | —                                         |       | — |   | 3,307 |   | 2,969 |   | — |   | 6,276 |   |
| (Loss) earnings  from operations         |       | (393                                           | )          | — |   | 9,336 |   | 10,823 |   | — |   | 19,766 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Equity in  earnings of subsidiaries      |       | 8,980                                          |       | — |   | — |   | (53 | ) | (8,927 | ) | — |   |
| Interest  expense, net                   |       | (1,745                                         | )          | — |   | (1,466 | ) | (5,915 | ) | — |   | (9,126 | ) |
| Internal  interest (expense) income, net |       | (1,120                                         | )          | — |   | (2,931 | ) | 4,051 |   | — |   | — |   |
| Other income,  net                       |       | —                                         |       | — |   | 103 |   | 403 |   | — |   | 506 |   |
| Earnings before  income taxes            |       | 5,722                                          |       | — |   | 5,042 |   | 9,309 |   | (8,927 | ) | 11,146 |   |
| (Benefit)  provision for income taxes    |       | (1,170                                         | )          | — |   | 2,253 |   | 3,171 |   | — |   | 4,254 |   |
|                                     |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net earnings                             |       | $                                              | 6,892      |   | $ | — |   | $ | 2,789 |   | $ | 6,138 |   | $ | (8,927 | ) | $ | 6,892 |   |

 

22

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| ** **                                      | ** ** | **Successor as of June 25, 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          |   | $ | 19 |   | $ | 999 |   | $ | 34,783 |   | $ | — |   | $ | 35,802 |   |
| Accounts  receivable, net                       |       | —                                         |       | — |   | 80,684 |   | 70,377 |   | — |   | 151,061 |   |
| Inventories                                     |       | —                                         |       | — |   | 86,464 |   | 31,265 |   | — |   | 117,729 |   |
| Other current  assets                           |       | 111                                            |       | — |   | 8,567 |   | 1,642 |   | — |   | 10,320 |   |
| Total current  assets                           |       | 112                                            |       | 19 |   | 176,714 |   | 138,067 |   | — |   | 314,912 |   |
| Property, plant  and equipment, net             |       | —                                         |       | — |   | 74,815 |   | 80,829 |   | — |   | 155,644 |   |
| Amounts due from  affiliates                    |       | 120,752                                        |       | 1,384 |   | 82,790 |   | 77,522 |   | (282,448 | ) | — |   |
| Goodwill, net                                   |       | —                                         |       | — |   | 95,439 |   | 42,174 |   | — |   | 137,613 |   |
| Intangible  assets, net                         |       | —                                         |       | — |   | 30,571 |   | 15,359 |   | — |   | 45,930 |   |
| Investment in  consolidated subsidiaries        |       | 266,937                                        |       | 94,090 |   | — |   | 1,116 |   | (362,143 | ) | — |   |
| Deferred income  taxes                          |       | 74                                             |       | 1,564 |   | 96 |   | 3,627 |   | — |   | 5,361 |   |
| Other assets                                    |       | 5,831                                          |       | 2,831 |   | 5,595 |   | 1,478 |   | — |   | 15,735 |   |
|                                            |       | $                                              | 393,706    |   | $ | 99,888 |   | $ | 466,020 |   | $ | 360,172 |   | $ | (644,591 | ) | $ | 675,195 |   |
| **LIABILITIES AND SHAREHOLDERS’  EQUITY**  |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Current  liabilities:                           |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Cash overdrafts                                 |       | $                                              | —     |   | $ | — |   | $ | 2,285 |   | $ | — |   | $ | — |   | $ | 2,285 |   |
| Accounts payable                                |       | —                                         |       | — |   | 66,716 |   | 45,299 |   | — |   | 112,015 |   |
| Accrued expenses  and other current liabilities |       | (2,014                                         | )          | 1,310 |   | 37,032 |   | 24,753 |   | — |   | 61,081 |   |
| Current  maturities of long-term debt           |       | —                                         |       | — |   | 422 |   | 8,347 |   | — |   | 8,769 |   |
| Total current  liabilities                      |       | (2,014                                         | )          | 1,310 |   | 106,455 |   | 78,399 |   | — |   | 184,150 |   |
| Long-term debt,  less current maturities        |       | 137,255                                        |       | 62,745 |   | 62,613 |   | 26,657 |   | — |   | 289,270 |   |
| Amounts due to  affiliates                      |       | 138,510                                        |       | 237 |   | 116,912 |   | 26,789 |   | (282,448 | ) | — |   |
| Deferred income  taxes                          |       | 58                                             |       | 389 |   | 29,916 |   | 21,267 |   | — |   | 51,630 |   |
| Other  liabilities                              |       | —                                         |       | 3,961 |   | 3,715 |   | 22,330 |   | — |   | 30,006 |   |
| Total  liabilities                              |       | 273,809                                        |       | 68,642 |   | 319,611 |   | 175,442 |   | (282,448 | ) | 555,056 |   |
| Shareholders’equity:                       |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Common stock                                    |       | 500                                            |       | 21 |   | 1 |   | 35,023 |   | (35,045 | ) | 500 |   |
| Additional paid-in  capital                     |       | 155,866                                        |       | 29,170 |   | 119,166 |   | 110,673 |   | (259,380 | ) | 155,495 |   |
| Treasury stock                                  |       | (69,836                                        | )          | — |   | — |   | — |   | — |   | (69,836 | ) |
| Restricted stock                                |       | (2,999                                         | )          | — |   | — |   | — |   | — |   | (2,999 | ) |
| Retained  earnings                              |       | 37,114                                         |       | 6,789 |   | 27,287 |   | 15,537 |   | (49,613 | ) | 37,114 |   |
| Accumulated  other comprehensive (loss) income  |       | (748                                           | )          | (4,734 | ) | (45 | ) | 23,497 |   | (18,105 | ) | (135 | ) |
| Total  shareholders’ equity                |       | 119,897                                        |       | 31,246 |   | 146,409 |   | 184,730 |   | (362,143 | ) | 120,139 |   |
|                                            |       | $                                              | 393,706    |   | $ | 99,888 |   | $ | 466,020 |   | $ | 360,172 |   | $ | (644,591 | ) | $ | 675,195 |   |

 

23

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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 |   |
| Intangible  assets, net                         |       | —                                         |       | — |   | 2,492 |   | — |   | — |   | 2,492 |   |
| 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 |   | 6,986 |   | 1,689 |   | — |   | 17,264 |   |
|                                            |       | $                                              | 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 |   |

 

24

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** **
| ** **                                            | ** ** | **Successor six months ended June 25, 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  |       | $                                                | 56,380     |   | $ | (2,262 | ) | $ | (10,973 | ) | $ | 19,312 |   | $ | (61,081 | ) | $ | 1,376 |   |
|                                                  |       |                                             |       |   |   |   |   |   |   |   |   |   |   |
| Cash flows from  investing activities:                |       |                                             |       |   |   |   |   |   |   |   |   |   |   |
| Proceeds from  sales of assets                        |       | —                                           |       | — |   | 34 |   | 1,009 |   | — |   | 1,043 |   |
| Purchases of  businesses                              |       | —                                           |       | — |   | (1,172 | ) | — |   | — |   | (1,172 | ) |
| Contributed  capital to subsidiaries                  |       | (28,262                                          | )          | — |   | — |   | — |   | 28,262 |   | — |   |
| Transfer of  businesses between affiliates            |       | —                                           |       | (88,262 | ) | — |   | 88,262 |   | — |   | — |   |
| Capital  expenditures                                 |       | —                                           |       | — |   | (2,120 | ) | (1,534 | ) | — |   | (3,654 | ) |
| Net cash (used  in) provided by investing activities  |       | (28,262                                          | )          | (88,262 | ) | (3,258 | ) | 87,737 |   | 28,262 |   | (3,783 | ) |
|                                                  |       |                                             |       |   |   |   |   |   |   |   |   |   |   |
| Cash flows from  financing activities:                |       |                                             |       |   |   |   |   |   |   |   |   |   |   |
| Net borrowings  on revolving credit facility          |       | —                                           |       | — |   | 61,584 |   | 79 |   | — |   | 61,663 |   |
| Repayment of  long-term debt                          |       | —                                           |       | — |   | (220 | ) | (2,678 | ) | — |   | (2,898 | ) |
| Change in cash  overdrafts                            |       | —                                           |       | — |   | 1,850 |   | — |   | — |   | 1,850 |   |
| Dividends paid                                        |       | —                                           |       | — |   | — |   | (61,081 | ) | 61,081 |   | — |   |
| Expenses  relating to the 2003 Stock Transaction      |       | (554                                             | )          | — |   | — |   | — |   | — |   | (554 | ) |
| Purchase of  treasury stock                           |       | (67,872                                          | )          | — |   | — |   | — |   | — |   | (67,872 | ) |
| Deferred finance  fees                                |       | (555                                             | )          | (249 | ) | (61 | ) | (24 | ) | — |   | (889 | ) |
| Contributed  capital from parent                      |       | —                                           |       | 28,262 |   | — |   | — |   | (28,262 | ) | — |   |
| Due to/from  affiliates                               |       | 40,864                                           |       | 61,046 |   | (66,747 | ) | (35,163 | ) | — |   | — |   |
| Net cash (used  in) provided by financing activities  |       | (28,117                                          | )          | 89,059 |   | (3,594 | ) | (98,867 | ) | 32,819 |   | (8,700 | ) |
|                                                  |       |                                             |       |   |   |   |   |   |   |   |   |   |   |
| Effect of  exchange rate changes on cash              |       | —                                           |       | 1,463 |   | (584 | ) | (2,197 | ) | — |   | (1,318 | ) |
|                                                  |       |                                             |       |   |   |   |   |   |   |   |   |   |   |
| Net increase  (decrease) in cash and cash equivalents |       | 1                                                |       | (2 | ) | (18,409 | ) | 5,985 |   | — |   | (12,425 | ) |
| Cash and cash  equivalents at beginning of period     |       | —                                           |       | 21 |   | 19,408 |   | 28,798 |   | — |   | 48,227 |   |
| Cash and cash  equivalents at end of period           |       | $                                                | 1          |   | $ | 19 |   | $ | 999 |   | $ | 34,783 |   | $ | — |   | $ | 35,802 |   |

 

25

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| ** **                                           | ** ** | **Predecessor five months ended May 23, 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 |       | $                                              | (3,596     | ) | $ | — |   | $ | (9,557 | ) | $ | 63,361 |   | $ | (62,253 | ) | $ | (12,045 | ) |
|                                                 |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Cash flows from  investing activities:               |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Proceeds from  sales of assets                       |       | —                                         |       | — |   | 7 |   | 28 |   | — |   | 35 |   |
| Capital  expenditures                                |       | —                                         |       | — |   | (2,283 | ) | (2,661 | ) | — |   | (4,944 | ) |
| Net cash used in  investing activities               |       | —                                         |       | — |   | (2,276 | ) | (2,633 | ) | — |   | (4,909 | ) |
|                                                 |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Cash flows from  financing activities:               |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net borrowings  on revolving credit facility         |       | —                                         |       | — |   | 16,800 |   | 1,464 |   | — |   | 18,264 |   |
| Change in cash  overdrafts                           |       | —                                         |       | — |   | 2,603 |   | — |   | — |   | 2,603 |   |
| Purchase of  treasury stock                          |       | (2,556                                         | )          | — |   | — |   | — |   | — |   | (2,556 | ) |
| Deferred finance  fees                               |       | —                                         |       | — |   | (71 | ) | (45 | ) | — |   | (116 | ) |
| Dividend paid                                        |       | —                                         |       | — |   | (62,253 | ) | — |   | 62,253 |   | — |   |
| Due to/from  affiliates                              |       | 6,152                                          |       | — |   | 54,864 |   | (61,016 | ) | — |   | — |   |
| Net cash  provided by (used in) financing activities |       | 3,596                                          |       | — |   | 11,943 |   | (59,597 | ) | 62,253 |   | 18,195 |   |
|                                                 |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Effect of  exchange rate changes on cash             |       | —                                         |       | — |   | — |   | 778 |   | — |   | 778 |   |
|                                                 |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net increase in  cash and cash equivalents           |       | —                                         |       | — |   | 110 |   | 1,909 |   | — |   | 2,019 |   |
| Cash and cash  equivalents at beginning of period    |       | —                                         |       | — |   | 560 |   | 11,086 |   | — |   | 11,646 |   |
| Cash and cash  equivalents at end of period          |       | $                                              | —     |   | $ | — |   | $ | 670 |   | $ | 12,995 |   | $ | — |   | $ | 13,665 |   |

 

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** **
| ** **                                             | ** ** | **Successor one month ended June 27, 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   |       | $                                              | (920       | ) | $ | — |   | $ | 2,798 |   | $ | 10,046 |   | $ | — |   | $ | 11,924 |   |
|                                                   |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Cash flows from  investing activities:                 |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Proceeds from  sales of assets                         |       | —                                         |       | — |   | 24 |   | 20 |   | — |   | 44 |   |
| Capital  expenditures                                  |       | —                                         |       | — |   | (306 | ) | (483 | ) | — |   | (789 | ) |
| Net cash used in  investing activities                 |       | —                                         |       | — |   | (282 | ) | (463 | ) | — |   | (745 | ) |
|                                                   |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Cash flows from  financing activities:                 |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net repayments  on revolving credit facility           |       | —                                         |       | — |   | (1,500 | ) | (9,653 | ) | — |   | (11,153 | ) |
| Change in cash  overdrafts                             |       | —                                         |       | — |   | (2,995 | ) | — |   | — |   | (2,995 | ) |
| Issuance of  common stock from shares held in treasury |       | 353                                            |       | — |   | — |   | — |   | — |   | 353 |   |
| Purchase of treasury  stock                            |       | (80                                            | )          | — |   | — |   | — |   | — |   | (80 | ) |
| Deferred finance  fees                                 |       | —                                         |       | — |   | (148 | ) | (94 | ) | — |   | (242 | ) |
| Due to/from  affiliates                                |       | 647                                            |       | — |   | 2,304 |   | (2,951 | ) | — |   | — |   |
| Net cash  provided by (used in) financing activities   |       | 920                                            |       | — |   | (2,339 | ) | (12,698 | ) | — |   | (14,117 | ) |
|                                                   |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Effect of  exchange rate changes on cash               |       | —                                         |       | — |   | — |   | 191 |   | — |   | 191 |   |
|                                                   |       |                                           |       |   |   |   |   |   |   |   |   |   |   |
| Net increase  (decrease) in cash and cash equivalents  |       | —                                         |       | — |   | 177 |   | (2,924 | ) | — |   | (2,747 | ) |
| Cash and cash  equivalents at beginning of period      |       | —                                         |       | — |   | 670 |   | 12,995 |   | — |   | 13,665 |   |
| Cash and cash  equivalents at end of period            |       | $                                              | —     |   | $ | — |   | $ | 847 |   | $ | 10,071 |   | $ | — |   | $ | 10,918 |   |

 

27

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

 

# **Business Overview**

# ** **

The following discussionshould be read in conjunction with the condensed consolidated financialstatements included elsewhere in this document, as well as the year-endconsolidated financial statements and management’s discussion and analysisincluded in the Company’s annual report on Form 10-K for the year endedDecember 26, 2003.

 

Euramax is an international producer of value-added aluminum, steel,vinyl and fiberglass fabricated products, with facilities located in all majorregions of the United States (“U.S.”), as well as the United Kingdom (“U.K.”),The Netherlands and France. Our manufacturing and distribution network consistsof 43 strategically located facilities, of which 37 are located in the U.S. and6 are located in Europe. We sell our products principally to two markets, thebuilding and construction market and the transportation market. Our coreproducts include specialty coated coils, aluminum recreational vehicle (“RV”)sidewalls, RV doors, farm and agricultural panels, roofing accessories, metaland vinyl raincarrying systems, soffit and fascia systems, and vinylreplacement windows. In addition, we sell an extensive line of accessoryproducts, including roofing and siding hardware, trim parts and roof drainageaccessories. Our customers include original equipment manufacturers (“OEMs”)such as RV, commercial panel and transportation industry manufacturers; ruralcontractors; home centers; home improvement contractors; distributors;industrial and architectural contractors; and manufactured housing producers.

 

Our condensedconsolidated statements of earnings and condensed consolidated statements ofcash flows present our results for the three and six months ended June 25,2004, the two and five months ended May 23, 2003 and the one month ended June27, 2003. Our 2003 results are presented divided into the predecessor periodand successor period as a result of the 2003 Stock Transaction described inNote 2 to the condensed consolidated financial statements. The discussion ofthe results of operations below combines the predecessor two months ended May23, 2003 and the successor one month ended June 27, 2003 for comparison to thesuccessor three months ended June 25, 2004, and combines the predecessor five monthsended May 23, 2003 and the successor one month ended June 27, 2003 forcomparison to the successor six months ended June 25, 2004, for purposes ofdiscussing net sales and cost of goods sold. All other items are separated intothe predecessor and successor periods for discussion purposes.

 

In connection with the 2003 Stock Transaction and subsequent issuanceof senior subordinated notes, accounting principles generally accepted in theU.S. required that the purchase price paid in excess of the book value of ourequity acquired be allocated to our assets and liabilities based upon estimatesof their fair values. This application of purchase accounting resulted inincreasing the value of inventory at the time of the 2003 Stock Transaction by$4.0 million. This inventory was sold in June 2003 and accordingly $4.0 millionwas recorded as cost of goods sold. This amount does not reflect costs incurredor amounts paid by us to prepare inventory for sale and accordingly had noaffect on our cash flows from operations.

 

Aluminum and steel raw material purchase prices increased significantlyduring the first six months of 2004. Rising aluminum and steel prices areevidenced by an increase in the average aluminum London Metal Exchange pricefrom $0.63/lb. in the first six months of 2003 to an average of $0.75/lb. inthe first six months of 2004, and widely publicized increases in steel pricesresulting from strengthening world demand and industry consolidation in theU.S. While we have obtained selling price increases and announced future priceincreases, we do not have agreements with our customers who purchase aluminumor steel products from us that obligates them to pay higher prices when thecost of aluminum

 

28

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or steel rises. Therefore, if aluminum or steel prices continue to riseand we are unable to pass any or all of these increases through to ourcustomers, our gross profit will be adversely affected.

 

**Results of Operations**

 

**ThreeMonths Ended June 25, 2004 as Compared to Three Months Ended June 27, 2003**

 

Thefollowing table sets forth the Company’s Statements of Earnings Data expressedas a percentage of net sales:

 
| ** **                       | ** ** | **Successor  three months****ended  June 25,  2004** | ** ** | **Predecessor  two months****ended  May 23,  2003** | ** ** | **Successor  one month****ended  June 27,  2003** | ** ** |
|----------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| **Statements of Earnings Data:** |       |                                                 |       |                                                |       |                                              |       |
| Net sales                        |       | 100.0                                                | %          | 100.0                                               | %          | 100.0                                             | %          |
| Costs and expenses:              |       |                                                 |       |                                                |       |                                              |       |
| Cost of goods sold               |       | 77.3                                                 |       | 79.4                                                |       | 82.8                                              | (1)        |
| Selling and general              |       | 8.6                                                  |       | 9.2                                                 |       | 10.6                                              |       |
| Depreciation and amortization    |       | 1.5                                                  |       | 2.2                                                 |       | 2.0                                               |       |
| Earnings from operations         |       | 12.6                                                 |       | 9.2                                                 |       | 4.6                                               |       |
| Interest expense, net            |       | (2.4                                                 | )          | (3.2                                                | )          | (2.4                                              | )          |
| Other income, net                |       | 0.2                                                  |       | 0.2                                                 |       | —                                            |       |
| Earnings before income taxes     |       | 10.4                                                 |       | 6.2                                                 |       | 2.2                                               |       |
| Provision for income taxes       |       | 3.7                                                  |       | 2.3                                                 |       | 0.7                                               |       |
| Net earnings                     |       | 6.7                                                  | %          | 3.9                                                 | %          | 1.5                                               | %          |

 
| ** **                          | ** ** | **Net Sales**                             | ** ** | **Earnings from Operations**           | ** ** |
|-------------------------------------|------------|-------------------------------------------|------------|----------------------------------------|------------|
| ** **                          | ** ** | **Successor**                             | ** ** | **Predecessor**                        | ** ** | **Successor** | ** ** | **Successor** | ** ** | **Predecessor** | ** ** | **Successor** | ** ** |
| **In  thousands**                   | ** ** | **three months****ended  June 25,  2004** | ** ** | **two months****ended  May 23,  2003** | ** ** | **one month****ended  June 27,  2003****(1)** | ** ** | **three months****ended  June 25,  2004** | ** ** | **two months****ended  May 23,  2003** | ** ** | **one month****ended  June 27,  2003****(1)** | ** ** |
|                                |       |                                      |       |                                   |       |   |   |   |   |   |   |   |   |
| U.S. Fabrication Roof Drainage      |       | $                                         | 66,707     |                                   | $          | 27,078 |   | $ | 20,089 |   | $ | 9,688 |   | $ | 3,908 |   | $ | 2,233 |   |
| U.S. Fabrication Building Materials |       | 102,239                                   |       | 48,030                                 |       | 32,148 |   | 9,348 |   | 2,708 |   | 155 |   |
| European Roll Coating               |       | 51,175                                    |       | 23,552                                 |       | 15,234 |   | 8,285 |   | 2,637 |   | 656 |   |
| European Fabrication                |       | 30,366                                    |       | 15,797                                 |       | 9,723 |   | 4,194 |   | 1,256 |   | 516 |   |
| Totals                              |       | $                                         | 250,487    |                                   | $          | 114,457 |   | $ | 77,194 |   | $ | 31,515 |   | $ | 10,509 |   | $ | 3,560 |   |

 

----

(1)   In connection with the 2003Stock Transaction (see Note 2 to the condensed consolidated financialstatements)  and subsequent issuance ofsenior subordinated notes, accounting principles generally accepted in the U.S.required that the purchase price paid in excess of the book value of theCompany’s equity acquired be allocated to the assets and liabilities of theCompany based upon estimates of their fair values. This application of purchaseaccounting resulted in increasing the value of inventory at the time of the2003 Stock Transaction by $4.0 million. This inventory was sold in June 2003and accordingly $4.0 million was recorded as cost of goods sold. This amountdoes not reflect  costs incurred oramounts paid by the Company to prepare inventory for sale and accordingly hadno affect on the cash flows from operations of the Company for the one monthended June 27, 2003.

 

*Net Sales.*For the three months ended June 25, 2004, netsales were $250.5 million compared to $191.7 million for the three months endedJune 27, 2003, an increase of $58.8 million or 30.7%. Net sales in the

 

29

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U.S. increased 32.7% to $168.9 million forthe three months ended June 25, 2004, from $127.3 million for the three monthsended June 27, 2003. This increase in net sales in the U.S. includes anincrease in the U.S. Fabrication Roof Drainage segment of $19.5 million or41.4% and an increase in the U.S. Fabrication Building Materials segment of$22.1 million or 27.5%. Net sales in the U.S. Fabrication Roof Drainage segmentincreased primarily as a result of the acquisition of Berger Holdings inNovember 2003, together with higher sales volumes of raincarrying products todistributors, home centers and home improvement contractors, and higher sellingprices resulting from rising aluminum and steel costs.  Net sales in the U.S. Fabrication BuildingMaterials segment increased primarily as a result of higher sales volumes of fabricatedaluminum and steel roofing and siding to rural contractors, industrial andarchitectural contractors and home centers, higher sales volumes of aluminumdoors, roofing and siding to U.S. RV manufacturers and higher sales volumes ofpatio awning products to home improvement contractors, together with higherselling prices resulting from rising aluminum and steel costs.

 

Net sales in Europe increased 26.8% to $81.5million for the three months ended June 25, 2004, from $64.3 million for thethree months ended June 27, 2003. This increase in net sales in Europe includesan increase in the European Roll Coating segment of $12.4 million or 31.9%, andan increase in the European Fabrication segment of $4.8 million or 19.0%.Approximately $3.7 million and $2.4 million of the increase in the EuropeanRoll Coating segment and the European Fabrication segment, respectively, were aresult of the strengthening of the Euro and British Pound against the U.S.Dollar. The balance of the increase in the European Roll Coating segmentprimarily resulted from higher sales volumes of painted aluminum and steel coilto European OEMs, including European RV manufacturers. The balance of theincrease in the European Fabrication segment resulted primarily from highersales volumes to the European automotive industry, together with higher salesvolumes of fabricated doors and windows to European RV manufacturers.

 

*Cost of goods sold.*Cost of goodssold, as a percentage of net sales, were 77.3% for the three months ended June25, 2004, compared to 80.7% for the three months ended June 27, 2003. Thedecrease as a percentage of net sales is largely attributable to the $4.0million increase in inventories resulting from the application of the purchasemethod of accounting associated with the 2003 Stock Transaction (see Note 2 toour condensed consolidated financial statements). The $4.0 million increase wasrecognized in cost of goods sold in June 2003. The remaining decrease isprimarily the result of higher sales volumes. Higher aluminum and steel costsin the three months ended June 25, 2004 have largely been offset by higherselling prices on products manufactured from aluminum and steel.

 

*Selling and general.*Selling andgeneral expenses, as a percentage of net sales, were 8.6%, 9.2% and 10.6% forthe three months ended June 25, 2004, the two months ended May 23, 2003 and theone month ended June 27, 2003, respectively. Selling and general expensesincreased to $21.4 million in the three months ended June 25, 2004, from $10.6million in the two months ended May 23, 2003 and $8.2 million in the one monthended June 27, 2003. This increase resulted primarily from the acquisition ofBerger Holdings in November 2003, together with higher selling expenses due tothe increase in sales volume, higher employee compensation expense and a highercost of employee benefits. Additionally, a stronger Euro and British Poundagainst the U.S. Dollar in the three months ended June 25, 2004, used inconverting local currency into U.S. Dollars, resulted in higher selling andgeneral expense in the three months ended June 25, 2004. Partially offsettingthese items were lower product warranty costs in the three months ended June25, 2004. Selling and general expenses in the one month ended June 27, 2003include $1.4 million in compensation expense resulting from bonus paymentsassociated with the 2003 Stock Transaction. The three months ended June 25, 2004 and the one month ended June 27,2003 include advisory fees payable to CVC Management LLC of $0.3 million and$0.4 million, respectively. Prior to the 2003 Stock Transaction and theestablishment of the advisory agreement with CVC Management LLC, there were noadvisory fees paid to CVC Management LLC.

 

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*Depreciation and amortization.*Depreciationand amortization was $3.9 million for the three months ended June 25, 2004,compared to $2.5 million for the two months ended May 23, 2003 and $1.6 millionfor the one month ended June 27, 2003. Depreciation and amortization expensefor the three months ended June 25, 2004 includes an adjustment increasingexpense by $0.2 million relating to the final allocation of the purchase priceassociated with the 2003 Stock Transaction and the acquisition of BergerHoldings.  See Note 2 to the condensedconsolidated financial statements for further discussion on the adjustmentsrelating to the 2003 Stock Transaction. Additionally, Berger Holdings' results are included in the three monthsended June 25, 2004.

 

*Earnings from operations.*Earnings from operations were $31.5million for the three months ended June 25, 2004, compared to $10.5 million forthe two months ended May 23, 2003 and $3.6 million for the one month ended June27, 2003. Operating margins were 12.6% for the three months ended June 25,2004, compared to 9.2% for the two months ended May 23, 2003 and 4.6% for theone month ended June 27, 2003. In the one month ended June 27, 2003, earningsfrom operations reflect $4.0 million charged to expense resulting from theapplication of the purchase method of accounting associated with the 2003 StockTransaction.

 

Earnings from operationsin the U.S. Fabrication Roof Drainage segment were $9.7 million for the threemonths ended June 25, 2004, compared to $3.9 million for the two months endedMay 23, 2003 and $2.2 million for the one month ended June 27, 2003. Operatingmargins were 14.5% for the three months ended June 25, 2004, compared to 14.4%for the two months ended May 23, 2003 and 11.1% for the one month ended June27, 2003. Earnings from operations in the U.S. Fabrication Roof Drainagesegment include $1.0 million of the $4.0 million increase in inventoriescharged to expense in June 2003 resulting from the application of the purchasemethod of accounting associated with the 2003 Stock Transaction. Higher salesvolumes in the three months ended June 25, 2004, partially offset by higherdepreciation and amortization expense, resulted in higher operating margins.Higher aluminum and steel costs in the three months ended June 25, 2004 havelargely been offset by higher selling prices on products manufactured fromaluminum and steel. Berger Holdings' results are included in the three monthsended June 25, 2004.

 

Earnings from operationsin the U.S. Fabrication Building Materials segment were $9.3 million for thethree months ended June 25, 2004, compared to $2.7 million for the two monthsended May 23, 2003 and $0.2 million for the one month ended June 27, 2003.Operating margins were 9.1% for the three months ended June 25, 2004, comparedto 5.6% for the two months ended May 23, 2003 and 0.5% for the one month endedJune 27, 2003. Earnings from operations in the U.S. Fabrication BuildingMaterials segment include $1.7 million of the $4.0 million increase ininventories charged to expense in June 2003 resulting from the application ofthe purchase method of accounting associated with the 2003 Stock Transaction.Higher sales volumes in the three months ended June 25, 2004, partially offsetby higher depreciation and amortization expense, resulted in higher operatingmargins. Higher aluminum and steel costs in the three months ended June 25,2004, have largely been offset by higher selling prices on productsmanufactured from aluminum and steel.

 

Earnings from operationsin the European Roll Coating segment were $8.3 million for the three monthsended June 25, 2004, compared to $2.6 million for the two months ended May 23,2003 and $0.7 million for the one month ended June 27, 2003. Operating marginswere 16.2% for the three months ended June 25, 2004, compared to 11.2% for thetwo months ended May 23, 2003 and 4.3% for the one month ended June 27, 2003.Earnings from operations in the European Roll Coating segment include $0.9million of the $4.0 million increase in inventories charged to expense in June2003 resulting from the application of the purchase method of accountingassociated with the 2003 Stock Transaction. Higher sales volumes in the threemonths ended June 25, 2004, together with lower depreciation and amortizationexpense,

 

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resulted in higheroperating margins. The strengthening of the Euro and British Pound against theU.S. Dollar increased the European Roll Coating segment’s earnings fromoperations by $0.6 million.

 

Earnings from operationsin the European Fabrication segment were $4.2 million for the three monthsended June 25, 2004, compared to $1.3 million for the two months ended May 23,2003 and $0.5 million for the one month ended June 27, 2003. Operating marginswere 13.8% for the three months ended June 25, 2004, compared to 8.0% for thetwo months ended May 23, 2003 and 5.3% for the one month ended June 27, 2003.Earnings from operations in the European Fabrication segment include $0.4million of the $4.0 million increase in inventories charged to expense in June2003 resulting from the application of the purchase method of accountingassociated with the 2003 Stock Transaction. Higher sales volumes in the threemonths ended June 25, 2004, together with a more profitable product mix and lowerdepreciation and amortization expense, resulted in higher operating margins.The strengthening of the Euro and British Pound against the U.S. Dollarincreased the European Fabrication segment’s earnings from operations by $0.3million.

 

*Interest expense, net.* Netinterest expense was $6.0 million, $3.7 million and $1.8 million for the threemonths ended June 25, 2004, the two months ended May 23, 2003 and the one monthended June 27, 2003, respectively. The increase in net interest expense in 2004is primarily the result of a higher outstanding average debt balance during thethree months ended June 25, 2004, together with higher deferred finance feeamortization expense in the three months ended June 25, 2004. On August 6, 2003we issued $200.0 million 8.50% senior subordinated notes. The proceeds fromthis issuance were used to purchase our outstanding $135.0 million 11.25%senior subordinated notes. The average outstanding balance under our seniorsecured credit facility was $95.0 million at an average interest rate of 5.2%for the three months ended June 25, 2004, compared to $84.3 million at anaverage interest rate of 5.3% for the three months ended June 27, 2003.

 

*Other income, net.*Other incomewas $0.6 million and $0.3 million for the three months ended June 25, 2004 andthe two months ended May 23, 2003, respectively, and was insignificant for theone month ended June 27, 2003. The three months ended June 25, 2004 include again on the sale of non-core assets from our operation in France of $0.5 million.The remaining other income, net in both periods primarily resulted from foreignexchange gains on unhedged assets and liabilities remeasured into the localcurrency.

 

*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 was 35.7% for the three months ended June 25, 2004, compared to37.5% for the two months ended May 23, 2003 and 33.2% for the one month endedJune 27, 2003.  The change in theeffective tax rate from 2003 to 2004 is primarily due to a greater expectedproportion of earnings in fiscal year 2004 in Europe, where the Company has alower effective tax rate, together with a higher valuation allowance in 2003due to the uncertainty of the future benefit of U.S. state net operating losscarryforwards.

 

**SixMonths Ended June 25, 2004 as Compared to Six Months Ended June 27, 2003**

 

Thefollowing table sets forth the Company’s Statements of Earnings Data expressedas a percentage of net sales:

 

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| ** **                       | ** ** | **Successor  six months****ended  June 25,  2004** | ** ** | **Predecessor  five months****ended  May 23,  2003** | ** ** | **Successor  one month****ended  June 27,  2003** | ** ** |
|----------------------------------|------------|----------------------------------------------------|------------|------------------------------------------------------|------------|---------------------------------------------------|------------|
| **Statements of Earnings Data:** |       |                                               |       |                                                 |       |                                              |       |
| Net sales                        |       | 100.0                                              | %          | 100.0                                                | %          | 100.0                                             | %          |
| Costs and expenses:              |       |                                               |       |                                                 |       |                                              |       |
| Cost of goods sold               |       | 78.6                                               |       | 80.0                                                 |       | 82.8                                              | (1)        |
| Selling and general              |       | 9.3                                                |       | 10.0                                                 |       | 10.6                                              |       |
| Depreciation and amortization    |       | 2.0                                                |       | 2.4                                                  |       | 2.0                                               |       |
| Earnings from operations         |       | 10.1                                               |       | 7.6                                                  |       | 4.6                                               |       |
| Interest expense, net            |       | (2.6                                               | )          | (3.5                                                 | )          | (2.4                                              | )          |
| Other income, net                |       | 0.3                                                |       | 0.2                                                  |       | —                                            |       |
| Earnings before income taxes     |       | 7.8                                                |       | 4.3                                                  |       | 2.2                                               |       |
| Provision for income taxes       |       | 2.8                                                |       | 1.6                                                  |       | 0.7                                               |       |
| Net earnings                     |       | 5.0                                                | %          | 2.7                                                  | %          | 1.5                                               | %          |

 
| ** **                          | ** ** | **Net Sales**                                      | ** ** | **Earnings from Operations**                         | ** ** |
|-------------------------------------|------------|----------------------------------------------------|------------|------------------------------------------------------|------------|
| **In  thousands**                   | ** ** | **Successor  six months****ended  June 25,  2004** | ** ** | **Predecessor  five months****ended  May 23,  2003** | ** ** | **Successor  one month****ended  June 27,  2003** | ** ** | **Successor  six months****ended  June 25,  2004** | ** ** | **Predecessor  five months****ended  May 23,  2003** | ** ** | **Successor  one month****ended  June 27,  2003****(1)** | ** ** |
|                                |       |                                               |       |                                                 |       |   |   |   |   |   |   |   |   |
| U.S. Fabrication Roof Drainage      |       | $                                                  | 109,425    |                                                 | $          | 53,464 |   | $ | 20,089 |   | $ | 10,586 |   | $ | 4,669 |   | $ | 2,233 |   |
| U.S. Fabrication Building Materials |       | 173,345                                            |       | 107,586                                              |       | 32,148 |   | 11,289 |   | 3,988 |   | 155 |   |
| European Roll Coating               |       | 99,897                                             |       | 59,653                                               |       | 15,234 |   | 15,672 |   | 7,577 |   | 656 |   |
| European Fabrication                |       | 63,223                                             |       | 39,912                                               |       | 9,723 |   | 7,497 |   | 3,532 |   | 516 |   |
| Totals                              |       | $                                                  | 445,890    |                                                 | $          | 260,615 |   | $ | 77,194 |   | $ | 45,044 |   | $ | 19,766 |   | $ | 3,560 |   |

 

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(1)          In connection with the 2003 Stock Transaction (see Note 2 to thecondensed consolidated financial statements) and subsequent issuance of seniorsubordinated notes, accounting principles generally accepted in the U.S.required that the purchase price paid in excess of the book value of theCompany’s equity acquired be allocated to the assets and liabilities of theCompany based upon estimates of their fair values. This application of purchaseaccounting resulted in increasing the value of inventory at the time of the2003 Stock Transaction by $4.0 million. This inventory was sold in June 2003and accordingly $4.0 million was recorded as cost of goods sold. This amountdoes not reflect costs incurred or amounts paid by the Company to prepareinventory for sale and accordingly had no affect on the cash flows from operationsof the Company for the one month ended June 27, 2003.

 

*Net Sales.*For the six months ended June 25, 2004, netsales were $445.9 million compared to $337.8 million for the six months endedJune 27, 2003, an increase of $108.1 million or 32.0%. Net sales in the U.S.increased 32.6% to $282.8 million for the six months ended June 25, 2004, from$213.3 million for the six months ended June 27, 2003. This increase in netsales in the U.S. includes an increase in the U.S. Fabrication Roof Drainagesegment of $35.9 million or 48.8% and an increase in the U.S. FabricationBuilding Materials segment of $33.6 million or 24.1%. Net sales in the U.S.Fabrication Roof Drainage segment increased primarily as a result of theacquisition of Berger Holdings in November 2003, together with higher salesvolumes of raincarrying products to distributors, home centers and homeimprovement contractors and higher selling prices resulting from risingaluminum and steel costs. Net sales in the U.S. Fabrication Building Materialssegment increased primarily as a result of higher sales volumes of fabricatedaluminum and steel roofing and siding to rural contractors, industrial andarchitectural

 

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contractors and home centers, higher salesvolumes of aluminum doors, roofing and siding to U.S. RV manufacturers andhigher sales volumes of patio awning products to home improvement contractors,together with higher selling prices on products manufactured from aluminum andsteel resulting from rising aluminum and steel costs.

 

Net sales in Europe increased 31.0% to $163.1million for the six months ended June 25, 2004, from $124.5 million for the sixmonths ended June 27, 2003. This increase in net sales in Europe includes anincrease in the European Roll Coating segment of $25.0 million or 33.4%, and anincrease in the European Fabrication segment of $13.6 million or 27.4%.Approximately $10.4 million and $6.9 million of the increase in the EuropeanRoll Coating segment and the European Fabrication segment, respectively, were aresult of the strengthening of the Euro and British Pound against the U.S.Dollar. The balance of the increase in the European Roll Coating segmentprimarily resulted from higher sales volumes of painted aluminum and steel coilto European OEMs, including European RV manufacturers. The balance of theincrease in the European Fabrication segment resulted primarily from highersales volumes to the European automotive industry, together with higher salesvolumes of fabricated doors and windows to European RV manufacturers.

 

*Cost of goods sold.*Cost of goodssold, as a percentage of net sales, were 78.6% for the six months ended June25, 2004, compared to 80.6% for the six months ended June 27, 2003. Thedecrease as a percentage of net sales is primarily attributable to the $4.0million increase in inventories resulting from the application of the purchasemethod of accounting associated with the 2003 Stock Transaction (see Note 2 tothe condensed consolidated financial statements). The $4.0 million increase wasrecognized in cost of goods sold in June 2003. The remaining decrease isprimarily the result of higher sales volumes.

 

*Selling and general.*Selling andgeneral expenses, as a percentage of net sales, were 9.3%, 10.0% and 10.6% forthe six months ended June 25, 2004, the five months ended May 23, 2003 and theone month ended June 27, 2003. Selling and general expenses increased to $41.3million in the six months ended June 25, 2004, from $26.2 million in the fivemonths ended May 23, 2003 and $8.2 million in the one month ended June 27,2003. The increase for the six months ended June 25, 2004, resulted primarilyfrom the acquisition of Berger Holdings in November 2003, together with higherselling expenses due to the increase in sales volume, higher employeecompensation expense, higher cost of employee benefits, and higher legal andprofessional fees. Additionally, a stronger Euro and British Pound against theU.S. Dollar in the six months ended June 25, 2004, used in converting localcurrency into U.S. Dollars resulted in higher selling and general expenses inthe six months ended June 25, 2004. Selling and general expenses in the one month ended June 27, 2003include $1.4 million in compensation expense resulting from bonus paymentsassociated with the 2003 Stock Transaction. The six months ended June 25, 2004and the one month ended June 27, 2003 include advisory fees payable to CVCManagement LLC of $0.5 million and $0.4 million, respectively. Prior to the2003 Stock Transaction and the establishment of the advisory agreement with CVCManagement LLC, there were no advisory fees paid to CVC Management LLC. The sixmonths ended June 25, 2004 and the one month ended June 27, 2003 includeamortization of restricted stock awards of $0.4 million and $0.1 million,respectively. The restricted stock awards were issued in June 2003 at the timeof the 2003 Stock Transaction.

 

*Depreciation and amortization.*Depreciationand amortization was $9.0 million for the six months ended June 25, 2004,compared to $6.3 million for the two months ended May 23, 2003 and $1.6 millionfor the one month ended June 27, 2003. Depreciation and amortization expensefor the six months ended June 25, 2004 includes an adjustment increasingexpense by $0.2 million relating to the final allocation of the purchase priceassociated with the 2003 Stock Transaction and the acquisition of BergerHoldings.  See Note 2 to the condensedconsolidated financial statements for further discussion on the adjustments relatingto the 2003 Stock Transaction. Additionally, Berger Holdings' results are included in the six monthsended June 25, 2004.

 

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*Earnings from operations.*Earnings from operations were $45.0million for the six months ended June 25, 2004, compared to $19.8 million forthe five months ended May 23, 2003 and $3.6 million for the one month endedJune 27, 2003. Operating margins were 10.1% for the six months ended June 25,2004, compared to 7.6% for the five months ended May 23, 2003 and 4.6% for theone month ended June 27, 2003. In the one month ended June 27, 2003, earningsfrom operations reflect $4.0 million charged to expense resulting from theapplication of the purchase method of accounting associated with the 2003 StockTransaction.

 

Earnings from operationsin the U.S. Fabrication Roof Drainage segment were $10.6 million for the sixmonths ended June 25, 2004, compared to $4.7 million for the five months endedMay 23, 2003 and $2.2 million for the one month ended June 27, 2003. Operatingmargins were 9.7% for the six months ended June 25, 2004, compared to 8.7% forthe five months ended May 23, 2003 and 11.1% for the one month ended June 27,2003. Earnings from operations in the U.S. Fabrication Roof Drainage segmentinclude $1.0 million of the $4.0 million increase in inventories charged toexpense in June 2003 resulting from the application of the purchase method ofaccounting associated with the 2003 Stock Transaction. Higher sales volumes inthe three months ended June 25, 2004, partially offset by lower margins onaluminum products and higher depreciation and amortization expense, resulted inhigher operating margins. Lower margins on aluminum products primarily resultedfrom higher aluminum costs, partially offset by higher aluminum selling prices.Berger Holdings' results are included in the six months ended June 25, 2004.

 

Earnings from operationsin the U.S. Fabrication Building Materials segment were $11.3 million for thesix months ended June 25, 2004, compared to $4.0 million for the five monthsended May 23, 2003 and $0.2 million for the one month ended June 27, 2003.Operating margins were 6.5% for the six months ended June 25, 2004, compared to3.7% for the five months ended May 23, 2003 and 0.5% for the one month endedJune 27, 2003. Earnings from operations in the U.S. Fabrication BuildingMaterials segment include $1.7 million of the $4.0 million increase ininventories charged to expense in June 2003 resulting from the application of thepurchase method of accounting associated with the 2003 Stock Transaction.Higher sales volumes in the six months ended June 25, 2004, partially offset byhigher depreciation and amortization expense, resulted in higher operatingmargins. Higher aluminum and steel costs in the six months ended June 25, 2004,have largely been offset by higher selling prices on products manufactured fromaluminum and steel

 

Earnings from operationsin the European Roll Coating segment were $15.7 million for the six monthsended June 25, 2004, compared to $7.6 million for the five months ended May 23,2003 and $0.7 million for the one month ended June 27, 2003. Operating marginswere 15.7% for the six months ended June 25, 2004, compared to 12.7% for thefive months ended May 23, 2003 and 4.3% for the one month ended June 27, 2003.Earnings from operations in the European Roll Coating segment include $0.9million of the $4.0 million increase in inventories charged to expense in June2003 resulting from the application of the purchase method of accountingassociated with the 2003 Stock Transaction. Higher sales volumes in the sixmonths ended June 25, 2004, together with operational improvements at ourCorby, England paintline and lower depreciation and amortization expense, resultedin higher operating margins. The strengthening of the Euro and British Poundagainst the U.S. Dollar increased the European Roll Coating segment’s earningsfrom operations by $1.7 million.

 

Earnings from operationsin the European Fabrication segment were $7.5 million for the six months endedJune 25, 2004, compared to $3.5 million for the five months ended May 23, 2003and $0.5 million for the one month ended June 27, 2003. Operating margins were11.9% for the six months ended June 25, 2004, compared to 8.8% for the fivemonths ended May 23, 2003 and 5.3% for the one month ended June 27, 2003.Earnings from operations in the European Fabrication segment include $0.4million of the $4.0

 

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million increase ininventories charged to expense in June 2003 resulting from the application ofthe purchase method of accounting associated with the 2003 Stock Transaction.Higher sales volumes in the six months ended June 25, 2004, together with amore profitable product mix and lower depreciation and amortization expense,resulted in higher operating margins. The strengthening of the Euro and BritishPound against the U.S. Dollar increased the European Fabrication segment’searnings from operations by $0.8 million.

 

*Interest expense, net.* Netinterest expense was $11.8 million, $9.1 million and $1.8 million for the sixmonths ended June 25, 2004, the five months ended May 23, 2003 and the onemonth ended June 27, 2003, respectively. The increase in net interest expenseis a result of a higher outstanding average debt balance during the six monthsended June 25, 2004, together with higher deferred finance fee amortizationexpense in the six months ended June 25, 2004. On August 6, 2003 we issued$200.0 million 8.50% senior subordinated notes. The proceeds from this issuancewere used to purchase our outstanding $135.0 million 11.25% senior subordinatednotes. The average outstanding balance under our senior secured credit facilitywas $70.3 million at an average interest rate of 5.6% for the six months endedJune 25, 2004, compared to $78.9 million at an average interest rate of 5.4%for the six months ended June 27, 2003.

 

*Other income, net.*Other incomewas $1.4 million and $0.5 million for the six months ended June 25, 2004 andfive months ended May 23, 2003, respectively, and was insignificant for the onemonth ended June 27, 2003. The six months ended June 25, 2004 includes a gainon the sale of non-core assets from our operation in France of $0.5 million.  The remaining other income, net in bothperiods primarily 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 was 35.4% for the six months ended June 25, 2004 compared to 38.2%for the five months ended May 23, 2003 and 33.2% for the one month ended June 27,2003.  The change in the effective taxrate from 2003 to 2004 is primarily due to a greater expected proportion ofearnings in fiscal year 2004 in Europe, where the Company has a lower effectivetax rate, together with a higher valuation allowance in 2003 due to theuncertainty of the future benefit of U.S. state net operating losscarryforwards.

 

**Liquidity and Capital Resources**

 

*Liquidity*. Our primary liquidityneeds arise from debt service and the funding of capital expenditures. Ourliquidity sources at June 25, 2004 include $35.8 million in cash and cashequivalents and an undrawn amount of $49.5 million under our revolving creditfacility, subject to borrowing base limitations. At June 25, 2004, the entire$49.5 million of the undrawn amount was available.

 

On March 31, 2004,we repurchased 55% of our outstanding common stock held by Court Square CapitalLimited, or 93,324.34 shares, for an aggregate repurchase price ofapproximately $37.3 million. On April 30, 2004, we repurchased the remaining45% of our outstanding common stock held by Court Square Capital Limited, or76,356.28 shares, for an aggregate repurchase price of $30.5 million. Theserepurchases were funded with borrowings under our revolving 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

 

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reduce the fundsavailable for capital expenditures and other operational needs. In addition,our leveraged position may impede our ability to obtain financing in the futurefor working capital, capital expenditures and general corporate purposes.Further, our leveraged position may make us more vulnerable to economic downturns,may limit our ability to withstand competitive pressures, and may limit ourability to comply with restrictive financial covenants required under oursenior secured credit facility.

 

Our primary source of liquidity is funds generated from operations, whichare supplemented by borrowings under our senior secured credit facility. Netcash provided by (used in) operating activities for the six months ended June25, 2004, the five months ended May 23, 2003 and the one month ended June 27,2003 were $1.4 million, $(12.0) million and $11.9 million, respectively. Inaddition to cash generated from earnings, key components of our cash flow fromoperations are changes in our working capital accounts. The six months endedJune 25, 2004 include a use of cash resulting from an increase in accountsreceivable and inventories of $29.2 million and $27.9 million, respectively.Partially offsetting this use of cash was cash provided by an increase inaccounts payable, accrued liabilities and other current liabilities of $32.1million. The five months ended May 23, 2003 include a use of cash resultingfrom an increase in accounts receivable and inventories of $22.8 million and$13.0 million, respectively. Partially offsetting this use of cash was cashprovided by an increase in accounts payable, accrued liabilities and othercurrent liabilities of $12.9 million. The one month ended June 27, 2003includes cash provided by an increase in accounts payable, accrued expenses andother current liabilities of $8.0 million, together with a decrease ininventories of $3.0 million. Partially offsetting these items was a use of cashresulting from an increase in accounts receivable of $6.1 million. Seediscussion of working capital below.

 

Net cash used in investing activities for the six months ended June 25,2004, the five months ended May 23, 2003 and the one month ended June 27, 2003were $3.8 million, $4.9 million and $0.7 million, respectively. The six monthsended June 25, 2004, the five months ended May 23, 2003 and the one month endedJune 27, 2003 include a use of cash resulting from capital expenditures of $3.7million, $4.9 million and $0.8 million, respectively. See discussion of capitalexpenditures below. The six months ended June 25, 2004 include cash provided bythe sale of non-core assets from our operation in France of $1.0 million and ause of cash for costs associated with the acquisition of Berger Holdings of$1.2 million.

 

Net cash (used in) provided by financing activities for the six monthsended June 25, 2004, the five months ended May 23, 2003 and the one month endedJune 27, 2003 were $(8.7) million, $18.2 million and $(14.1) million,respectively. The six months ended June 25, 2004 include borrowings under ourrevolving credit facility of $61.7 million to fund the repurchase of 55% of ouroutstanding common stock held by Court Square Capital Limited for an aggregatepurchase price of $67.9 million. Additionally, we repaid $2.9 million of ouroutstanding long-term debt in the six months ended June 25, 2004. The fivemonths ended May 23, 2003 include borrowings under our revolving creditfacility of $18.3 million to fund our increase in working capital, togetherwith the repurchase of $2.6 million of our outstanding common stock inconnection with the retirement of key employees. The one month ended June 27,2003 includes repayments under our revolving credit facility of $11.2 million.

 

The above-noted sources are expected to provide the liquidity required,if necessary, to supplement cash from operations, although no assurance to thateffect can be given.

 

*Capital Expenditures.* Our capitalexpenditures were $3.7 million, $4.9 million and $0.8 million for the sixmonths ended June 25, 2004, the five months ended May 23, 2003 and the onemonth ended June 27, 2003, respectively. Capital expenditures in 2004 includedapproximately $0.9 million for improvements to the paintlines in Helena,Arkansas; Corby, England; and Roermond, The Netherlands; and approximately $0.4million for several projects related to business expansion. Capitalexpenditures in 2003 included approximately $0.6 million for improvements tothe paintlines in Helena, Arkansas; Corby, England; and Roermond, TheNetherlands; and approximately $3.4 million for several projects related tobusiness expansion. The balance of capital expenditures in both periods relatedto purchases and upgrades of fabricating equipment, transportation and materialmoving equipment, and information systems.

 

We have made and will continue to make capital expenditures to complywith environmental laws. We estimate that our environmental capitalexpenditures for 2004 will approximate $0.5 million.

 

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*Working Capital Management.*Working capital was $130.8 million as of June 25, 2004, compared to $116.8million as of December 26, 2003. This increase in working capital is largelyattributable to higher accounts receivable and inventories, partially offset byhigher accounts payable and income taxes payable, together with lower cash and cashequivalents as of June 25, 2004. Seasonal demands of the business result insubstantial increases from year end in trade accounts receivable, inventoriesand accounts payable.

 

Accounts receivable of$151.1 million as of June 25, 2004, increased $29.4 million, from $121.7million as of December 26, 2003. The primary reason for this increase was a30.7% increase in net sales in the two months ended June 25, 2004, compared tothe two months ended December 26, 2003. The majority of outstanding accounts receivableat the end of each period are generated from net sales in the preceding twomonths. As of June 25, 2004, days sales outstanding in accounts receivable were54.9 days, compared to 53.9 days as of December 26, 2003 and 57.1 days as ofJune 27, 2003.

 

Inventories of $117.7million as of June 25, 2004, increased $28.2 million, from $89.5 million as ofDecember 26, 2003. As of June 25, 2004, days sales in inventories was 61.9days, compared to 60.6 days as of December 26, 2003 and 53.2 days as of June 27,2003.  Higher aluminum and steel rawmaterial costs increased inventory balances as of June 25, 2004, compared toJune 27, 2003 and December 26, 2003, together with higher volumes of aluminumand steel in inventory as of June 25, 2004.

 

# **Critical AccountingPolicies**

 

*Business Combinations*

 

In accordance with Statement of Financial Accounting Standard No. 141(“SFAS No. 141”), “Business Combinations”, the Company allocates the cost ofacquired companies to the identifiable tangible and intangible assets andliabilities acquired, with the remaining amount being classified as goodwill.Certain intangible assets are amortized to expense over time. The Company’sfuture operating performance will be impacted by the future amortization ofidentifiable intangible assets and potential impairment charges related togoodwill. Accordingly, the allocation of the purchase price to intangibleassets and goodwill has an impact on the Company’s future operating results.The allocation of the purchase price of the acquired companies to intangibleassets and goodwill requires management to make significant estimates andassumptions, including estimates of future cash flows expected to be generatedby the acquired assets and the appropriate discount rate to value these cash flows.Should different conditions prevail, material write-downs of net intangibleassets and/or goodwill could occur.

 

The Company was required to recognize certain identifiable intangibleassets in connection with the 2003 Stock Transaction and acquired identifiableintangible assets in connection with the acquisition of Berger Holdings. Theseidentifiable intangible assets primarily consist of the value associated withcustomer relationships, trade names and patents. The valuation of theseintangible assets is subjective and requires a great deal of expertise andjudgment. The values of the customer relationships were primarily derived usingestimates of future cash flows to be generated from the customer relationships.This approach was used since the inherent value of the customer relationship isits ability to generate current and future income. The value of the trade namesand patents were determined using an estimate market-based royalty rate appliedto projected future revenue. While different amounts would have been reportedusing different methods or using different assumptions, the Company believesthat the methods selected and the assumptions used are the most appropriate foreach asset analyzed.

 

# **EnvironmentalMatters**

 

Our exposure toenvironmental matters has not changed significantly from the year endedDecember 26, 2003. For detailed information regarding environmental matters,see “Management’s Discussion and Analysis – Risk Management” set forth in ourAnnual Report on Form 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

 

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business would not reasonably be expected to have a material adverseeffect on our consolidated financial position, results of operations or cashflows; (3) statements regarding management’s belief that our potential share ofthe estimated 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 based on a number of assumptions thatcould ultimately prove inaccurate, and, therefore, there can be no assurancethat 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 about the Company’s risk management activitiesincludes forward-looking statements that involve risk and uncertainties. Actualresults could differ materially from those projected in the forward-lookingstatement. See “Note Regarding Forward Looking Statements” for additionalinformation regarding the Private Securities Litigation Reform Act. TheCompany’s management of market risk from changes in interest rates, exchangerates and commodity prices has not changed from the year ended December 26,2003, except as follows. In March 2004, the Company entered into three Euroswaps (the “Euro Swaps”) with substantially equivalent terms. The terms of theEuro Swaps expire on August 15, 2011, and require the Company to payapproximately 49.3 million Euros with semi-annual payments at a weightedaverage interest rate of 8.81% in exchange for $60.0 million with semi-annualinterest payments of 8.50%. The Euro Swaps were designated as cash flow hedgesthat effectively converted $60.0 million of the 8.50% senior subordinated notesdue 2011 on the books of a Netherlands subsidiary into a fixed-rate Euro loan,which is expected to reduce the impact of foreign exchange rate changes on theprincipal and interest payments on the loan. For detailed information regardingthe Company’s risk management, see “Management’s Discussion and Analysis – RiskManagement” and “Item 7A. Quantitative and Qualitative Disclosures about MarketRisk” set forth in the Company’s Annual Report on Form 10-K for the year endedDecember 26, 2003.

 

**Interest Rate Risk**

 

This analysis presentsthe hypothetical increase in interest expense and increase in other expenserelated to those financial instruments and derivative instruments held by us atJune 25, 2004, that are sensitive to changes in interest rates. A hypothetical10 percent increase in interest rates for one year on our variable ratefinancial instruments would increase interest expense by approximately $0.5million as calculated at June 25, 2004, as compared to a hypothetical increasein interest expense of approximately $0.2 million as calculated at December 26,2003.

 

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A hypothetical 10 percentdecrease in interest rates for one year on our derivative instruments wouldincrease other expense by approximately $0.1 million as calculated at June 25,2004 and December 26, 2003.

 

**Foreign Currency Exchange Risk**

 

This analysis presentsthe hypothetical increase in foreign exchange loss and increase in interestexpense related to those financial instruments and derivative instruments heldby us at June 25, 2004, that are sensitive to changes in foreign currencyexchange risks. A hypothetical 10 percent increase in the British Poundcompared to the U.S. Dollar would increase our foreign exchange loss byapproximately $3.9 million as calculated at June 25, 2004, compared to ahypothetical increase in foreign exchange loss of approximately $2.1 million ascalculated at December 26, 2004. A hypothetical 10 percent increase in the Eurocompared to the U.S. Dollar would increase our foreign exchange loss byapproximately $3.7 million as calculated at June 25, 2004, compared to ahypothetical decrease in foreign exchange loss of approximately $1.2 million ascalculated at December 26, 2003.

 

All other factorsremaining unchanged, a hypothetical 10 percent increase in foreign currencyexchange rates for one year would increase interest expense by approximately$0.4 million as calculated at June 25, 2004, for those financial instrumentsand derivative instruments affected by foreign currency exchange fluctuations,as compared to a hypothetical increase in interest expense of approximately$0.2 million as calculated at December 26, 2003.

 

**Item 4. Controls and Procedures**

 

As of June 25, 2004,based upon an evaluation of the effectiveness of the design and operation ofthe Company’s disclosure controls and procedures, the Company’s Chief ExecutiveOfficer and the Company’s Chief Financial Officer concluded that as of the evaluationdate, the Company’s disclosure controls and procedures (1) are effective intimely alerting them to material information relating to the Company (includingits consolidated subsidiaries) required to be included in the Company’s reportsthat it files or submits under the Securities and Exchange Act of 1934 (the“Exchange Act”) and (2) are adequate to ensure that information required to bedisclosed by the Company in the reports filed or submitted by the Company underthe Exchange Act is recorded, processed and summarized and reported within thetime periods specified in the SEC’s rules and forms. Further, there were nochanges in the Company’s internal controls over financial reporting identifiedin connection with that evaluation that occurred during the quarter ended June25, 2004, that have materially affected or would be reasonably likely tomaterially affect the Company’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 our consolidatedfinancial position, results of operations or cash flows.

 

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**Item 2.  Changes in Securities, Use of Proceeds andIssuer Purchases of Equity Securities**

 

None.

 

**Item 3.  Defaults Upon Senior Securities.**

 

None.

 

**Item 4.  Submission of Matters to a Vote of SecurityHolders.**

 

None

 

**Item 5.  Other Information.**

 

None.

 

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

# ** **

(a)                                  Exhibits:

 

The exhibits listed inthe Exhibit Index immediately preceding the exhibits are filed or incorporatedby reference as part of this Quarterly Report on Form 10-Q.

 

(b)           Reports on Form 8-K:

 

On May 12, 2004, the Company filed a report on Form8-K relating to its financial information for the quarter ended March 26, aspresented in a press release dated May 7, 2004.

 

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**SIGNATURES**

 

**Pursuant to the requirements ofSection 13 or 15(d) of the Securities and Exchange Act of 1934, EuramaxInternational, Inc. has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.**

 

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

 
| **Signature**         | ** ** | **Title**                              | ** ** | **Date**       |   |
|-----------------------|------------|----------------------------------------|------------|----------------|--------|
|                  |       |                                   |       |           |   |
| /s/  J. DAVID SMITH   |       | Chairman, Chief  Executive Officer     |       | August 9, 2004 |   |
| J. David Smith        |       | and President                          |       |           |   |
|                  |       |                                   |       |           |   |
|                  |       |                                   |       |           |   |
| /s/  R. SCOTT VANSANT |       | Chief Financial  Officer and Secretary |       | August 9, 2004 |   |
| R. Scott Vansant      |       |                                   |       |           |   |

 

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**ExhibitIndex**

 
| **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.)                        |
| 10.1                      |       | First Amendment dated as  of May 2004 to the Third Amended and Restated Credit Agreement among Euramax  International, Inc. and its subsidiaries, Wachovia Bank, N.A., as agent and  lender, and the Lenders named therein                                                                                  |
| 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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