Euramax Holdings, Inc. Fourth Quarter and Full Year 2013 Financial Results

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| Source: Euramax International, Inc.

NORCROSS, Ga., March 28, 2014 (GLOBE NEWSWIRE) -- Euramax Holdings, Inc. (the "Company"), a leading producer of metal and vinyl products sold to the residential repair and remodel, commercial construction and recreational vehicle (RV) markets primarily in North America and Europe, today announced financial results for the fourth quarter and full year of 2013. Net sales, operating loss, and Adjusted EBITDA for the quarter were $196.4 million, $(4.1) million, and $7.3 million, respectively. Net sales, operating income, and Adjusted EBITDA for the year ended December 31, 2013 were $826.7 million, $7.0 million, and $53.4 million, respectively.

President Hugh Sawyer commented, "Following consecutive periods of quarter over quarter growth in revenue and operating income, our results during the fourth quarter of 2013 were negatively impacted by a number of factors including severe winter weather conditions in many of the North America markets we serve. We believe these negative weather conditions likely resulted in a shorter building season and contributed to the decline in our performance when compared to the prior year fourth quarter. Despite the overall decline in revenues and operating income during the fourth quarter of 2013, our operating results in our European business improved during the fourth quarter as a result of continued business development, operational initiatives, and other actions."

Full Year 2013 Financial Summary

  • Net sales for 2013 decreased $10.4 million, or 1.2%, to $826.7 million compared to $837.1 million for 2012.

    -- Net sales declines were primarily the result of lower demand in the Company's U.S. Commercial Products segment predominantly in the post frame construction market. The Company believes this decline in demand was the result of uncertain economic conditions in the U.S. commercial construction markets combined with extreme weather conditions throughout many of its core sales territories in North America during the first and fourth quarters of 2013. Net sales for the Company's European operating segments also continued to be negatively impacted by certain economic conditions and reduced consumer confidence primarily in the RV and transportation end markets we serve.

    -- Overall net sales declines were partially offset by higher demand in the U.S. Residential Products segment. Sales of patio covers and vinyl window products improved over the prior year driven by economic conditions in the residential repair and remodel sector. The Company believes demand for roof drainage and roofing accessory products in both the home center and distributor markets also benefited from favorable weather conditions during the second and third quarters of 2013 compared to significant drought conditions experienced in the prior year. Demand for architectural and industrial projects in the European segments also increased modestly despite market challenges in Western Europe, as a result of ongoing business development initiatives in emerging markets.

    -- Foreign currency translation resulted in an approximate $4.6 million increase in net sales during 2013 primarily as a result of the strengthening of the euro against the U.S. dollar compared to 2012.
     
  • On a consolidated basis, income (loss) from operations in North America and Europe for 2013 declined $4.4 million, or 38.6%, to $7.0 million compared to $11.4 million for 2012.

    -- In the Company's U.S. segments, operating income declined $7.6 million, or 36.0%, compared to the prior year. This decline is primarily related to lower demand in the U.S. commercial construction markets and a reduction in pricing in both the U.S. Residential and U.S. Commercial segments as a result of lower raw material costs.

    -- In Europe, the Company's end markets continue to be negatively impacted by economic uncertainty and reduced consumer confidence, primarily in the RV and transportation end markets we serve. Despite the overall end market challenges, operating income for our European segments improved $1.6 million, or 61.5%, over the prior year. This improvement in operating income is the result of continued emphasis on various initiatives including product profitability, business development initiatives in emerging markets and actions taken to reduce operating costs and improve efficiency.
     
  • Adjusted EBITDA is a significant operating measure used by the Company to measure its operating performance and liquidity. Adjusted EBITDA was $53.4 million for 2013 compared to $56.4 million for 2012. Adjusted for the impact of pro forma items, Pro Forma Adjusted EBITDA was $55.5 million for 2013 compared to $61.4 million for 2012.

Conference Call

The Company will host an investor conference call regarding its fourth quarter and full year 2013 financial results at 2:00 p.m. Eastern Time on Tuesday, April 1, 2014. The call can be accessed through the following dial-in numbers: US/Canada: 866-952-1906; International: 785-424-1825. A replay of the conference call will be available through April 29, 2014. The replay may be accessed using the following dial-in information: US/Canada: 800-723-0498; International: 402-220-2652.

About Euramax Holdings, Inc.

Euramax Holdings, Inc. is an international building products company manufacturing aluminum, steel, vinyl and copper products. The company was formed in 1996 to acquire the fabricated products business of Alumax Inc., an integrated aluminum producer that was later acquired by Alcoa.

Core products include specialty coated coils, metal wall and roof systems, metal and vinyl rain carrying systems, soffit and fascia systems, roofing accessories, aluminum and vinyl windows and doors, patio products, aluminum recreational vehicle doors, windows and sidewalls and aluminum bath and shower enclosures. Products are represented in the market by multiple brands such as Amerimax Exterior Home Products, Amerimax Fabricated Products, Berger Building Products, Fabral, Copper Craft and Euramax Coated Products.

The core of our business model is the supply of fabricated components to original equipment manufacturers, distributors, contractors and home centers. Euramax has grown both organically and through a number of strategic acquisitions to become one of the largest suppliers of specialty coated aluminum coil, building materials and RV sidewalls in North American and international markets.

Forward Looking Statements

Certain statements contained in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to statements related to plans for future business development activities, anticipated costs of revenues, product mix, research and development and selling, general and administrative activities, and liquidity and capital needs and resources. When used in this release, the words "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate," and similar expressions are generally intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements, which only speak as of the date of this press release. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.

GAAP Versus Non-GAAP Presentation

The Company presents Adjusted EBITDA and Pro Forma Adjusted EBITDA in this press release as additional information regarding the Company's operating results. Adjusted EBITDA is defined as net loss plus (i) benefit for income taxes, (ii) interest expense and (iii) depreciation and amortization, as further adjusted to exclude the effects of certain income and expense items that management believes make it more difficult to assess the Company's actual operating performance. The Company's calculation of Adjusted EBITDA is consistent with the calculation of Consolidated Cash Flow in the indenture governing the Notes, excluding certain proforma items. Proforma Adjusted EBITDA is defined as Adjusted EBITDA given pro forma effect, including pro forma costs savings, for investments, acquisitions, dispositions, mergers, consolidations, business restructurings, operational changes and financing changes made during the fiscal year, as if they had occurred on the first day of the Company's fiscal year. Adjusted EBITDA and Pro Forma Adjusted EBITDA are not measures of financial performance under accounting principles generally accepted in the U.S., and should not be considered alternatives to net income as a measure of operating performance or cash flows from operating, investing and financing activities as a measure of liquidity.

The Company believes Adjusted EBITDA and Pro Forma Adjusted EBITDA are helpful to investors in highlighting trends because Adjusted EBITDA and Pro Forma Adjusted EBITDA exclude the results of certain decisions of operating management that can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. Management compensates for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. The Company also believes Adjusted EBITDA and Pro Forma Adjusted EBITDA are useful to investors because they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Investors use Adjusted EBITDA and Pro Forma Adjusted EBITDA, among other things, to assess the Company's period-to-period operating performance and to gain insight into the manner in which management analyzes operating performance.

A reconciliation of the Company's Adjusted EBITDA and Pro Forma Adjusted EBITDA to net income (loss) is included in the supplemental information attached to this release.

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
     
  December 31, December 31,
  2013 2012
ASSETS    
Current assets:    
Cash and cash equivalents  $ 8,977  $ 10,024
Accounts receivable, less allowances of $2,235 and $2,751 in 2013 and 2012, respectively 73,996 73,876
Inventories, net 89,760 89,294
Income taxes receivable 982 1,527
Deferred income taxes 580 907
Other current assets 7,008 4,789
Total current assets 181,303 180,417
Property, plant, and equipment, net 130,114 141,208
Goodwill 204,053 199,375
Customer relationships, net 40,631 54,589
Other intangible assets, net 7,073 7,475
Deferred income taxes 87 68
Other assets 8,712 11,290
Total assets  $ 571,973  $ 594,422
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY    
Current liabilities:    
Accounts payable  $ 57,262  $ 55,883
Accrued expenses 26,366 30,667
Accrued interest payable 9,020 9,017
Deferred income taxes 605 847
Total current liabilities 93,253 96,414
Long-term debt 535,396 516,674
Deferred income taxes 18,980 20,419
Other liabilities 32,907 46,907
Total liabilities 680,536 680,414
Shareholder's (deficit) equity    
Common stock 195 189
Additional paid-in capital 724,071 721,869
Accumulated loss (843,750) (818,855)
Accumulated other comprehensive income 10,921 10,805
Total shareholders' (deficit) equity (108,563) (85,992)
Total liabilities and shareholders' (deficit) equity  $ 571,973  $ 594,422
     
     
EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
         
  Three months Twelve months
  ended ended
  December 31, December 31, December 31, December 31,
  2013 2012 2013 2012
Net sales  $ 196,431  $ 195,492  $ 826,672  $ 837,140
Costs and expenses:        
Cost of goods sold (excluding depreciation and amortization) 171,539 166,788 699,962 701,045
Selling and general (excluding depreciation and amortization) 15,661 19,069 75,428 83,492
Depreciation and amortization 9,542 8,846 35,099 34,784
Other operating charges 3,810 3,823 9,165 6,425
Multiemployer pension withdrawal expense 39
Income (loss) from operations (4,121) (3,034) 7,018 11,355
Interest expense (12,821) (14,067) (54,078) (54,858)
Other income, net 3,343 4,337 7,404 5,012
Loss before income taxes (13,599) (12,764) (39,656) (38,491)
Benefit from income taxes (2,117) (883) (14,761) (1,723)
Net loss $ (11,482) $ (11,881) $ (24,895) $ (36,768)
         
         
EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
   
  Year Ended
  December 31, December 31,
  2013 2012
Net cash (used in) provided by operating activities $ (10,315)  $ 3,985
     
Investing activities:    
Proceeds from sale of assets 2,346 1,321
Capital expenditures (10,742) (7,140)
Purchase of a business, net of cash acquired (6,445)
Net cash used in investing activities (8,396) (12,264)
     
Financing activities:    
Net borrowings on ABL Credit Facility 18,270 8,280
Deferred financing fees (175) (34)
Net cash provided by financing activities 18,095 8,246
     
Effect of exchange rate changes on cash (431) (4,270)
Net decrease in cash and cash equivalents (1,047) (4,303)
Cash and cash equivalents at beginning of year 10,024 14,327
Cash and cash equivalents at end of year  $ 8,977  $ 10,024
     
     
EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
ADJUSTED EBITDA RECONCILIATION
(in thousands)
(unaudited)
Reconciliation of net loss to Adjusted EBITDA is as follows:
   
  Three months Twelve months
  ended ended
  December 31, December 31, December 31, December 31,
  2013 2012 2013 2012
Net loss $ (11,482) $ (11,881) $ (24,895) $ (36,768)
         
Add:        
Interest expense 12,821 14,067 54,078 54,858
Depreciation and amortization (a) 9,542 8,846 35,099 35,280
Benefit from income taxes (2,117) (883) (14,761) (1,723)
         
Adjustments:        
Other income, net (b) (3,343) (4,337) (7,404) (5,012)
Transition services agreement expense (c) 2,000 2,000
Plant closure, severance, relocation and one-time compensation costs 1,154 3,489 5,903 5,119
Asset write-offs and impairments (d) 1,121 1,121
Non-recurring consulting, legal and professional fees 43 269 89 1,014
Stock compensation expense (37) 755 2,208 3,036
Long term incentive plan (e) (2,406) (836) (1,604) 277
Loss on asset held for sale (f) 1,594
Multiemployer pension withdrawal 39
Acquisition-related costs 65 292
Adjusted EBITDA (g)  $ 7,296  $ 9,554  $ 53,428  $ 56,412
(a) Depreciation and amortization for 2012 included amortization attributable to royalty payments under a minimum purchase agreement entered into in connection with our acquisition of a product line in 2005, which was being recognized in net sales. The royalty agreement was fully amortized as of September 28, 2012.
(b) Other income, net for the three months ended December 31, 2013 is primarily comprised of translation gains on intercompany obligations of approximately $3.5 million, offset by losses of $0.2 million on forward foreign currency contracts. Other income, net for the three months ended December 31, 2012 is primarily composed of translation gains on intercompany obligations of $4.6 million, offset by losses of $0.2 million on forward foreign currency contracts.
Other income, net for the year ended December 31, 2013 is primarily comprised of translation gains of approximately $7.6 million, offset by losses of $0.4 million on forward foreign currency contracts. Other income, net for the year ended December 31, 2012 includes a $0.5 million gain on the sale of assets related to the exit of our RV door product line and translation gains on intercompany obligations of $4.9 million, offset by losses of $0.3 million on forward foreign currency contracts.
(c) Transition services agreement expense for the three months and year ended December 31, 2013, include expenses incurred related to the resignation of the Company's chief executive officer in November 2013.
(d) Asset writeoffs and impairments for the year ended December 31, 2013 includes a $1.1 million impairment of capitalized software costs as a result of the decision to abandon the implementation of an Enterprise Resource Planning System that did not align with the Company's relocation and consolidation activities.
(e) The Company determined that as of December 31, 2013, the liability related to the Long Term Incentive Plan (the "Plan") no longer met the probability threshold required by generally accepted accounting principles for recognition in the financial statements. As a result, previously recorded compensation expense of $2.4 million was reversed within selling, general, and administrative expenses during the fourth quarter of 2013. 
(f) Loss on assets held for sale for the year ended December 31, 2013 includes the sale of land and buildings as part of restructuring activities in the European Engineered Products segment related to the consolidation and relocation of multiple plant facilities into one location.
(g) Adjusted EBITDA excludes certain pro forma adjustments allowable under the definition of Consolidated Cash Flow used in calculating the Fixed Charge Coverage Ratio and Secured Debt Ratio under the indenture for the Company's Notes. We have prepared a reconciliation of Adjusted EBITDA to Pro Forma Adjusted EBITDA in the following table.
 
 
EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
PROFORMA ADJUSTED EBITDA RECONCILIATION
(in thousands)
(unaudited)
Reconciliation of Adjusted EBITDA to Pro Forma Adjusted EBITDA is as follows:
   
  Year Ended
  December 31, December 31,
  2013 2012
Adjusted EBITDA  $ 53,428  $ 56,412
     
Pro Forma Adjustments:    
Legal, professional and consulting fees 963 1,663
Cost savings from restructuring activities and other social programs 1,025 1,574
Pro forma impact of acquisitions and exit activities and (a) 302 1,165
Cost incurred as a result of supply disruptions 635
Contributions to pension plans in excess of net periodic pension cost (b) (231) (19)
Pro Forma Adjusted EBITDA  $ 55,487  $ 61,430
(a) Acquisitions and exit activities in 2013 included the discontinuance of a product line and one time product enhancement costs in our European Engineered Products segment. Acquisitions and exit activities in 2012 were primarily comprised of the pro forma impact, totaling approximately $1.2 million on adjusted EBITDA, as if the acquisition of Cleveland Tubing, Inc. had occurred on the first day of the Company's fiscal year.
(b) These amounts represent cash contributions to defined benefit pension plans in the U.S. and UK in excess of net periodic pension cost recognized during the fiscal year. In 2013, the Company recognized a $0.2 million gain on its Senior Executive Retirement Plan as a result of the resignation of its chief executive officer in November 2013.
Euramax Holdings, Inc.
Mary S. Cullin (770) 449-7066
Senior Vice President, Chief Financial Officer and Treasurer
Email: