10-Q 1 a10-qseptember2013.htm 10-Q 10-Q September 2013



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 2013
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to                                     
Commission File No.  333-05978
EURAMAX HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
 
58-2502320
(I.R.S. Employer
Identification Number)
 
303 Research Drive, Suite 400,
Norcross, GA
(Address of principal executive offices)
 
30092 
(Zip Code)
 

Registrant’s Telephone Number, Including Area Code: (770) 449-7066

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x*
 
* The registrant is a voluntary filer of reports required to be filed by certain companies under Sections 13 or 15(d) of the Securities Exchange Act of 1934 and has filed all reports that would have been required during the preceding 12 months, had it been subject to such filing requirements.

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer o
 
Non-accelerated filer x
 (Do not check if a smaller reporting company)
 
 
Smaller reporting company o
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

There were 194,902 shares of the registrant’s common stock, par value $1.00 per share, issued and outstanding as of November 7, 2013, none of which are publicly traded.




EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS



 
 
 
 
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
Item 1.
Item 1A.
Item 6.












Part I. Financial Information

Item 1. Financial Statements (unaudited)

EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
September 27,
2013
 
December 31,
2012
ASSETS
(unaudited)
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
9,460

 
$
10,024

Accounts receivable, less allowances of $2,597 and $2,751, respectively
101,317

 
73,876

Inventories, net
106,933

 
89,294

Income taxes receivable
747

 
1,527

Deferred income taxes
909

 
907

Other current assets
6,197

 
4,789

Total current assets
225,563

 
180,417

Property, plant and equipment, net
131,261

 
141,208

Goodwill
201,952

 
199,375

Customer relationships, net
44,242

 
54,589

Other intangible assets, net
7,223

 
7,475

Deferred income taxes
98

 
68

Other assets
9,304

 
11,290

Total assets
$
619,643

 
$
594,422

LIABILITIES AND SHAREHOLDERS’ DEFICIT
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
70,366

 
$
55,883

Accrued expenses and other current liabilities
30,116

 
30,667

Accrued interest payable
21,714

 
9,017

   Current portion of long-term debt
1,836

 

Deferred income taxes
868

 
847

Total current liabilities
124,900

 
96,414

Long-term debt
536,525

 
516,674

Deferred income taxes
19,466

 
20,419

Other liabilities
36,096

 
46,907

Total liabilities
716,987

 
680,414

Shareholders’ deficit:
 
 
 
Common stock
195

 
189

Additional paid-in capital
724,109

 
721,869

Accumulated loss
(832,268
)
 
(818,855
)
Accumulated other comprehensive income
10,620

 
10,805

Total shareholders’ deficit
(97,344
)
 
(85,992
)
Total liabilities and shareholders’ deficit
$
619,643

 
$
594,422

 
See the accompanying notes to these condensed consolidated financial statements.

1



EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)



 
Three months ended
 
Nine months ended
 
September 27,
2013
 
September 28,
2012
 
September 27,
2013
 
September 28,
2012
Net sales
$
227,835

 
$
219,173

 
$
630,241

 
$
641,648

Costs and expenses:
 
 
 
 
 

 
 

Cost of goods sold (excluding depreciation and amortization)
188,792

 
182,557

 
528,423

 
534,257

Selling and general (excluding depreciation and amortization)
20,387

 
20,503

 
59,767

 
64,423

Depreciation and amortization
8,514

 
8,624

 
25,557

 
25,938

Other operating charges
1,455

 
840

 
5,355

 
2,602

Multiemployer pension withdrawal expense

 
39

 

 
39

Income from operations
8,687

 
6,610

 
11,139

 
14,389

Interest expense
(13,805
)
 
(13,394
)
 
(41,257
)
 
(40,791
)
Other income, net
8,295

 
3,494

 
4,061

 
675

Income (loss) before income taxes
3,177

 
(3,290
)
 
(26,057
)
 
(25,727
)
Benefit from income taxes
(13,082
)
 
(2,115
)
 
(12,644
)
 
(840
)
Net income (loss)
$
16,259

 
$
(1,175
)
 
$
(13,413
)
 
$
(24,887
)
See the accompanying notes to these condensed consolidated financial statements.

2




EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(in thousands)
(unaudited)

 
Three months ended
 
Nine months ended
 
September 27,
2013
 
September 28,
2012
 
September 27,
2013
 
September 28,
2012
Net income (loss)
$
16,259

 
$
(1,175
)
 
$
(13,413
)
 
$
(24,887
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustment
(89
)
 
26

 
(431
)
 
(176
)
Defined benefit pension plan adjustments
81

 
86

 
246

 
256

Total comprehensive income (loss)
$
16,251

 
$
(1,063
)
 
$
(13,598
)
 
$
(24,807
)
See the accompanying notes to these condensed consolidated financial statements.



3



EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

 
Nine months ended
 
September 27,
2013
 
September 28,
2012
Net cash used in operating activities
$
(16,736
)
 
$
(4,625
)
Cash flows from investing activities:
 
 
 
Proceeds from sales of assets
2,288

 
1,289

Capital expenditures
(7,355
)
 
(4,586
)
Purchase of a business, net of cash acquired

 
(6,446
)
Net cash used in investing activities
(5,067
)
 
(9,743
)
Cash flows from financing activities:
 
 
 
Net borrowings on ABL Credit Facility
19,514

 
7,113

Net borrowings on Dutch Revolving Credit Facility
1,836

 

Debt issuance costs
(175
)
 
(59
)
Changes in cash overdrafts

 
3,467

Net cash provided by financing activities
21,175

 
10,521

Effect of exchange rate changes on cash
64

 
(690
)
Net decrease in cash and cash equivalents
(564
)
 
(4,537
)
Cash and cash equivalents at beginning of period
10,024

 
14,327

Cash and cash equivalents at end of period
$
9,460

 
$
9,790

See the accompanying notes to these condensed consolidated financial statements.
  

4



EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1. Basis of Presentation and Principles of Consolidation
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Euramax Holdings, Inc. and its subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, these statements include all adjustments considered necessary for the fair presentation of all interim periods reported herein. All adjustments are of a normal recurring nature unless otherwise disclosed.
The Company’s sales volumes have historically been higher in the second and third quarters due to the seasonal demand of the building products markets served. Accordingly, results for the three and nine months ended September 27, 2013 are not necessarily indicative of the results that may be expected for the full year. Management believes that the disclosures made are adequate for a fair presentation of the Company’s results of operations, financial position and cash flows. These condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the Company’s accounts and the accounts of its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Each of our interim reporting periods, other than the fourth interim reporting period, ends on the Friday closest to the last day of the corresponding quarterly calendar period. The third quarter of 2013 and 2012 ended on September 27 and September 28, respectively. Our fourth interim reporting period and our fiscal year end on December 31 regardless of the day of the week on which it falls.
Recent Accounting Pronouncements
In February 2013, the FASB issued amendments to disclosure requirements for presentation of comprehensive income. The Standard requires prospective presentation of the effect of significant amounts reclassified from each component of accumulated other comprehensive income and the respective line items in the condensed consolidated statement of operations which are impacted. The amendment is effective prospectively for periods beginning after December 15, 2012. The Company has included the required disclosure in Note 6, Accumulated Other Comprehensive Income.


5



2. Inventories
Inventories were comprised of:
 
September 27,
2013
 
December 31,
2012
 
(in thousands)
Aluminum and steel coil
$
69,877

 
$
59,651

Raw materials
16,947

 
14,520

Work in process
2,891

 
1,598

Finished products
17,218

 
13,525

Total inventories, net
$
106,933

 
$
89,294

The Company has disclosed aluminum and steel coil inventory separately, as it represents inventory that can be classified as raw material, work in process or finished product. Aluminum and steel coil includes both painted and bare coil. Inventories are net of related reserves totaling $2.4 million and $2.9 million as of September 27, 2013 and December 31, 2012, respectively.
3. Indebtedness
Indebtedness consisted of the following:
 
September 27,
2013
 
December 31,
2012
 
(in thousands)
Senior Secured Notes (9.50%)
$
375,000

 
$
375,000

Senior Unsecured Loan Facility (12.25%)
123,525

 
123,188

ABL Credit Facility
38,000

 
18,486

Dutch Revolving Credit Facility
1,836

 

Total debt
538,361

 
516,674

Less: current portion
1,836

 

Total long term debt
$
536,525

 
$
516,674


Senior Secured Notes
The Senior Secured Notes (the "Notes") were issued pursuant to an indenture (the "Indenture"), dated March 18, 2011, among Euramax International, Inc ("Euramax"), Euramax Holdings, Inc ("Euramax Holdings"), and certain of its domestic subsidiaries as guarantors, and Wells Fargo Bank, National Association, the Trustee. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Euramax Holdings, Euramax, and Amerimax Richmond Company, a 100% wholly-owned domestic subsidiary of Euramax. The Notes bear interest at 9.50% per year and mature on April 1, 2016, unless earlier redeemed or repurchased by Euramax. Interest is payable semi-annually on April 1 and October 1 of each year.
The Notes may be redeemed at the option of Euramax, in whole or in part, under the conditions specified in the Indenture, at the following redemption prices plus accrued and unpaid interest to the redemption date if redeemed during the twelve-month period beginning on April 1 of the years indicated:
Year
Percentage
2013
107.125
%
2014
104.750
%
2015 and thereafter
100.000
%

6



The Indenture contains restrictive covenants that limit, among other things, the ability of Euramax and certain of its subsidiaries to incur additional indebtedness, pay dividends and make certain distributions, make other restricted payments, make investments, incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets and enter into certain transactions with affiliates, in each case, subject to exclusions, and other customary covenants. These limitations also limit Euramax's ability to transfer cash or assets to Euramax Holdings, whether by dividend, loan or otherwise. The Indenture also contains customary events of default. If Euramax undergoes a change of control (as defined in the Indenture), Euramax will be required to make an offer to repurchase the Notes at 101% of the principal amount of the Notes redeemed plus accrued and unpaid interest, if any, to the date of redemption.
Senior Unsecured Loan Facility
In March 2011, Euramax Holdings, Euramax, and certain of its domestic subsidiaries entered into the Senior Unsecured Loan Facility with investment funds affiliated with Highland Capital Management, L.P. and Levine Leichtman Capital Partners, as lenders. The Senior Unsecured Loan Facility was issued at 98% of par on March 18, 2011 and matures on October 1, 2016. The difference between the consideration received and the aggregate face amount ($1.5 million) is being amortized and recorded in interest expense using the effective interest rate method over the term. The Senior Unsecured Loan Facility bears interest at 12.25% per year in the event no election is made to pay interest in kind (PIK), and 14.25% (7.875% cash pay and 6.375% PIK) per annum in the event a PIK election is made. Euramax may make a PIK election for up to six quarters during the term of the Senior Unsecured Loan Facility. The interest rate on outstanding borrowings at September 27, 2013 was 12.25%, as Euramax has not made a PIK election.
Euramax may prepay outstanding amounts under the Senior Unsecured Loan Facility, in whole or in part, at the prices (expressed as percentages of the loans) set forth below:
Prepayment Date
Percentage
On or after the second anniversary of the closing but prior to the third anniversary thereof
103
%
On or after the third anniversary of the closing but prior to the fourth anniversary thereof
102
%
On or after the fourth anniversary of the closing
100
%
Upon a change of control, Euramax may be required to prepay all or a portion of the Senior Unsecured Loan Facility at a price equal to 101% of the principal amount plus accrued and unpaid interest. All obligations under the Senior Unsecured Loan Facility are unconditionally guaranteed by Euramax Holdings and Amerimax Richmond Company, a 100% wholly-owned domestic subsidiary of Euramax, and any future direct and indirect wholly‑owned domestic material restricted subsidiaries.
The Senior Unsecured Loan Facility contains restrictive covenants that limit, among other things, the ability of Euramax and certain of its subsidiaries to incur additional indebtedness, pay dividends and make certain distributions, make other restricted payments, make investments, incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets and enter into certain transactions with affiliates, in each case, subject to exclusions, and other customary covenants.
The Senior Unsecured Loan Facility contains certain customary representations and warranties, affirmative covenants and events of default, including among other things, payment defaults, covenant defaults, cross‑defaults to certain indebtedness, certain events of bankruptcy, material judgments, and failure of any guaranty supporting the Senior Unsecured Loan Facility to be in force and effect in any material respect. If such an event of default occurs, the administrative agent would be entitled to take various actions, including the acceleration of amounts due under the Senior Unsecured Loan Facility and all actions permitted to be taken by an unsecured creditor.

7



ABL Credit Facility
On March 18, 2011, Euramax Holdings, Euramax, and certain of its domestic subsidiaries, entered into the ABL Credit Facility with Regions Bank, as Collateral and Administrative Agent, Wells Fargo Capital Finance, LLC, as Co-Collateral Agent, and Regions Business Capital, as Sole Lead Arranger and Bookrunner. The ABL Credit Facility provides for revolving credit financing of up to $70 million, subject to borrowing base availability. The ABL Credit Facility was amended on March 25, 2013 to, among other items, (i) extend the maturity date to January 1, 2016 or to March 1, 2018 in the event the maturity date of the Senior Secured Notes and Senior Unsecured Loan Facility is extended to a date that is ninety days or more following March 1, 2018, (ii) reduce the Minimum Excess Availability Reserve to $1.0 million from 20% of outstanding borrowings, and (iii) reduce the excess availability threshold from 15.0% to 12.5%. In the event excess availability falls below the 12.5% threshold, Euramax would be required to meet, for the period from the amendment date to November 30, 2013, a Minimum Consolidated Adjusted EBITDA of $55 million, and after November 30, 2013, a Minimum Consolidated Fixed Charge Coverage Ratio of 1.15 to 1.00. At September 27, 2013, $31.1 million was available to be drawn on the ABL Credit Facility.
Borrowings under the ABL Credit Facility bear interest at a rate per annum equal to either (a) LIBOR plus an applicable margin or (b) a base rate determined by reference to the highest of (1) the prime commercial lending rate published by Regions Bank as its “prime rate” for commercial loans, (2) the federal funds effective rate plus 0.50% and (3) the one-month LIBOR plus 1.00%, plus an applicable margin. The applicable margin is dependent upon the type of borrowings Euramax has made under the ABL Credit Facility. At September 27, 2013, the applicable margins were 2.50% and 1.50% for LIBOR and Base Rate borrowings, respectively. The applicable margins are subject to Euramax’s corporate credit rating as determined from time to time by Standard and Poor’s and Moody’s Investors Service and range from 2.00% to 2.75% for LIBOR borrowings and 1.00% to 1.75% for Base Rate borrowings. The weighted average interest rate at September 27, 2013, including the applicable margin payable on outstanding borrowings under the ABL Credit Facility, was 2.7%. The ABL Credit Facility requires Euramax to pay a commitment fee ranging from 0.375% to 0.5%, based on the unutilized commitments. Euramax is also required to pay customary letter of credit fees, including, without limitation, a letter of credit fee equal to the applicable margin on revolving credit LIBOR loans and fronting fees.
All obligations under the ABL Credit Facility are unconditionally guaranteed by Euramax Holdings, Euramax, and Amerimax Richmond Company, a wholly-owned domestic subsidiary of Euramax, and any future direct and indirect wholly-owned domestic restricted subsidiaries which are not borrowers. All obligations under the ABL Credit Facility are secured, subject to certain exceptions, by a first‑priority security interest in Euramax’s and the Guarantors’ inventory and accounts receivable and related assets, referred to as the ABL Collateral, and a junior‑priority security interest in (i) substantially all of Euramax’s and the Guarantors’ assets (other than inventory and accounts receivable and related assets, which assets secure the ABL Credit Facility on a first priority basis) and (ii) all of Euramax’s capital stock and the capital stock of each material domestic restricted subsidiary owned by Euramax or a Guarantor and 65% of the voting capital stock and 100% of any non-voting capital stock of foreign restricted subsidiaries directly owned by Euramax or a Guarantor, which we refer to collectively as the Notes Collateral.
The ABL Credit Facility contains affirmative and negative covenants customary for this type of financing, including, but not limited to certain financial covenants in the event excess availability is less than 12.5% of the lesser of the aggregate amount of commitments outstanding at such time and the borrowing base. If excess availability falls below the 12.5% threshold, Euramax would be required to meet, for the period from the amendment date to November 30, 2013, a Minimum Consolidated Adjusted EBITDA of $55 million for the immediately preceding twelve month period. After November 30, 2013, Euramax would be required to meet a Minimum Consolidated Fixed Charge Coverage Ratio of at least 1.15 to 1.00 if excess availability falls below 12.5%. As of September 27, 2013, excess availability exceeded 12.5% of the borrowing base; therefore, Euramax was not required to meet the Minimum Consolidated Adjusted EBITDA or Minimum Consolidated Fixed Charge Coverage Ratio. Additionally, restrictive covenants limit the ability of Euramax and certain of its subsidiaries to incur liens, incur, assume or permit to exist additional indebtedness, guarantees and other contingent obligations, consolidate, merge or sell all or substantially all of their assets, pay dividends or make other distributions, make certain loans and investments, amend or otherwise alter the terms of documents related to certain of their indebtedness, enter into transactions with affiliates and prepay certain indebtedness, in each case, subject to exclusions, and other customary covenants.

8



Dutch Revolving Credit Facility
In February 2012, Euramax's wholly-owned subsidiary Euramax Coated Products, BV entered into a revolving credit facility with Rabobank Roermond (the "Dutch Revolving Credit Facility"). The Dutch Revolving Credit Facility provides revolving credit financing of up to EUR 15 million and matures on April 1, 2016. Borrowings under the Dutch Revolving Credit Facility bear interest at a rate per annum which is the aggregate of the average one month Euribor rate over a calendar month plus a margin of 2% and requires payment of a commitment fee of 0.35% per annum on the nominal amount of the credit facility. The weighted average interest rate at September 27, 2013, including the margin payable on outstanding borrowings under the Dutch Revolving Credit Facility, was 2.4%. All obligations under the Dutch Revolving Credit Facility are secured by a mortgage on the real estate of Euramax Coated Products, BV, a pledge on present and future machinery and present and future accounts receivable balances of Euramax Coated Products, BV. At September 27, 2013, $18.4 million was available to be drawn on the Dutch Revolving Credit Facility.
The Dutch Revolving Credit Facility contains financial and non-financial covenants customary for this type of financing. Financial covenants include, but are not limited to, a minimum annual EBITDA target and a minimum amount of risk-bearing capital for Euramax Coated Products, BV, both measured at the Company's fiscal year-end. The Dutch Revolving Credit Facility also contains a clause limiting further indebtedness. As of September 27, 2013, Euramax Coated Products, BV is in compliance with all covenants.
4. Commitments and Contingencies
Raw Material Commitments
The Company’s primary raw materials are aluminum and steel coil. Because changes in aluminum and steel prices are generally passed through to customers, increases or decreases in aluminum and steel prices generally cause corresponding increases and decreases in reported net sales, causing fluctuations in reported revenues that are unrelated to the level of business activity. However, if the Company is unable to pass through aluminum and steel price increases to customers in the future, its business and results of operations could be materially adversely affected. Although the Company believes there is sufficient supply in the marketplace to competitively source all of its aluminum and steel needs without reliance on any particular supplier, any major disruption in the supply and/or price of aluminum and steel could have a material adverse effect on the Company’s business and financial condition.
To ensure a margin on specific customer orders, the Company may commit to purchase aluminum ingot or coil at a fixed market price for future delivery. These contracts are for normal purchases and sales, and therefore, are not required to be accounted for as derivatives.
Litigation
The Company is currently party to legal proceedings that have arisen in the ordinary course of business. The Company has and will continue to vigorously defend itself in these matters. It is the opinion of the Company’s management, based upon information available at this time, that the expected outcome of all matters to which the Company is currently a party would not reasonably be expected to have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.
Environmental Matters
The Company’s operations are subject to U.S., Canadian, and European federal, state, and local environmental laws and regulations, including those concerning the management of pollution and hazardous substances.

9



In connection with the acquisition of the Company from Alumax Inc. (which was acquired by Aluminum Company of America in May 1998, and hereafter referred to as Alumax) on September 25, 1996, the Company was indemnified by Alumax for substantially all of its costs, if any, related to specifically identified environmental matters arising prior to the closing date of the acquisition during the period of time it was owned directly or indirectly by Alumax. Such indemnification includes costs that may ultimately be incurred to contribute to the remediation of eleven specified existing National Priorities List (NPL) sites for which the Company had been named a potentially responsible party under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) as of the closing date of the acquisition from Alumax, as well as certain potential costs for nine sites to which the Company may have sent waste for disposal. The Company does not believe that it has any significant probable liability for environmental claims. Further, the Company believes it to be unlikely that the Company would be required to bear environmental costs in excess of its pro rata share of such costs as a potentially responsible party at any site. Any receivable for recoveries under the indemnification would be recorded separately from the corresponding liability when the environmental claim and related recovery is determined to be probable. In addition, the Company establishes reserves for remedial measures required from time to time at its facilities. Management believes that the reasonably probable outcomes of these matters will not be material. The Company’s reserves, expenditures, and expenses for all environmental exposures were not significant as of any of the dates or for any of the periods presented.
Product Warranties
The Company provides warranties on certain products. The warranty periods differ depending on the product, but generally range from one year to limited lifetime warranties. The Company provides for warranties based on historical experience and expectations of future occurrence. Changes in the product warranty accrual are summarized as follows:
 
Three months ended
 
Nine months ended
 
September 27,
2013
 
September 28,
2012
 
September 27,
2013

September 28,
2012
 
(in thousands)
Balance, beginning of period
$
5,047

 
$
5,272

 
$
5,098


5,050

Payments made or service provided
(734
)
 
(596
)
 
(2,565
)

(2,008
)
Warranty expense
997

 
718

 
2,838


2,386

Foreign currency translation
93

 
47

 
32


13

Balance, end of period
$
5,403

 
$
5,441

 
$
5,403


$
5,441

5. Income Taxes
The provision for income taxes for 2013 and 2012 are computed at the effective rate expected to be applicable in each respective full year using the statutory rates on a country by country basis, adjusted for changes in valuation allowances relating to the Company’s net operating loss and capital loss carryforwards and changes in tax uncertainties. The effective rates for the three month periods ended September 27, 2013 and September 28, 2012, were a benefit of 411.8% and a benefit of 64.3%, respectively.
The effective rate for the three months ended September 27, 2013 differed from the U.S. statutory rate primarily due to the reversal of an uncertain tax position as a result of the expiration of statute of limitations discussed in the tax uncertainties section below. Other factors impacting the effective rate include state income taxes, lower tax rates of our foreign operations as compared to the U.S. federal rates, and recognition of valuation allowances related to current year losses in the UK and in U.S. federal and state jurisdictions.
The effective rate for the three months ended September 28, 2012 differed from the U.S. statutory rate primarily due to state income taxes, lower tax rates of our foreign operations as compared to the U.S. federal rates, and recognition of valuation allowances related to net losses in the UK and in U.S. federal and state jurisdictions.
The effective tax rates for the nine month periods ended September 27, 2013 and September 28, 2012, were a benefit of 48.5% and a benefit of 3.3%, respectively.

10



The effective rate for the nine months ended September 27, 2013 differed from the U.S. statutory rate due to the reversal of various uncertain tax positions, primarily relating to the expiration of certain statutes of limitations. Other factors impacting the effective rate include state income taxes, lower tax rates of our foreign operations as compared to the U.S. federal rates, and valuation allowances related to current year losses in the UK and in U.S. federal and state jurisdictions.
The effective rate for the nine months ended September 28, 2012 differed from the U.S. statutory rate primarily due to state income taxes, lower tax rates of our foreign operations as compared to the U.S. federal rates, and valuation allowances related to net losses in the UK and in U.S. federal and state jurisdictions.
Tax uncertainties
On September 27, 2013 and December 31, 2012, the gross amount of unrecognized tax benefits was $2.2 million and $11.2 million, respectively, exclusive of interest and penalties. As of September 27, 2013 and December 31, 2012, if we were to prevail on all unrecognized tax benefits, $2.2 million and $11.2 million, respectively, would have benefited the effective tax rate. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense in the consolidated statements of operations. As of September 27, 2013 and December 31, 2012, the Company had $0.2 million and $3.3 million, respectively, of accrued interest and penalties. Interest and penalties recognized in the three months ended September 27, 2013 and September 28, 2012 were a benefit of $3.3 million and expense of $0.1 million, respectively. Interest and penalties recognized in the nine months ended September 27, 2013 and September 28, 2012 were a benefit of $3.1 million and expense of $0.3 million, respectively.
 During the three months ended September 27, 2013, the statute of limitations expired for an uncertain tax position taken in a prior year. As a result, the Company recognized $9.0 million in previously unrecognized tax benefit and an additional $3.4 million related to the reversal of accrued interest and penalties associated with the position during the current quarter. During the next 12 months, the Company does not expect to have any significant reversal of gross unrecognized tax benefits. The Company files income tax returns in the U.S. federal and state and local jurisdictions, and in the UK, Canada, the Netherlands, and France. Under the generally accepted statute of limitation rules, the Company is not subject to changes in income taxes by any taxing jurisdiction for years prior to 2010.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for the nine months ended September 27, 2013 is as follows:
 
September 27, 2013
 
(in thousands)
Balance, beginning of period
$
(11,209
)
Reductions for tax positions of prior years
9,105

Effects of foreign currency translation
(53
)
Balance, end of period
$
(2,157
)

11



6. Accumulated Other Comprehensive Income
Changes in accumulated other comprehensive income (loss) by component for the nine month period ended September 27, 2013 were as follows:
 
 
Foreign Currency Translation Adjustments
 
Defined Benefit Pension Plan Adjustments
 
Total
 
 
(in thousands)
Balance, beginning of period
 
$
20,096

 
$
(9,291
)
 
$
10,805

Other comprehensive income (loss) before reclassifications
 
(431
)
 

 
(431
)
Amounts reclassified from accumulated other comprehensive income (loss)
 

 
246

 
246

Net other comprehensive income (loss)
 
(431
)
 
246

 
(185
)
Balance, end of period
 
$
19,665

 
$
(9,045
)
 
$
10,620

Amounts reclassified from the defined benefit pension plan adjustments component of accumulated other comprehensive income (loss) were recorded in selling and general expenses within the condensed consolidated statement of operations. There were no net tax effects related to the reclassification as a result of the full valuation allowances in the U.S. and UK in the current year. The accumulated tax effect related to the defined benefit pension plan adjustments component of accumulated other comprehensive income (loss) was a benefit of $0.9 million as of September 27, 2013 and December 31, 2012. There are no tax impacts related to the foreign currency translation adjustment component of accumulated other comprehensive income (loss) as the earnings of subsidiaries are considered to be permanently invested.
7. Employee Benefit Plans
Retirement Plans
The Company maintains a non-contributory defined benefit pension plan covering substantially all U.S. hourly employees (the "U.S. Plan"). In addition, the employees at Euramax Coated Products Limited and Ellbee Limited participate in a single employer pension plan (the "UK Plan"). The measurement date for the U.S. and UK plans is the last day of the fiscal year. The Company curtailed the accrual of participant benefits provided under the UK Plan effective March 31, 2009. This curtailment did not affect the timing for the payment of benefits earned under the UK Plan through the curtailment date. In January 2010, the Company's board of directors approved a motion to freeze future benefit accruals under the U.S. Plan. The impact on the Company's projected benefit obligation was not significant. Components of net periodic pension cost for the Company’s defined and multiemployer pension plans were as follows:
 
Three months ended
 
Nine months ended
 
September 27, 2013
 
September 28, 2012
 
September 27, 2013
 
September 28, 2012
 
U.S. Plan
 
UK Plan
 
U.S. Plan
 
UK Plan
 
U.S. Plan
 
UK Plan
 
U.S. Plan
 
UK Plan
 
(in thousands)
Service cost
$
16

 
$

 
$
19

 
$

 
$
48

 
$

 
$
57

 
$

Interest cost
130

 
527

 
128

 
590

 
390

 
1,582

 
384

 
1,770

Expected return on assets
(156
)
 
(411
)
 
(144
)
 
(418
)
 
(468
)
 
(1,233
)
 
(432
)
 
(1,254
)
Recognized actuarial net loss
73

 
8

 
62

 
24

 
217

 
29

 
186

 
70

Total defined benefit net periodic pension cost
63

 
124

 
65

 
196

 
187

 
378

 
195

 
586

Multiemployer benefit expense
313

 

 
308

 

 
860

 

 
884

 

Multiemployer pension withdrawal expense

 

 
39

 

 

 

 
39

 

Net periodic pension cost
$
376

 
$
124

 
$
412

 
$
196

 
$
1,047

 
$
378

 
$
1,118

 
$
586


12



8. Fair Value Measurements
Accounting principles generally accepted in the U.S. define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Additionally, the inputs used to measure fair value are prioritized based on a three-level hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1. We value assets and liabilities included in this level using dealer and broker quotations, certain pricing models, bid prices, quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
Recurring Fair Value Measurements
In accordance with accounting principles generally accepted in the U.S., certain assets and liabilities are required to be recorded at fair value on a recurring basis. For the Company, the only assets and liabilities that are adjusted to fair value on a recurring basis are derivative financial instruments.
Derivative Financial Instruments
The Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company's financial performance and are referred to as "market risks." The Company, when deemed appropriate, uses derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risk managed by the Company through the use of derivative instruments is foreign currency exchange rate risk related to intercompany interest payments. The Company does not enter into derivative contracts for trading purposes.
The Company has entered into forward contracts to buy or sell a quantity of a currency at a predetermined future date, and at a predetermined rate or price to mitigate uncertainty and volatility, and to cover underlying exposures to certain payments in currencies other than the functional currency. The Company has not designated these contracts for hedge accounting treatment and, therefore, the gains and losses on these contracts are recorded in other income (loss), net in the condensed consolidated statement of operations. For the three months ended, September 27, 2013 and September 28, 2012, the Company recognized losses of $0.3 million and $0.2 million, respectively, related to these forward contracts. For the nine months ended September 27, 2013 and September 28, 2012, the Company recognized losses of $0.2 million and $0.1 million, respectively, related to these forward contracts.
Derivatives are carried at fair value in the condensed consolidated balance sheets in the line item accrued expenses and other current liabilities. As of September 27, 2013 and December 31, 2012, the fair value of outstanding derivatives totaled net liabilities of $0.5 million and $0.2 million, respectively. The fair value of foreign exchange contracts is determined using quotations from financial institutions and is classified as a Level 2 measurement in the fair value hierarchy.
Nonrecurring Fair Value Measurements
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records assets and liabilities at fair value on a nonrecurring basis as required by accounting principles generally accepted in the U.S. Generally, adjustments made to record assets at fair value on a nonrecurring basis are the result of impairment charges.

13



In the first quarter of 2013, the Company recorded losses of approximately $1.6 million in other operating charges related to the reclassification of land and buildings to assets held for sale. These losses, incurred as part of the Company's restructuring activities in the European Engineered Products segment, represent the difference between the carrying value prior to the reclassification and the fair value. The fair value of assets held for sale was determined based on the selling price less costs incurred to sell and was classified as Level 1 in the fair value hierarchy. The assets were sold during the second quarter of 2013 and no additional losses were recorded from the sale of the assets. The Company did not record any impairment charges related to assets measured at fair value on a nonrecurring basis during the three or nine months ended September 28, 2012.
Other Fair Value Disclosures
The carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued expenses, and loans and notes payable approximate their fair values because of the relatively short-term maturities of these instruments.
The fair value of our long-term debt is estimated using Level 2 inputs based on dealer quoted prices for our debt instruments based on recent transactions obtained from various sources. As of September 27, 2013, the carrying amount and fair value of our Senior Secured Notes, were $375.0 million and $358.1 million, respectively. As of December 31, 2012, the carrying amount and fair value of our Senior Secured Notes, were $375.0 million and $348.8 million, respectively.
9. Other Operating Charges
Other operating charges incurred by operating segment were as follows:
 
Three months ended
 
Nine months ended
 
September 27, 2013
 
September 28, 2012
 
September 27, 2013
 
September 28, 2012
 
(in thousands)
U.S. Residential Products
$
57

 
$
226

 
$
214

 
$
290

U.S. Commercial Products
69

 
55

 
364

 
232

European Roll Coated Aluminum
305

 
31

 
495

 
531

European Engineered Products
995

 
174

 
4,039

 
359

Other non-allocated
29

 
354

 
243

 
1,190

Total other operating charges
$
1,455

 
$
840

 
$
5,355

 
$
2,602

Other operating charges are comprised of restructuring initiatives, facility closures, acquisition related costs and other operational initiatives. For the three months ended September 27, 2013, other operating charges of $1.5 million were primarily comprised of ongoing restructuring and relocation initiatives in the European Engineered Products segment including approximately $0.8 million of severance and relocation costs associated with the relocation from multiple plant facilities in the UK into one operating location and $0.2 million of severance costs for various social programs in France. The remaining $0.5 million of other operating charges were comprised primarily of severance and relocation costs related to various organizational initiatives in the European Roll Coated Aluminum segment and in the U.S. to reduce operating costs and improve efficiencies.
For the three months ended September 28, 2012, other operating charges of $0.8 million were primarily comprised of $0.4 million of severance and relocation costs related to restructuring and cost savings initiatives in both the U.S. and Europe, $0.2 million of legal and professional fees related to reorganizational activities in North America and Europe, and $0.2 million of costs related to the acquisition of Cleveland Tubing, Inc.
For the nine months ended September 27, 2013, other operating charges of $5.4 million were primarily comprised of restructuring and relocation initiatives in the European Engineered Products segment, including a $1.6 million loss related to the sale of land and buildings, $2.0 million of severance, relocation and other restructuring charges related to the relocation from multiple plant facilities in the UK into one operating location, and $0.5 million of severance costs for various social programs in France. The remaining other operating charges in the first nine months of 2013 were comprised of $1.3 million in severance and relocation costs in both the U.S. and Europe related to various organizational initiatives to reduce operating costs and improve efficiencies.

14



For the nine months ended September 28, 2012, other operating charges of $2.6 million included $1.7 million of severance and relocation related to cost savings initiatives and restructuring activities in both the U.S. and Europe, $0.7 million of legal and professional fees related to the Company's North America reorganization, and $0.2 million of costs related to the acquisition of Cleveland Tubing, Inc.
10. Segment Information
The Company manages its business and serves its customers through reportable segments differentiated by product type, end market, and geography. The Company's four reportable segments are described below:
U.S. Residential Products—The U.S. Residential Products segment utilizes aluminum, steel, copper and vinyl to produce residential roof drainage products, including preformed gutters, downspouts, elbows, soffit, drip edge, fascia, flashing, snow guards and related accessories. These products are used primarily for the repair, replacement or enhancement of residential roof drainage systems. The Company sells these products to home improvement retailers, lumber yards, distributors and contractors from manufacturing and distribution facilities throughout North America. The Company also produces specialty made-to-order vinyl replacement windows and aluminum patio and awning components sold primarily to home improvement contractors in the western U.S.
U.S. Commercial Products—The U.S. Commercial Products segment utilizes various materials, including steel coil, aluminum coil and fiberglass to create various products with commercial applications, including roofing and siding panels, ridge caps, flashing, trim, soffit and other accessories as well as sidewall components, siding and other exterior components for the towable RV, cargo and manufactured housing markets. The Company sells these products to builders, contractors, lumber yards, home improvement retailers, OEMs, and RV manufacturers from manufacturing and distribution facilities located throughout the U.S. These products are used in the construction of a wide variety of small scale commercial, agricultural and industrial building types on either wood or metal frames, manufactured homes, and towable RVs.
European Roll Coated Aluminum—The European Roll Coated Aluminum segment uses a roll coating process to apply paint to bare aluminum coil and, to a lesser extent, bare steel coil in order to produce specialty coated coil, which the Company also processes into specialty coated sheets and panels. The Company sells these products to building panel manufacturers, contractors and UK “holiday home,” RV and transportation OEMs throughout Europe and in parts of Asia. The Company’s customers use its specialty coated metal products to manufacture, among other things, RV sidewalls, commercial roofing panels, interior ceiling panels, and liner panels for shipping containers. The Company produces and distributes these roll coated products from facilities located in the Netherlands and the UK.
European Engineered Products—The European Engineered Products segment utilizes aluminum and vinyl extrusions to produce residential windows, doors and shower enclosures. These products are sold to home improvement retailers, distributors and factory‑built “holiday home” builders in the UK. The Company also produces windows used in the operator compartments of heavy equipment, components sold to suppliers to automotive OEMs in Western Europe and RV doors. The Company produces and distributes these engineered products from facilities in France and the UK and has developed extensive in-house manufacturing capabilities, including powder coating, glass cutting, anodizing and glass toughening.
The Company evaluates the performance of its segments and allocates resources to them based primarily on segment income (loss) from operations. Expenses, income and assets that are not segment specific relate to the holding company and business development activities conducted for the overall benefit of the Company, and accordingly, are not attributable to the Company’s segments.

15



The following table presents information about reported segments for the three months ended September 27, 2013:
 
U.S.
Residential
Products
 
U.S.
Commercial
Products
 
European
Roll Coated
Aluminum
 
European
Engineered Products
 
Other Non-
Allocated
 
Eliminations
 
Consolidated
Three months ended September 27, 2013
(in thousands)
Net sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
Third party
$
87,518

 
$
80,717

 
$
45,660

 
$
13,940

 
$

 
$

 
$
227,835

Intersegment
188

 
58

 
87

 

 

 
(333
)
 

Total net sales
$
87,706

 
$
80,775

 
$
45,747

 
$
13,940

 
$

 
$
(333
)
 
$
227,835

Income (loss) from operations
$
9,281

 
$
2,251

 
$
1,782

 
$
(1,612
)
 
$
(3,015
)
 
$

 
$
8,687

Depreciation and amortization
$
2,891

 
$
2,628

 
$
2,435

 
$
401

 
$
159

 
$

 
$
8,514

Capital expenditures
$
873

 
$
361

 
$
717

 
$
180

 
$
266

 
$

 
$
2,397

The following table presents information about reported segments for the three months ended September 28, 2012:
 
U.S.
Residential
Products
 
U.S.
Commercial
Products
 
European
Roll Coated
Aluminum
 
European
Engineered Products
 
Other Non-
Allocated
 
Eliminations
 
Consolidated
Three months ended September 28, 2012
(in thousands)
Net sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
Third party
$
77,469

 
$
79,334

 
$
48,540

 
$
13,830

 
$

 
$

 
$
219,173

Intersegment
191

 
33

 
176

 

 

 
(400
)
 

Total net sales
$
77,660

 
$
79,367

 
$
48,716

 
$
13,830

 
$

 
$
(400
)
 
$
219,173

Income (loss) from operations
$
7,475

 
$
1,707

 
$
2,095

 
$
(1,461
)
 
$
(3,206
)
 
$

 
$
6,610

Depreciation and amortization
$
2,926

 
$
2,686

 
$
2,299

 
$
615

 
$
98

 
$

 
$
8,624

Capital expenditures
$
345

 
$
329

 
$
493

 
$
89

 
$
683

 
$

 
$
1,939

The following table presents information about reported segments for the nine months ended September 27, 2013:
 
U.S.
Residential
Products
 
U.S.
Commercial
Products
 
European
Roll Coated
Aluminum
 
European
Engineered Products
 
Other Non-
Allocated
 
Eliminations
 
Consolidated
Nine months ended September 27, 2013
(in thousands)
Net sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
Third party
$
226,203

 
$
209,217

 
$
145,238

 
$
49,583

 
$

 
$

 
$
630,241

Intersegment
522

 
356

 
192

 

 

 
(1,070
)
 

Total net sales
$
226,725

 
$
209,573

 
$
145,430

 
$
49,583

 
$

 
$
(1,070
)
 
$
630,241

Income (loss) from operations
$
18,857

 
$
(1,830
)
 
$
7,422

 
$
(5,144
)
 
$
(8,166
)
 
$

 
$
11,139

Depreciation and amortization
$
8,721

 
$
7,866

 
$
7,149

 
$
1,397

 
$
424

 
$

 
$
25,557

Capital expenditures
$
2,076

 
$
1,367

 
$
2,527

 
$
396

 
$
989

 
$

 
$
7,355


16



The following table presents information about reported segments for the nine months ended September 28, 2012:
 
U.S.
Residential
Products
 
U.S.
Commercial
Products
 
European
Roll Coated
Aluminum
 
European
Engineered Products
 
Other Non-
Allocated
 
Eliminations
 
Consolidated
Nine months ended September 28, 2012
(in thousands)
Net sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
Third party
$
214,665

 
$
222,267

 
$
152,012

 
$
52,704

 
$

 
$

 
$
641,648

Intersegment
774

 
162

 
441

 

 

 
(1,377
)
 

Total net sales
$
215,439

 
$
222,429

 
$
152,453

 
$
52,704

 
$

 
$
(1,377
)
 
$
641,648

Income (loss) from operations
$
18,261

 
$
165

 
$
7,979

 
$
(2,304
)
 
$
(9,712
)
 
$

 
$
14,389

Depreciation and amortization
$
8,665

 
$
8,089

 
$
7,054

 
$
1,868

 
$
262

 
$

 
$
25,938

Capital expenditures
$
1,085

 
$
724

 
$
1,243

 
$
541

 
$
993

 
$

 
$
4,586


It is impractical for the Company to provide revenues from external customers by groups of similar products. Accordingly, the following table reflects revenues from external customers by markets for the periods indicated.
 
 
Three months ended
 
Nine months ended
Customers/Markets
Primary Products
September 27, 2013
 
September 28, 2012
 
September 27, 2013
 
September 28, 2012
 
 
(in thousands)
Home Improvement Retailers
Rain carrying systems, metal panels, roofing accessories, windows, doors and shower enclosures
$
57,449

 
$
51,806

 
$
145,995

 
$
139,740

Original Equipment Manufacturers (“OEMs”)
Painted aluminum sheet and coil; fabricated painted aluminum, laminated and fiberglass panels; windows and roofing; and composite building panels
45,474

 
43,457

 
149,791

 
161,946

Rural Contractors
Steel and aluminum roofing and siding
44,029

 
43,116

 
97,932

 
107,412

Industrial and Architectural Contractors
Metal panels and siding and roofing accessories
37,926

 
40,321

 
112,721

 
110,908

Distributors
Metal coils, rain carrying systems and roofing accessories
25,096

 
23,917

 
67,121

 
68,807

Home Improvement Contractors
Vinyl replacement windows; metal coils, rain carrying systems; metal roofing and insulated roofing panels; shower, patio and entrance doors; and awnings
11,546

 
9,564

 
31,971

 
27,590

Manufactured Housing
Steel siding and trim components
6,315

 
6,992

 
24,710

 
25,245

 
 
$
227,835

 
$
219,173

 
$
630,241

 
$
641,648



17




11. Supplemental Guarantor Condensed Financial Information
On March 18, 2011, Euramax Holdings, Inc. (presented as Parent in the following schedules), through its 100%-owned subsidiary, Euramax International, Inc. (presented as Issuer in the following schedules) issued the Notes. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Euramax Holdings, Inc., Euramax International, Inc., and Amerimax Richmond Company, a 100% owned domestic subsidiary of Euramax International, Inc. No other subsidiaries of Euramax International, Inc., whether direct or indirect, guarantee the Notes (the "Non-Guarantors").
Additionally, the Notes are secured on a second priority basis by liens on all of the collateral (subject to certain exceptions) securing the ABL Credit Facility. In the event that secured creditors exercise remedies with respect to Euramax International, Inc.'s pledged assets, the proceeds of the liquidation of those assets will first be applied to repay obligations secured by the first priority liens under the senior secured credit facilities and any other first priority obligations.
The Indenture contains restrictive covenants that limit, among other things, the ability of Euramax and certain of its subsidiaries to incur additional indebtedness, pay dividends and make certain distributions, make other restricted payments, make investments, incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets and enter into certain transactions with affiliates, in each case, subject to exclusions, and other customary covenants. These limitations also limit Euramax's ability to transfer cash or assets to Euramax Holdings, whether by dividend, loan or otherwise.
The following condensed consolidating financial statements present the results of operations, comprehensive operations, financial position and cash flows of (1) the Parent, (2) the Issuer, (3) the Non-Guarantor Subsidiaries, and (4) eliminations to arrive at the information for Euramax Holdings, Inc. on a consolidated basis.


18




EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 27, 2013
(in thousands)
(unaudited)
 
Parent
 
Issuer
 
Non-Guarantor
 
Eliminations
 
Total
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
4,443

 
$
5,017

 
$

 
$
9,460

Accounts receivable, less allowance for doubtful accounts

 
58,640

 
42,677

 

 
101,317

Inventories, net

 
77,010

 
29,923

 

 
106,933

Income taxes receivable

 
312

 
435

 

 
747

Deferred income taxes

 
794

 
115

 

 
909

Other current assets

 
4,642

 
1,555

 

 
6,197

Total current assets

 
145,841

 
79,722

 

 
225,563

Property, plant and equipment, net

 
63,742

 
67,519

 

 
131,261

Amounts due from affiliates

 
219,410

 
20,876

 
(240,286
)
 

Goodwill

 
81,359

 
120,593

 

 
201,952

Customer relationships, net

 
27,079

 
17,163

 

 
44,242

Other intangible assets, net

 
7,223

 

 

 
7,223

Investment in consolidated subsidiaries
(92,155
)
 
6,528

 

 
85,627

 

Deferred income taxes

 

 
98

 

 
98

Other assets

 
7,198

 
2,106

 

 
9,304

Total assets
$
(92,155
)
 
$
558,380

 
$
308,077

 
$
(154,659
)
 
$
619,643

LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$

 
$
43,817

 
$
26,549

 
$

 
$
70,366

Accrued expenses and other current liabilities
16

 
15,711

 
14,389

 

 
30,116

Accrued interest payable

 
21,714

 

 

 
21,714

Current portion of long-term debt

 

 
1,836

 

 
1,836

Deferred income taxes

 

 
868

 

 
868

Total current liabilities
16

 
81,242

 
43,642

 

 
124,900

Long-term debt

 
536,525

 

 

 
536,525

Amounts due to affiliates
5,173

 
8,900

 
226,213

 
(240,286
)
 

Deferred income taxes

 
12,054

 
7,412

 

 
19,466

Other liabilities

 
11,814

 
24,282

 

 
36,096

Total liabilities
5,189

 
650,535

 
301,549

 
(240,286
)
 
716,987

Shareholders’ (deficit) equity:
 
 
 
 
 
 
 
 
 
Common stock
195

 

 
21

 
(21
)
 
195

Additional paid-in capital
724,109

 
661,216

 
199,452

 
(860,668
)
 
724,109

Accumulated loss
(832,268
)
 
(763,991
)
 
(207,470
)
 
971,461

 
(832,268
)
Accumulated other comprehensive income
10,620

 
10,620

 
14,525

 
(25,145
)
 
10,620

Total shareholders’ (deficit) equity
(97,344
)
 
(92,155
)
 
6,528

 
85,627

 
(97,344
)
Total liabilities and shareholders’ (deficit) equity
$
(92,155
)
 
$
558,380

 
$
308,077

 
$
(154,659
)
 
$
619,643


19




EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2012
(in thousands)

 
Parent
 
Issuer
 
Non-Guarantor
 
Eliminations
 
Total
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
1,574

 
$
8,450

 
$

 
$
10,024

Accounts receivable, less allowance for doubtful accounts

 
39,743

 
34,133

 

 
73,876

Inventories, net

 
62,986

 
26,308

 

 
89,294

Income taxes receivable

 
388

 
1,139

 

 
1,527

Deferred income taxes

 
793

 
114

 

 
907

Other current assets

 
3,358

 
1,431

 

 
4,789

Total current assets

 
108,842

 
71,575

 

 
180,417

Property, plant and equipment, net

 
69,241

 
71,967

 

 
141,208

Amounts due from affiliates

 
218,957

 
30,651

 
(249,608
)
 

Goodwill

 
81,310

 
118,065

 

 
199,375

Customer relationships, net

 
33,620

 
20,969

 

 
54,589

Other intangible assets, net

 
7,475

 

 

 
7,475

Investment in consolidated subsidiaries
(81,316
)
 
18,549

 

 
62,767

 

Deferred income taxes

 

 
68

 

 
68

Other assets

 
6,225

 
5,065

 

 
11,290

Total assets
$
(81,316
)
 
$
544,219

 
$
318,360

 
$
(186,841
)
 
$
594,422

LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$

 
$
34,921

 
$
20,962

 
$

 
$
55,883

Accrued expenses and other current liabilities
10

 
17,582

 
13,075

 

 
30,667

Accrued interest payable

 
9,017

 

 

 
9,017

Deferred income taxes

 

 
847

 

 
847

Total current liabilities
10

 
61,520

 
34,884

 

 
96,414

Long-term debt

 
516,674

 

 

 
516,674

Amounts due to affiliates
4,666

 
15,844

 
229,098

 
(249,608
)
 

Deferred income taxes

 
8,621

 
11,798

 

 
20,419

Other liabilities

 
22,876

 
24,031

 

 
46,907

Total liabilities
4,676

 
625,535

 
299,811

 
(249,608
)
 
680,414

Shareholders’ (deficit) equity:
 
 
 
 
 
 
 
 
 
Common stock
189

 

 
21

 
(21
)
 
189

Additional paid-in capital
721,869

 
658,970

 
199,452

 
(858,422
)
 
721,869

Accumulated loss
(818,855
)
 
(751,091
)
 
(195,851
)
 
946,942

 
(818,855
)
Accumulated other comprehensive income
10,805

 
10,805

 
14,927

 
(25,732
)
 
10,805

Total shareholders’ (deficit) equity
(85,992
)
 
(81,316
)
 
18,549

 
62,767

 
(85,992
)
Total liabilities and shareholders’ (deficit) equity
$
(81,316
)
 
$
544,219

 
$
318,360

 
$
(186,841
)
 
$
594,422


20




EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 27, 2013
(in thousands)
(unaudited)

 
Parent
 
Issuer
 
Non-Guarantor
 
Eliminations
 
Total
Net sales
$

 
$
165,866

 
$
64,365

 
$
(2,396
)
 
$
227,835

Costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of goods sold (excluding depreciation and amortization)

 
137,171

 
54,017

 
(2,396
)
 
188,792

Selling and general (excluding depreciation and amortization)
325

 
13,686

 
6,376

 

 
20,387

Depreciation and amortization

 
5,579

 
2,935

 

 
8,514

Other operating charges

 
155

 
1,300

 

 
1,455

Income (loss) from operations
(325
)
 
9,275

 
(263
)
 

 
8,687

Equity in earnings of subsidiaries
16,584

 
(4,171
)
 

 
(12,413
)
 

Interest expense

 
(13,528
)
 
(277
)
 

 
(13,805
)
Intercompany income (loss), net

 
4,478

 
(4,478
)
 

 

Other income (loss), net

 
8,313

 
(18
)
 

 
8,295

Income (loss) before income taxes
16,259

 
4,367

 
(5,036
)
 
(12,413
)
 
3,177

Benefit from income taxes

 
(12,217
)
 
(865
)
 

 
(13,082
)
Net income (loss)
$
16,259

 
$
16,584

 
$
(4,171
)
 
$
(12,413
)
 
$
16,259




EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 27, 2013
(in thousands)
(unaudited)

 
Parent
 
Issuer
 
Non-Guarantor
 
Eliminations
 
Total
Net income (loss)
$
16,259

 
$
16,584

 
$
(4,171
)
 
$
(12,413
)
 
$
16,259

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
(89
)
 
(89
)
 
(89
)
 
178

 
(89
)
Defined benefit pension plan adjustments, net of tax
81

 
81

 
8

 
(89
)
 
81

Total comprehensive income (loss)
$
16,251

 
$
16,576

 
$
(4,252
)
 
$
(12,324
)
 
$
16,251







21




EURAMAX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 28, 2012
(in thousands)
(unaudited)

 
Parent
 
Issuer
 
Non-Guarantor
 
Eliminations
 
Total
Net sales
$

 
$
154,293

 
$
67,987

 
$
(3,107
)
 
$
219,173

Costs and expenses:


 


 


 


 
 
Cost of goods sold (excluding depreciation and amortization)

 
128,191

 
57,473

 
(3,107
)
 
182,557

Selling and general (excluding depreciation and amortization)
150

 
13,487

 
6,866

 

 
20,503

Depreciation and amortization

 
5,595

 
3,029

 

 
8,624

Other operating charges

 
635

 
205

 

 
840

Multiemployer pension withdrawal expense

 
39

 

 

 
39

Income (loss) from operations
(150
)
 
6,346

 
414

 

 
6,610

Equity in earnings of subsidiaries
(1,025
)
 
(2,055
)
 

 
3,080

 

Interest expense

 
(13,141
)
 
(253
)
 

 
(13,394
)
Intercompany income (loss), net

 
4,189

 
(4,189
)
 

 

Other income, net

 
3,492

 
2

 

 
3,494

Loss before income taxes
(1,175
)
 
(1,169
)
 
(4,026
)
 
3,080

 
(3,290
)
Benefit from income taxes

 
(144
)
 
(1,971
)
 

 
(2,115
)
Net loss
$
(1,175
)
 
$
(1,025
)
 
$
(2,055
)
 
$
3,080

 
$
(1,175
)