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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

For the Transition period from to

Commission file number 0-20328

AMTROL Inc.

(Exact Name of Registrant as Specified in Its Charter)


Rhode Island		05-0246955

(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)


1400 Division Road, West Warwick, RI		02893

(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (401) 884-6300
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act). Yes o No þ.

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes þ No o.

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 and (2) has been subject to such filing requirements for the past 90 days. Yes o No þ.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer”in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ.

State the aggregate market value of the Registrant’s voting and non-voting common equity held by non-affiliates as of the last business day of the Registrant’s most recently completed fiscal quarter: $0

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date: $0.01 Par Value: 100 shares outstanding as of March 30, 2006.

Documents Incorporated by Reference: None

PART I

ITEM 1. BUSINESS

Background

AMTROL Inc., together with its subsidiaries (“AMTROL” or the “Company”), is a leading international designer, manufacturer and marketer of expansion and pressure control products used in water systems applications and selected sectors of the Heating, Ventilation and Air Conditioning (“HVAC”) market. The Company’s principal products include well water accumulators, hot water expansion controls, water treatment products, indirect-fired water heaters and returnable and non-returnable pressure-rated cylinders used primarily to store, transport and dispense refrigerant, heating and cooking gases. Many of these products are based on a technology originated and developed by the Company, involving a pre-pressurized vessel with an internal diaphragm to handle fluids under pressure.

The Company was incorporated in Rhode Island in 1973, and is the successor of a Rhode Island corporation which was incorporated in 1946. On November 12, 1996, as a result of a merger agreement with AMTROL Holdings Inc. (“Holdings Inc.”) and its wholly owned subsidiary, AMTROL Acquisition Inc., the Company became a wholly-owned subsidiary of Holdings Inc., a Delaware corporation controlled by The Cypress Group LLC (“Cypress”). The Company’s principal executive offices are located at 1400 Division Road, West Warwick, Rhode Island 02893 (telephone number: (401) 884-6300).

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has a significant working capital deficiency that raises substantial doubt about its ability to continue as a going concern. The working capital deficit is a direct result of all of the Company’s North American debt ($179.3 million in principal as of December 31, 2005) maturing in December 2006. Management’s plans to address this uncertainty are described in Note 1 to the consolidated financial statements included in Item 15 and within the Liquidity and Capital Resources discussion of Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Company did not include any adjustments to the consolidated financial statements to reflect the possible future effects that may result from the uncertainty of its ability to continue as a going concern. Additionally, there can be no assurances that the Company will be able to recover the value of its recorded assets.

Operations

AMTROL is a market leader in the manufacture of its principal products. The Company’s prominence is attributable to the strength of its brand names, product breadth, quality and innovation, as well as its marketing, distribution and manufacturing expertise. In addition, AMTROL’s principal markets are highly replacement oriented. A substantial portion of the Company’s core business comes from replacement sales. Sales can be affected by extreme weather conditions, as well as significant changes in economic circumstances.

One of the Company’s strengths is its brand names, which are among the most widely recognized in its markets. For example, the Company’s EXTROL^{^®}brand is widely recognized by customers as the leading hot water expansion control tank. Other well-known brand names of the Company include Well-X-Trol^{^®}, Therm-X-Trol^{^®}, BoilerMate™, CHAMPION^{^®} and Water Worker^{^®}. The Company is a recognized technology leader in virtually all of its core product lines. In fact, many of the Company’s major product lines are considered the industry benchmark, a key strategic marketing advantage.

During its 60-year history, AMTROL has established a strong partnership with wholesalers, supporting a broad distribution network serving approximately 1,600 customers throughout North America. The Company’s strong brand recognition and reputation for quality ensure that nearly every significant plumbing, pump specialty and HVAC wholesaler carries at least one line of its products. This facilitates new product introduction, effectively “pulling” the Company’s new products through its distribution system. The Company also offers a broad range of products, which allows the Company’s customers to consolidate their purchases with the Company and manage inventory more efficiently. These factors have established AMTROL’s products as preferred brands and allow the Company to realize premium pricing on many of its products.

AMTROL ALFA Metalomecânica, S.A. (“AMTROL ALFA”), a wholly-owned subsidiary of the Company located in Guimaraes, Portugal, is Europe’s largest manufacturer of reusable steel, hybrid and composite gas cylinders, distributed worldwide and used principally for the storage of cooking and heating gases. AMTROL ALFA also produces non-returnable gas cylinders supplied to European and Asian customers that are used principally for the storage of refrigerant gases. AMTROL ALFA provides the Company with a low-cost international manufacturing base for all of the Company’s cylinder products and is an important source of supply for the Company’s international customers.

During 2005, AMTROL ALFA introduced the CoMet™, a metal-matrix composite cylinder used to store and transport Liquefied Propane Gas (“LPG”), to its European markets. CoMet™ cylinders consist of a metal liner reinforced with thermoplastic filament windings, all encapsulated in an impact-resistant plastic shell. CoMet™ cylinders are highly ergonomic and weigh approximately one-third less in comparison to conventional steel LPG cylinders, substantially improving handling and transportation by consumers.

AMTROL Poland Sp z.o.o. (“AMTROL Poland”), a wholly-owned subsidiary of the Company located in Swarzedz, Poland, refurbishes returnable gas cylinders, primarily for the Polish market. AMTROL Poland provides the Company with both a favorable manufacturing cost structure and close proximity to the gas cylinder markets in Central and Eastern Europe.

Net sales in geographic regions outside of the United States and Canada, primarily Europe, the Middle East, Africa and the Far East, accounted for 34.7%, 34.2% and 38.7% of the Company’s total net sales in fiscal years 2003, 2004 and 2005, respectively.

Products And Markets

Water Systems Solutions Products

AMTROL’s sales of its water systems products consist primarily of water accumulators for residential and commercial well water systems and products for residential water pressure boosting systems.

Well Water Systems. The Company produces and sells well water accumulators for both residential and commercial applications under the brand names Well-X-Trol^{^®}, CHAMPION^{^®} and VALUE-WELL™, as well as under several other brand and private label programs. Virtually all of the well water accumulators sold by the Company incorporate an internally mounted rubber diaphragm that seals an air charge and allows pressure to increase as water fills the plastic-lined vessel. This design serves to control pressure while maintaining the separation of air and water in the vessel, thereby eliminating water logging (absorption of air into water) as well as reducing wear on switches, pump motors and other system components caused by more frequent on/off cycling. A typical well water system consists of a submersible or jet pump located in the well that pumps water to an AMTROL well water accumulator.

The well water accumulator is connected to the plumbing system in order to provide water on demand within a specific range of pressure as controlled by a pressure switch. As the water level and pressure in the vessel decreases, the diaphragm relaxes and the pressure switch causes the pump to cycle until a certain pressure is achieved in the system. The Company also manufactures and markets products under the brand name AMTROL Pressuriser^{^®} that boosts water pressure where available pressure is not adequate.

Water Treatment Products

The Company offers a range of products to meet increasing global demand for improved water quality. The Company manufactures and markets water softeners under the Water Soft™ brand. Other products such as reverse osmosis accumulators and related systems distributed by the Company can improve the quality of both municipal-supplied water and well water. A recent supplement to this product line is the Odor Oxidizer™ hydrogen sulfide removal system. This patented system removes offensive sulfur odor from potable water systems via a proprietary method that uses no chemicals or media. Due to the success of the Odor Oxidizer™ application, the Company has enhanced its product breadth to include the water treatment removal of iron (ARMOR — TROL™) and arsenic (SORB — TROL™).

Hydronic Technologies Products

The Company’s sales to selected sectors of the HVAC market include products such as expansion accumulators and water heaters. The Company’s residential HVAC products include expansion vessels for heated water, potable water heaters and other accessories used in residential HVAC systems. The Company’s commercial HVAC products are substantially identical in function to those used in residential applications, but may be modified for design codes and the higher operating pressures of larger systems.

EXTROLs^{^®}. The EXTROL^{^®} expansion accumulator, the first of the Company’s products for handling fluid under pressure, redefined the standards for controlling the expansion of water in hydronic heating systems. Earlier systems consisted simply of a vessel containing air, resulting in excessive pressure and corrosion. The Company developed a technology which uses a flexible diaphragm inside a pre-pressurized vessel to maintain the separation of air and water and has applied this technology in other HVAC and water system products. This technology controls pressure in the heating system and minimizes problems related to hot water expansion by allowing the volume of water to increase as the temperature of the water increases within a closed system, thereby substantially reducing operating problems.

Therm-X-Trols^{^®}. Therm-X-Trols^{^®} accumulate expanded hot water from potable water heaters where flow back into the public water supply is prohibited due to the presence of backflow prevention devices. In response to the Clean Water Act of 1984, certain jurisdictions established local codes to require owners of commercial and residential buildings to install backflow prevention devices in order to prevent the contamination of the public water supply. Codes adopted by organizations that set standards for most of the United States also require a separate device to handle the expanded water and prevent it from flowing back into the public water supply. The principal alternatives are relief valves, which permit water to drain inside the building, and thermal expansion accumulators, such as the Therm-X-Trol^{^®}, which capture the water. Therm-X-Trol^{^®} satisfies these code requirements, as well as the codes of certain localities that specifically require a thermal expansion accumulator. Additionally, certain domestic water heater manufacturers specify that their warranties are void if thermal expansion accumulators are not used in conjunction with their products where backflow prevention devices are installed.

Indirect-Fired Water Heaters. In response to market demands for both an abundant supply of hot water and energy conservation, the Company offers a line of indirect-fired residential and commercial water heaters, which it manufactures and distributes under the brand name Boiler Mate™. Used in conjunction with a new or existing boiler installed to heat living and work areas, these water heaters offer an alternative to conventional gas and electric potable water heaters and tankless coils. Hot water is generated through the use of heat exchangers and circulators which circulate heated water from the boiler through a coil in the core of the water heater’s reservoir. The Boiler Mate Classic Series™, available in 26 and 41 gallon models, is sold primarily for residential applications. The Boiler Mate Premier Series™, a line of stainless steel models, offers sizes ranging from 60 to 120 gallons for light commercial applications and residential customers who require large amounts of hot water and rapid recovery time. In addition, the Company, as a result of continuing communication with key customers and installers, has introduced several new products. These include the Boiler Mate Top Down Series™, the dual-coil for commercial applications and the Boiler Mate™ in multiple colors. The Boiler Mate Top Down Series™ (41 gallon models) have the heat exchanger and all piping connections placed at the top for fast installation and easy maintenance.

Engineered Products

The Company principally manufactures and sells HVAC and Potable water system components that are designed to meet customer specifications for commercial offices, manufacturing and educational facilities, hospitals, retail stores and governmental buildings. The Company markets its engineered products under the familiar Extrol, Therm-X-Trol and Well-X-Trol brand names.

The market for commercial HVAC and Potable water equipment is divided into standard and custom-designed equipment. Standard products are by far the largest portion of the market place. The Company markets its commercial HVAC products primarily through distribution and to OEM accounts where the product is then incorporated into other systems. The Company strives to maintain strong relationships nationwide with design engineers, contractors and select end users.

The Company believes that it is among the largest suppliers of commercial HVAC and Potable water pressure vessels in the United States. The Company’s portfolio of products and its ability to produce equipment that meets the performance characteristics required by the particular product application provides it with advantages over some of its competitors.

Pressure-Rated Cylinders

The Company’s pressure-rated cylinders for refrigerant gases are used mainly in the storage, transportation and dispensing of gases used principally in air conditioning and refrigeration systems. In addition, the AMTROL ALFA facility produces returnable pressure-rated cylinders for storing gas used in residential and commercial heating and cooking applications. AMTROL produces and distributes reusable LPG cylinders and reusable and non-returnable refrigerant cylinders. AMTROL ALFA is the largest producer of reusable steel gas cylinders in Europe. Reusable LPG cylinders are typically purchased by major gas companies or their distributors who fill the cylinders for customers who use the gas for heating and cooking in residential and commercial applications. In 1998, the Company transferred to AMTROL ALFA a non-returnable refrigerant cylinder production line previously located in Singapore and began supplying its European and Asian non-returnable refrigerant cylinder customers from AMTROL ALFA. The transfer of this production line enhanced the Company’s worldwide presence in non-returnable cylinder markets and its ability to provide optimum production and delivery solutions to its major multi-national customers. The Company is also one of the world’s two largest manufacturers of non-returnable pressure-rated cylinders used in the storage, transport and dispensing of refrigerant gases for air conditioning and refrigeration systems.

During 2005, AMTROL ALFA introduced the CoMet™, a metal-matrix composite cylinder used to store and transport LPG, to its European markets. CoMet™ cylinders consist of a metal liner reinforced with thermoplastic filament windings, all encapsulated in an impact-resistant plastic shell. CoMet™ cylinders are highly ergonomic and weigh approximately one-third less in comparison to conventional steel LPG cylinders, substantially improving handling and transportation by consumers.

In 1999, the Company established AMTROL Poland that refurbishes returnable gas cylinders, primarily for the Polish market. AMTROL Poland provides the Company with both a favorable manufacturing cost structure and close proximity to the gas cylinder markets in Central and Eastern Europe.

Distribution and Marketing

The Company’s principal channel of distribution is plumbing, heating and pump specialty wholesalers. The Company maintains its presence in the United States and Canadian wholesale markets through a network of approximately 60 independent manufacturer’s representatives arranging sales on a commission basis, as well as 11 salaried direct sales professionals. To service its customers with greater efficiency, the Company has streamlined its representative network and, through consolidation of multiple lines of business, has brought a broader range of products to its wholesalers. The Company also provides certain of its products to the retail channel through its salaried direct sales force.

At its Education Center, which is an integral part of the Company’s marketing organization, and at Company sponsored seminars throughout the United States and selected international locations, the Company provides education and training to wholesalers, contractors and engineers, independent sales representatives and their employees to assist them in understanding the technical aspects of their respective customers’ requirements and the Company’s product lines. As the Company educates contractors and engineers about the benefits of the Company’s products, its products are more effectively “pulled” through its distribution system.

Non-returnable refrigerant pressure-rated cylinders are sold to major chemical companies, which produce and package refrigerant gases, and to independent contractors that purchase bulk refrigerants and fill the cylinders. The Company’s major customers for reusable refrigerant gas cylinders are wholesale distributors who sell the products to service providers and refrigerant recovery equipment manufacturers. AMTROL ALFA’s major customers for reusable cylinders are major European gas companies or their distributors.

With the exception of one cylinder customer to whom global sales were approximately 6.2% of total consolidated net sales, no individual customer represented more than five percent of the Company’s net sales in 2005.

Manufacturing, Raw Materials and Suppliers

The Company manufactures its products primarily at its own facilities, many of which depend on the Company’s expertise in low-pressure vessel construction. The Company takes advantage of the material economies and precision inherent in deep-draw stamping technology to manufacture products of superior performance and life.

In 2005, the Company continued to experience cost increases for several key raw materials, energy and freight, similar to those experienced in 2004. However, the magnitude of cost increases for certain raw materials, particularly steel declined during the year. In 2006, the Company anticipates slight downward cost pressure for steel and natural gas but anticipates additional cost increases for other commodities such as copper, bronze and other products in these same cost categories. The Company anticipates that mitigating the impact of rising raw material costs and availability issues will continue to require active management in 2006.

Capital expenditures in 2005 continued to yield anticipated material utilization and labor efficiency improvements in nearly all product lines. The Company expects that capital investments will continue to yield material utilization and labor efficiency improvements to mitigate rising wage and benefits costs in 2006. Emphasis has been placed on low risk, basic automation, as well as process and product variation reduction. In addition, productivity improvement techniques such as Kaizen, Visual Control and One-Piece Flow initiatives continue to allow the Company to identify and eliminate waste in its cost structure.

During 2005, quality levels continued to meet management’s expectations. Field failures and sales returns declined in comparison to 2004. The Company believes this improvement is attributable to the revision of rework policies and stringent enforcement of supplier quality protocols initiated in 2004 and enhanced in 2005.

Emphasis on safety continues to be a primary focus at all of the Company’s locations. During 2005, the Company’s OSHA frequency and severity rates at each of its four manufacturing locations were once again below industry standards set by the Bureau of Labor Statistics.

The condition of the Company’s facilities and capital equipment is considered good. Capital expenditures in 2005 yielded further productivity improvements. As a result, the Company does not anticipate any capacity constraints.

Seasonality and Backlog

Although the Company’s sales fluctuate with general economic activity, the effect of significant economic volatility is mitigated by the fact that many of the Company’s markets are highly replacement oriented. While sales of certain of its products are seasonal in nature, the Company’s overall business is not highly seasonal. Due to the generally short lead time of its orders, the Company historically has not carried any material backlog.

Patents, Trademarks And Licenses

While the Company owns a number of patents, the Company believes that its position in its markets depends primarily on factors such as manufacturing expertise, technological leadership, superior service and quality and strong brand name recognition, rather than on patent protection. The Company believes that foreign and domestic competitors have been unable to match the quality of the Company’s branded products.

The Company also holds a number of registered and unregistered trademarks for its products. The Company believes the following registered trademarks, which appear on its products and

are widely recognized in its markets, are among those of strategic importance to its business: Well-X-Trol^{^®}, Therm-X-Trol^{^®}, EXTROL^{^®}, Boiler Mate™, CHAMPION^{^®}and Water Worker^{^®}.

Competition

The Company experiences competition from a number of foreign and U.S. competitors in each of its markets. AMTROL and its competitors in the water systems products and HVAC markets compete principally on the basis of technology, quality, service and price.

Employees

As of December 31, 2005, the Company had 472 employees in the United States, none of who were represented by collective bargaining units. In addition, the Company had 788 employees in its international operations. Some of the Company’s international employees are represented by a works council. The Company considers relations with its employees to be good.

Environmental Matters

Some of the Company’s operations generate or have in the past generated waste materials that are regulated under environmental laws. Based upon the Company’s experience in matters that have been resolved and the amount of hazardous waste shipped to off-site disposal facilities, the Company believes that any share of costs attributable to it will not be material should any litigation arise or any claims be made in the future. However, there can be no assurance that any liability arising from, for example, contamination at facilities the Company owns or operates or formerly owned or operated (or an entity or business the Company has acquired or disposed of), or locations at which waste or contaminants generated by the Company have been deposited (or deposited by an entity or business the Company has acquired or disposed of) will not arise or be asserted against the Company or entities for which the Company may be responsible in a manner that could materially and adversely affect the Company.

The Company monitors and reviews its procedures and policies for compliance with environmental laws. Based upon the Company’s experience to date, the Company operates in substantial compliance with environmental laws, and the cost of compliance with existing regulations is not expected to have a material adverse effect on the Company’s results of operations, financial condition or cash flows. However, future events, including changes in existing laws and regulations or enforcement policies, may give rise to additional compliance costs which could have a material adverse effect on the Company’s results of operations, financial condition or competitive position.

ITEM 1A. RISK FACTORS

A significant portion of the Company’s outstanding debt obligations will mature in December 2006.

The Company has a significant working capital deficiency that raises substantial doubt about its ability to continue as a going concern. The working capital deficit is a direct result of all of the Company’s North American debt ($179.3 million in principal as of December 31, 2005) maturing in December 2006. Management’s plans to address this uncertainty are described in Note 1 to the consolidated financial statements included in Item 15 and within the Liquidity and Capital Resources discussion of Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. However, there can be no assurance that management’s plans will be successful, and if unsuccessful, will cause the Company to default on its obligations.

The Company’s inability to pass along increases in pricing of raw materials to its customers could have a negative impact on the Company’s business.

The Company’s operating results are dependent upon the availability and pricing of raw materials including, among others, steel, rubber, copper, packaging material, and other components that it purchases from third parties. Substantially all of the markets in which the Company operates are highly competitive and compete mainly on the basis of price. These competitive forces may not allow the Company to implement price increases for higher raw material costs within its core markets and as a result would adversely affect the operating results of the Company.

The Company’s business strategies could be significantly disrupted if the Company lost members of its management team.

The Company’s success depends to a significant degree upon the continued contributions of its executive officers and key employees, both individually and as a group. The Company’s future performance will be dependent on its ability to retain and motivate them. The loss of the services of any of these executive officers or key personnel could prevent the Company from implementing its business strategies.

The Company’s operating results could be adversely affected by changes in foreign currency exchange rates.

The Company is exposed to risks associated with foreign currency fluctuations and changes in exchange rates. The Company’s exposure to foreign currency fluctuations relates primarily to operations in foreign countries conducted through subsidiaries, primarily in Portugal. Exchange rate fluctuations impact the U.S. dollar value of reported earnings as well as the carrying value of the net assets related to these operations.

The Company’s operating results could be adversely affected by weather conditions adverse to sales growth.

The Company’s sales attributable to its water systems product line, mainly the well water accumulators, are susceptible to adverse weather conditions that hamper the ability of well drillers to drill residential and commercial underground water wells. Prolonged rainy spring seasons hamper the ability of well drillers to drill underground wells due to the size and weight of their well drilling rigs. In addition, extended periods of cold weather could hamper well drilling due to state regulations that prohibit the travel of the large well drilling rigs on state highways.

Continued growth of the Company’s operating results are linked to customer acceptance of its planned new products.

Within the last few years, the Company has introduced a series of new products which it feels will position the Company for future sales growth. The Company feels that customer acceptance of products such as the CoMet™, Odor Oxidizer hydrogen sulfide removal system, Top Down Boiler Mate and digital pressure controller are important to the Company. Should these sales not materialize, the Company may not achieve its expected future sales growth.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

The following table sets forth information regarding the Company’s principal properties each of which is owned by the Company unless otherwise indicated:


Location	Square Footage	Principal Use
	(approximate)
West Warwick, RI	270,000	Corporate Headquarters, Manufacturing, and Education Center
Guimaraes, Portugal (b)	295,600	Manufacturing
North Kingstown, RI (a)	143,800	Distribution Center
Paducah, KY	46,300	Manufacturing
Mansfield, OH (a)	45,000	Manufacturing and Distribution Center
Baltimore, MD	37,000	Manufacturing
Swarzedz, Poland (a)	29,000	Manufacturing
Kitchener, Ontario(a)	18,400	Sales Office and Distribution

Total	885,100

(a) Leased facilities

(b) 43,700 sq ft leased warehouse included

The Company believes that its properties and equipment generally are well maintained, in good operating condition and adequate for its present needs. The Company regularly evaluates its manufacturing requirements and believes that it has sufficient capacity to meet its current and anticipated future needs. The inability to renew any short-term real property lease would not have a material adverse effect on the Company’s results of operations, financial condition or competitive position.

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company is named as a defendant in legal actions. These legal actions include a wide range of matters, including, among others, environmental matters, contract and employment claims, workers compensation claims, product liability, warranty and other claims. However, management believes, after review of insurance coverage and consultation with legal counsel, that the ultimate resolution of the current pending legal actions to which it is a party will not likely have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data presented below for and as of each of the years in the five-calendar-year period ended December 31, 2005 have been derived from the Consolidated Financial Statements of the Company, including the related notes thereto. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the Consolidated Financial Statements of the Company, including the related notes thereto, appearing elsewhere in this Form 10-K.


	Year Ended December 31,
	2001			2002			2003			2004			2005
							(in thousands)
Statement of Operations Data:
Net sales	$	175,096		$	179,416		$	185,046		$	198,394		$	218,548
Cost of goods sold		133,374			136,556			144,761			152,136			172,271

Gross profit		41,722			42,860			40,285			46,258			46,277
Selling, general and administrative expenses		25,867			27,290			26,702			28,305			27,230
Amortization of goodwill		4,391			—			—			—			—

Income from operations		11,464			15,570			13,583			17,953			19,047
Interest expense, net		(18,964	)		(19,867	)		(19,499	)		(21,512	)		(22,007	)
Gain (loss) on extinguishment of debt, net		(584	)		—			6,760			—			—
Other income (expense), net		372			(385	)		(100	)		(55	)		235

Gain (loss) from continuing operations before provision (benefit) for income taxes		(7,712	)		(4,682	)		744			(3,614	)		(2,725	)
Provision (benefit) for income taxes		(1,166	)		774			1,166			9,737			(535	)

Loss from continuing operations		(6,546	)		(5,456	)		(422	)		(13,351	)		(2,190	)
Loss from discontinued operations		(2,869	)		(5,381	)		(1,310	)		(8,863	)		—
Cumulative effect of a change in accounting principle		—			(34,492	)		—			—			—

Net loss	$	(9,415	)	$	(45,329	)	$	(1,732	)	$	(22,214	)	$	(2,190	)


Other Data:
Depreciation and amortization	$	12,788		$	8,803		$	9,744		$	8,808		$	7,437
Capital expenditures		3,800			3,165			3,249			6,626			6,961

Balance Sheet Data (at period end):
Working capital (deficit)	$	8,602		$	7,877		$	27,884		$	22,820		$	(149,411	)
Total assets		264,455			226,873			237,023			228,240			222,451
Long-term debt, less current maturities		157,511			158,391			167,022			171,300			—
Shareholders’ equity (deficit)		58,219			15,849			17,211			(220	)		(4,942	)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section should be read in conjunction with the Consolidated Financial Statements of the Company and related notes thereto included elsewhere herein.

Business Overview

AMTROL Inc., together with its subsidiaries (“AMTROL” or the “Company”), is a leading international designer, manufacturer and marketer of expansion and pressure control products used in water systems applications and selected sectors of the Heating, Ventilation and Air Conditioning (“HVAC”) market. The Company is the market leader in the manufacture of its principal products. The Company’s prominence is attributable to the strength of its brand names, product breadth, quality and innovation, as well as its marketing, distribution and manufacturing expertise. The Company’s two business segments include North America and Europe.

In the North America segment, the Company’s principal markets are highly replacement oriented, with a substantial portion of the Company’s core business coming from replacement sales. Sales can be affected by extreme weather conditions, as well as significant changes in economic circumstances. During 2005, the Company experienced an increase in net sales due principally to implemented price increases during 2004 and 2005 to offset rising steel costs and new product introductions partially offset by the impact of the weakening of the Euro against the U.S. Dollar.

During 2005, the Company experienced increasing costs for several key raw materials (steel, copper, brass and rubber), energy and freight. The Company responded to these higher raw material costs by increasing prices again in 2005, after a series of price increases in 2004. The Company also acted aggressively to mitigate these cost increases by developing new sources and through contracted purchases. The Company anticipates that mitigating the impact of increasing costs will require continued active management in 2006.

Emphasis on productivity improvements continued in 2005 via capital expenditures and continuous improvement techniques such as Kaizen, Visual Control and One-Piece Flow Initiatives. These techniques allow the Company to identify and eliminate waste in its cost structure. In addition, management continues to explore and implement strategies in order to reduce its selling, general and administrative expenses.

Forward Looking Statements

The Company and its representatives may from time to time make written or oral statements, including statements contained in AMTROL’s filings with the Securities and Exchange Commission (“SEC”) and in its reporting to customers, which constitute or contain “forward-looking” statements as that term is defined in the Private Securities Litigation Reform Act of 1995 or the SEC in its rules, regulations and releases.

All statements other than statements of historical fact included in this Form 10-K and elsewhere relating to the Company’s financial position, strategic initiatives and statements addressing industry developments are forward-looking statements. When incorporated in this discussion, the words “expect(s)”, “feel(s)”, “believe(s)”, “anticipate(s)” and similar expressions are intended to identify some of these forward-looking statements. Forward looking statements include those containing these phrases but also any other statements that are not references to historical fact. Although the Company believes that the expectations reflected in such forward-looking statements are expressed in good faith and have a reasonable basis, there can be no assurance that such expectations or beliefs will result or be achieved or accomplished.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The following are some of the important factors that can vary or change or involve substantial risk and cause actual results to differ materially from such expectations: the Company’s ability to restructure/recapitalize its debt; the Company’s ability to successfully implement its business strategy; the availability and cost of raw materials; changes in domestic or foreign government regulation or enforcement policies, particularly related to refrigerant gases or cylinders and building and energy efficiency requirements or restrictions or limitations or general reduction in the use of domestic wells; significant weather conditions adverse to the Company’s business; development of competing technologies; acceptance of the Company’s existing and planned new products in global markets; competition in the Company’s markets, particularly price competition; the rate of growth of developing economies and demand for the Company’s products; the ultimate cost of future warranty and other claims relating to the Company’s products and business; whether the Company succeeds in acquiring new businesses; availability of capital; foreign exchange rates; increases in interest rates; the business abilities and judgment of personnel; and general economic, financial and business conditions, both domestically and internationally.

Results of Operations

Fiscal 2005 Compared to Fiscal 2004

The following table sets forth consolidated operating results for the fiscal years indicated:

In millions of dollars


	2004						2005
				% of Net						% of Net			%
	Actual			Sales			Actual			Sales			Change
Net sales	$	198.4			100.0	%	$	218.5			100.0	%		10.1	%
Cost of goods sold		152.1			76.7	%		172.2			78.9	%		13.2	%

Gross profit		46.3			23.3	%		46.3			21.1	%		0.0	%
Selling, general and administrative expenses		28.3			14.3	%		27.2			12.4	%		-3.8	%

Income from operations		18.0			9.0	%		19.1			8.7	%		5.9	%
Other income (expense), net
Interest expense, net		(21.5	)		-10.8	%		(22.0	)		-10.1	%		2.2	%
Other, net		(0.1	)		0.0	%		0.2			0.2	%		340.0	%

Loss before income taxes		(3.6	)		-1.8	%		(2.7	)		-1.2	%		-25.8	%

Income tax expense (benefit)		9.7			4.9	%		(0.5	)		-0.2	%		-105.2	%

Loss from continuing operations		(13.3	)		-6.7	%		(2.2	)		-1.0	%		83.7	%
Loss from discontinued operations, net		(8.9	)		-4.5	%		—			0.0	%		100.0	%

Net loss	$	(22.2	)		-11.2	%	$	(2.2	)		-1.0	%		90.2	%

Fiscal Year Ended December 31, 2005 Compared to Fiscal Year Ended December 31, 2004.

Net Sales. Net sales in 2005 increased $20.1 million or 10.1% to $218.5 million from $198.4 million in 2004. In North America, net sales of $132.3 million increased $4.5 million or 3.5% in comparison to 2004 due principally to price increases implemented during 2004 and 2005 to offset rising steel costs, combined with volume increases. Volume increases were realized from cylinder products, which yield lower average selling prices. In Europe, net sales of $86.2 million increased $15.6 million or 22.1% in comparison to 2004. This increase is attributable primarily to increased metal cylinder volume, price increases and the introduction of the CoMet™ metal matrix composite cylinder in the fourth quarter of 2005. If the value of the Euro had remained at the average level of 2004, reported net sales in Europe for 2005 would have increased $15.4 million or 21.8% in comparison to 2004.

Gross Profit. Gross profit remained steady at $46.3 million in 2005. As a percentage of net sales, gross profit in 2005 decreased to 21.1% from 23.3% in 2004. This decrease was due principally to changes in product mix and the dilutive effect of the pass through of rising steel costs.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $1.1 million or 3.8% in 2005 to $27.2 million from $28.3 million in 2004. The decrease was primarily due to a decrease in payroll expenses as a result of personnel reductions and lower performance-based compensation offset in part by higher commission expenses.

Interest Expense. Interest expense increased $0.5 million in 2005 as compared to 2004. The increase is primarily attributable to rising interest rates.

Other Income (Expense), Net. Other income (expense), net for 2005 was $0.2 million as compared to 2004 of $(0.1) million. The increase was principally due to foreign exchange losses recorded in 2004 that did not occur in 2005.

Income Taxes. Income tax expense decreased $10.2 million in 2005 as compared to 2004. During 2004, the Company determined that an increase in the valuation allowance associated with its deferred tax assets of $8.9 million was required as a result of the uncertainty surrounding the future utilization of the net operating loss carry forwards. The benefit from income taxes for the year ended December 31, 2005 included a $2.6 million reversal of income tax accruals recorded in prior years. This accrual related to tax matters that, based upon additional

information obtained during the fourth quarter, was no longer necessary. The reversal was recorded in the fourth quarter of 2005. Offsetting this reversal was a $0.4 million tax reserve provided in the fourth quarter related to foreign withholding taxes.

Net Loss. The net loss in 2005 of $2.2 million compares to a net loss in 2004 of $22.2 million. The improvement was principally due to a loss of $8.9 million incurred on the sale of a discontinued subsidiary and the establishment of a tax valuation allowance of $8.9 million during 2004.

Segment Operations

North America

The following table presents a summary of operating results for the fiscal years indicated:

In millions


	2004					2005
			% of Net					% of Net			%
	Actual		Sales			Actual		Sales			Change
Net sales	$	127.8		100.0	%	$	132.3		100.0	%		3.5	%
Cost of goods sold		90.5		70.8	%		97.8		73.9	%		8.1	%

Gross profit		37.3		29.2	%		34.5		26.1	%		-7.5	%
Selling, general and administrative expenses		22.1		17.3	%		20.1		15.2	%		-9.0	%

Income from operations	$	15.2		11.9	%	$	14.4		10.9	%		-5.3	%


Units shipped		5.15					5.25

In North America, net sales increased $4.5 million or 3.5% in comparison to 2004 due principally to price increases implemented during 2004 and 2005 to mitigate rising steel costs, combined with volume increases. The Company’s average selling price increased 1.5% in 2005 to $25.20 versus $24.82 as a function of price increases partially offset by a mix shift to lower price products. The shift in mix was primarily attributable to increases in volume of its cylinder products, which yield lower average selling prices, along with a decrease in volume of water technology products that have higher average selling prices. Gross profit decreased $2.8 million in 2005 to $34.5 million from $37.3 million in 2004. As a percentage of net sales, gross profit in 2005 decreased to 26.1% from 29.2% in 2004. This decrease was due principally to changes in product mix and the dilutive effect of the pass through of rising steel costs. Selling, general and administrative expenses decreased $2.0 million or 9.0% to $20.1 million from $22.1 million in 2004. The decrease was primarily due to a decrease in payroll expenses as a result of personnel reductions and lower performance-based compensation of $1.3 million and lower amortization related to software of $0.9 million, partially offset by higher commission expenses of $0.1 million.

Europe

The following table presents a summary of operating results for the fiscal years indicated:

In millions


	2004					2005
			% of Net					% of Net			%
	Actual		Sales			Actual		Sales			Change
Net sales	$	70.6		100.0	%	$	86.2		100.0	%		22.1	%
Cost of goods sold		61.6		87.3	%		74.4		86.3	%		20.8	%

Gross profit		9.0		12.7	%		11.8		13.7	%		31.1	%
Selling, general and administrative expenses		6.2		8.7	%		7.1		8.2	%		14.5	%

Income from operations	$	2.8		4.0	%	$	4.7		5.5	%		67.9	%


Units shipped		4.00					3.52

In Europe, net sales of $86.2 million increased $15.6 million or 22.1% in comparison to 2004. This increase is attributable primarily to increased metal cylinder volume, price increases and the introduction of the CoMet™ metal matrix composite cylinder in the fourth quarter of 2005. The Company’s average selling price increased 38.8% in 2005 to $24.49 versus $17.65 due to price increases and the change in product mix. Gross profit increased approximately $2.8 million in 2005 to $11.8 million from $9.0 million in 2004. As a percentage of net sales, gross profit in 2005 increased to 13.7% from 12.7% in 2004. This increase was due principally to price increases and the change in product mix. Selling, general and administrative expenses increased $0.9 million or 14.5% to $7.1 million from $6.2 million in 2004. The increase was primarily due to an increase in performance-based compensation of $0.7 million, commissions of $0.1 million and professional services of $0.1 million.

Fiscal 2004 Compared to Fiscal 2003

The following table sets forth consolidated operating results for the fiscal years indicated:

In milions of dollars


	2003						2004
				% of Net						% of Net			%
	Actual			Sales			Actual			Sales			Change
Net sales	$	185.0			100.0	%	$	198.4			100.0	%		7.2	%
Cost of goods sold		144.7			78.2	%		152.1			76.7	%		5.1	%

Gross profit		40.3			21.8	%		46.3			23.3	%		14.9	%
Selling, general and administrative expenses		26.7			14.4	%		28.3			14.3	%		6.0	%

Income from operations		13.6			7.4	%		18.0			9.0	%		32.4	%
Other income (expense), net
Interest expense, net		(19.5	)		-10.5	%		(21.5	)		-10.8	%		10.3	%
Gain on extinguishment of debt, net		6.7			3.6	%		—			0.0	%		-100.0	%
Other, net		(0.1	)		-0.1	%		(0.1	)		0.0	%		0.0	%

Income (loss) before income taxes		0.7			0.4	%		(3.6	)		-1.8	%		-614.3	%
Income tax expense		1.1			0.6	%		9.7			4.9	%		781.8	%

Loss from continuing operations		(0.4	)		-0.2	%		(13.3	)		-6.7	%		-3225.0	%
Loss from discontinued operations, net		(1.3	)		-0.7	%		(8.9	)		-4.5	%		-584.6	%

Net loss	$	(1.7	)		-0.9	%	$	(22.2	)		-11.2	%		-1205.9	%

Fiscal Year Ended December 31, 2004 Compared to Fiscal Year Ended December 31, 2003.

Net Sales. Net sales in 2004 increased $13.4 million or 7.2% to $198.4 million from $185.0 million in 2003. In North America, net sales increased $10.7 million or 9.1% as compared to 2003 due principally to implemented price increases during the year to offset rising steel costs, combined with volume increases. The volume increases were realized from its core product offering and a variety of new product introductions. Net sales in Europe increased $2.7 million or 4.0% as compared to 2003 due principally to the strengthening of the Euro against the U.S. dollar, mitigated by a reduction in volume. If the value of the Euro had remained at the average level of 2003, reported net sales in Europe for 2004 would have decreased $4.0 million or 5.9% from 2003.

Gross Profit. Gross profit increased $6.0 million in 2004 to $46.3 million from $40.3 million in 2003. As a percentage of net sales, gross profit in 2004 increased to 23.3% from 21.8% in 2003. This increase was due principally to the combination of volume, foreign exchange rates and productivity improvements discussed above.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $1.6 million or 6.0% in 2004 to $28.3 million from $26.7 million in 2003. The increase was primarily due to accrued performance-based compensation, higher commission expenses and the strengthening of the Euro versus the U.S. dollar, offset by a decline in expense attributable to personnel reductions and marketing expenses.

Interest Expense. Interest expense increased $2.1 million in 2004 as compared to 2003. The increase is primarily attributable to the additional Term B loan and increases in interest rates.

Gain on Extinguishment of Debt, Net. The decrease of $6.7 million was principally the result of a gain of $7.2 million recorded in 2003 on the purchase of $17.2 million of the Company’s outstanding Senior Subordinated Notes offset by a loss of $0.5 million on the extinguishment of debt for unamortized financing costs associated with the execution of the First Amendment and Second Amendment to the Loan and Security Agreement and Term C Loan Agreement.

Other Income (Expense), Net. Other income (expense), net for 2004 of $(0.1) million was unchanged as compared to 2003 of $(0.1) million.

Income Taxes. Income tax expense increased $8.6 million in 2004 as compared to 2003. The Company determined that an increase in the valuation allowance associated with its deferred tax assets of $8.9 million was required during 2004 as a result of the uncertainty surrounding the future utilization of the net operating loss carryforwards.

Net Loss. The net loss in 2004 of $22.2 million compares to a net loss in 2003 of $1.7 million. The reduction was principally due to increased North America earnings offset by the loss of $8.9 million incurred on the sale of the discontinued subsidiary in February 2004, the tax valuation allowance of $8.9 million and the gain of $6.8 million recorded in 2003 on the extinguishment of a portion of the Company’s senior subordinated notes.

Segment Operations

North America

The following table presents a summary of operating results for the fiscal years indicated:


In millions	2003					2004
			% of Net					% of Net			%
	Actual		Sales			Actual		Sales			Change
Net sales	$	117.1		100.0	%	$	127.8		100.0	%		9.1	%
Cost of goods sold		84.4		72.1	%		90.5		70.8	%		7.2	%

Gross profit		32.7		27.9	%		37.3		29.2	%		14.1	%
Selling, general and administrative expenses		20.3		17.3	%		22.1		17.3	%		8.9	%

Income from operations	$	12.4		10.6	%	$	15.2		11.9	%		22.6	%


Units shipped		5.11					5.15

In North America, net sales increased $10.7 million or 9.1% as compared to 2003 due principally to implemented price increases during the year to mitigate rising steel costs combined with volume increases. The Company’s average selling price increased 8.3% in 2004 to $24.82 versus $22.92 as a function of both the implemented price increases and unit volume increases that reflect a mix shift to higher value products. The volume increases were realized from its core product offering and a variety of new product introductions. Gross profit increased $4.6 million in 2004 to $37.3 million from $32.7 million in 2003. As a percentage of net sales, gross profit in 2004 increased to 29.2% from 27.9% in 2003. This increase was due principally to the combination of additional volume, better product mix and productivity improvements totaling $0.7 million. Selling, general and administrative expenses increased $1.8 million or 8.9% to $22.1 million from $20.3 million in 2003. The increase was primarily due to accrued performance-based compensation of $1.7 million. Increased commission expenses of $0.5 million resulting from increased sales were offset by a decline in marketing expenses of $0.5 million.

Europe

The following table presents a summary of operating results for the fiscal years indicated:


In millions	2003					2004
			% of Net					% of Net			%
	Actual		Sales			Actual		Sales			Change
Net sales	$	67.9		100.0	%	$	70.6		100.0	%		4.0	%
Cost of goods sold		60.3		88.8	%		61.6		87.3	%		2.2	%

Gross profit		7.6		11.2	%		9.0		12.7	%		18.4	%
Selling, general and administrative expenses		6.4		9.4	%		6.2		8.7	%		-3.1	%

Income from operations	$	1.2		1.8	%	$	2.8		4.0	%		133.3	%


Units shipped		4.38					4.00

In Europe, net sales increased $2.7 million or 4.0% as compared to 2003 due principally to the strengthening of the Euro against the U.S. dollar offset by a reduction in volume. The Company’s average selling price increased 13.9% in 2004 to $17.65 versus $15.50 due to the strengthening of the Euro against the U.S. dollar amounting to $1.64 or 76.3% of the change in the average selling price and a favorable product mix. Gross profit increased approximately $1.4 million in 2004 to $9.0 million from $7.6 million in 2003. As a percentage of net sales, gross profit in 2004 increased to 12.7% from 11.2% in 2003. This increase was due principally to the strengthening of the Euro against the U.S. dollar of $0.8 million and productivity

improvements, mitigated by a decrease in units shipped. Selling, general and administrative expenses decreased $0.2 million or 3.1% to $6.2 million from $6.4 million in 2003. The decrease was primarily due to a decline in depreciation expense of $0.3 million, personnel reductions of $0.4 million and commissions of $0.1 million, offset by the strengthening of the Euro against the U.S. dollar of $0.6 million.

Liquidity and Capital Resources

The Company is a party to two credit facilities: a $52.5 million senior first-priority secured credit facility arranged by Foothill Capital Corporation (as amended, the “Foothill Facility”) and a $35.0 million senior second-priority secured credit facility (the “Term C Loan Facility”), formerly with affiliates of the Cypress Group, L.L.C. (“Cypress”). During January 2006, the Term C Loan Facility (not including the warrants issued to Cypress) was purchased by certain funds managed by GSO Capital Partners, L.P., an independent third party.

The Foothill Facility provides the Company (i) a term loan facility consisting of a five-year Term A Loan maturing in December 2006, with an outstanding principal amount of $3.8 million at December 31, 2005, bearing cash interest at Wells Fargo Reference Rate (approximating the prime rate) plus 0.75% (8.00% at December 31, 2005), and a five-year Term B Loan maturing December 2006, with an outstanding principal amount of $19.3 million as of December 31, 2005, bearing cash interest at the Wells Fargo Reference Rate plus 3.5%, and paid-in-kind (“PIK”) interest at 3.5% (14.25% at December 31, 2005) (collectively the “Term Loans”) and (ii) a five-year Revolving Credit Facility maturing December 2006, bearing interest at Wells Fargo Reference Rate plus 0.5% (7.75% at December 31, 2005), providing the lesser of (a) $30.0 million less the aggregate outstanding principal amount of the Term A Loan less letter of credit usage and (b) borrowing base less letter of credit usage. At December 31, 2005, total availability and aggregate borrowings under the Revolving Credit Facility were $10.1 million and $5.8 million, respectively.

On March 29, 2006, the Company amended its Foothill Facility by entering into the Third Amendment to Loan and Security Agreement (the “Foothill Third Amendment”). The material provisions of the Foothill Third Amendment were: (a) to allow letter of credit usage to increase by $2.0 million to a maximum of $5.0 million, with no more than $2.15 million used to support payments under retention agreements with Company executives, which agreements are described in Item 11 of this Form 10-K; (b) to establish North American EBITDA and consolidated EBITDA requirements for quarterly periods in fiscal 2006 that are higher than the minimum levels contained in the First Amendment; and (c) to clarify that the explanatory paragraph relating to the Company’s ability to continue as a going concern in its independent auditor’s opinion with respect to the year ended December 31, 2005, does not violate the facility’s covenants. The Foothill Third Amendment has been filed as an exhibit to this Form 10-K.

On December 22, 2004, the Company amended its Foothill Facility by entering into the Second Amendment to Loan and Security Agreement (the “Foothill Second Amendment”). This Foothill Second Amendment extended the maturity date of the Term B Loan to December 21, 2006. The Foothill Second Amendment did not affect the maturity dates of the Revolving Credit Facility, Term A Loan or the Term C Loan Facility and did not revise any covenants.

were issued to Cypress under the Term C Loan Facility. The Company expects that the effective interest rate will be greater than 12% given the additional interest expense associated with the warrants. During January 2006, the Term C Loan Facility (other than the warrants described above) was purchased by certain funds managed by GSO Capital Partners, L.P., an independent third party.

The Foothill Facility and Term C Loan Facility contain certain affirmative and negative covenants and restrictions. As of December 31, 2005, the Company was in compliance with all of these covenants and restrictions.

As of December 31, 2005, the Company’s operating capital (defined as accounts receivable and inventory, less accounts payable) increased $3.6 million from $37.6 million at December 31, 2004 to $41.2 million. Accounts receivable, inventories and accounts payable increased $7.4 million, decreased $5.7 million and decreased $1.9 million, respectively.

The increase in accounts receivable was due principally to higher sales levels offset by the impact of the weakening Euro on the translation of the Company’s European operations. The Company did not experience any significant changes in credit terms, credit utilization or delinquency in accounts receivable in 2005 as compared to 2004.

The decrease in inventories was due principally to working capital management and the impact of the weakening Euro on the translation of the Company’s European operations.

The decrease in accounts payable was due principally to the lower inventory levels and the impact of the weakening Euro on the translation of the Company’s European operations.

Net cash provided by operating activities in 2005 of $9.6 million increased $2.2 million as compared to 2004 of $7.4 million. The change was due principally to increased earnings and aggressive working capital management. Cash used in financing activities increased $4.6 million primarily due to principal payments made during the year.

Capital expenditures were $3.2 million, $6.6 million and $7.0 million for the years ended December 31, 2003, 2004 and 2005, respectively. Substantially all of the expenditures in 2003 related to ongoing maintenance and upgrading of the Company’s manufacturing technology at all of its production facilities. 2004 and 2005 maintenance and upgrading expenditures were comparable to prior periods while the balance of the increase related to productivity improvement initiatives.

In November 1996, the Company issued, under a Note Indenture Agreement (the “Agreement”), $115.0 million of Senior Subordinated Notes due 2006 (the “Notes”) of which $97.8 million was outstanding as of December 31, 2005. The Notes are unsecured obligations of the Company. The Notes bear interest at the rate of 10.625% per annum payable semi-annually on each June 30 and December 31. The Notes are redeemable at the option of the Company on or after December 31, 2004, in whole or in part, at par. Upon a “Change of Control” (as defined in the Indenture), each Note holder has the right to require the Company to repurchase such holder’s Notes at a purchase price of 101% of the principal amount plus accrued interest. The Notes Indenture contains certain affirmative and negative covenants and restrictions. As of December 31, 2005, the Company is in compliance with all of these covenants.

During 2003, the Company purchased a portion of the Notes with a face value of $17.2 million from Cypress. The purchase was facilitated by Cypress and financed through the issuance of additional Term C Loan debt of $10.0 million, which is included in the outstanding principal amount of $52.6 million of the Term C Loan Facility referenced above. The extinguishment resulted in a gain of $7.2 million that was included in “Gain on extinguishment of debt, net” in the

Company’s Consolidated Statement of Operations. The Company and/or affiliates of the Company, including entities related to Cypress may continue, from time to time, to purchase the Notes previously issued by the Company in the open market or by other means.

The following table represents the Company’s contractual obligations for future payments:

(in thousands)


	Payments due by period as of December 31, 2005
			Less than 1				4 - 5		Over 5
	Total		Year		1 - 3 Years		Years		Years
Short-term debt	$	184,943	$	184,943	$	—	$	—	$	—
Interest Expense		22,432		22,432		—		—		—
Operating leases		2,411		1,088		1,309		14		—
Deferred pension		1,433		229		687		458		59
Raw materials, etc.		16		16		—		—		—


	$	211,235	$	208,708	$	1,996	$	472	$	59

The Company intends to fund its working capital (exclusive of its North American debt that matures during December 2006), capital expenditures and debt interest service requirements with cash flow from operations, cash and cash equivalents and borrowings under the Foothill Facility. Management believes that cash generated from these sources will be sufficient to meet the Company’s operational needs through November 2006.

The Company is currently exploring various avenues to recapitalize and/or restructure this debt or the business including the possible sale of all or portions of the business. Given the level of the Company’s debt obligations and current assets, there is a limited opportunity to mitigate the impact of the Company’s working capital deficit by reducing its workforce and/or scaling back on capital and operational expenditures. Accordingly, the Company has recently retained an independent investment banker to explore the possible sale of all or a portion of the business and is currently in the process of assessing the viability of this alternative. In addition, the Company has retained the services of a financial advisor to assist in establishing a strategy to facilitate the recapitalization and/or restructuring of the debt or the business should the sale process not materialize on terms favorable to the Company. However, there can be no assurance that these options will be successful and, if unsuccessful, will cause the Company to default on its debt obligations. If an event of default occurs, the creditors can pursue any available remedy to collect the payment of principal of or interest on the debt, thereby resulting in the Company’s inability to continue as a going concern.

During 2005, the Company experienced cost increases on many of its raw materials, such as steel, natural gas, rubber and other commodities, that were largely offset via price increases to its customers. For 2006, the Company believes that anticipated inflation rates will not have a material adverse effect on its results of operations or financial condition. However, there can be no assurance that sharply increasing raw material or fuel costs will not adversely affect the Company’s financial condition or results of operations.

In December 2004, Financial Accounting Standards Board (FASB) issued SFAS No. 123(R) (revised 2004), Share-Based Payment, which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation”. SFAS No. 123(R) supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and amends SFAS No. 95, “Statement of Cash Flows”. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. The new standard will be effective for the Company in the quarter beginning January 1, 2006. The adoption of this standard is not expected to have a material impact on the Company’s overall financial position and results of operations.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs – an amendment of ARB No. 43”. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. This Statement amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing”, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal”. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The adoption of this standard is not expected to have a material impact on the Company’s overall financial position and results of operations.

Critical Accounting Policies

Certain of the Company’s accounting policies require the application of judgment in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. The Company periodically evaluates the judgments and estimates used for its critical accounting policies to ensure that such judgments and estimates are reasonable for its interim and year-end reporting requirements. These judgments and estimates are based on the Company’s historical experience, current trends and information available from other sources, as appropriate. If different conditions result from those assumptions used in the Company’s judgments, the results could be materially different from the Company’s estimates. The Company’s critical accounting policies include:

Goodwill and Other Long-Lived Assets

The Company accounts for acquired goodwill and goodwill impairment in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). This pronouncement requires considerable judgment and, where necessary, the Company utilizes appraisals to assist in the Company’s valuation of acquired goodwill and evaluation of goodwill impairment. The Company has selected December 31 as its annual review date and primarily utilizes a combination of market multiple and discounted cash flow approaches, weighted heavier towards the market multiple approach, in order to value the Company’s operating segments required to be tested for impairment by SFAS No. 142.

The market multiples approach utilizes market transactions, ownership interests or securities in public companies to develop valuation measures, such as control premiums, general economic conditions and financial position of similar companies within the same industry, that can be used in the valuation of a business. The Company believes that this approach is reasonable for fair value, given its reliance on quoted market prices in the Company’s manufacturing industry and reflects the Company’s current strategic focus.

The discounted cash flow approach requires that the Company forecast future cash flows of the operating segments and discounts the cash flow stream based upon a weighted average cost of capital that is derived from comparable companies within similar industries. The discounted cash flow calculations also include a terminal value calculation that is based upon an expected long-term growth rate for the applicable operating segment. The Company believes that its procedures for applying the discounted cash flow methodology, including the estimates of future cash flows, the weighted average cost of capital and the long-term growth rate, are reasonable and consistent with market conditions at the time of the valuation.

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), the Company evaluated the realizability of other long-lived assets, which primarily consist of property, plant and equipment and definite-lived intangible assets, when indicators of impairment are identified. Once an indicator of impairment is identified, the undiscounted cash flows of the asset group is compared to the carrying value of the asset group. If the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset group, the Company would, if the fair value of the asset group is less than the carrying value, recognize an impairment loss. The Company’s cash flow estimates are based upon historical cash flows, as well as future projected cash flows received from subsidiary management in connection with the annual Company wide planning process, and include a terminal valuation for the applicable subsidiary based upon a multiple of earnings before interest expense, taxes and depreciation and amortization expense (“EBITDA”). The Company estimates the EBITDA multiple by reviewing comparable company information and other industry data. The Company believes that its procedures for estimating gross future cash flows, including the terminal valuation, are reasonable and consistent with current market conditions.

Revenue Recognition

In accordance with SEC Staff Accounting Bulletin (“SAB”) No. 104, the Company recognizes revenue only when there is a valid contract or purchase order which includes a fixed price, the goods have been delivered in accordance with the shipping terms; and there is an expectation that the collection of the revenue is reasonably assured. Determination of the criteria is based upon management’s judgments regarding the fixed nature of the price and the ability to collect revenue.

Allowances for cash discounts, volume rebates, and other customer incentive programs, as well as gross customer returns, among others, are recorded as a reduction of sales at the time of sale based upon the estimated future outcome. Cash discounts, volume rebates and other customer incentive programs are based upon certain percentages agreed to with the Company’s various customers, which are typically earned by the customer over an annual period. The Company records periodic estimates for these amounts based upon the historical results to date, estimated future results through the end of the contract period and the contractual provisions of the customer agreements. For calendar year customer agreements, the Company is able to adjust its periodic estimates to actual amounts as of December 31 each year based upon the contractual provisions of the customer agreements. As a result, at the end of any given reporting period, the amounts recorded for these allowances are based upon estimates of the likely outcome of future sales with the applicable customers and may require adjustment in the future if the actual

outcome differs. The Company believes that its procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are adjusted to the actual amounts.

Provisions for the estimated costs for future product warranty claims and bad debts are recorded as a reduction to revenue and selling, general and administrative expense, respectively. The amounts recorded are generally based upon historically derived percentages while also factoring in any new business conditions that might impact the historical analysis such as new product introduction for warranty and bankruptcies of particular customers for bad debts. The Company also periodically evaluates the adequacy of its reserves for warranty and bad debts recorded in its consolidated balance sheet as a further test to ensure the adequacy of the recorded provisions. Warranty claims can extend far into the future and bad debt analysis often involves subjective analysis of a particular customer’s ability to pay. As a result, significant judgment is required by the Company in determining the appropriate amounts to record and such judgments may prove to be incorrect in the future. The Company believes that its procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are adjusted to the actual amounts.

Inventory Valuation

The Company’s inventories are stated at the lower of cost or market including material, labor and manufacturing overhead. The Company records provisions, as appropriate, to write-down obsolete and excess inventory to estimated net realizable value. The process for evaluating obsolete and excess inventory often requires the Company to make subjective judgments and estimates concerning future sales levels, quantities and prices at which such inventory will be able to be sold in the normal course of business. Accelerating the disposal process or incorrect estimates of future sales potential may cause the actual results to differ from the estimates at the time such inventory is disposed or sold. The Company believes that its procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are adjusted to the actual amounts.

Income Taxes

The Company accounts for income taxes using the liability method in accordance with SFAS No. 109, “Accounting for Income Taxes” (“SFAS No. 109”), which requires that the deferred tax consequences of temporary differences between the amounts recorded in the Company’s Consolidated Financial Statements and the amounts included in the Company’s federal and state income tax returns be recognized in the balance sheet. As the Company generally does not file their income tax returns until well after the closing process for the December 31 financial statements is complete, the amounts recorded at December 31 reflect estimates of what the final amounts will be when the actual income tax returns are filed for that fiscal year. In addition, estimates are often required with respect to, among other things, the appropriate state income tax rates to use in the various states that the Company and its subsidiaries are required to file, the potential utilization of operating and capital loss carry-forwards for both federal and state income tax purposes and valuation allowances required, if any, for tax assets that may not be realizable in the future. SFAS No. 109 requires balance sheet classification of current and long-term deferred income tax assets and liabilities based upon the classification of the underlying asset or liability that gives rise to a temporary difference. During 2005 and 2004, the Company increased the valuation allowance for certain deferred tax assets related to net operating loss carry forwards. The increase resulted from a reassessment by management of the timing and likelihood of certain prospective events central to management’s tax planning strategies, consistent with the requirements of SFAS No. 109. The net operating loss carry forwards are long-term in nature and management may reduce the valuation allowance if its assessment of the timing and

likelihood of these prospective events changes. The income tax estimates used have historically not resulted in material adjustments to income tax expense in subsequent periods when the estimates are adjusted to the actual filed tax return amounts, although there may be reclassifications between the current and long-term portion of the deferred tax accounts.

The Company is subject to the examinations of its income tax returns by the Internal Revenue Service and other tax authorities. The Company evaluates the likelihood of unfavorable adjustments arising from the examinations and believes adequate provisions have been made in the income tax provision; however, the final determination of certain transactions and tax audits could be materially different than that which is reflected in historical income tax provisions and accruals.

Contingencies

The Company is subject to contingencies, including legal proceedings and claims arising out of its businesses that cover a wide range of matters, including, among others, environmental matters, contract and employment claims, workers compensation claims, product liability and warranty.

The Company provides accruals for direct costs associated with the estimated resolution of contingencies at the earliest date at which it is deemed probable that a liability has been incurred and the amount of such liability can be reasonably estimated. Costs accrued have been estimated and are based upon an analysis of potential results.

While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits, the Company believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the consolidated financial position or results of operations of the Company. It is possible, however, that future results of operations for any particular future period could be materially affected by changes in our assumptions or strategies related to these contingencies or changes out of the Company’s control.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK

Foreign Currency Risk

The Company is exposed to market risk related to foreign currency exchange rates. Portions of revenues in 2005 from the Company’s Portuguese operations were denominated in U.S. dollars and British Pounds. As a result of the weakening of the Euro versus the U.S. dollar during 2005, the Company recorded approximately $0.1 million in foreign exchange gains in 2005. During 2005, the Company did use forward contracts, which are generally three months in duration, to hedge its foreign currency exposures. At December 31, 2005, the Company’s Portuguese operations had no forward contracts outstanding. The Company believes that by the continued use of forward contracts in 2006, the risk of material foreign currency exchange losses is low.

Interest Rate Market Risk

With respect to fluctuating interest rates, the impact on 2005 operating results was not material and the expected impact on 2006 operating results is not anticipated to be material.

The following sensitivity analysis summarizes the potential impact on the Company of additional interest expense resulting from a hypothetical 100 basis point increase in the interest rate indices upon which AMTROL’s floating rate debt instruments are based (000’s):

Year End

2005 Exposure

Hypothetical

Effect on

Variable

to Interest

Change in

Amtrol

Rate Debt

Rate Risk

Rate Index

Interest

Revolver

5,754

100 bps

Term A Loan

3,841

100 bps

Term B Loan

19,298

100 bps

192

28,893

100 bps

288

The Company believes that the potential effects of a hypothetical 100-basis point increase in its floating rate debt instruments are not material to cash flows or net loss.

Commodity Risk

The Company is subject to market risk with respect to the pricing of its principal raw materials (steel, rubber, corrugate and paint) and utilities. If prices of these raw materials and utilities were to increase dramatically, the Company might not be able to pass such increases on to its customers and, as a result, gross margins could decline. The Company manages its exposure to commodity pricing risk by continuing to diversify its product mix, strategic buying programs and vendor partnering. At December 31, 2005, the Company had not entered into any derivative financial instruments to manage its exposure to higher prices.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements are included in a separate section beginning on page 37 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company, under the supervision and with the participation of its management, including its principal executive officer and principal financial officer, performed an evaluation of the Company’s disclosure controls and procedures, as required by Securities Exchange Act Rule 13a-15(e). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and procedures are effective to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to them, particularly during the period for which the periodic reports are being prepared.

Changes in Internal Controls

There have been no changes in internal control over financial reporting that occurred during the fourth quarter of 2005, that have materially affected, or are reasonably likely to materially

affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information regarding each of the directors and executive officers of the Company:


Name	Age		Position
Larry T. Guillemette		50	Chairman of the Board, President, Chief Executive Officer and Director

Joseph L. DePaula		51	Executive Vice President, Chief Financial Officer, Treasurer and Secretary

William Chohfi		57	President – Alfa European Operations

Christopher A. Laus		47	Senior Vice President — Operations

John P. Cashman		65	Director

James A. Stern		55	Director

Larry T. Guillemette became Chairman of the Board, President and Chief Executive Officer in January 2006. Previously, Mr. Guillemette served as Executive Vice President, Chief Financial Officer and Treasurer since August 2000 and as Executive Vice President-Marketing and Business Development since joining the Company in 1998. From 1991 to 1998, Mr. Guillemette was President and Chief Executive Officer of Balcrank Products, Inc.

Joseph L. DePaula became Executive Vice President, Chief Financial Officer, Treasurer and Secretary in January 2006. Previously, Mr. DePaula served as Vice President-Finance & Corporate Controller since April 2001 and became Secretary of the Company in 2005. For the previous five-year period thereto, Mr. DePaula served as Chief Financial Officer of Semi-Alloys Co.

William Chohfi became President – Alfa European Operations in 1997. From 1992 to 1996, he was Managing Director of Comanor, predecessor to Amtrol Alfa, in Portugal. Previous to 1992, Mr. Chohfi held the position of Managing Director of Tupyfort and Chief Financial Officer of Martini & Rossi, both in Brazil.

Christopher A. Laus became Senior Vice President – Operations in July 2003. Mr. Laus joined Amtrol in September 1998 as Vice President of Quality and Reengineering. He previously served in various managerial positions at Abex Friction Products from 1981 to 1998.

John P. Cashman became a Director upon the Merger in November, 1996. In addition, Mr. Cashman served as Chairman of the Board, Chief Executive Officer and President upon the Merger until Mr. Indelicato joined the Company in July 1998. From 1989 until March 1996, Mr. Cashman served as Chairman and Co-Chief Executive Officer of R. P. Scherer Corporation.

James A. Stern became a Director of the Company in 1996. Mr. Stern has been Chairman of Cypress since its formation in April 1994. Prior to joining Cypress, Mr. Stern spent his entire career with Lehman Brothers Inc., most recently as head of the Merchant Banking Group. Mr. Stern is a director of Lear Corporation, WESCO International Inc., Affinia Group Inc., MedPointe Inc. and Club Corp.

Audit Committee Financial Expert

The Finance Committee, which performs similar functions as an audit committee of the Board of Directors, is designated to oversee the financial reporting process of the Board. Until Mr. Spalding’s resignation from the Finance Committee effective December 31, 2005, Mr. Spalding served as the Company’s audit committee financial expert as defined by SEC rules. The Company is currently in the process of finding a replacement for Mr. Spalding.

Code of Ethics

The Company has adopted a Code of Ethics, within the meaning of applicable SEC rules, applicable to its principal executive, financial and accounting officers, or persons performing similar functions. The Company has filed its Code of Ethics as an exhibit to this annual report on Form 10-K.

Compliance with Section 16(a) of the Securities Exchange Act of 1934.

Not applicable

ITEM 11. EXECUTIVE COMPENSATION

The following table summarizes the compensation paid or accrued by the Company to its Chief Executive Officer, its former Chief Executive Officer and the three most highly compensated executive officers other than the Chief Executive Officer who were serving as executive officers at December 31, 2005 and who earned more than $100,000 in salary and bonus in 2005 in each case for services rendered in all capacities to the Company during the three year period ended December 31, 2005 (the “Named Executive Officers”):

Summary Compensation Table


							Long Term
			Annual				Compensation
			Compensation (a)				Awards
							Securities
Name and Principal							Underlying		All Other
Position	Year		Salary (b)		Bonus		Options/SARs		Compensation (c)
Larry T. Guillemette		2005	$	207,981	$	135,000		—	$	12,336
Chairman, President and		2004		194,375		—		—		11,484
Chief Executive Officer (d)		2003		201,945		—		—		11,779

Albert D. Indelicato		2005		430,000		400,000		—		195,995
Former Chairman, President		2004		400,000		—		—		14,900
and Chief Executive Officer (e)		2003		414,231		—		—		71,403

William Chohfi		2005		298,150		62,181		—		49,021
President – Alfa European		2004		296,700		—		—		43,490
Operations		2003		264,653		109,130		—		35,101

Joseph L. DePaula		2005		194,934		100,000		—		19,160
Executive Vice President,		2004		182,654		—		—		18,963
Chief Financial Officer and Treasurer (d)		2003		187,365		—		—		19,237

Christopher A. Laus		2005		179,764		120,000		—		11,391
Senior Vice President –		2004		168,004		—		—		9,131
Operations		2003		172,466		—		—		11,494


(a)		Any perquisites or other personal benefits received from the Company by any of the named executives were substantially less than the reporting thresholds established by the Securities and Exchange Commission (the lesser of $50,000 or 10% of the individual’s cash compensation).

(b)		Includes portion of salary deferred under the Company’s 401(k) Plan.

(c)		Amounts paid in 2005 include the Company’s contributions under the Company’s 401(k) Plan in the amount of $11,221, $11,085, $10,243, and $9,850 for Mssrs. Indelicato, Guillemette, Laus, and DePaula, respectively, premiums paid by the Company with respect to term life and long-term disability insurance purchased for such executive officers in the amount of $1,467, $1,251, $1,148 and $1,210 for Mssrs. Indelicato, Guillemette, Laus and DePaula, respectively and an automobile allowance received by Messrs. Indelicato, Chohfi, and DePaula, respectively, in the amount of $2,813, $14,193, and $8,100, respectively. Messrs. Indelicato and Chohfi received other compensation in the amount of $180,494 and $34,828, respectively in connection with their


		employment agreements. Mr. Indelicato’s other compensation primarily related to reimbursement of state income taxes.

(d)		Appointed by Board of Directors to these positions effective January 18, 2006. Until that date and for all periods covered by this table, Mr. Guillemette served as the Company’s Executive Vice President, Chief Financial Officer and Treasurer and Mr. DePaula served as the Company’s Vice President – Finance, Corporate Controller and (since 2005) Secretary.

(e)		Resigned effective January 18, 2006.

Option Plans

The following table sets forth certain information regarding currently outstanding options to buy the common stock of Holdings held by the Named Executive Officers as of December 31, 2005.

Aggregated Option/SAR Exercises in Last Fiscal Year and Year-End Option/SAR Values

Number of

Securities

Underlying

Unexercised

Number of

Option/SARs at

Securities

Calendar Year

Value of

Underlying

End 2005

Unexercised

Options/SARs

Exercisable/

In-the-Money

Name

Exercised

Value Realized($)

Unexercisable

Options/SAR($)

Larry T. Guillemette

5,500/0

0/0

Albert D. Indelicato

15,250/0

0/0

William Chohfi

2,500/0

0/0

Joseph L. DePaula

0/0

Christopher A. Laus

2,500/0

0/0

Supplemental Retirement Plans

The Company maintains two Supplemental Retirement Plans: Supplemental Retirement Plan I that covers a former officer/director and Supplemental Retirement Plan II that covers two former officers. In the event a participant in either Supplemental Plan dies after retirement, the participant’s beneficiary will receive any remaining benefits which such participant was entitled to receive at the time of the participant’s death.

Employment Agreements and Other Transactions

The Company entered into agreements with three key executives during the first quarter of 2006 that would be triggered in the event of a “Change of Control” or without cause termination of the Named Executive Officers of the Company and certain other facts set forth therein. The three key executives of the Company are Mssrs. Larry T. Guillemette, Chairman of the Board, President, Chief Executive Officer and Director, Joseph L. DePaula, Executive Vice President, Chief Financial Officer, Treasurer and Secretary and Christopher A. Laus, Senior Vice President — Operations. Should a trigger event occur, as defined within the agreements, Mssrs. Guillemette, DePaula and Laus would be eligible to receive compensation equivalent to 36, 24 and nine

months salary, respectively, of which one third of such amount was paid upon execution of the agreement. These agreements have been filed as exhibits within this Form 10-K under material contracts.

In addition, AMTROL Holdings Inc. and AMTROL Inc. entered into Indemnification and Advancement of Expenses Agreements (the “Indemnification Agreements”) with two key executives during the first quarter of 2006. The Indemnification Agreements stipulate that AMTROL Holdings Inc. and AMTROL Inc. will indemnify these two key executives to the fullest extent permitted by the General Corporation Law of the State of Delaware (AMTROL Holdings Inc.) and the Rhode Island Business Corporation Act (AMTROL Inc.) should they be or are threatened to be made a party, witness or other participant in any threatened, pending or completed action, suit, proceeding or alternative dispute resolution related to their position or actions as an executive of the above companies. These agreements have been filed as exhibits within this Form 10-K under material contracts.

Directors’ Compensation

The Company has a total of three directors, two of who are non-employees that sit on various committees. For 2005, one non-employee director, Mr. Cashman, was paid $2,500 per meeting attended plus out-of-pocket expenses associated with travel. The remaining non-employee director, Mr. Stern, did not receive any remuneration for any of the meetings attended, except for out-of-pocket travel expenses, given his association to Cypress.

AMTROL Holdings Inc. and AMTROL Inc. entered into Indemnification and Advancement of Expenses Agreements (the “Indemnification Agreements”) with its respective Board of Directors and certain officers during the fourth quarter of 2004. The Indemnification Agreements stipulate that AMTROL Holdings Inc. and AMTROL Inc. will indemnify their respective Board of Directors to the fullest extent permitted by the General Corporation Law of the State of Delaware (AMTROL Holdings Inc.) and the Rhode Island Business Corporation Act (AMTROL Inc.) should they be or are threatened to be made a party, witness or other participant in any threatened, pending or completed action, suit, proceeding or alternative dispute resolution related to their position or actions as a director or officer of the above companies.

Compensation and Benefits Committee

The Compensation and Benefits Committee held one meeting in 2005. Mr. Stern is the current member of this committee. Mr. Spalding was a member of this committee until his resignation in December 2005. This committee has functions that include reviewing the salary system with regard to external competitiveness and reviewing incentive compensation plans to ensure that they continue to be effective incentive and reward systems. The Compensation and Benefits Committee also determines the CEO’s compensation and, if appropriate, approves the CEO’s recommendations with respect to the compensation of executive officers that report to him.

Compensation Committee Interlocks and Insider Participation

No member of the Committee has any interlocking or insider relationship with the Company which is required to be reported under the applicable rules and regulations of the Securities and Exchange Commission.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Company is a direct, wholly-owned subsidiary of Holdings Inc. The following

table sets forth information with respect to the beneficial ownership of Holdings Inc. common stock or preferred stock as of March 30, 2006 by (i) each person known to the Company to beneficially own more than 5% of Holdings Inc.’s outstanding common stock, (ii) each of the Company’s directors and Named Executive Officers and (iii) all directors and executive officers of the Company as a group. Each share of Holdings Inc. preferred stock is convertible at any time into one share of Holdings Inc. common stock. Unless otherwise indicated below, the persons and entities named in the table have sole voting and investment power with respect to all shares beneficially owned.


	Common Stock				Preferred Stock
	Number
	of		Percentage		Number		Percentage
Name and Address of Beneficial Owner	Shares		of Total		of Shares		of Total
Cypress Merchant Banking Partners L.P.(a) (c) c/o The Cypress Group L.L.C. 65 East 55^th Street, 28^th Floor New York, NY 10022		847,127		86.6		95,076		93.0

Cypress Offshore Partners L.P. (a) (c) c/o The Cypress Group L.L.C. 65 East 55^th Street, 28^th Floor New York, NY 10022		43,873		4.5		4,924		4.8

John P. Cashman (b)		40,517		4.1		2,235		2.2
Larry T. Guillemette (b)		6,166		0.6		—		—
Christopher A. Laus		3,200		0.3		—		—
William Chohfi		5,616		0.6
Joseph L. DePaula		—		—		—		—
James A. Stern (a)		—		—		—		—
All directors and executive officers as a group (consisting of 6 persons)		55,499		5.6		2,235		2.2


(a)		Cypress Merchant Banking Partners L.P. and Cypress Offshore Partners L.P. are affiliates of The Cypress Group L.L.C. Mr. Stern is an executive of The Cypress Group L.L.C. and may be deemed to share beneficial ownership of the shares shown as beneficially owned by such Cypress entities. Each of such individuals disclaims beneficial ownership of such shares. See Item 10, “Directors and Executive Officers of the Company.”

(b)		Includes 23,281, 5,500 and 2,500 shares of Common Stock issuable upon exercise of options granted to Messrs. Cashman, Guillemette and Chohfi, respectively.

(c)		Includes 57,046 and 2,954 shares of common stock issuable upon exercise of warrants granted to Cypress Merchant Banking Partners, L.P. and Cypress Offshore Partners, L.P.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees:

The Company during the years 2004 and 2005 incurred audit fees of $429,000 and $479,600, respectively, by its independent registered accountants, Ernst & Young LLP.

Audit Related Fees:

The Company during the years 2004 and 2005 was billed audit related fees of $16,500 and $17,000, respectively, by its independent registered accountants, Ernst & Young LLP.

Tax Fees:

The Company during the years 2004 and 2005 was billed tax fees of $37,150 and $23,500, respectively, by its independent registered accountants, Ernst & Young LLP.

All Other Fees:

The Company during the years 2004 and 2005 was billed fees for market diligence services of $87,500 and $0, respectively, by its independent registered accountants, Ernst & Young LLP.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) Financial Statements

The following consolidated financial statements are included in a separate section of this Report commencing on the page numbers specified below:


		Page
	Report of Independent Registered Public Accounting Firm	36

	Consolidated Balance Sheets as of December 31, 2004 and 2005	37

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2003, 2004 and 2005	38

	Consolidated Statements of Shareholders’ Equity (Deficit) for the years ended December 31, 2003, 2004 and 2005	39

	Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2004 and 2005	40

	Notes to Consolidated Financial Statements	41

(a) (2) Financial Statement Schedule

	Schedule II - Valuation and Qualifying Accounts and Reserves for the
	years ended December 31, 2003, 2004 and 2005	57

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

(a) (3) Exhibits

See List of Exhibits, Page 59.

Report of Independent Registered Public Accounting Firm

To the Board of Directors of
AMTROL Inc.

We have audited the accompanying consolidated balance sheets of AMTROL Inc. (the “Company”) as of December 31, 2005 and 2004, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AMTROL Inc. at December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the Company’s significant working capital deficit raises substantial doubt about its ability to continue as a going concern. Management’s plans as to these matters are described in Note 1. The 2005 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

ERNST & YOUNG LLP

March 23, 2006, except for Note 4, as to
which the date is March 29, 2006
Providence, Rhode Island

AMTROL INC. AND SUBSIDIARIES

Consolidated Balance Sheets
(In thousands, except share data)
Assets


	December 31
	2004			2005
Current Assets:
Cash and cash equivalents	$	12,378		$	7,470
Accounts receivable, less allowance for doubtful accounts, credits and returns of $1,049 and $973 in 2004 and 2005, respectively		29,946			37,375
Inventories		30,637			24,895
Tax refund receivable		2,010			1,477
Deferred income taxes — short-term		103			132
Prepaid expenses and other		904			566

Total current assets		75,978			71,915


Property, Plant and Equipment, at cost
Land		4,162			3,197
Buildings and improvements		12,681			11,389
Machinery and equipment		67,608			72,433
Furniture and fixtures		1,491			1,494
Information systems software and other		9,051			8,050

		94,993			96,563

Less: accumulated depreciation and amortization		64,193			67,178

		30,800			29,385


Other Assets:
Goodwill		119,205			119,205
Deferred financing costs		1,920			960
Deferred income taxes — long-term		23			680
Other		314			306

		121,462			121,151

	$	228,240		$	222,451


Liabilities and Shareholders’ Equity (Deficit)

Current Liabilities:
Current maturities of long-term debt	$	2,957		$	179,332
Notes payable to banks		10,774			5,611
Accounts payable		23,006			21,117
Accrued volume rebates		4,615			4,650
Accrued expenses		10,158			9,749
Accrued interest		256			226
Accrued income taxes		1,415			641

Total current liabilities		53,181			221,326


Other Noncurrent Liabilities		3,979			6,067

Long-Term Debt, less current maturities		171,300			—

Commitments and Contingencies		—			—
Shareholders’ Equity (Deficit)
Capital stock $.01 par value — authorized 1,000 shares, 100 shares issued		—			—
Additional paid-in capital		99,273			99,273
Accumulated deficit		(105,339	)		(107,529	)
Accumulated other comprehensive income		5,846			3,314

Total shareholders’ equity (deficit)		(220	)		(4,942	)

	$	228,240		$	222,451

The accompanying notes are an integral part of these consolidated financial statements.

AMTROL INC. AND SUBSIDIARIES

Consolidated Statements of Operations
(In thousands)


	Year Ended December 31
	2003			2004			2005
Net sales	$	185,046		$	198,394		$	218,548

Cost of goods sold		144,761			152,136			172,271


Gross profit		40,285			46,258			46,277

Operating expenses:
Selling		11,075			11,267			11,174
General and administrative		15,627			17,038			16,056


Income from operations		13,583			17,953			19,047

Other income (expense):
Interest expense		(19,564	)		(21,664	)		(22,287	)
Interest income		65			152			280
Gain on extinguishment of debt, net		6,760			—			—
Other income (expense), net		(100	)		(55	)		235


Income (loss) before provision for income taxes		744			(3,614	)		(2,725	)

Provision (benefit) for income taxes		1,166			9,737			(535	)


Loss from continuing operations		(422	)		(13,351	)		(2,190	)

Discontinued operations:
Loss from sale of subsidiary, net		—			(8,093	)		—
Loss from discontinued operations, net		(1,310	)		(770	)		—


Net loss	$	(1,732	)	$	(22,214	)	$	(2,190	)

Consolidated Statements of Comprehensive Income (Loss)
(In thousands)


	Year Ended December 31
	2003			2004			2005
Net loss	$	(1,732	)	$	(22,214	)	$	(2,190	)
Foreign currency translation adjustments		2,800			4,726			(2,532	)
Derivative instrument valuation		294			57			—

Comprehensive income (loss)	$	1,362		$	(17,431	)	$	(4,722	)

The accompanying notes are an integral part of these consolidated financial statements .

AMTROL INC. AND SUBSIDIARIES

Consolidated Statements of Shareholder’s Equity (Deficit)
(In thousands)


								Accumulated
			Additional					Other
	Capital		Paid-in		Accumulated			Comprehensive
	Stock		Capital		Deficit			Income (Loss)
Balance, December 31, 2002	$	—	$	99,273	$	(81,393	)	$	(2,031	)

Net loss		—		—		(1,732	)		—
Derivative instrument valuation adjustment		—		—		—			294
Currency translation adjustment		—		—		—			2,800


Balance, December 31, 2003		—		99,273		(83,125	)		1,063

Net loss		—		—		(22,214	)		—
Derivative instrument valuation adjustment		—		—		—			57
Currency translation adjustment from discontinued operations									(2,483	)
Currency translation adjustment		—		—		—			7,209


Balance, December 31, 2004		—		99,273		(105,339	)		5,846

Net loss		—		—		(2,190	)		—
Currency translation adjustment		—		—		—			(2,532	)


Balance, December 31, 2005	$	—	$	99,273	$	(107,529	)	$	3,314

The accompanying notes are an integral part of these consolidated financial statements.

AMTROL INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)


	Year Ended December 31
	2003			2004			2005
Cash Flows Provided by Operating Activities:
Loss from continuing operations	$	(422	)	$	(13,351	)	$	(2,190	)
Loss from discontinued operations		(1,310	)		(8,863	)		—
Adjustments to reconcile net loss to net cash provided by operating activities -
Depreciation		8,292			7,480			6,477
Amortization		1,452			1,328			960
Deferred income tax provision		—			8,686			(667	)
Provision for losses on accounts receivable		77			73			6
Gain on extinguishment of debt, net		(6,760	)		—			—
Deferred interest		4,517			6,667			7,479
Changes in operating assets and liabilities:
Accounts receivable, net		1,853			(1,584	)		(9,910	)
Tax refund receivable		746			(12	)		283
Inventory		(769	)		(5,386	)		4,119
Prepaid expenses and other current assets		365			252			243
Other assets		2,414			612			1,114
Accounts payable		(5,120	)		(685	)		100
Accrued expenses and other current liabilities		(1,782	)		4,529			(718	)
Other noncurrent liabilities		658			475			2,307
Net assets of discontinued operations		(967	)		7,148			—

Net cash provided by operating activities		3,244			7,369			9,603


Cash Flows Used in Investing Activities:

Proceeds from sale of discontinued business		—			363			—
Capital expenditures		(3,249	)		(6,626	)		(6,961	)
Capital expenditures — discontinued operations		(167	)		—			—

Net cash used in investing activities		(3,416	)		(6,263	)		(6,961	)


Cash Flows Provided by (Used in) Financing Activities:
Repayment of long-term debt		(124,276	)		(138,879	)		(106,962	)
Issuance of long-term debt		119,933			135,803			103,849
Repayment of short-term debt		(15,461	)		(21,026	)		(30,670	)
Issuance of short-term debt		16,350			21,663			26,716
Issuance of new senior debt and warrants		15,000			—			—

Net cash provided by (used in) financing activities		11,546			(2,439	)		(7,067	)


Net increase (decrease) in cash and cash equivalents		11,374			(1,333	)		(4,425	)

Effect of exchange rate changes on cash and cash equivalents		216			422			(483	)

Cash and cash equivalents, beginning of period		1,699			13,289			12,378


Cash and cash equivalents, end of period	$	13,289		$	12,378		$	7,470

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

AMTROL Inc., a Rhode Island corporation, and its wholly-owned subsidiaries (collectively referred to herein as the “Company”), design, manufacture and market products used principally in flow control, storage, heating and other treatment of fluids in the water systems market and selected sectors of the heating, ventilating and air conditioning (“HVAC”) market. The Company offers a broad product line of quality fluid handling products and services marketed under widely recognized brand names.

The Company is a wholly-owned subsidiary of AMTROL Holdings, Inc. (“Holdings Inc.”), a Delaware corporation formed by The Cypress Group, LLC (“Cypress”) in 1996 to effect the acquisition of all of the outstanding common stock of the Company. Holdings Inc. has no other material assets, liabilities or operations other than those that result from its ownership of the common stock of the Company.

(2) Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

(2) Summary of Significant Accounting Policies (Continued)

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fiscal Year

The Company uses a calendar fiscal year and three quarterly interim periods ending on Saturday of the thirteenth week of the quarter.

Reclassifications

Certain prior year balances have been reclassified to conform to the current year presentation.

Revenue Recognition and Related Costs

In accordance with Staff Accounting Bulletin (“SAB”) No. 104, the Company recognizes revenue only when there is a valid contract or purchase order, which includes a fixed price; the goods have been delivered in accordance with the shipping terms; and there is an expectation that the collection of the revenue is reasonably assured. Shipping/handling fees and costs are included in net sales and cost of goods sold, respectively, consistent with the presentation required by Emerging Issues Task Force (“EITF”) 00-10.

The Company generally recognizes revenue upon shipment of its products to customers net of applicable provisions for discounts and allowances. Allowances for cash discounts and volume rebates, among others, are recorded as a reduction to revenue at the time of sale based upon the estimated future outcome. Cash discounts and volume rebates are based upon certain percentages and sales targets agreed to with the Company’s customers, which are typically earned by the customers over an annual period. The allowance for volume rebates is consistent with the provisions of EITF 00-22, Accounting for “Points” and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free Products or Services to Be Delivered in the Future.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and short-term investments that are readily convertible into cash with an original maturity to the Company of three months or less.

Allowance for Doubtful Accounts

In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, an allowance is established. The majority of accounts are individually evaluated on a regular basis and appropriate allowances are established as deemed appropriate. The remainder of the allowance is based upon historical trends and current market assessments.

(2) Summary of Significant Accounting Policies (Continued)

Concentration of Credit Risk

The Company extends credit to almost all its customers on an uncollateralized basis. Concentration of credit and geographic risk with respect to accounts receivable is limited due to the large number of and general dispersion of accounts which constitute the Company’s customer base. The Company periodically performs credit evaluations of its customers. At December 31, 2004 and 2005, there were no customers accounting for greater than ten percent of the Company’s accounts receivable. The Company has not experienced significant credit losses on customers’ accounts.

The Company invests its excess cash in highly liquid short-term investments. The Company has established guidelines that maintain safety and liquidity and reviews these guidelines when economic conditions change. The Company has not experienced any losses on its cash equivalents or short-term investments.

Depreciable Property and Equipment

Property, plant, and equipment are stated on the basis of cost. The Company provides for depreciation by charges to income (computed on the straight-line method) in amounts estimated to depreciate the cost of properties over their estimated useful lives, which generally fall within the following ranges:


Building and improvements		10-40 years
Machinery and equipment		3-12 years
Furniture and fixtures		5-20 years
Other		3-10 years

Leasehold improvements are amortized over the life of the lease or the estimated useful life of the improvement, whichever is shorter.

Interest costs, during the construction period, on borrowings used to finance construction of buildings and related property are included in the cost of the constructed property. As of December 31, 2005, the Company had no capitalized interest.

Inventories

The Company’s inventories are stated at the lower of cost or market including material, labor and manufacturing overhead (see Note 3). The Company records provisions, as appropriate, to write-down obsolete and excess inventory to estimated net realizable value. The process for evaluating obsolete and excess inventory often requires the Company to make subjective judgments and estimates concerning future sales levels, quantities and prices at which such inventory will be able to be sold in the normal course of business. Accelerating the disposal process or incorrect estimates of future sales potentially may cause the actual results to differ from the estimates at the time such inventory is disposed or sold. The Company believes that its procedures for estimating such amounts are reasonable and historically have not resulted in material adjustments in subsequent periods when the estimates are adjusted to the actual amounts.

(2) Summary of Significant Accounting Policies (Continued)

Warranty

The Company extends various warranties covering most of its products ranging from a limited one-year warranty to a limited lifetime warranty against defects in materials and workmanship. The specific terms and conditions of the warranties depend on the type of product that is sold. The Company’s warranties are generally limited to the replacement of the defective parts or products at the Company’s option. The Company estimates the costs that may be incurred under its warranty program and records a liability at the time of sale. Factors that influence the Company’s warranty liability include the amount of production, manufactured cost of the product, historical warranty returns and anticipated returns based upon engineering and material improvements. The Company periodically assesses the adequacy of its warranty reserve

through a detailed analysis and adjusts the reserve accordingly.

As part of the Company’s regular review of its warranty reserve during 2004 and 2005, the Company increased its warranty reserve by $0.7 million and $0.3 million, respectively. The adjustment for 2004 was due to higher steel costs and a higher than anticipated level of warranty returns associated with its limited lifetime products. The adjustment for 2005 was due to higher production costs as a result of increases in raw material prices.

The following table illustrates the changes in the Company’s warranty reserve during 2004 and 2005:

(in thousands)


	2004			2005
Balance, beginning of year	$	3,065		$	3,662

Warranties issued during year		1,924			2,182

Claims during year		(1,987	)		(2,392	)

Change in estimate		660			277


Balance, end of year	$	3,662		$	3,729

Goodwill and Long-Lived Assets

(2) Summary of Significant Accounting Policies (Continued)

industry and reflects the Company’s current strategic focus.

Based on the Company’s 2005 goodwill impairment review, there is sufficient value in the Company’s net assets to support the recovery of the goodwill. However, as indicated in Note 1, due to a significant working capital deficit, the Company is exploring various avenues to recapitalize and/or restructure the debt or the business including the possible sale of all or portions of the business. If the Company is not successful in these efforts, goodwill impairment charges may result.

Fair Value of Financial Instruments

In accordance with the requirements of SFAS No. 107, Disclosures About Fair Value of Financial Instruments, the Company has determined the estimated fair value of its financial instruments using appropriate market information and valuation methodologies. Considerable judgment is required to develop the estimates of fair value; thus, the estimates are not necessarily indicative of the amounts that could be realized in a current market exchange. The Company’s financial instruments consist of cash, accounts receivable, accounts payable, senior subordinated notes and bank debt. Based upon information provided by an independent financial advisor, the Company believes that the fair value of the senior subordinated notes is approximately $92 to $96 on a par value of $100. The carrying value of the remaining assets and liabilities is a reasonable estimate of the fair value at December 31, 2005.

Research and Development Expenses

All costs for research and development, which amounted to approximately $0.9 million, $0.8 million, and $1.3 million for the years ended December 31, 2003, 2004, and 2005, respectively, are charged to general and administrative expenses as incurred.

(2) Summary of Significant Accounting Policies (Continued)

Deferred Financing Costs

Deferred financing costs are stated at cost and amortized over the life of the related debt using the effective interest method. Amortization of deferred financing costs is included in interest expense.

Foreign Currency Translation

Assets and liabilities of non-U.S. operations have been translated into United States dollars using the year-end rate of exchange. Shareholders’ equity has been converted using historical rates, and revenues and expenses at the average exchange rates prevailing during the year. The cumulative effect of the resulting translation is reflected as a separate component of shareholders’ equity. $0.6 million and $0.1 million in foreign currency exchange losses were recorded in the Consolidated Statements of Operations during 2003 and 2004, respectively while a foreign currency exchange gain of $0.1 million was recorded during 2005.

During 2004 and 2005, the Company used forward contracts, generally three months in duration, to hedge certain of its foreign currency exposures. The foreign currency exposures relate primarily to its operations in Portugal. A portion of revenues from the Company’s Portuguese operations were denominated in U.S. dollars and British Pounds so as the Euro weakened, the corresponding receivables gained value. At December 31, 2004 and 2005, the Company’s Portuguese operations had no forward contracts outstanding.

The following table illustrates the components of accumulated other comprehensive income:

(in thousands)


	2004		2005
Currency translation adjustment	$	5,846	$	3,314

Total accumulated other comprehensive income	$	5,846	$	3,314

Stock Options

The Company accounts for employee stock options in accordance with SFAS No. 123, Accounting for Stock Based Compensation. As permitted under SFAS No. 123, the Company applies Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations to account for its stock option plans.

Accounting for Derivative Instruments and Hedging Activities

The Company had an interest rate swap contract and an interest rate cap (the “Contract”) that matured on June 30, 2004. The Company received the 90-day LIBOR rate and paid a fixed rate of 4.60%, unless LIBOR increased to 7.1%, for the period from January 1, 2001 through June 30, 2004. The Contract was designated as a cash flow hedge of variable future cash flows associated with the Foothill Agreement Term A Loan and Term B Loan debt.

Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123(R) (revised 2004), Share-Based Payment, which is a revision of SFAS No. 123. SFAS No. 123(R) supersedes APB Opinion No. 25, and amends SFAS No. 95, “Statement of Cash Flows”. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. The new standard will be effective for the Company in the quarter beginning January 1, 2006. The adoption of this standard is not expected to have a material impact on the Company’s overall financial position and results of operations.

(3) Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market and consist of the following at December 31 (in thousands):


	2004		2005
Raw materials and work in process	$	18,935	$	15,511
Finished goods		11,702		9,384

	$	30,637	$	24,895

(4) Debt and Notes Payable to Banks

Debt consisted of the following at December 31, (in thousands):


	2004		2005

Revolving credit facility	$	5,201	$	5,754
Term A loan		5,548		3,841
Term B loan		19,799		19,298
Term C loan		45,860		52,590
Senior subordinated notes, due 2006, 10.625%		97,849		97,849

		174,257		179,332
Less: Current maturities of long-term debt		2,957		179,332

Long-term debt	$	171,300	$	—

Revolving Credit and Term Loans

The Company is a party to two credit facilities: a $52.5 million senior first-priority secured credit facility arranged by Foothill Capital Corporation (as amended, the “Foothill Facility”) and a $35.0 million senior second-priority secured credit facility (the “Term C Loan Facility”), formerly with affiliates of Cypress. During January 2006, the Term C Loan Facility (other than the warrants issued to Cypress) was purchased by certain funds managed by GSO Capital Partners L.P., an independent third party.

Upon execution of the First Amendment and Second Amendment, the Company was required per EITF 96-19, Debtor’s Accounting for a Modification or Exchange of Debt Instruments, to record a loss of $0.5 million on extinguishment of debt for unamortized costs associated with the original Term B Loan and any bank related fees in relation to the recent Amendments.

The Term C Loan Facility consists of term loans totaling $35.0 million. The Term C Loan Facility, with an outstanding principal amount of $52.6 million (which includes PIK interest of $17.6 million) as of December 31, 2005, has a maturity date of December 26, 2006, and bears PIK interest fixed at 12% per annum paid quarterly, which at the lenders option can be paid in common stock of the Company. In addition, 60,000 warrants with an exercise price of $0.01 were issued to Cypress under the Term C Loan Facility. The Company expects that the effective interest rate will be greater than 12% given the additional interest expense associated with the warrants. During January 2006, the Term C Loan Facility (other than the warrants described

above) was purchased by certain funds managed by GSO Capital Partners L.P., an independent third party.

The Foothill Facility and the Term C Loan Facility contain certain affirmative and negative covenants and restrictions, such as EBITDA and Fixed Charges Ratio on a North America and Worldwide basis. As of December 31, 2005, the Company was in compliance with the various covenants of the Foothill Facility and the Term C Loan Facility.

Senior Subordinated Notes

The Company has $97.8 million of Senior Subordinated Notes due 2006 (the “Notes”), which are unsecured obligations of the Company and bear interest at a rate of 10.625% per annum payable semi-annually on June 30 and December 31.

The Notes are redeemable at the option of the Company on or after December 31, 2004, in whole or in part, at par. Upon a “Change of Control” (as defined in the Indenture), each Note holder has the right to require the Company to repurchase such holder’s Notes at a purchase price of 101% of the principal amount plus accrued interest. The Indenture contains certain affirmative and negative covenants and restrictions. As of December 31, 2005, the Company was in compliance with the various covenants of the Notes.

In 2003, the Company purchased from Cypress a portion of the Notes with a face value of $17.2 million. The purchase was facilitated through Cypress and financed through the issuance of additional Term C Loan debt of $10.0 million, which is included in the $52.6 million principal amount of the Term C Loan Facility at December 31, 2005. The extinguishment resulted in a gain of $7.2 million that is included in the Company’s Consolidated Statement of Operations. The Company and/or affiliates of the Company, including entities related to Cypress may continue, from time to time, to purchase the Notes previously issued by the Company in the open market or by other means.

Short-Term Debt

AMTROL ALFA, a wholly-owned subsidiary, has available revolving credit facilities with local banks providing for short-term working capital loans of up to the equivalent of approximately $14.0 million. Borrowings under these agreements accrue interest at the three month EURIBOR rate plus a premium ranging from 1.00% to 1.50% (3.49% — 3.99% at December 31, 2005). The balance outstanding at December 31, 2004 and 2005 was approximately $10.8 million and $5.6 million, respectively.

Worldwide cash interest payments amounted to approximately $13.7 million, $13.9 million, and $13.9 million for the years ended December 31, 2003, 2004 and 2005, respectively.

(5) Income Taxes

The components of income (loss) before income taxes are as follows (in thousands):


	Year Ended December 31,
	2003		2004			2005
US	$	114	$	(5,689	)	$	(6,965	)
Foreign		630		2,075			4,240

	$	744	$	(3,614	)	$	(2,725	)

The components of the provision (benefit) for income taxes are as follows (in thousands):


	Year Ended December 31,
	2003		2004			2005
Current:
Federal	$	40	$	—		$	—
State		75		150			85
Foreign		1,051		901			47

		1,166		1,051			132

Deferred:
Federal		—		8,812			—
Foreign		—		(126	)		(667	)

		—		8,686			(667	)

Provision (benefit)	$	1,166	$	9,737		$	(535	)

The income tax rate reconciliation of the difference between actual and statutory effective tax rates for continuing operations is as follows:


	December 31,
	2003			2004			2005
Provision (benefit) for income taxes at the Federal statutory rate	$	252		$	(1,228	)	$	(926	)

State taxes, net of federal tax		50			90			56

Foreign taxes rate differential		397			(391	)		(180	)

Increase (decrease) in U.S. valuation allowance		(11	)		8,060			2,370

Other taxes		602			327			198

Change in tax contingency reserves		—			2,637			(2,272	)

Other, net		(124	)		242			219


Recorded provision (benefit)	$	1,166		$	9,737		$	(535	)

Significant items giving rise to deferred tax assets (liabilities) are as follows (in thousands):


	December 31,
	2004			2005
Deferred Income Taxes short-term
Allowance for doubtful accounts	$	153		$	152
Inventory		878			1,033
Accrued liabilities and other		1,676			880
Valuation allowance		(2,604	)		(1,933	)

	$	103		$	132


	2004			2005
Deferred Income Taxes long-term
Net operating loss carryforward	$	12,390		$	15,761
Capital loss carryforward		—			2,609
Property, plant and equipment		(1,998	)		(2,104	)
Warranty reserves		772			1,278
Deferred compensation		434			371
Other		355			286
Valuation allowance		(11,930	)		(17,521	)


	$	23		$	680

The Company has provided a full valuation allowance against its US net deferred tax assets, which are primarily net operating loss carryforwards. The provision of such valuation allowance results from an assessment by management of the timing and likelihood of certain prospective events central to management’s tax planning strategies, consistent with the requirements of SFAS No. 109. The net operating loss carryforwards are long-term in nature and management may reduce the valuation allowance if its assessment of the timing and likelihood of these prospective events changes. The increase in the valuation allowance is principally due to losses incurred in the Company’s North America segment based upon the Company’s assessment that it was not more likely than not that these tax assets would be realized.

Cash paid for income taxes amounted to $1.1 million, $0.7 million, and $0.1 million for the years ended December 31, 2003, 2004 and 2005, respectively. At December 31, 2005, the Company had federal and state net operating loss carryforwards in the United States of approximately $36.4 million and $16.0 million, respectively, expiring in 2012 through 2025.

The benefit from income taxes for the year ended December 31, 2005 included a $2.6 million reversal of income tax accruals recorded in prior years. This accrual related to tax matters that, based upon additional information obtained during the fourth quarter, was no longer necessary. The reversal was recorded in the fourth quarter of 2005. Offsetting this reversal was a $0.4 million tax reserve provided in the fourth quarter related to foreign withholding taxes.

It is the Company’s policy that no U.S. taxes are provided on undistributed earnings of wholly- owned foreign subsidiaries because substantially all such earnings are expected to be indefinitely reinvested.

(6) Pension and Profit Sharing Plans

The Company has a defined contribution 401(k) plan covering substantially all of its U.S. employees. Under the Plan, eligible employees are permitted to contribute up to 25% of gross pay, not to exceed the maximum allowed under the Internal Revenue Code. The Company matches each employee contribution up to 6% of gross pay at a rate of $0.25 per $1 of employee contribution.

The Company also contributes 3% of each employee’s gross pay up to the Social Security taxable wage base and 4% of amounts in excess of that level up to approximately $0.2 million of wages.

Company contributions to the 401(k) plan totaled approximately $0.8 million for each of the years ended December 31, 2003, 2004 and 2005.

(7) Lease Commitments

The Company leases certain plant facilities and equipment. Total rental expenses charged to operations approximated $1.3 million, $1.3 million and $1.4 million for the years ended December 31, 2003, 2004 and 2005, respectively. Minimum rental commitments under all non-cancelable operating leases are as follows (in thousands):


2006	$	1,088
2007		860
2008		328
2009		121
2010		14

	$	2,411

Certain of the leases provide for renewal options.

(8) Intangible Assets

Intangible assets consist of patents and trademarks and are amortized on a straight-line basis over an estimated useful life of 5 years. Amortization of intangible assets amounted to $0.1 million, $0.4 million and $0.1 million for the years ended December 31, 2003, 2004 and 2005, respectively. These assets are included as part of Other Assets – Other on the Company’s Consolidated Balance Sheets. The table that follows presents the Company’s intangible assets as of December 31, 2005 and 2004:

(in thousands)


	Gross Carrying		Accumulated			Net Intangible
	Amount		Amortization			Assets
December 31, 2005

Patents	$	733	$	(666	)	$	67
Trademarks		104		(82	)		22

	$	837	$	(748	)	$	89


December 31, 2004

Patents	$	697	$	(609	)	$	88
Trademarks		97		(65	)		32

	$	794	$	(674	)	$	120

As of December 31, 2005, the estimated annual intangible asset amortization expense for each of the succeeding five years aggregates $0.1 million as follows:


Year Ended		Annual Amortizaton
December 31,		Expense
2006		$47
2007		21
2008		12
2009		9

(9) Commitments and Contingencies

At December 31, 2005, the Foothill Agreement contained a sublimit to support the issuance of letters of credit in the amount of $3.0 million. At December 31, 2005, letters of credit outstanding amounted to $2.5 million. On March 29, 2006, the Company entered into the Foothill Third Amendment which increased the sublimit from $3.0 million to $5.0 million with certain limitations. Refer to Note 4 for additional details.

The Company monitors and reviews its procedures and policies for compliance with environmental laws. Based upon the Company’s experience to date, the Company operates in substantial compliance with environmental laws, and the cost of compliance with existing regulations is not expected to have a material adverse effect on the Company’s results of operations, financial condition, cash flows or competitive position. However, future events, including changes in existing laws and regulations or enforcement policies, may give rise to additional compliance costs which could have a material adverse effect on the Company’s results of operations, financial condition or competitive position.

The Company is involved in various legal proceedings which, in the opinion of management, will not result in a material adverse effect on its financial condition, results of operations or cash flows.

(10) Stock Plans

Certain key employees and directors have been granted options to purchase common shares of the Company’s parent, Holdings Inc., under the AMTROL Holdings 1997 Incentive Stock Plan (the “Plan”). The Plan included both time vesting and performance-based vesting options. The options which vest over time are subject to fixed plan accounting under APB 25. Under fixed plan accounting, compensation is measured as the intrinsic value of the option at date of grant. The performance-based options expired because the performance measure was not met.

As of December 31, 2005, options to purchase 62,551 shares under the Plan were outstanding. The outstanding options, which have a life of ten years and an exercise price of $100, are exercisable immediately, provided that purchased shares are subject to repurchase by Holdings at fair market value until such shares vest under certain circumstances.

The Company applies APB Opinion No. 25 to account for its stock option plans. Accordingly, pursuant to the terms of the Plan, no compensation cost related to the issuance of stock options has been recognized in the Company’s financial statements. During 2003, 2004 and 2005, no options were granted or vested under this plan.

(11) Business Segment Information

AMTROL’s reportable segments are delineated geographically. In addition to the geographic delineation, the segments are managed separately because of their different product offerings, markets served and cost structures.

The Company’s North American segment operates manufacturing facilities in Rhode Island, Kentucky, Maryland and Ohio, and operates a distribution facility in Ontario, Canada. This segment manufactures and markets products used principally in flow control, storage, heating and other treatment of fluids in the water system, HVAC and refrigerant cylinder markets. These products are marketed throughout the world but primarily in North America, Western Europe and Asia.

The Company’s Europe segment includes its facilities in Guimaraes, Portugal, and Swarzedz, Poland. The Guimaraes facility manufactures returnable and non-returnable steel, hybrid and composite gas cylinders for storing and dispensing of cooking, heating and refrigerant gases that are marketed worldwide. The Swarzedz facility refurbishes gas cylinders.

The primary criteria by which financial performance is evaluated and resources are allocated include revenues and EBITDA. The method of calculating EBITDA is consistent with the definition contained in the Foothill Facility, the Cypress Facility and the Indenture. Readers of financial statements frequently consider EBITDA a useful tool in evaluating a company’s performance. Therefore, the Company believes that inclusion of EBITDA is useful supplemental information. However, EBITDA is not a measure of true cash flow since it does not incorporate changes of other assets or liabilities that may generate or require cash. EBITDA is not a generally accepted accounting measure. The following is a summary of key financial data by segment:


	2003		2004		2005
Net Sales to external customers
North America US
US
Water technologies	$	86,483	$	97,865	$	99,087
Cylinders		23,927		22,662		25,422
Other						—
Water technologies		6,700		7,307		7,779
Europe
Portugal
Cylinders		65,988		69,267		84,893
Other
Cylinders		1,948		1,293		1,367

Consolidated	$	185,046	$	198,394	$	218,548


Income from operations
North America	$	12,371	$	15,185	$	14,435
Europe		1,212		2,768		4,612

Consolidated	$	13,583	$	17,953	$	19,047


EBITDA
North America	$	17,434	$	20,060	$	18,453
Europe		4,406		5,470		7,586

Consolidated	$	21,840	$	25,530	$	26,039


Long-Lived assets
North America
US	$	115,819	$	114,859	$	113,430
Other		10		9		11
Europe
Portugal		31,999		33,127		33,569
Other		1,888		2,010		1,580

Consolidated	$	149,716	$	150,005	$	148,590

(12) Discontinued Operations

The Company, on February 27, 2004, completed the sale of the stock of AMTROL Holdings GmbH (“Holdings”) to DTT NOVA Beteiligungen GmbH & Co. KG (“DTT”) for 300,000 Euros or $363,000. Holdings’ principal subsidiary is AMTROL Nova GmbH & Co. KG, a German-based manufacturer of indirect fired water heaters. DTT is a German-based company that operates as a manufacturer of water heaters.

Holdings’ results of operations were included within the Company’s Europe segment. The Company has treated the sale of Holdings as a discontinued operation; accordingly the results of operations of Holdings are excluded from continuing operations for all periods presented. There was no interest expense allocated to this discontinued operation.

The following table illustrates the net loss recorded on sale of Holdings:


Net assets of Holdings at 2/27/04	$	5,973
Net proceeds		(363	)

Net loss prior to write-off of currency translation adjustment		5,610
Loss resulting from write-off of currency translation adjustment		2,483


Net loss recorded on sale of Holdings	$	8,093

The following table illustrates Holdings’ net sales and pre-tax loss for each of the periods presented (in thousands):


	Year Ended December 31,
	2003			2004			2005
Net sales	$	11,111		$	1,871		$	—

Pre-tax loss		(1,310	)		(770	)		—

Item 15(a)(2) SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

(in thousands)


	Balance at
	Beginning of						Adjustments/			Balance at End
Consolidated	Period		Provision		Recoveries		Write-Offs			of Period
Year ended December 31, 2003 Allowance for doubtful accounts	$	1,075	$	77	$	44	$	—		$	1,196

Year ended December 31, 2004 Allowance for doubtful accounts		1,196		73		—		(220	)		1,049

Year ended December 31, 2005 Allowance for doubtful accounts		1,049		6		—		(82	)		973

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in West Warwick, Rhode Island, on the 31st day of March 2006.


		AMTROL Inc.

		By:		/s/ Joseph L. DePaula Joseph L. DePaula
				Chief Financial Officer

		Date:		March 31, 2006

Pursuant to the requirements of the Securities Act of 1934, this Form 10-K has been signed by the following persons in the capacities and on the date indicated.


Signature	Title	Date
/s/ Larry T. Guillemette	Chairman of the Board, President,	March 31, 2006
Larry T. Guillemette	Chief Executive Officer and Director
	(Principal Executive Officer)

/s/ Joseph L. DePaula Joseph L. DePaula	Exec. Vice President, Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)	March 31, 2006

/s/ John P. Cashman John P. Cashman	Director	March 31, 2006

/s/ James A. Stern James A. Stern	Director	March 31, 2006

EXHIBIT INDEX


Exhibit #		Document Description
	3.1	Restated Articles of Incorporation of AMTROL Inc. (incorporated by reference from the Company’s Registration Statement on Form S-4, Registration No. 333-18075, declared effective by the Securities and Exchange Commission on January 2, 1997).

	3.2	Bylaws of AMTROL Inc. (incorporated by reference from the Company’s Registration Statement on Form S-4, Registration No. 333-18075, declared effective by the Securities and Exchange Commission on January 2, 1997).

	4.1	Indenture, dated as of November 1, 1996 between AMTROL Acquisition, Inc. and The Bank of New York (incorporated by reference from the Company’s Registration Statement on Form S-4, Registration No. 333-18075, declared effective by the Securities and Exchange Commission on January 2, 1997).

	4.2	Form of 10-5/8% Senior Subordinated Notes due 2006 (included in Exhibit 4.1) (incorporated by reference from the Company’s Registration Statement on Form S-4, Registration No. 333-18075, declared effective by the Securities and Exchange Commission on January 2, 1997).

	4.3	First Supplemental Indenture, dated as of November 13, 1996, between AMTROL Inc. and The Bank of New York (incorporated by reference from the Company’s Registration Statement on Form S-4, Registration No. 333-18075, declared effective by the Securities and Exchange Commission on January 2, 1997).

	10.1	Credit Agreement, dated as of November 13, 1996, among AMTROL Acquisition, Inc. and AMTROL Holdings, Inc., various lending institutions party thereto, Morgan Stanley Senior Funding, Inc. as documentation agent, and Bankers Trust Company, as administrative agent (incorporated by reference from the Company’s Registration Statement on Form S-4, Registration No. 333-18075, declared effective by the Securities and Exchange Commission on January 2, 1997).

	10.1.1	First Amendment to Credit Agreement, dated as of June 24, 1997 (incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 5, 1997).

	10.1.2	Second Amendment to Credit Agreement, dated as of December 12, 1997 (incorporated by reference to Exhibit 7(c) in the Company’s Current Report on Form 8-K dated December 22, 1997).

	10.1.3	Third Amendment to the Credit Agreement dated as of June 24, 1998 (incorporated by reference to the Company’s Quarterly report on Form 10-Q for the quarter ended July 4, 1998).

	10.1.4	Fourth Amendment to the Credit Agreement dated as of July 13, 1998 (incorporated by reference to the Company’s Quarterly report on Form 10-Q for the third quarter ended October 3, 1998).

	10.1.5	Fifth Amendment to the Credit Agreement dated as of March 30, 2001 (incorporated by reference to the Company’s Annual Report of Form 10-K for the fiscal year ended December 31, 2000).

	10.2	AMTROL Inc. Pension Plan and Trust (incorporated by reference from the Company’s Registration Statement on Form S-1, Registration No. 33-48413, declared effective by the Commission on March 18, 1993).*

	10.3	Amendments to AMTROL Inc. Pension Plan and Trust (incorporated by reference from the Company’s Registration Statement on Form S-1, Registration No. 33-48413, declared effective by the Securities and Exchange Commission on March 18, 1993).*

	10.4	AMTROL Inc. Executive Cash Bonus Plan (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1994).*


	10.5			AMTROL Inc. Supplemental Retirement Plan II (incorporated by reference from the Company’s Registration Statement on Form S-1, Registration No. 33-48413, declared effective by the Commission on March 18, 1993).*

	10.6			First Amendment to AMTROL Inc. Supplemental Retirement Plan II (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995).*

	10.10			Employment Agreement dated June 24, 1998 by and between AMTROL Inc. and Albert D. Indelicato (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998).*

	10.11			AMTROL Holdings Inc. 1997 Incentive Stock Plan dated December 16, 1997. (incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997).*

	10.12			Loan and Security Agreement dated December 26, 2001 among Amtrol Holdings, Inc., Amtrol Inc. and WaterSoft Inc. and Foothill Capital Corporation as the Arranger and Administrative Agent (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).

	10.12.1			First Amendment and Waiver To Loan and Security Agreement dated November 18, 2003 among Amtrol Holdings, Inc., Amtrol Inc., WaterSoft Inc., Amtrol Canada LTD (incorporated by reference from the Company’s Form 8-K dated November 25, 2003).

	10.13			Loan and Security Agreement dated December 26, 2001 among Amtrol Holdings, Inc., Amtrol Inc. and WaterSoft Inc. and Cypress Merchant Banking Partners, L.P. and Cypress Offshore Partners, L.P. (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).

	10.13.1			First Amendment to Loan and Security Agreement dated November 18, 2003 among Amtrol Holdings, Inc., Amtrol Inc., WaterSoft Inc., Amtrol Canada LTD, and Cypress Merchant Banking Partners, L.P. and Cypress Offshore Partners, L.P. (incorporated by reference from the Company’s Form 8-K dated November 25, 2003).

	10.13.2			Second Amendment to Loan and Security Agreement dated November 18, 2003 among Amtrol Holdings, Inc., Amtrol Inc., WaterSoft Inc., Amtrol Canada LTD, and Cypress Merchant Banking Partners, L.P. and Cypress Offshore Partners, L.P. (incorporated by reference from the Company’s Form 8-K dated November 25, 2003).

	10.13.3			Second Amendment to Loan and Security Agreement dated December 22, 2004 among Amtrol Holdings, Inc., Amtrol Inc., WaterSoft Inc., Amtrol Canada LTD, and Wells Fargo Foothill, Inc. (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004).

	10.13.4			Third Amendment to Loan and Security Agreement dated March 29, 2006 among Amtrol Holdings, Inc., Amtrol Inc., WaterSoft Inc., Amtrol Canada LTD, and Wells Fargo Foothill, Inc.

	10.14			Subsidiary Guaranty Agreement dated December 26, 2001 among Amtrol International Investments, Inc. and Cypress Merchant Banking Partners, L.P. and Cypress Offshore Partners, L.P. (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).

	10.15			Contribution Agreement dated December 26, 2001 among Amtrol Holdings, Inc., Amtrol Inc. and WaterSoft Inc. and Cypress Merchant Banking Partners, L.P. and Cypress Offshore Partners, L.P. (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).

	10.16			Subsidiary Guaranty Agreement dated December 26, 2001 among Amtrol International Investments, Inc. and Foothill Capital Corporation (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).

	10.17			Contribution Agreement dated December 26, 2001 among Amtrol Holdings, Inc., Amtrol Inc. and WaterSoft Inc. and Foothill Capital Corporation (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001).


	10.18			Change of Control Agreement dated October 29, 2004 among Amtrol Holdings Inc. and Albert D. Indelicato.* (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004).

	10.19			Retention and Change of Control Agreement dated January 18, 2006 among Amtrol Holdings Inc., Amtrol Inc. and Larry T. Guillemette.*

	10.20			Retention and Change of Control Agreement dated January 18, 2006 among Amtrol Holdings Inc. and Amtrol Inc. and Joseph DePaula.*

	10.21			Retention and Change of Control Agreement dated January 18, 2006 among Amtrol Holdings Inc., Amtrol Inc. and Christopher A. Laus.*

	10.22			Form of Indemnification Agreement dated February 2, 2006 among Amtrol Inc and Larry T. Guillemette.*

	10.23			Form of Indemnification Agreement dated February 2, 2006 among Amtrol Holdings Inc and Larry T. Guillemette.*

	10.24			Form of Indemnification Agreement dated February 2, 2006 among Amtrol Inc and Joseph L. DePaula.*

	10.25			Form of Indemnification Agreement dated February 2, 2006 among Amtrol Holdings Inc and Joseph L. DePaula.*

	10.26			Form of Indemnification Agreement entered into between Amtrol Inc and each member of the Board of Directors and certain executives (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004).

	10.27			Form of Indemnification Agreement entered into between Amtrol Holdings Inc and each member of the Board of Directors and certain executives (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004).

	14			Code of Ethics

	18			Preferability letter regarding change in accounting policy from LIFO to FIFO (incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998).

	21			Subsidiaries of AMTROL Inc.

	31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

	31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14 (a) under the Securities Exchange Act of 1934.

	32.1			Certification of Chief Executive Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2			Certification of Chief Financial Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contract or compensatory plan arrangement.


PART I	Page

Item 1 — Business
Background		3
Operations		4
Products and Markets		5
Distribution and Marketing		7
Manufacturing, Raw Materials and Suppliers		8
Seasonality and Backlog		8
Patents, Trademarks and Licenses		8
Competition		9
Employees		9
Environmental Matters		9
Item 1A — Risk Factors		9
Item 1B — Unresolved Staff Comments		10
Item 2 — Properties		11
Item 3 — Legal Proceedings		11
Item 4 — Submission of Matters to a Vote of Security Holders		11

PART II

Item 5 — Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		12
Item 6 — Selected Financial Data		13
Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 7A — Quantitative and Qualitative Disclosures of Market Risk		27
Item 8 — Financial Statements and Supplementary Data		28
Item 9 — Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		28
Item 9A — Controls and Procedures		28
Item 9B — Other Information		29

PART III

Item 10 — Directors and Executive Officers of the Registrant		29
Item 11 - Executive Compensation		30
Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		33
Item 13 — Certain Relationships and Related Transactions		34
Item 14 — Principal Accountant Fees and Services		34

PART IV

Item 15 — Exhibits and Financial Statement Schedules		35
Report of Independent Registered Public Accounting Firm		36
Schedule II — Valuation and Qualifying Accounts and Reserves		57
Signatures		58
Exhibit Index		59
EX-10.13.4 THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT DATED MARCH 29, 2006
EX-10.19 GUILLEMETTE AGREEMENT DATED 1-18-2006
EX-10.20 DEPAULA AGREEMENT DATED 1-18-2006
EX-10.21 LAUS AGREEMENT DATED 1-18-2006
EX-10.22 AGREEMENT DATED 2-2-2006 AMONG AMTROL INC. AND LARRY T. GUILLEMETTE
EX-10.23 AGREEMENT DATED 2-2-2006 AMONG AMTROL HOLDINGS INC. AND LARRY T. GUILLEMETTE
EX-10.24 AGREEMENT DATED 2-2-2006 AMONG AMTROL INC AND JOSEPH L. DEPAULA
EX-10.25 AGREEMENT DATED 2-2-2006 AMONG AMTROL HOLDINGS INC. AND JOSEPH L. DEPAULA
EX-14 CODE OF ETHICS
EX-21 SUBSIDIARIES OF AMTROL INC.
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32.1 SECTION 906 CERTIFICATION OF CEO
EX-32.2 SECTION 906 CERTIFICATION OF CFO