Associated Materials' net sales down; company ends Q1 with $6.1 million of cash and equivalents

By Lisa Kerner

Charlotte, N.C., May 17 - Associated Materials, LLC's first-quarter 2013 performance was a continuation of "what we experienced in the fourth quarter," according to president and chief executive officer Jerry Burris, and included "increased adjusted EBITDA on lower revenue and continued progress on our strategic initiatives."

Burris made his comments during the company's earnings conference call on Friday.

"We continued to see softness in the repair and remodeling market, and we believe the cool weather in many parts of the country negatively impacted sales," Burris said.

"Net sales for the quarter were $209 million, down 1.9% as compared to $213 million in 2012."

While not satisfied with topline sales results, which he believes are reflective of market conditions, Burris is pleased with Associated Materials' $1.5 million improvement in adjusted EBITDA year-over-year.

First-quarter adjusted EBITDA was a negative $1.3 million compared to a negative $2.8 million for the first quarter of 2012.

The company's capital optimization efforts in the quarter were primarily capital-structure related, according to Burris.

"We amended our asset-based loan facility for improved pricing and extension of maturity, and shortly thereafter, we issued $100 million of additional 9 1/8% senior secured notes for the purpose of paying down borrowings on our ABL."

The transactions provided Associated Materials with increased liquidity and flexibility to grow the business, said the CEO.

Financial highlights

At the end of the quarter at March 30, the company had cash and cash equivalents of $6.1 million and available borrowing capacity of $44 million under its ABL facilities, according to chief financial officer Paul Morrisroe.

By amending the ABL facility in April, allowing for the May 1 add-on notes offering, the company reduced interest expense by 75 basis points, extended the maturity to 2018 and increased borrowing availability, said Morrisroe.

Total long-term debt at quarter-end was $820 million, compared to $808 million at year-end, according to Associated Materials' form 10-Q filed with the Securities and Exchange Commission.

First-quarter gross profit increased 9% to $44.8 million due to lower material costs and favorable pricing, said Morrisroe, driving gross profit margin up 210 bps to 21.4%.

Net cash used in operating activities for the quarter was $14 million, compared to $4 million for the prior-year period.

"Cash generated from working capital was $3.2 million in the first quarter of 2013 as compared to cash generation of $19.6 million in the first quarter of 2012, resulting in a year-over-year decrease of $16.4 million," Morrisroe said.

The company reported a net loss for the first quarter of 2013 of $31 million versus a net loss of $38 million for the first quarter of 2012.

Associated Materials manufactures and distributes exterior residential building products and is based in Cuyahoga Falls, Ohio.

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