1. HIGH YIELD/
DISTRESSED
MILLER TABAK ROBERTS SECURITIES, LLC RESEARCH
_________________________________________________________ REPORT
Associated Materials Inc. (SIDE)
Mdy's/ Current Bond
Coupon Description Issuer Maturity CUSIP S&P Amt O/S Yield YTW Price Opinion
9.750% Senior Subordinated Notes Associated 04/15/12 045709AE2 Caa2/CCC $ 165MM 9.7% 9.6% 100.50 Hold
11.250% Senior Discount Notes AMH 03/01/14 001706AB6 Caa3/CCC $ 307MM 0.0% 15.8% 53.75 Sell
13.625% Senior Notes AMH II 12/01/14 NA NA $ 77MM NA NA NA NA
* 11.25% Senior Discount Notes were issued at an aggregate principal amount of $446 million.
Moody's and S&P's outlook is stable.
March 7, 2006
Ronald A. Rich
(212) 692-5185
rrich@mtrdirect.com
OPINION
We initiate coverage of Associated Materials with a HOLD recommendation on the
structurally senior 9.75% Senior Subordinated Notes and a SELL recommendation on the
11.25% Senior Discount Notes. We expect the company to successfully navigate lower
liquidity levels in the second quarter of fiscal 2006 and 2007, though we believe there are a
number of external forces that could potentially compromise the company’s medium-term
financial health, including further raw material cost increases, a mature vinyl siding market,
a rising mortgage interest rate environment, and a softening new home construction market.
In our restructuring scenario, to which we have applied a cumulative probability of 32.5%, the
9.75% Senior Subordinated Notes are fully covered by distributable value, while the 11.25%
Senior Discount Notes are substantially impaired. As compared with our investment hurdle
rates of 9.5% and 20.0% on the Senior Subordinated Notes and the Senior Discount Notes, we
calculate an expected internal rate of return of 9.0% and 9.8%, respectively. While the 9.75%
Senior Subordinated Notes could come under pricing pressure should our fundamental view
materialize, our HOLD recommendation reflects our belief that the Notes are currently fully
valued.
SUMMARY
• Headquartered in Cuyahoga Falls, OH, Associated Materials Inc. is a leading manufacturer
and distributor of vinyl windows, vinyl siding, aluminum and steel siding, and accessories,
with net sales of $1.1 billion. Harvest Partners and Investcorp own the company.
• The company has recently been adversely affected by softness in the repair and remodeling
markets within pockets of the Midwest and Central regions, soaring polyvinyl chloride and
aluminum costs, as well as slowing growth in its vinyl siding segment. Additionally, as
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2. announced on February 3, 2006, Associated’s President and CEO, Michael Caporale,
resigned, effective at the time a successor is named; we consider this a negative.
• We expect continued strong unit growth in window sales, offset by slightly declining unit
volumes in siding and accessories. Gross margins are anticipated to continue to be under
pressure, with raw material recovery projected to begin in the fourth quarter of fiscal 2006.
• Fiber-cement siding, via James Hardie Industries, is acquiring an increasing share of the
siding market, possibly to the long-term detriment of vinyl siding and Associated Materials.
• We project that prime polyvinyl chloride pricing will abate at a rate of $0.02 per pound per
quarter, while aluminum will maintain its bull run through 2006, resulting in a year-over-year
net negative effect on gross profit through the third quarter of fiscal 2006.
• The debt load associated with the company and its parent entities was acquired in connection
with its take-private transaction and two dividend recapitalizations. Net leverage and net
interest/dividend coverage through the 13.625% Senior Notes are 7.5x and 1.3x, respectively.
• LTM adjusted EBITDA is $95.7 million for the period ending September 30, 2005, as
compared with $124.0 million in the prior-year period. Liquidity at the end of the third
quarter of 2005 was $75.7 million, comprised of $3.8 million of cash and $71.9 million of
revolver availability. Our base case scenario produces a trough liquidity position in the
second quarter of 2006 of $30.0 million.
BUSINESS OVERVIEW
Associated Materials Inc. (“Associated” or “Company”) is a leading manufacturer and distributor
of exterior building products with LTM sales of $1.1 billion for the period ending September 30,
2005. The Company’s core products consist of vinyl windows, vinyl siding, aluminum and steel
siding, and accessories, and are complemented by vinyl fencing, decking and railing products, as
well as third-party manufactured products. Associated distributes its products through a
company-owned network of 129 supply centers (70% of net sales) and approximately 250
independent distributors across the U.S. and Canada. Products are marketed to an estimated
50,000 contractors, as well as to an increasing new home builder base. Approximately 60% of
Associated’s products are currently sold to contractors engaged in the home repair and
remodeling market, while 40% is sold to the new construction market; historically, the
repair/remodel market has accounted for 66% of sales. As of January 1, 2005, the Company had
approximately 3,317 full-time employees, with an estimated 615 workers covered by collective
bargaining agreements.
Recent financial performance has been adversely affected by a number of factors. The Company
has experienced a slowing in its home repair and remodeling market within pockets of the
Midwest and Central regions, flat vinyl siding unit volumes, and lower Other product volumes.
Rising raw material costs (resin and aluminum), a very competitive and possibly maturing vinyl
siding market, higher freight costs due to higher fuel costs, and manufacturing efficiencies
related to a plant consolidation, have all impacted gross margins.
PRODUCT LINES
Associated Materials manufactures and distributes vinyl windows, vinyl siding, aluminum trim
coil, aluminum and steel siding, and accessories, as well as vinyl fencing, decking and railing.
As a specialty distributor, it offers a wide variety of products within its company-owned supply
centers that are complemented by third-party products (15% of net sales), including roofing
materials, insulation, and installation equipment and tools. Outside of the Company’s core
2

3. offerings, the majority of products sold support the installation of siding. The following section
will focus on Associated’s primary product lines, as well as those elements that differentiate
them and drive their competitive dynamic.
Windows
Vinyl windows comprised 31% of Associated’s 2004 net sales, totaling $339 million.
Associated manufactures and distributes its windows across the economy, standard and premium
categories under the Alside, Revere, Gentek and Preservation brand names. The Company’s
economy windows are sold primarily into the new construction market, while the standard and
premium windows are typically used in repair and remodeling. All of Associated’s windows are
made to order and, in the repair and remodeling segment, are custom manufactured to fit existing
window openings. Custom fabrication results in a less expensive and higher quality installation.
The Company manufactures its windows at facilities in Ohio, Iowa, North Carolina, Washington
and London, Ontario (Canada), most of which utilize vinyl extrusions produced in its West
Salem, Ohio vinyl extrusion facility. Associated expects to complete construction of a new
window manufacturing facility in Yuma, Arizona in 2006.
Types. All windows share the same basic construction - glass, mounted in a sash that sits in a
frame. The arrangement of these elements produces various styles, including double-hung
windows (the most popular), casement windows, sliding windows, bay windows, hopper
windows and awning windows. Each suits a certain style of house and has benefits that differ
according to weather and use. Associated manufactures most styles of window.
Materials. With regard to exterior building material products, consumers seek the best looking,
lowest maintenance product for a given price point. Windows are no exception and have
evolved to offer consumers a greater choice of materials, and varying appearance and
maintenance attributes. Wood tends to be the most popular material, especially for that part of
the window that is seen from the interior. While it does not conduct cold or allow for
condensation as much as other materials, it is subject to shrinkage and swelling. A wood
window will require repainting on its exterior every few years. A clad-wood window addresses
the maintenance issue with cladding, made of extruded aluminum or vinyl, on its exterior. The
cladding covers both the sash and frame, and is virtually maintenance-free. Vinyl cladding is
constructed so that its color permeates the material, reducing the appearance of wear. As
compared with vinyl, aluminum-clad windows are offered in a greater variety of colors, but will
scratch. The all-vinyl window, which is produced by Associated, is among the least expensive
window types and is resistant to heat loss and condensation. The newest material technologies
combine wood fiber and thermoplastic polymers to produce a window that has the dimensional
stability and insulating properties of wood and the rot imperviousness of vinyl.
Product Features. Energy efficiency in windows is an ongoing focus for new product
development, incorporating multiple panes of glass, gas fillings, and heat-sensitive coatings.
Most new windows utilize dual-pane glass, in which a layer of inert gas, such as krypton or
argon, is sealed between the inner and outer panes. Another method of achieving energy savings
is through a low-emissivity (low-E) coating, an invisible layer of metallic oxide that reduces the
passage of heat through the glass. Low-E coatings also filter ultraviolet radiation, protecting
furniture and artwork from fading. Associated’s window line incorporates these energy saving
features, which is consistent with most major manufacturers. Another popular trend is making
the vinyl window exterior appear more like wood by creating the appearance of a grain in the
vinyl.
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4. Raw Materials. Primary raw materials used in the manufacture of Associated’s windows and
siding include prime polyvinyl chloride (“PVC”), resin stabilizers and pigments, packaging
materials, window hardware and glass. With many of these materials reliant upon energy-
related feedstock, and with raw materials accounting for an estimated 50% of the cost of
goods sold, Associated has come under pressure to maintain margins in the face of rising
costs. Between the third and fourth quarters of fiscal 2005, the Company experienced a
35% increase in its cost of resin, as well as a 25% increase in the cost of micro-ingredients.
Pricing. Due to the high degree of competitor fragmentation and product feature proliferation in
the fenestration (the arrangement of windows in a wall) industry, the pricing of windows is less
transparent to the end-user than the price of siding. This has allowed manufacturers to better
exploit price/benefit trade-offs and price their products more opportunistically. A vinyl window
produced for the new construction market costs approximately $180, while a replacement
window will cost around $210. A wood window can be $100 to $150 more than a vinyl window,
and a vinyl-clad wood window can be even more expensive.
Decision-maker. The primary decision-maker Figure 1
in the purchase of a window depends upon BUILDING PRODUCTS
whether the window is being sold into the new Top Industry Participants
construction or repair/remodel market. In a WINDOW MANUFACTURERS SIDING MANUFACTURERS
Associated Materials Associated Materials
survey conducted by the National Fenestration Jeld-Wen Alcoa
Rating Council in 2001, home builders Anderson
Pella
Owens Corning
Louisiana-Pacific
accounted for 87% of decision-makers for Atrium Windows & Doors
Silver Line Building Products
Royal Group Technologies
CertainTeed
window purchases in the new construction Weather Shield
Milgard Windows
Ply Gem Industries
James Hardie
market. Builders appear to be very loyal to MI Windows & Doors Kaycan Building Materials
Marvin Windows & Doors Heartland Building Products
particular manufacturers and cited high quality PRO DEALERS SPECIALTY DISTRIBUTORS
Hughes Supply Associated Materials
and consistent, reliable service as their two top Stock Building Supply Rinker Materials
reasons for their ongoing relationship with the 84 Lumber
Lanoga
ABC Supply
Bradco Supply
manufacturer. In the repair/remodel market, BMHC
Builders FirstSource
Allied Building Products
Pacific Coast Building Products
consumers have a greater impact on the The Strober Organization Norandex Distribution (Owens)
Huttig Building Products Beacon Roofing Supply
purchase decision, speaking to the importance Hope Lumber & Supply Harvey Industries
RETAILERS HOME BUILDERS
of brand recognition and transparency regarding Home Depot D.R. Horton
efficiency made possible through energy- Lowe's Companies
Wal-mart
Pulte Homes
Lennar Corp.
efficiency ratings systems. Sears
Menards
Centex Corp.
KB Home
CCA Global Partners Beazer Homes USA
Sherwin-Williams The Ryland Group
Competition. The fenestration industry is Stock Building Supply Hovnanian Enterprises
84 Lumber M.D.C. Holdings
highly fragmented, comprised of an estimated Lanoga NVR
Source: MTR
four to five hundred window manufacturers.
Companies compete primarily on relationships with distributors and home builders, price/benefit
and service. Leading window manufacturers include Anderson, Jeld-Wen, Pella, Atrium
Windows & Doors, MI Windows & Doors, Milgard Windows, Silver Line Building Products,
Weather Shield, Marvin Windows & Doors, Ply Gem Industries, Simonton Windows,
CertainTeed (owned by St. Gobain), Royal Group Technologies, Owens Corning and Associated
Materials (see Figure 1). Strategic consolidation, as well as private equity investment, continues
to shape the competitive landscape of the industry. As of July 2005, Window & Door Magazine
estimated that the nation’s top five window manufacturers accounted for approximately one-third
of all residential window units, up from 25% in 1995.
4

5. Siding
Siding, or exterior cladding, is the material applied to the exterior of a house to protect it from
weather and pests, helping to prevent moisture penetration and the growth of biological
contaminants such as mold, dust mites and bacteria. In fiscal 2004, vinyl siding accounted for
28% of Associated Materials’ net sales, or $306 million. The Company manufacturers its vinyl
siding in a variety of patterns and colors across the economy, standard and premium categories.
As with windows, economy siding is sold into the new construction market, while standard and
premium siding are primarily used in the repair/remodel market. Associated also manufactures a
broad range of painted and vinyl coated aluminum trim coil to support vinyl siding installations.
In addition, the Company makes aluminum siding and accessories that are sold into specific
markets, such as Canada.
Types. There are a number of different types of exterior cladding, including wood, vinyl, metal,
composite wood, fiber-cement, stucco, brick and stone. Each presents its own trade-offs that
center on upfront product cost, maintenance and appearance (see Figure 2).
Materials. While it has long been considered the standard for exterior cladding, wood is losing
market share to other cladding materials. According to the U.S. Census Bureau, wood siding
was used on 10% of new homes in 2002, as compared with 30% in 1970. The primary issue has
been its cost, as well as the cost of maintenance. Depending upon the weather of a particular
region, wood siding must be repainted every three to five years. Vinyl, the current market
leader, and fiber-cement have progressively taken market share from wood, due primarily to
their lower maintenance requirements (see Markets). Vinyl siding does not have to be painted
and can usually be washed clean with a garden hose. Fiber-cement has become increasingly
popular and may have recently reached a tipping point in market recognition. Given the
importance of its emergence, fiber-cement siding will be discussed in greater detail below. In
some parts of the country, masonry sidings are popular. These systems include thin brick,
cultured stone, concrete brick and stucco. Brick and stone have the lowest life cycle cost
because of low maintenance costs, but they also have the highest initial cost.
Geography. Over time, different materials have come to dominate distinct geographic markets,
driven by local weather, style and affordability. Historically, vinyl siding has been the exterior
cladding of choice in the Midwest, followed by the Mid-Atlantic and South Atlantic regions.
Wood cladding is common in the Northeast, Pacific Northwest and South Central regions.
Stucco accounts for approximately 50% of the South West, while brick is readily found in the
South Central region.
Vinyl Siding Pros. With a 40%-plus market share position, vinyl siding is the exterior cladding
of choice for homes priced up to $300,000. Beyond its low maintenance benefits, its popularity
has grown over the past decade due to new product offerings such as wood-like textures, shingle
and shake-style panels, more appealing trim components and deeper colors. In addition, most
larger vinyl siding manufacturers warranty their products to the original owner for fifty years or
for life.
Vinyl Siding Cons. When queried about the leadership position of vinyl siding in the exterior
cladding market, competing materials manufacturers will ask, “What person says that, when she
grows up, she would like to live in a plastic house?” The question makes an over-simplified
point, but it does speak to the primary downside of vinyl siding – it is not wood. For the starter-
5

6. home buyer, though, the less-than-ideal exterior is more than made up for by increased home
square footage.
Vinyl siding can be damaged by impact, severe winds and heat reflecting off a window. Because
vinyl siding expands and contracts in response to temperature changes, the quality of installation
greatly affects the appearance and longevity of a vinyl siding application. Poor workmanship
can lead to bulges, warping and separations in the siding, sags in the vinyl soffitt and ripples in
the fascia.
Quality. The quality of vinyl siding often begins with its thickness. Economy siding, typically
0.040 inches thick, is sold into the new construction market, while standard and premium siding,
often 0.044 to 0.048 inches thick, is more common in the repair/remodel market. Thickness not
only influences the stiffness of the siding, but also its thermal stability. Thin panels can bulge
and buckle, and those thinner than 0.040 inches can sag in hot weather. Rigid panels will also
better survive high winds. Recent advancements include a foam-backed siding in which
conventional vinyl is fused with expanded polystyrene. The result is a more rigid board that can
have a wider reveal and a straighter face. The foam-backed siding is priced up to 50% more than
conventional vinyl, positioning it up-market and making it less competitive with substitute
products.
Raw Materials. PVC is the primary raw material used in the production of vinyl siding. It is
heated until molten and then extruded into sheets that are then embossed with a brushed or
wood-grain pattern that provides texture and reduces PVC’s synthetic look. Additives are used
to improve impact resistance and prevent UV damage and color fading. Color pigments are
mixed with the vinyl resin before the plastic is extruded, so that the color permeates the siding.
Some manufacturers co-extrude one layer of vinyl over another, with the bottom layer comprised
of both prime and recycled PVC.
Pricing. With six primary manufacturers in the marketplace and an estimated fifteen
secondary producers, pricing in the vinyl siding market is relatively transparent. Price
increases by manufacturers typically follow a herd mentality, with some leading (Alcoa) and
others following (Associated). Vinyl siding’s on-the-wall cost (installed), depending upon
thickness, can range between $1.50 and $2.00 per square foot, with a typical installation
requiring 2,500 square feet of siding. By comparison, fiber-cement and wood plank’s on-the-
wall cost is approximately $2.65 per square foot and $3.50 per square foot, respectively.
Decision-maker. In a study published in the July 2001 Forest Products Journal, it was found
that, among architects, contractors and homeowners, homeowners were by far the least likely to
select the siding for new residential construction projects. Architects and contractors did indicate
that homeowner opinion was important, though, and cited appearance and performance as the
most important influences in their selection of siding material. Among cost factors, installation
and warranty costs ranked the highest. Our conversations with building materials distributors
reinforce this conclusion and extend it to include most repair/remodel installations. Empirically,
distributors have found that consumers have limited awareness of siding manufacturers and are
highly influenced by their contractor and architect. This speaks to the value of Associated’s
supply centers and the Company’s ability to directly represent its product to its customer.
It has also been noted that builders and lumberyards are highly price sensitive, while
repair/remodel contractors place a greater emphasis on brand.
6

7. Competition. As mentioned above, the siding industry is considerably more consolidated than
the fenestration industry. Each manufacturer tends to emphasize a particular segment of the
siding market, which will also drive its products’ presence in certain distribution channels. For
example, Alcoa’s product line focuses on higher-end, higher margin siding, which will typically
not be found in lumberyards; Royal Group Technologies produces a lower-end product that it
markets to home builders. Leading siding manufacturers include Alcoa, Royal Group
Technologies, CertainTeed, Louisiana-Pacific, Owens Corning, Ply Gem, James Hardie
Industries and Associated Materials.
Seasonality. Given that most of the Company’s building products are intended for exterior use,
sales are somewhat seasonal, with an emphasis on the second and third fiscal quarters and a
marked low in the first quarter of the year. This seasonality is more pronounced in the
Company’s siding line as compared to windows.
7

8. Figure 2
SIDING PRODUCT COMPARISON
Cost per
Siding Types Description SF Pros Cons Manufacturers
Alcoa,
Associated
Does not need to be Materials,
Does not look like
painted, color CertainTeed,
wood, fewer color
permeates thickness, Crane,
choices than wood,
$ 1.50 - low maintenance, Heartland,
VINYL more easily damaged
2.00 improving likeness to Louisiana-
and more difficult to
wood, material and Pacific, Nailite,
repair than wood, little
installation costs are Owens Corning,
insulation value,
relatively low Royal Group
Technologies,
Variform
Unmatched beauty
and durability, takes a
variety of finishes,
easy to install and
Boards, shingles, $ 3.00 - repair, some insulation Expensive, must be
WOOD Boise Cascade
shakes 4.00 value, available painted or stained
prestained, primed or
unfinished, fire-
retardent, environment-
friendly
Least expensive,
easiest composite to
$ 1.50 -
Plywood install, best suited to Boise Cascade
2.00
contemporary-styled
homes
Preprimed and Boise Cascade,
Oriented Strand Molded to look like $ 1.50 - Does not look like
COMPOSITE WOOD prefinished in a variety Louisiana-
Board (OSB) clapboard 2.00 wood
of colors Pacific
Preprimed and Does not look like
Molded to look like $ 1.50 - Louisiana-
Hardboard prefinished in a variety wood, questionable
clapboard 2.00 Pacific
of colors durability
Panels made of kiln- No mortar required,
Thin Brick Expensive
fired clay bricks maintenance free
$ 12.00 - No mortar required, Owens Corning,
Stone Expensive
15.00 maintenance free Eldorado Stone
U.S. Gypsum,
Available in a number
Sand and cement $ 12.00 - Dryvit, Senergy,
Stucco of colors, textures and
product 16.00 Parex, Simplex,
MASONRY patterns, waterproof
La Habra, STO
Available in planks or
panels, variety of
Made of cement sand
textures, primed, Brittle, tough on James Hardie,
and cellulose fiber,
Fiber-cement $ 2.65 prefinished or blades, requires CertainTeed,
designed to look like
unprimed, impact topcoat maintenance Nichiha
wood
resistant, termite and
fireproof
Durable, less prone to Alcoa, Owens
Aluminum corrosion, less Corning, Revere,
Poor insulator, limited
expensive than steel Rollex
METAL colors, denting, difficult
Durable, resists dents to install and repair
Steel
better than aluminum
Source: New-Siding.com and MTR
8

9. MARKETS
Associated Materials’ business is affected by macro trends across a number of different markets.
The following section will discuss those elements that define each of these markets, addressing
market size, historical trends and market drivers.
Windows
Driven by growth in remodeling and an increasing trend toward larger homes that require a
greater number of windows, domestic window demand has grown rapidly over the past ten years.
The vinyl window’s initial success in the marketplace came at the expense of aluminum, but it is
increasingly taking market share from wood. The Freedonia Group has estimated that vinyl
window demand will grow at a compounded annual rate of 5.0% between 2002 and 2012;
this compares with Associated’s approximate 10% year-to-date unit volume growth. In
2004, Ducker Research estimated that vinyl windows accounted for 35.1% of all windows used
in new construction and 52.3% of windows used in the repair and remodel market (see Figures 3,
4). Vinyl’s success in the repair/remodel market stems from the manufacturing flexibility
required to produce a wide variety of custom sizes. Industry participants attribute recent
strong demand for windows to the consumer’s desire to lower monthly energy bills.
Looking forward, replacement windows are estimated to grow to 59% of total window demand
in 2008 and to 62% of total window demand in 2012. As for vinyl’s future market share, vinyl
window manufacturers are optimistic about continued growth in the segment and expect vinyl to
continue to take share from wood and aluminum.
Figure 3 Figure 4
VINYL WINDOW SHARE OF WINDOW MARKET RESIDENTIAL WINDOW MARKET
(In Millions of Units)
35.5% 52.5%
32.0
New Construction
Repair/Remodel
52.0%
35.0% 30.0
28.0
Units
51.5%
34.5% 26.0
51.0%
24.0
34.0% 50.5% 22.0
2000 2001 2002 2003 2004 2000 2001 2002 2003 2004
Percentage of New Construction Percentage of Repair/Remodel New Construction Repair/Remodel
Source: Ducker Research Co. from National Fenestration Rating Council Source: Ducker Research Co. from National Fenestration Rating Council
Siding
Based upon figures from the National Association of Home Builders, the exterior cladding
market as a whole is expected to be flat through 2006 at 12.0 billion square feet; this compares
with 11.9 billion square feet in 2003. As shown in Figure 5, exterior cladding in the
repair/remodel segment is expected to continue to grow to 6.5 billion square feet in 2006, while
the new construction market is projected to remain relatively flat at 5.5 billion square feet.
9

10. Figure 5 Figure 6
EXTERIOR CLADDING U.S. SHIPMENTS OF VINYL SIDING AND SOFFIT*
(In Billions of SF) (In Millions of Squares)
6.6 45.0
Squares (10x10SF)
40.0
6.2
Square Feet
35.0
5.8
30.0
5.4 25.0
20.0
5.0
2002 2003 2004 2005P 2006P 15.0
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
New Construction Repair/Remodel
Source: NAHB from James Hardie Industries * Data reflects only companies reporting shipments to VSI, except 1991 data.
Source: Vinyl Siding Institute from Plastics News
Vinyl siding has grown tremendously over the past twenty years, peaking at an estimated 41.3
million squares in 2004 (see Figure 6). Much of its market share growth has been rooted in its
low installation and maintenance costs. Rising resin and micro-ingredient costs have driven the
price of vinyl siding higher and closer to that of potential substitutes, such as fiber-cement.
Vinyl siding unit volumes are down 2.6% year-over-year in 2005, and some industry
participants believe that the category has matured. We have had numerous conversations
with building materials distributors and extrusion equipment manufacturers, and we
believe that fiber-cement siding may very well be taking market share from vinyl siding.
Fiber-cement Siding. Introduced in the United States in the early 1980’s, fiber-cement may be at
its tipping point in terms of market growth acceleration. The technology gained a foothold
within the southern U.S. as a much-needed replacement to hardboard. Hardboard, a combination
of wood pulp and resin, had experienced tremendous problems due to moisture, which resulted in
warping, deterioration, delaminating and rotting. Fiber-cement siding made its initial market
inroads as the replacement technology to hardboard.
Fiber-cement siding is made of cement, sand and cellulose fiber that has been cured with
pressurized steam, offering the homeowner that which vinyl cannot – the look of wood. The
aesthetic of fiber-cement siding is considered superior to vinyl by many. It is less expensive
than brick or masonry, it is stiff
Figure 7
and solid on the wall, it is
extremely durable, it sheds JAMES HARDIE MARKET PENETRATION
water, and requires painting as (In Billions of SF)
little as every ten years. 1.6 13.0%
Though still more expensive
Share of U.S. Siding
1.4 12.0%
than vinyl, the on-the-wall price 1.2 11.0%
Square Feet
Market
of fiber-cement siding has been 1.0 10.0%
0.8 9.0%
in decline, as the price of vinyl 0.6 8.0%
has been increasing. This is 0.4 7.0%
primarily due to the labor 0.2 6.0%
component of installation. 2000 2001 2002 2003 2004 2005E
Considerably heavier than Fiber-cement Siding Hardie Market Share
vinyl, a fiber-cement siding Source: James Hardie Industries
installation requires one-third
more man-hours to install; it also requires its own tools and skill set for installation. In the
beginning stages of market penetration, there were few contractors that had the experience to
install fiber-cement siding, and those who had it charged a premium. As more contractors have
10

11. learned to install the product, installation time has decreased and competition has increased,
driving installation costs down. In addition, as land values have soared over the past decade, the
cost of siding has become a smaller component of the overall cost of housing, creating greater
pricing inelasticity. Detractors of fiber-cement siding cite that it is heavy (2.3 pounds per square
feet), brittle (resulting in greater waste during installation), requires special installation tools and
is more difficult to install.
We believe that most vinyl manufacturers are fully aware of the threat of fiber-cement and
are working to develop competing products. Evidently, the technology is not easy to
duplicate, and market penetration may require an approach that vinyl siding manufacturers do
not currently have. With an estimated 90% market share of the fiber-cement siding market,
James Hardie has projected that it will have penetrated 12.6% of the U.S. siding market in 2005
(see Figure 7).
Repair and Remodel
Figure 8
Historically, the repair/remodel
market has accounted for two- THE REMODELING MARKET
thirds of Associated’s net sales.
290 50%
This has changed somewhat
270
through fiscal 2005, reflecting
Billions of Dollars
250
Market Share
softness in some repair/remodel 230
45%
markets, as well as a greater 210
corporate emphasis on new 190
40%
170
home builders. As of the third 150
quarter of fiscal 2005, 130 35%
repair/remodel net sales 1995 1997 1999 2001 2003 2005E
declined to 60% from 66% of Total Residential Spending Remodel Spending as % Total
total year-to-date sales, Source: Joint Center for Housing Studies, Harvard University
reflecting a material shift in
year-over-year end-market sales.
Strength in the repair/remodel market is driven by underlying demand and the consumer’s ability
to pay for this demand. During the recent market expansion, demand has been driven by
favorable demographics led by the baby boom generation, an aging housing stock, increased
average home size and low financing rates. As shown in Figure 8, remodeling spending, while
having increased from $153 Figure 9
billion in 1995 to an estimated CONSUMER CONFIDENCE
$275 billion in 2005, grew at a
slower rate than new 110.0
construction spending. 100.0
90.0
Index
In a recent presentation on the
80.0
state of the U.S. home
improvement industry, the Joint 70.0
Center for Housing Studies 60.0
(JCHS) at Harvard University 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05
addressed a number of concerns
National East North Central
regarding the future of the
Source: The Conference Board
repair/remodel market. Firstly,
11

12. with regard to rising mortgage interest rates, the JCHS points out that less than one-third of all
home remodeling is financed (though studies by the Federal Reserve Board have found that a
significant share of recent refinancings was used for home improvements). Secondly, Center
data suggests that high-end income growth has kept pace with home price inflation, allowing
recent homebuyers to continue to afford home improvements. Lastly, as baby boomers age
beyond their prime remodeling years, their consumption is being replaced by Generation X’ers
that possess greater spending power than their predecessors, compensating for the variance in
population size.
In the near-term, the JCHS expects remodeling spending to continue to grow modestly, as
key drivers of home improvement spending, such as home sales, employment increases and
income growth, remain steady. The latter two elements directly affect consumer confidence,
which is a leading indicator for remodeling expenditures. In Figure 9, we have graphed the
Consumer Confidence Index, as reported by The Conference Board, juxtaposing the East North
Central region with the rest of the country. Comprised of Ohio, Indiana, Illinois, Michigan
and Wisconsin, the East North Central region (the Midwest region accounted for an
estimated 24% of Associated’s 2004 net sales) is not only lagging the rest of the country,
but it is also diverging.
New Home Construction
New home construction currently accounts for 40% of Associated’s net sales, and that figure
may continue to grow depending upon the repair/remodel market and management’s success
with developing new home builder business. While new home construction sales are lower
margin than those to the repair/remodel market, we believe that the home builder market
represents an under-tapped opportunity for the Company and a means to better leverage
the Company’s supply centers. From a defensive point of view, increased penetration of
this market would provide Associated with EBITDA contribution that should help to offset
the softness in its Midwest and Central repair/remodel markets.
Since 1991, housing starts have Figure 10
increased at a compounded NEW HOME STARTS
annual growth rate of 4.9%. Seasonally Adjusted Annual Rate
Driven by low mortgage
interest rates, favorable 2,200
Units In Thousands
demographics, increasing 2,100
2,000
immigrant demand for starter
1,900
homes, and maturing baby
1,800
boomers seeking second homes,
1,700
this rate has accelerated to 1,600
12.3% over the past two years; 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05
simultaneously, new home
National
starts increased from a
seasonally adjusted annual rate Source: U.S. Department of Commerce
of 1.7 million units in the first quarter of 2003 to a peak of 2.1 million units in the third quarter
of 2005 (see Figure 10). The Homeownership Alliance predicts that these demand drivers will
lead to 1.85 million to 2.17 million new U.S. housing starts per year through 2014.
We estimate that Associated’s net sales are geographically allocated in the following manner for
fiscal 2004: 21% in the Northeast, 24% in the Midwest, 30% in the South, 6% in the West, and
12

13. 19% in Canada. Based on recent data from the U.S. Department of Commerce, new home starts
in the Northeast, Midwest and West regions for the fourth quarter of 2005 are down from peak
levels, while reaching a new high in the South region (see Figures 11,12). The Northeast and
West regions exhibited peak home starts in the third quarter of 2005 at 198,000 and 550,000
seasonally adjusted annual units, respectively. New home starts in the Midwest peaked at
403,000 units in the third quarter of 2003 and are currently down 17% from peak levels.
Figure 11 Figure 12
NEW HOME STARTS NEW HOME STARTS
% Change from Peak Home Starts % Change from Peak Home Starts
5% 5%
0% 0%
-5%
-5%
% Change
% Change
-10%
-10%
-15%
-15%
-20%
-25% -20%
-30% -25%
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05
Northeast South Midwest West
Source: U.S. Department of Commerce and MTR Source: U.S. Department of Commerce and MTR
The National Association of Home Builders’ chief economist, David Seiders, expects overall
housing starts to reach 1.94 million units in 2006, down 5.8% from an estimated 2.06 million
units in 2005.
Raw Materials
As compared with the effects of changing end-user and product markets, the effect of
Associated’s cost of raw materials, net of price increases, may prove to be more difficult to
manage and may have the greatest impact on the Company’s near-term liquidity.
Polyvinyl Chloride. Resin is an important component of Associated’s raw material mix,
accounting for an approximate 13% of total cost of goods sold. The Company’s vinyl siding and
vinyl window products utilize PVC, as well as micro-ingredients that are responsible for a
variety of physical properties. PVC is a widely used plastic found in products ranging from
clothing to plumbing fixtures, and its presence is so pervasive in the building industry through its
use in pipe, conduit, frames and siding, that its demand cycles with construction trends. The
American Plastics Council estimates that rigid pipe and tubing account for half of all domestic
PVC sales in the United States and Canada, while other construction-related uses account for
almost 22%. PVC is produced Figure 13
from its monomer, vinyl
chloride, which is dependent PRIME PVC PRICING
upon the feedstocks natural gas, 75
chlorine and ethylene. 70
PVC (cents/lb)
65
60
Pricing on prime PVC has 55
increased 90.8% since the first 50
45
quarter of fiscal 2003, moving 40
from 38 cents per pound to 72.5 35
cents per pound in the fourth
03
03
03
03
04
04
04
04
05
05
05
05
E
P
P
P
06
06
06
06
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
2Q
3Q
4Q
1Q
quarter of 2005 (see Figure 13).
Prime PVC
Along with increases in other
raw materials such as steel, Source: Plastics News, Bloomberg and MTR
13

14. aluminum and micro-ingredients, the rise in PVC has placed pressure on Associated’s
gross margins, contributing to a gross profit reduction (due to raw material cost increases)
of $11.2 million for the nine months ended September 30, 2005 (adjusted gross profit for
the nine months ended September 30, 2004 was $221 million).
PVC pricing is not only dependent on petrochemical pricing but also on the supply and demand
dynamic of its chemical and monomer feeds. Dow Chemical is expected to close its vinyl
chloride monomer plant in the first half of 2006, accounting for an estimated 10% reduction in
domestic production capacity. It has been speculated that PVC pricing has increased to a level
that will spur the use of substitutes such as concrete and ductile iron for rigid pipe in the
construction industry. While there appears to be a number of opposing forces on pricing, we
have based our projections on our conversations with PVC producers, which predict some
pricing relief over the coming year.
Forecasted PVC pricing is an important driver in our model for the Company’s projected gross
margin. The extent of its impact will depend upon the market’s acceptance of pricing pass-
throughs. We have forecast PVC pricing to begin to abate to 70 cents per pound in the first
quarter of 2006, and thereafter to decline to 60 cents per pound in the second quarter of
2007; the decrease will be driven by increased supply due to normalized domestic
production capacity following Hurricanes Katrina and Rita, as well as augmented China
production capacity (as forecasted by CMAI, reaching 35% in 2005 and 17% in 2006).
Aluminum. Management has Figure 14
stated that aluminum and steel
ALUMINUM PRICING
account for 12% of
Associated’s total cost of goods 1.30
sold. In addition to its use in 1.20
Dollars per Pound
siding and siding accessories, 1.10
aluminum is a key raw material 1.00
0.90
in the Company’s metal
0.80
offerings (18% of 2004 net 0.70
sales), including trim coil and 0.60
flatstock. Since 2003,
P
P
P
03
03
03
03
04
04
04
04
05
05
05
05
E
06
06
06
06
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
2Q
3Q
4Q
1Q
aluminum has consistently
trended upward, increasing Aluminum
48.6% through the fourth Source: The London Metal Exchange Limited via the Company
quarter of 2005 (see Figure 14). According to American Metal Market, many industry sources
believe that the aluminum market has been greatly supported by investment fund interest, given
that aluminum supply is not that constrained. It has been estimated that, by the end of 2005,
there had been $80 billion invested in commodity index funds, up from $50 billion twelve
months earlier. In addition, the industry is concerned with the possibility of a United
Steelworkers strike at a number of Alcoa facilities, with formal contract negotiations scheduled
to begin in early May 2006. Offsetting these demand drivers is the possible start-up of idled
smelting capacity, as well as substitute products that become more competitive as aluminum
pricing increases. Having reached $1.18 per pound, many metal analysts believe that the
price of aluminum will continue to move higher over the next six months. As shown in
Figure 14, our model assumes that aluminum will increase through the third quarter of 2006,
peaking at $1.29 per pound.
14

15. SUPPLY CHAIN
Associated is relatively unique among exterior building products manufacturers in that it
primarily distributes its products through a network of company-owned supply centers. This
vertically integrated structure is core to the Company’s growth strategy, carrying with it distinct
pros and cons. In this section, we will discuss the makeup of distribution channels in the
building products industry, the manner in which Associated’s structure differs, and its
implications for the Company.
The building products Figure 15
BUILDING PRODUCTS
distribution landscape is Supply Chain
comprised of pro dealers,
Home Builders
specialty distributors (also
Specialty Warehouse Home Contractors,
known as short-line Distributors Centers Homeowners
distributors) and retailers Pro Dealers
Contractors
Warehouse
(see Figure 15). Each is Home Centers
Contractors, Homeowners
differentiated through the Home Builders
products and services it Building Product Manufacturers Contractors
offers and the end-markets Home Builders
each serves. The pro dealer Specialty Distributors
Warehouse
Contractors, Homeowners
Home Centers
primarily supplies the home Contractors
builder, the remodeling Warehouse Home
Contractors, Homeowners
Centers
contractor, and the
Home Builders
warehouse home center, Source: MTR
offering a broad range of
products. As home builders have consolidated over the past decade, large pro dealers have seen
their share of sales concentrate among fewer customers. This, typically, has meant lower
average gross margins. On the whole, this segment’s business has become more relationship
driven and often entails a bundled service offering that helps to ensure a loyal customer base,
including such benefits as advice on project design and material selection, next day delivery,
delivery to the job site, and help with resolving customer disputes. Just like pro dealers,
specialty distributors also sell to home builders, contractors and warehouse home centers.
Specialty distributors specialize in a few particular product lines, offering greater breadth and
depth of SKU’s than pro dealers, which often translates into fewer inventory turns. They will
also carry complementary product lines that are needed for a particular project, providing a one-
stop shopping experience for the contractor. Because the specialty distributor focuses on
particular product segments, it can often react faster than the pro dealer to customer service
demands, an important aspect of differentiation. Over the past fifteen years, warehouse home
centers, led by Home Depot and Lowe’s, have increasingly accounted for a larger share of sales
to the do-it-yourself homeowner, as well as contractors. Home Depot views contractors as key
to its growth and has installed “pro desks” in more than 1,400 stores. In a move to more broadly
and effectively serve the business customer, Home Depot announced in January 2006 that it will
acquire Hughes Supply for $3.2 billion, or 11.1x LTM EBITDA. Hughes Supply, one of the
nation’s largest diversified wholesale distributors of construction-related products, has more than
500 locations in 40 states.
Focusing on vinyl windows and siding, as well as on complementary and supplementary product
lines, Associated Materials is considered a specialty distributor. Leveraging a footprint of 129
company-owned supply centers and approximately 250 independent distributors throughout the
U.S. and Canada, the Company claims direct access to over 50,000 professional contractors.
15

16. Each of Associated’s supply centers is evaluated as a distinct profit center that compensates its
personnel based on profitability. For the nine months ended September 30, 2005, the Company
opened four new supply centers, in-line with Company guidance. Associated’s management
understands the importance of supplementing its center network with an independent distributor
base, one of the main reasons for its 2003 acquisition of Gentek Holdings. The Company
provides its independent distributor network with private label product, as well as sales and
marketing support. Sales to independent distributors for fiscal 2004 accounted for approximately
30% of total net sales.
Distribution within the building products industry is also segmented by one- and two-step
distribution channels. On the manufacturing side of the supply chain, one-step distribution refers
to the direct sale to builders, while the two-step model makes use of distributors. With regard to
building material distributors, one-step distribution refers to product sold to an end-user; two-
step distribution is the sale of product from one distributor to another that will ultimately sell to
the end customer. Both are common in the building materials marketplace.
The Company believes that managing its own supply centers allows it to build long-standing
customer relationships, develop customized marketing programs, monitor customer preferences,
and better manage distribution logistics. Given the Company’s understanding for its local
markets, we were surprised that it does not have a better sense for the underpinnings of the recent
softness in pockets of the Midwest and Central regions. Based upon discussions with industry
participants, customer relationship management appears to be very important, especially
with regard to products such as siding where brand recognition by the consumer is limited.
There are also a number of drawbacks to owning supply centers, which include higher
fixed costs, inventory financing costs, management focus, and channel conflict, which limits
the independent distributors with which the Company can do business. Medium-term, we
can envision a scenario in which Associated’s core contractor customer base is attacked
from two fronts: from up-market by pro dealers who may decide to diversify their focus in
light of a potentially softening home builder customer base; and from down-market by
warehouse home centers (such as Home Depot via its acquisition of Hughes Supply). The
former would likely prove more to be a less plausible threat, given the differences in customer
service needs between the two customer groups. We believe that the Company’s decision to
leverage infrastructure and increase its emphasis on home builders is a positive, even though the
incremental business will result in overall lower gross margin. The incremental gross margin
decrease may, in part, be recouped through the increased leverage of the supply centers.
16

17. CORPORATE STRUCTURE
Figure 16
AMH Holdings II
(AMH II)
13.625% Senior Notes
AMH Holdings, Inc.
(AMH)
11.25% Senior Disc Notes
Gt'd Credit Facility
Capital stock secures credit facility
Associated
Materials Holdings Inc.
(Holdings)
Gt'd Credit Facility
Associated Materials Inc.
(Associated)
9.75% Senior Sub Notes
$ 70MM Revolver
$ 175MM Term
Alside, Inc. Gentek Holdings, Inc. Gentek Bldg. Products, Inc. Gentek Bldg. Products, Ltd.
Gt' 9.75% on Sr. Sub basis Gt' 9.75% on Sr. Sub basis Gt' 9.75% on Sr. Sub basis Ontario, CA
Gt'd Credit Facility Gt'd Credit Facility Gt'd Credit Facility $ 20MM Revolver
Capital stock secures credit facility Capital stock secures credit facility Capital stock secures credit facility 2/3 Capital stock secures credit facility
(no operations)
Canadian Subs
Gt'd Gentek Credit Facility
Source: Company reports
CAPITAL STRUCTURE
As shown in Figure 16, there are four debt issues affiliated with Associated Materials. The U.S.
portion of the credit facility and the Senior Subordinated Notes were issued at Associated
Materials Inc., the operating holding company, while the credit facility’s Canadian sub-facility
was issued at Gentek Building Products Ltd. The Senior Discount Notes have each been issued
at distinct holding companies and are not obligations of Associated. Associated Materials
Holdings Inc. (“Holdings”), the direct parent of the Company, is a pass-through entity and has no
material relevance to debt service.
Senior Credit Facility
Associated’s senior credit facility is comprised of a $70 million U.S. revolving loan, a US$20
million Canadian revolving sub-facility, and a $174.6 million term loan. As of September 30,
2005, the credit facility had no outstanding borrowings on the revolvers, and net of $8.1 million
of LC’s, it had revolver availability of $71.9 million. The revolving credit facility bears interest
at LIBOR plus a margin of 3.25%, which can decline to as low as 2.50% depending upon the
Company’s leverage ratio; it is scheduled to expire in April 2009. The credit facility’s term loan
bears interest at LIBOR plus 2.50%, payable quarterly, and is due in August 2010. Under the
term loan facility, the Company is required to make minimum quarterly principal amortization
payments of 1% per year, commencing September 30, 2005. Also, on an annual basis beginning
17

18. December 31, 2005, the Company is required to make principal payments based upon a
percentage of Excess Cash Flow.
The credit facility is secured by a security interest in substantially all of the Company’s assets
and the assets of the domestic guarantors under the credit facility, and a pledge of the Company’s
capital stock, the capital stock of Holdings and the capital stock of the Company’s domestic
subsidiaries (and up to two-thirds of the voting stock of “first tier” foreign subsidiaries). The
credit facility is jointly and severally guaranteed by AMH Holdings (“AMH”), Holdings and all
of the Company’s direct and indirect wholly owned domestic subsidiaries. All obligations of
Gentek under the credit facility are secured by the capital stock and assets owned by Gentek and
its Canadian subsidiaries, and are also jointly and severally guaranteed by Gentek’s wholly
owned Canadian subsidiaries.
On February 1, 2006, Associated Materials entered into Amendment No. 1 to its Second
Amended and Restated Credit Agreement. The Amendment (1) increased the interest margins on
each of the term loan facility and revolving credit facility by 25 basis points; (2) increased the
U.S. portion of the revolving credit facility from U.S.$60 million to U.S.$70 million; and (3)
amended certain covenants, in particular, the Leverage Ratio, the Interest Coverage Ratio and the
Fixed Charge Coverage Ratio. The Credit Agreement (in addition to the Note indentures) also
governs the restricted payments required to service the Senior Discount Notes at the holding
company levels. In addition, the Agreement limits capital expenditures to $28 million in fiscal
2005, and to $25 million in any fiscal year thereafter, with unused amounts able to be carried
forward. Coinciding with the seasonal drawdown on the revolver, we project that the Company
will come close to falling out of compliance with its leverage ratio covenant in the second
quarter of fiscal 2006.
9.75% Senior Subordinated Notes
Associated issued $165 million of 9.75% Senior Subordinated Notes in April 2002 in connection
with its take-private transaction. The Notes bear interest at an annual rate of 9.75%, payable
semiannually in April and October, and are scheduled to mature in April 2012.
The 9.75% Notes are general unsecured obligations of the Company, subordinated in right of
payment to senior indebtedness and senior in right of payment to any current or future
subordinated indebtedness of the Company. The Company’s payment obligations under the
Notes are fully and unconditionally guaranteed, jointly and severally on a senior subordinated
basis, by its domestic wholly owned subsidiaries Gentek Holdings, Inc., Gentek Building
Products Inc. and Alside, Inc. Gentek Building Products Limited is a Canadian company and
does not guarantee the Company’s 9.75% Notes.
The 9.75% Notes indenture allows the Company to incur indebtedness such that the calculated
pro forma Consolidated Coverage Ratio exceeds 2.0x. The Consolidated Coverage Ratio is
defined as the ratio of EBITDA for the most recent four consecutive fiscal quarters for which
financial statements are available to Consolidated Interest Expense for such four fiscal quarters;
Consolidated Interest Expense includes, among other items, non-cash interest expense, interest
expense attributable to capital lease obligations, amortization of debt discount and debt issuance
costs, and capitalized interest. Notwithstanding the Consolidated Coverage Ratio, the Company
can incur Permitted Indebtedness that includes, among other items, indebtedness pursuant to the
Credit Agreement, not to exceed the greater of (a) $165 million less net available cash used to
repay balances owed under the Credit Agreement, and (b) the sum of 65% of the book value of
18