UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended July 3, 2010


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

For the transition period from to

Commission file number: 333-115543

AMH Holdings, LLC

(Exact Name of Registrant as Specified in Its Charter)


Delaware		16-1693178

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

3773 State Rd. Cuyahoga Falls, Ohio		44223

(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code (330) 929 -1811

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ (Do not check if a smaller reporting company)		Smaller reporting company o

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

As of August 11, 2010 all of the registrant’s membership interests outstanding were held by an affiliate of the Registrant.

AMH HOLDINGS, LLC
REPORT FOR THE QUARTER ENDED JULY 3, 2010


	Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Unaudited Condensed Consolidated Balance Sheets July 3, 2010 and January 2, 2010		1

Unaudited Condensed Consolidated Statements of Operations Quarters ended July 3, 2010 and July 4, 2009 Six months ended July 3, 2010 and July 4, 2009		2

Unaudited Condensed Consolidated Statements of Cash Flows Six months ended July 3, 2010 and July 4, 2009		3

Notes to Unaudited Condensed Consolidated Financial Statements		4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19

Item 3. Quantitative and Qualitative Disclosures About Market Risk		32

Item 4. Controls and Procedures		32

PART II. OTHER INFORMATION

Item 6. Exhibits		34

SIGNATURES		35

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMH HOLDINGS, LLC

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)


	July 3,			January 2,
	2010			2010
Assets
Current assets:
Cash and cash equivalents	$	32,192		$	55,855
Accounts receivable, net		159,762			114,355
Inventories		158,717			115,394
Deferred income taxes		5,550			3,341
Prepaid expenses		8,868			8,945

Total current assets		365,089			297,890

Property, plant and equipment, net		107,067			109,037
Goodwill		231,271			231,263
Other intangible assets, net		94,676			96,081
Receivable from parent		27,646			27,237
Other assets		22,160			24,217

Total assets	$	847,909		$	785,725


Liabilities and Member’s Equity (Deficit)
Current liabilities:
Accounts payable	$	150,055		$	87,580
Payable to parent		9,789			14,848
Accrued liabilities		71,266			73,087
Deferred income taxes		—			2,312
Income taxes payable		580			1,112

Total current liabilities		231,690			178,939

Deferred income taxes		39,945			34,977
Other liabilities		59,957			61,326
Long-term debt		643,679			638,552
Member’s deficit		(127,362	)		(128,069	)

Total liabilities and member’s deficit	$	847,909		$	785,725

See accompanying notes to unaudited condensed consolidated financial statements.

AMH HOLDINGS, LLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)


	Quarters Ended						Six Months Ended
	July 3,			July 4,			July 3,			July 4,
	2010			2009			2010			2009

Net sales	$	328,322		$	274,969		$	532,559		$	447,301
Cost of sales		236,464			196,988			392,262			339,067

Gross profit		91,858			77,981			140,297			108,234
Selling, general and administrative expenses		53,589			51,297			101,070			99,795
Gain on debt extinguishment		—			8,897			—			8,897
Manufacturing restructuring costs		—			5,255			—			5,255

Income from operations		38,269			30,326			39,227			12,081
Interest expense, net		18,718			18,015			37,335			35,701
Foreign currency loss (gain)		70			(274	)		(52	)		(222	)

Income (loss) before income taxes		19,481			12,585			1,944			(23,398	)
Income tax (benefit) provision		(300	)		3,249			778			2,254

Net income (loss)	$	19,781		$	9,336		$	1,166		$	(25,652	)

See accompanying notes to unaudited condensed consolidated financial statements.

AMH HOLDINGS, LLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


	Six Months Ended
	July 3,			July 4,
	2010			2009
Operating Activities
Net income (loss)	$	1,166		$	(25,652	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		11,266			10,945
Deferred income taxes		261			5,039
Provision for losses on accounts receivable		1,974			7,231
Amortization of deferred financing costs		2,278			9,437
Amortization of management fee		—			250
Non-cash interest income		(409	)		—
Non-cash portion of manufacturing restructuring costs		—			5,255
Non-cash portion of gain on debt extinguishment		—			(8,897	)
Debt accretion		127			—
Loss on sale or disposal of assets other than by sale		27			56
Changes in operating assets and liabilities:
Accounts receivable		(48,448	)		(32,519	)
Inventories		(43,764	)		7,200
Accounts payable and accrued liabilities		61,014			69,903
Income taxes receivable/payable and payable to parent		(5,697	)		(6,613	)
Other		882			2,536

Net cash (used in) provided by operating activities		(19,323	)		44,171

Investing Activities
Additions to property, plant and equipment		(8,263	)		(2,381	)

Net cash used in investing activities		(8,263	)		(2,381	)

Financing Activities
Net borrowings (repayments) under ABL Facility		5,000			(16,500	)
AMH II intercompany loan		—			(26,833	)
Issuance of senior subordinated notes		—			20,000
Financing costs		(106	)		(5,014	)
Dividends paid		—			(4,269	)

Net cash provided by (used in) financing activities		4,894			(32,616	)

Effect of exchange rate changes on cash and cash equivalents		(971	)		(142	)

Net (decrease) increase in cash and cash equivalents		(23,663	)		9,032
Cash and cash equivalents at beginning of period		55,855			6,709

Cash and cash equivalents at end of period	$	32,192		$	15,741


Supplemental information:
Cash paid for interest	$	35,837		$	9,598

Cash paid for income taxes	$	6,214		$	3,828

See accompanying notes to unaudited condensed consolidated financial statements.

AMH HOLDINGS, LLC

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JULY 3, 2010

Note 1 — Basis of Presentation

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial reporting, the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, these interim condensed consolidated financial statements contain all of the normal recurring accruals and adjustments considered necessary for a fair presentation of the unaudited results for the quarter and six months ended July 3, 2010 and July 4, 2009. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended January 2, 2010. A detailed description of the Company’s significant accounting policies and management judgments is located in the audited financial statements for the year ended January 2, 2010, included in the Company’s Form 10-K filed with the Securities and Exchange Commission.

Associated Materials is a leading, vertically integrated manufacturer and distributor of exterior residential building products in the United States and Canada. Associated Materials’ core products include vinyl windows, vinyl siding, aluminum trim coil, and aluminum and steel siding and accessories. Because most of the Company’s building products are intended for exterior use, the Company’s sales and operating profits tend to be lower during periods of inclement weather. Therefore, the results of operations for any interim period are not necessarily indicative of the results of operations for a full year.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) amended the guidance on fair value to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. It also clarified existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The amendment also revised the guidance on employers’ disclosures about postretirement benefit plan assets to require that disclosures be provided by classes of assets instead of by major categories of assets. The new guidance is effective for the first reporting period beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company adopted the provisions of the guidance required for the period beginning in 2010; however, adoption of this amendment did not have a material impact on the Company’s consolidated financial statements.

In April 2010, the FASB issued Accounting Standards Update 2010-12 (“ASU 2010-12”), Income Taxes (Topic 740): Accounting for Certain Tax Effects of the 2010 Health Care Reform Acts. On March 30, 2010, the President of the United States signed the Health Care and Education Reconciliation Act of 2010, which is a reconciliation bill that amends the Patient Protection and Affordable Care Act that was signed on March 23, 2010 (collectively, the “Acts”). ASU No. 2010-12 allows entities to consider the two Acts together for accounting purposes. Upon adoption, the elimination of the future tax deduction for prescription drug costs associated with the Company’s post-retirement medical and dental plans was not material to the Company’s financial position, results of operations or cash flows. The Company is currently evaluating the potential impact of other sections of the legislation, but does not anticipate that the adoption would have a material impact on the consolidated financial statements.

Note 2 — Inventories

Inventories are valued at the lower of cost (first in, first out) or market. Inventories consist of the following (in thousands):


	July 3,		January 2,
	2010		2010

Raw materials	$	33,118	$	28,693
Work-in-process		9,840		8,552
Finished goods and purchased stock		115,759		78,149

	$	158,717	$	115,394

Note 3 — Goodwill and Other Intangible Assets

Goodwill represents the purchase price in excess of the fair value of the tangible and intangible net assets acquired in a business combination. Goodwill of $231.3 million as of July 3, 2010 and January 2, 2010 consisted of $194.8 million from the April 2002 merger transaction and $36.5 million from the acquisition of Gentek Holdings, Inc. (“Gentek”). The impact of foreign currency translation decreased the carrying value of Gentek goodwill by less than $0.1 million during the six months ended July 3, 2010. None of the Company’s goodwill is deductible for income tax purposes. The Company’s other intangible assets consist of the following (in thousands):


	Average
	Amortization		July 3, 2010						January 2, 2010
	Period				Accumulated		Net Carrying				Accumulated		Net Carrying
	(in Years)		Cost		Amortization		Value		Cost		Amortization		Value
Trademarks		15	$	28,070	$	15,014	$	13,056	$	28,070	$	14,087	$	13,983
Patents		10		6,230		5,092		1,138		6,230		4,781		1,449
Customer base		7		5,114		4,642		472		5,137		4,498		639

Total amortized intangible assets				39,414		24,748		14,666		39,437		23,366		16,071
Non-amortized trade names				80,010		—		80,010		80,010		—		80,010

Total intangible assets			$	119,424	$	24,748	$	94,676	$	119,447	$	23,366	$	96,081

The Company’s non-amortized intangible assets consist of the Alside^®, Revere^® and Gentek^® trade names and are tested for impairment at least annually.

Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense related to intangible assets was approximately $0.7 million and $0.8 million for the quarters ended July 3, 2010 and July 4, 2009, respectively. Amortization expense related to intangible assets was approximately $1.4 million and $1.5 million for the six months ended July 3, 2010 and July 4, 2009, respectively. The foreign currency translation impact on the cost and accumulated amortization of intangibles was less than $0.1 million for the quarter ended July 3, 2010. Amortization expense is expected to be approximately $1.3 million for the remainder of fiscal 2010. Amortization expense for fiscal years 2011, 2012, 2013 and 2014 is estimated to be $2.7 million, $2.2 million, $1.9 million and $1.9 million, respectively.

Note 4 — Long-Term Debt

Long-term debt consists of the following (in thousands):


	July 3,		January 2,
	2010		2010

9.875% notes	$	197,679	$	197,552
11.25% notes		431,000		431,000
Borrowings under the ABL Facility		15,000		10,000

Total long-term debt	$	643,679	$	638,552

9.875% Notes

On November 5, 2009, Associated Materials issued in a private offering $200.0 million of its 9.875% Senior Secured Second Lien Notes due 2016. In February 2010, Associated Materials completed the offer to exchange all of its outstanding privately placed 9.875% Senior Secured Second Lien Notes due 2016 for newly registered 9.875% Senior Secured Second Lien Notes due 2016 (the “9.875% notes”). The 9.875% notes were issued by Associated Materials and Associated Materials Finance, Inc., a wholly owned subsidiary of Associated Materials (collectively, the “Issuers”). The 9.875% notes were originally issued at a price of 98.757%. The net proceeds from the offering were used to discharge and redeem Associated Materials’ outstanding 9 3/4% Senior Subordinated Notes due 2012 (the “9.75% notes”) and its outstanding 15% Senior Subordinated Notes due 2012 (the “15% notes”), and to pay fees and expenses related to the offering. As of July 3, 2010, the accreted balance of the 9.875% notes, net of the original issue discount, was $197.7 million. Interest on the 9.875% notes is payable semi-annually in arrears on May 15th and November 15th of each year, with the first interest payment made on May 15, 2010.

The Issuers are required to redeem the 9.875% notes no later than December 1, 2013, if as of October 15, 2013, AMH’s 11 1/4% Senior Discount Notes due 2014 (the “11.25% notes”) remain outstanding, unless discharged or defeased, or if any indebtedness incurred by the Issuers or any of their holding companies to refinance such AMH 11.25% notes matures prior to the maturity date of the 9.875% notes. As of July 3, 2010, AMH had $431.0 million in aggregate principal amount of its 11.25% notes outstanding. Prior to November 15, 2012, the Issuers may redeem all or a portion of the 9.875% notes at any time or from time to time at a price equal to 100% of the principal amount of the 9.875% notes plus accrued and unpaid interest, plus a “make-whole” premium. Beginning on November 15, 2012, the Issuers may redeem all or a portion of the 9.875% notes at a redemption price of 107.406%. The redemption price declines to 104.938% at November 15, 2013, to 102.469% at November 15, 2014 and to 100% on November 15, 2015 for the remaining life of the 9.875% notes. In addition, on or prior to November 15, 2012, the Issuers may redeem up to 35% of the 9.875% notes using the proceeds of certain equity offerings at a redemption price equal to 100% of the aggregate principal amount thereof, plus a premium equal to the interest rate per annum on the 9.875% notes, plus accrued and unpaid interest, if any, to the date of redemption.

The 9.875% notes are senior obligations and rank equally in right of payment with all of the Issuers’ existing and future senior indebtedness and senior in right of payment to all of the Issuers’ future subordinated indebtedness. The 9.875% notes are guaranteed on a senior basis by all of Associated Materials’ existing and future domestic restricted subsidiaries, other than Associated Materials Finance, Inc. (the “Subsidiary Guarantors”), that guarantee or are otherwise obligors under Associated Materials’ asset-based credit facility (the “ABL Facility”). The 9.875% notes and guarantees are structurally subordinated to all of the liabilities of Associated Materials’ non-guarantor subsidiaries, including all Canadian subsidiaries of Associated Materials.

The 9.875% notes and related guarantees are secured, subject to certain permitted liens, by second-priority liens on the assets that secure the ABL Facility’s indebtedness, namely all of the Issuers’ and their U.S. subsidiaries’ tangible and intangible assets. The 9.875% notes are effectively senior to all of Associated Materials’ and the Subsidiary Guarantors’ existing or future unsecured indebtedness to the extent of the value of such collateral, after giving effect to first-priority liens on such collateral securing the U.S. portion of the ABL Facility.

The indenture governing the 9.875% notes contains covenants that, among other things, limit the ability of the Issuers and of certain restricted subsidiaries to incur additional indebtedness, make loans or advances to or other investments in subsidiaries and other entities, sell its assets or declare dividends. If an event of default occurs, the trustee or holders of 25% or more in aggregate principal amount of the notes may accelerate the notes. If an event of default relates to certain events of bankruptcy, insolvency or reorganization, the 9.875% notes will automatically accelerate without any further action required by the trustee or holders of the 9.875% notes.

The fair value of the 9.875% notes was $214.5 million and $197.5 million at July 3, 2010 and January 2, 2010, respectively. In accordance with the principles described in the FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), the fair value of the 9.875% notes as of July 3, 2010 was measured using Level 1 inputs of quoted prices in active markets. The fair value of the 9.875% notes as of January 2, 2010 was based upon the pricing determined in the private offering of the 9.875% notes at the time of issuance in November 2009.

ABL Facility

Associated Materials’ ABL Facility provides for a senior secured asset-based revolving credit facility of up to $225.0 million, comprising a $165.0 million U.S. facility and a $60.0 million Canadian facility, in each case subject to borrowing base availability under the applicable facility. Pursuant to an amendment to the ABL Facility (the “ABL Facility Amendment”) entered into in connection with the issuance of the 9.875% notes, effective November 5, 2009, the maturity date of the ABL Facility is the earliest of (i) October 3, 2013 and (ii) the date three months prior to the stated maturity date of the 9.875% notes (as amended, supplemented or replaced), if any such notes remain outstanding at such date taking into account any stated maturity dates which may be contingent, conditional or alternative. As of July 3, 2010, there was $15.0 million drawn under the ABL Facility and $158.0 million available for additional borrowing.

The obligations of Associated Materials, Gentek Building Products, Inc., Associated Materials Canada Limited, and Gentek Building Products Limited Partnership as borrowers under the ABL Facility, are jointly and severally guaranteed by Holdings and by Associated Materials’ wholly owned domestic subsidiaries, Gentek Holdings, LLC and Associated Materials Finance, Inc. (formerly Alside, Inc.). Such obligations and guaranties are also secured by (i) a security interest in substantially all of the owned real and personal assets (tangible and intangible) of Associated Materials, Holdings, Gentek Building Products, Inc., Gentek Holdings, LLC and Associated Materials Finance, Inc. and (ii) a pledge of up to 65% of the voting stock of Associated Materials Canada Limited and Gentek Canada Holdings Limited. The obligations of Associated Materials Canada Limited and Gentek Building Products Limited Partnership are further secured by a security interest in their owned real and personal assets (tangible and intangible) and are guaranteed by Gentek Canada Holdings Limited, an entity formed as part of the Canadian Reorganization.

The interest rate applicable to outstanding loans under the ABL Facility is, at Associated Materials’ option, equal to either a U.S. or Canadian adjusted base rate or a Eurodollar base rate plus an applicable margin. Pursuant to the ABL Amendment, the applicable margin related to adjusted base rate loans ranges from 1.25% to 2.25%, and the applicable margin related to LIBOR loans ranges from 3.00% to 4.00%, with the applicable margin in each case depending on Associated Materials’ quarterly average excess availability.

As of July 3, 2010, the per annum interest rate applicable to borrowings under the ABL Facility was 5%. The weighted average interest rate for borrowings under the ABL Facility was 5.2% for the quarter ended July 3, 2010. As of July 3, 2010, Associated Materials had letters of credit outstanding of $9.1 million primarily securing deductibles of various insurance policies. Associated Materials is required to pay a commitment fee of 0.50% to 0.75% per annum on any unused amounts under the ABL Facility.

The ABL Facility does not require Associated Materials to comply with any financial maintenance covenants, unless it has less than $28.1 million of aggregate excess availability at any time (or less than $20.6 million of excess availability under the U.S. facility or less than $7.5 million of excess availability under the Canadian facility), during which time Associated Materials is subject to compliance with a fixed charge coverage ratio covenant of 1.1 to 1. As of July 3, 2010, Associated Materials exceeded the minimum aggregate excess availability thresholds, and therefore, was not required to comply with this maintenance covenant.

Under the ABL Facility restricted payments covenant, subject to specified exceptions, Holdings, Associated Materials and its restricted subsidiaries cannot make restricted payments, such as dividends or distributions on equity, redemptions or repurchases of equity, or payments of certain management or advisory fees or other extraordinary forms of compensation, unless prior written notice is given and certain EBITDA and availability thresholds are met. If an event of default under the ABL Facility occurs and is continuing, amounts outstanding under the ABL Facility may be accelerated upon notice, in which case the obligations of the lenders to make loans and arrange for letters of credit under the ABL Facility would cease. If an event of default relates to certain events of bankruptcy, insolvency or reorganization of Holdings, Associated Materials, or the other borrowers and guarantors under the ABL Facility, the payment obligations of the borrowers under the ABL Facility will become automatically due and payable without any further action required.

11.25% Notes

In March, 2004, AMH issued $446.0 million aggregate principal at maturity in 2014 of 11.25% notes. Prior to March 1, 2009, interest accrued at a rate of 11.25% per annum on the 11.25% notes in the form of an increase in the accreted value of the 11.25% notes. Since March 1, 2009, cash interest has been accruing at a rate of 11.25% per annum on the 11.25% notes and is payable semi-annually in arrears on March 1st and September 1st of each year, with the first payment of cash interest under the 11.25% notes paid on September 1, 2009. The 11.25% notes mature on March 1, 2014. The 11.25% notes are structurally subordinated to all existing and future debt and other liabilities of AMH’s existing and future subsidiaries, including Associated Materials and Holdings. As of July 3, 2010, AMH had $431.0 million in aggregate principal amount of its 11.25% notes outstanding.

The fair value of the 11.25% notes was $438.5 million and $415.9 million at July 3, 2010 and January 2, 2010, respectively. In accordance with the principles described in ASC 820, the fair value of the 11.25% notes was measured using Level 1 inputs of quoted prices in active markets.

Parent Company Indebtedness

In connection with a December 2004 recapitalization transaction, AMH’s parent company AMH II was formed, and AMH II subsequently issued $75.0 million of 13.625% Senior Notes due 2014 (the “13.625% notes”). In June 2009, AMH II entered into an exchange agreement pursuant to which it paid $20.0 million in cash and issued $13.066 million original principal amount of its 20% Senior Notes due 2014 (the “20% notes”) in exchange for all of its outstanding 13.625% notes. Interest on AMH II’s 20% notes is payable in cash semi-annually in arrears or may be added to the then outstanding principal amount of the 20% notes and paid at maturity on December 1, 2014. The debt restructuring transaction was accounted for in accordance with the principles described in FASB ASC 470-60, Troubled Debt Restructurings by Debtors (“ASC 470-60”). As of July 3, 2010, AMH II has recorded liabilities for the $13.066 million original principal amount and $23.7 million of accrued interest related to all future interest payments on its 20% notes in accordance with ASC 470-60. As of July 3, 2010, total AMH II debt, including that of its consolidated subsidiaries, was approximately $680.5 million, which includes $23.7 million of accrued interest related to all future interest payments on AMH II’s 20% notes.

Because AMH II has no independent operations, it is dependent upon distributions, payments and loans from Associated Materials to service its indebtedness under the 20% notes. However, unlike AMH II’s previously outstanding 13.625% notes, all of which were exchanged for the 20% notes in June 2009, interest on AMH II’s 20% notes may be added to the then outstanding principal amount of the 20% notes and paid at maturity on December 1, 2014.

In June 2009, at the time Associated Materials entered into the purchase agreement pursuant to which it issued its 15% notes (which were redeemed and discharged in connection with the issuance of the 9.875% notes in November 2009), Associated Materials entered into an intercompany loan agreement with AMH II, pursuant to which Associated Materials agreed to periodically make loans to AMH II in an amount not to exceed an aggregate outstanding principal amount of approximately $33.0 million at any one time, plus accrued interest. Interest accrues at a rate of 3% per annum and is added to the then outstanding principal amount on a semi-annual basis. The principal amount and accrued but unpaid interest thereon will mature on May 1, 2015. As of July 3, 2010, the principal amount of borrowings by AMH II under this intercompany loan agreement and accrued interest thereon was $27.6 million. Associated Materials believes that AMH II will have the ability to repay the loan in accordance with its stated terms. Due to the related party nature and the underlying terms of the intercompany loan with AMH II, Associated Materials has deemed it not practical to assign and disclose a fair value estimate.

Note 5 — Comprehensive Income (Loss)

Comprehensive income (loss) differs from net income (loss) due to the reclassification of actuarial gains or losses and prior service costs associated with the Company’s pension and other postretirement plans and foreign currency translation adjustments as follows (in thousands):


	Quarters Ended					Six Months Ended
	July 3,			July 4,		July 3,			July 4,
	2010			2009		2010			2009
Net income (loss)	$	19,781		$	9,336	$	1,166		$	(25,652	)
Unrecognized prior service cost and net loss		240			254		482			511
Foreign currency translation adjustments		(3,803	)		3,544		(939	)		2,742

Comprehensive income (loss)	$	16,218		$	13,134	$	709		$	(22,399	)

Note 6 — Retirement Plans

The Company’s Alside division sponsors a defined benefit pension plan which covers hourly workers at its plant in West Salem, Ohio and a defined benefit retirement plan covering salaried employees, which was frozen in 1998 and subsequently replaced with a defined contribution plan. The Company’s Gentek subsidiary sponsors a defined benefit pension plan for hourly union employees at its Woodbridge, New Jersey plant (together with the Alside sponsored defined benefit plans, the “Domestic Plans”) as well as a defined benefit pension plan covering Gentek Canadian salaried employees and hourly union employees at the Lambeth, Ontario plant, a defined benefit pension plan for the hourly union employees at its Burlington, Ontario plant and a defined benefit pension plan for the hourly union employees at its Pointe Claire, Quebec plant (the “Foreign Plans”). Accrued pension liabilities are included in accrued and other long-term liabilities in the accompanying balance sheets. The actuarial valuation measurement date for the defined benefit pension plans is December 31st. Components of defined benefit pension plan costs are as follows (in thousands):


	Quarters Ended
	July 3, 2010						July 4, 2009
	Domestic			Foreign			Domestic			Foreign
	Plans			Plans			Plans			Plans
Net periodic pension cost
Service cost	$	155		$	593		$	146		$	354
Interest cost		778			887			783			787
Expected return on assets		(760	)		(852	)		(674	)		(667	)
Amortization of prior service costs		7			11			8			7
Amortization of unrecognized net loss		303			48			375			15

Net periodic pension cost	$	483		$	687		$	638		$	496


	Six Months Ended
	July 3, 2010						July 4, 2009
	Domestic			Foreign			Domestic			Foreign
	Plans			Plans			Plans			Plans
Net periodic pension cost
Service cost	$	310		$	1,197		$	292		$	678
Interest cost		1,556			1,790			1,566			1,509
Expected return on assets		(1,520	)		(1,719	)		(1,348	)		(1,279	)
Amortization of prior service costs		14			22			16			14
Amortization of unrecognized net loss		606			96			750			28

Net periodic pension cost	$	966		$	1,386		$	1,276		$	950

In March 2010, the President signed into law the Patient Protection and Affordable Care Act (“PPACA”) and the Health Care and Education Reconciliation Act of 2010 (“Reconciliation Act”). The PPACA and Reconciliation Act include provisions that will reduce the tax benefits available to employers that receive Medicare Part D subsidies. During the first quarter of 2010, the Company recognized a $0.1 million impact on its deferred tax asset as a result of the reduced deductibility of the subsidy.

The 2008 decline in market conditions resulted in significant decreased valuations of the Company’s pension plan assets. Based on the partial recovery of plan asset returns towards the end of 2009, the plans’ actuarial valuations and current pension funding legislation, the Company does not currently anticipate significant changes to current cash contribution levels for the remainder of 2010. However, the Company currently anticipates additional cash contributions may be required in 2011 to avoid certain funding-based benefit limitations as required under current pension law. Although changes in market conditions and current pension law and uncertainties regarding significant assumptions used in the actuarial valuations may have a material impact on future required contributions to the Company’s pension plans, the Company currently does not expect funding requirements to have a material adverse impact on current or future liquidity.

The actuarial valuations require significant estimates and assumptions to be made by management, primarily the funding interest rate, discount rate and expected long-term return on plan assets. These assumptions are all susceptible to changes in market conditions. The funding interest rate and discount rate are based on representative bond yield curves maintained and monitored by independent third parties. In determining the expected long-term rate of return on plan assets, the Company considers historical market and portfolio rates of return, asset allocations and expectations of future rates of return. As disclosed in the Company’s 2009 Annual Report on Form 10-K, the sensitivity of these estimates and assumptions are not expected to have a material impact on the Company’s 2010 pension expense and funding requirements.

Note 7 — Business Segments

The Company is in the single business of manufacturing and distributing exterior residential building products. The following table sets forth for the periods presented a summary of net sales by principal product offering (in thousands):


	Quarters Ended				Six Months Ended
	July 3,		July 4,		July 3,		July 4,
	2010		2009		2010		2009
Vinyl windows	$	115,443	$	99,031	$	191,780	$	160,087
Vinyl siding products		68,998		56,829		108,354		92,418
Metal products		52,086		44,421		88,461		73,404
Third-party manufactured products		72,329		57,305		109,892		90,021
Other products and services		19,466		17,383		34,072		31,371

	$	328,322	$	274,969	$	532,559	$	447,301

Note 8 — Product Warranty Costs and Service Returns

Consistent with industry practice, the Company provides to homeowners limited warranties on certain products, primarily related to window and siding product categories. Warranties are of varying lengths of time from the date of purchase up to and including lifetime. Warranties cover product failures such as stress cracks and seal failures for windows and fading and peeling for siding products, as well as manufacturing defects. The Company has various options for remedying product warranty claims including repair, refinishing or replacement and directly incurs the cost of these remedies. Warranties also become reduced under certain conditions of time and change in ownership. Certain metal coating suppliers provide warranties on materials sold to the Company that mitigate the costs incurred by the Company. Reserves for future warranty costs are provided based on management’s estimates of such future costs using historical trends of claims experience, sales history of products to which such costs relate, and other factors. An independent actuary assists the Company in determining reserve amounts related to significant product failures. The provision for warranties is reported within cost of sales in the consolidated statements of operations.

A reconciliation of the warranty reserve activity is as follows (in thousands):


	Quarters Ended						Six Months Ended
	July 3,			July 4,			July 3,			July 4,
	2010			2009			2010			2009
Balance at the beginning of the period	$	33,582		$	30,084		$	33,016		$	29,425
Provision for warranties issued		1,780			2,491			3,320			4,697
Claims paid		(2,039	)		(1,917	)		(3,276	)		(3,410	)
Foreign currency translation		338			289			601			235

Balance at the end of the period	$	33,661		$	30,947		$	33,661		$	30,947

Note 9 — Manufacturing Restructuring Costs

During the first quarter of 2008, the Company committed to, and subsequently completed, relocating a portion of its vinyl siding production from Ennis, Texas to its vinyl manufacturing facilities in West Salem, Ohio and Burlington, Ontario. In addition, during 2008, the Company transitioned the majority of distribution of its U.S. vinyl siding products to a center located in Ashtabula, Ohio and committed to a plan to discontinue use of its warehouse facility adjacent to its Ennis, Texas vinyl manufacturing facility.

The Company discontinued its use of the warehouse facility adjacent to the Ennis manufacturing plant during the second quarter of 2009. As a result, the related lease costs associated with the discontinued use of the warehouse facility were recorded as a restructuring charge of approximately $5.3 million during the second quarter of 2009.

The following is a reconciliation of the manufacturing restructuring liability (in thousands):


	Quarters Ended					Six Months Ended
	July 3,			July 4,		July 3,			July 4,
	2010			2009		2010			2009
Beginning liability	$	4,730		$	—	$	5,036		$	—
Additions		—			5,332		—			5,332
Accretion of related lease obligations		93			—		184			—
Payments		(289	)		—		(686	)		—

Ending liability	$	4,534		$	5,332	$	4,534		$	5,332

Of the remaining restructuring liability at July 3, 2010, approximately $0.5 million is expected to be paid during the remainder of 2010. Amounts related to the ongoing facility obligations will continue to be paid over the lease term, which ends April 2020.

Note 10 — Subsidiary Guarantors

Associated Materials’ payment obligations under its 9.875% notes are fully and unconditionally guaranteed, jointly and severally on a senior subordinated basis, by its domestic wholly owned subsidiaries, Gentek Holdings, LLC and Gentek Building Products, Inc. Associated Materials Finance, Inc. (formerly Alside, Inc.) is a co-issuer of the 9.875% notes and is a domestic wholly owned subsidiary of Associated Materials having no operations, revenues or cash flows for the periods presented. Associated Materials Canada Limited, Gentek Canada Holdings Limited and Gentek Buildings Products Limited Partnership are Canadian companies and do not guarantee the 9.875% notes. The Subsidiary Guarantors of the previously outstanding 9.75% notes are the same as those for the 9.875% notes, except that Associated Materials Finance, Inc. is a co-issuer of the 9.875% notes, but was a subsidiary guarantor of the previously outstanding 9.75% notes. In the opinion of management, separate financial statements of the respective Subsidiary Guarantors would not provide additional material information, which would be useful in assessing the financial composition of the Subsidiary Guarantors. None of the Subsidiary Guarantors have any significant legal restrictions on the ability of investors or creditors to obtain access to its assets in event of default on the subsidiary guarantee other than its subordination to senior indebtedness.

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
July 3, 2010
(In thousands)


					Subsidiary		Non-Guarantor		Reclassification/
	Parent		Co-Issuer		Guarantors		Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	5,209	$	—	$	127	$	26,856	$	—		$	32,192
Accounts receivable, net		103,277		—		15,407		41,078		—			159,762
Intercompany receivables		—		—		97,268		8,588		(105,856	)		—
Inventories		111,860		—		10,205		36,652		—			158,717
Deferred income taxes		8,833		—		—		2,210		(187	)		10,856
Prepaid expenses		6,134		—		1,084		1,650		—			8,868

Total current assets		235,313		—		124,091		117,034		(106,043	)		370,395

Property, plant and equipment, net		71,236		—		1,847		33,984		—			107,067
Goodwill		194,814		—		36,457		—		—			231,271
Other intangible assets, net		85,463		—		9,213		—		—			94,676
Investment in subsidiaries		209,616		—		85,241		—		(294,857	)		—
Receivable from AMH II		27,646		—		—		—		—			27,646
Intercompany receivable		—		197,679		—		—		(197,679	)		—
Other assets		16,668		—		—		1,766		—			18,434

Total assets	$	840,756	$	197,679	$	256,849	$	152,784	$	(598,579	)	$	849,489


Liabilities And Member’s Equity
Current liabilities:
Accounts payable	$	91,419	$	—	$	19,253	$	39,383	$	—		$	150,055
Intercompany payables		105,856		—		—		—		(105,856	)		—
Payable to parent		23,206		—		3,291		—		—			26,497
Accrued liabilities		39,528		—		5,685		9,891		—			55,104
Deferred income taxes		—		—		187		—		(187	)		—
Income taxes payable		—		—		—		580		—			580

Total current liabilities		260,009		—		28,416		49,854		(106,043	)		232,236

Deferred income taxes		40,197		—		2,333		5,741		—			48,271
Other liabilities		31,525		—		16,484		11,948		—			59,957
Long-term debt		212,679		197,679		—		—		(197,679	)		212,679
Member’s equity		296,346		—		209,616		85,241		(294,857	)		296,346

Total liabilities and member’s equity	$	840,756	$	197,679	$	256,849	$	152,784	$	(598,579	)	$	849,489

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For The Quarter Ended July 3, 2010
(In thousands)


					Subsidiary		Non-Guarantor		Reclassification/
	Parent		Co-Issuer		Guarantors		Subsidiaries		Eliminations			Consolidated
Net sales	$	239,861	$	—	$	50,352	$	88,987	$	(50,878	)	$	328,322
Cost of sales		173,694		—		47,425		66,223		(50,878	)		236,464

Gross profit		66,167		—		2,927		22,764		—			91,858
Selling, general and administrative expenses		43,199		—		296		10,094		—			53,589

Income from operations		22,968		—		2,631		12,670		—			38,269
Interest expense, net		6,159		—		—		183		—			6,342
Foreign currency loss		—		—		—		70		—			70

Income before income taxes		16,809		—		2,631		12,417		—			31,857
Income tax provision		6,492		—		840		3,738		—			11,070

Income before equity income from subsidiaries		10,317		—		1,791		8,679		—			20,787
Equity income from subsidiaries		10,470		—		8,679		—		(19,149	)		—

Net income	$	20,787	$	—	$	10,470	$	8,679	$	(19,149	)	$	20,787

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For The Six Months Ended July 3, 2010
(In thousands)


					Subsidiary		Non-Guarantor			Reclassification/
	Parent		Co-Issuer		Guarantors		Subsidiaries			Eliminations			Consolidated
Net sales	$	385,752	$	—	$	79,913	$	146,968		$	(80,074	)	$	532,559
Cost of sales		286,170		—		74,937		111,229			(80,074	)		392,262

Gross profit		99,582		—		4,976		35,739			—			140,297
Selling, general and administrative expenses		80,604		—		1,104		19,362			—			101,070

Income from operations		18,978		—		3,872		16,377			—			39,227
Interest expense, net		12,151		—		2		430			—			12,583
Foreign currency (gain)		—		—		—		(52	)		—			(52	)

Income before income taxes		6,827		—		3,870		15,999			—			26,696
Income tax provision		2,544		—		1,776		4,816			—			9,136

Income before equity income from subsidiaries		4,283		—		2,094		11,183			—			17,560
Equity income from subsidiaries		13,277		—		11,183		—			(24,460	)		—

Net income	$	17,560	$	—	$	13,277	$	11,183		$	(24,460	)	$	17,560

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For The Six Months Ended July 3, 2010
(In thousands)


						Subsidiary			Non-Guarantor
	Parent			Co-Issuer		Guarantors			Subsidiaries			Consolidated
Net cash (used in) provided by operating activities	$	(2,078	)	$	—	$	3,739		$	3,260		$	4,921

Investing Activities
Additions to property, plant and equipment		(6,286	)		—		(54	)		(1,923	)		(8,263	)
Other		385			—		—			(385	)		—

Net cash used in investing activities		(5,901	)		—		(54	)		(2,308	)		(8,263	)

Financing Activities
Net borrowings under ABL Facility		5,000			—		—			—			5,000
Dividends paid to parent company		(24,244	)		—		—			—			(24,244	)
Dividends from non-guarantor subsidiary		—			—		20,000			(20,000	)		—
Intercompany transactions		26,671			—		(23,640	)		(3,031	)		—
Financing costs		(106	)		—		—			—			(106	)

Net cash provided by (used in) financing activities		7,321			—		(3,640	)		(23,031	)		(19,350	)

Effect of exchange rate changes on cash and cash equivalents		—			—		—			(971	)		(971	)

Net (decrease) increase in cash and cash equivalents		(658	)		—		45			(23,050	)		(23,663	)
Cash and cash equivalents at beginning of period		5,867			—		82			49,906			55,855

Cash and cash equivalents at end of period	$	5,209		$	—	$	127		$	26,856		$	32,192

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
January 2, 2010

(In thousands)


					Subsidiary		Non-Guarantor		Reclassification/
	Parent		Co-Issuer		Guarantors		Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	5,867	$	—	$	82	$	49,906	$	—		$	55,855
Accounts receivable, net		81,178		—		8,728		24,449		—			114,355
Intercompany receivables		—		—		76,138		3,045		(79,183	)		—
Inventories		80,654		—		6,613		28,127		—			115,394
Deferred income taxes		8,834		—		—		—		(188	)		8,646
Prepaid expenses		6,542		—		1,263		1,140		—			8,945

Total current assets		183,075		—		92,824		106,667		(79,371	)		303,195

Property, plant and equipment, net		73,086		—		2,033		33,918		—			109,037
Goodwill		194,813		—		36,450		—		—			231,263
Other intangible assets, net		86,561		—		9,465		55		—			96,081
Investment in subsidiaries		197,163		—		92,409		—		(289,572	)		—
Receivable from AMH II		27,237		—		—		—		—			27,237
Intercompany receivable		—		197,552		—		—		(197,552	)		—
Other assets		18,185		—		—		1,799		—			19,984

Total assets	$	780,120	$	197,552	$	233,181	$	142,439	$	(566,495	)	$	786,797


Liabilities And Member’s Equity
Current liabilities:
Accounts payable	$	54,618	$	—	$	9,111	$	23,851	$	—		$	87,580
Intercompany payables		79,183		—		—		—		(79,183	)		—
Payable to parent		21,664		—		1,535		—		—			23,199
Accrued liabilities		41,699		—		6,118		9,108		—			56,925
Deferred income taxes		—		—		188		2,312		(188	)		2,312
Income taxes payable		—		—		—		1,112		—			1,112

Total current liabilities		197,164		—		16,952		36,383		(79,371	)		171,128

Deferred income taxes		39,973		—		2,314		1,016		—			43,303
Other liabilities		31,943		—		16,752		12,631		—			61,326
Long-term debt		207,552		197,552		—		—		(197,552	)		207,552
Member’s equity		303,488		—		197,163		92,409		(289,572	)		303,488

Total liabilities and member’s equity	$	780,120	$	197,552	$	233,181	$	142,439	$	(566,495	)	$	786,797

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended July 4, 2009
(In thousands)


					Subsidiary		Non-Guarantor			Reclassification/
	Parent		Co-Issuer		Guarantors		Subsidiaries			Eliminations			Consolidated
Net sales	$	200,645	$	—	$	38,801	$	73,922		$	(38,399	)	$	274,969
Cost of sales		143,726		—		36,708		54,953			(38,399	)		196,988

Gross profit		56,919		—		2,093		18,969			—			77,981
Selling, general and administrative expenses		41,782		—		551		8,964			—			51,297
Manufacturing restructuring costs		5,255		—		—		—			—			5,255

Income from operations		9,882		—		1,542		10,005			—			21,429
Interest expense, net		5,091		—		—		153			—			5,244
Foreign currency (gain)		—		—		—		(274	)		—			(274	)

Income before income taxes		4,791		—		1,542		10,126			—			16,459
Income tax provision		1,996		—		1,140		3,250			—			6,386

Income before equity income from subsidiaries		2,795		—		402		6,876			—			10,073
Equity income from subsidiaries		7,278		—		6,876		—			(14,154	)		—

Net income	$	10,073	$	—	$	7,278	$	6,876		$	(14,154	)	$	10,073

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended July 4, 2009
(In thousands)


						Subsidiary			Non-Guarantor			Reclassification
	Parent			Co-Issuer		Guarantors			Subsidiaries			/Eliminations			Consolidated
Net sales	$	333,870		$	—	$	65,279		$	113,412		$	(65,260	)	$	447,301
Cost of sales		250,589			—		64,521			89,217			(65,260	)		339,067

Gross profit		83,281			—		758			24,195			—			108,234
Selling, general and administrative expenses		81,033			—		1,739			17,023			—			99,795
Manufacturing restructuring costs		5,255			—		—			—			—			5,255

(Loss) income from operations		(3,007	)		—		(981	)		7,172			—			3,184
Interest expense, net		10,211			—		—			371			—			10,582
Foreign currency (gain)		—			—		—			(222	)		—			(222	)

(Loss) income before income taxes		(13,218	)		—		(981	)		7,023			—			(7,176	)
Income tax (benefit) provision		(5,315	)		—		277			2,254			—			(2,784	)

(Loss) income before equity income from subsidiaries		(7,903	)		—		(1,258	)		4,769			—			(4,392	)
Equity income from subsidiaries		3,511			—		4,769			—			(8,280	)		—

Net (loss) income	$	(4,392	)	$	—	$	3,511		$	4,769		$	(8,280	)	$	(4,392	)

ASSOCIATED MATERIALS, LLC AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended July 4, 2009
(In thousands)


						Subsidiary			Non-Guarantor
	Parent			Co-Issuer		Guarantors			Subsidiaries			Consolidated
Net cash provided by operating activities	$	20,300		$	—	$	12,912		$	10,959		$	44,171

Investing Activities
Additions to property, plant and equipment		(1,983	)		—		(11	)		(387	)		(2,381	)
Other		(383	)		—		383			—			—

Net cash (used in) provided by investing activities		(2,366	)		—		372			(387	)		(2,381	)

Financing Activities
Net repayments under ABL Facility		(16,500	)		—		—			—			(16,500	)
AMH II intercompany loan		(26,833	)		—		—			—			(26,833	)
Intercompany transactions		12,557			—		(13,381	)		824			—
Dividends paid to parent company		(4,269	)		—		—			—			(4,269	)
Issuance of senior subordinated notes		20,000			—		—			—			20,000
Financing costs		(4,920	)		—		—			(94	)		(5,014	)

Net cash (used in) provided by financing activities		(19,965	)		—		(13,381	)		730			(32,616	)

Effect of exchange rate changes on cash and cash equivalents		—			—		—			(142	)		(142	)

Net (decrease) increase in cash and cash equivalents		(2,031	)		—		(97	)		11,160			9,032
Cash and cash equivalents at beginning of period		4,964			—		97			1,648			6,709

Cash and cash equivalents at end of period	$	2,933		$	—	$	—		$	12,808		$	15,741

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

AMH Holdings, LLC (“AMH”), formerly AMH Holdings, Inc., was created on February 19, 2004. AMH has no material assets or operations other than its 100% ownership of Associated Materials Holdings, LLC (“Holdings”), which in turn has no material assets or operations other than its 100% ownership of Associated Materials, LLC (“Associated Materials”). AMH, Holdings and Associated Materials are collectively referred to as the “Company”. The Company is a leading, vertically integrated manufacturer and distributor of exterior residential building products in the United States and Canada. The Company’s core products are vinyl windows, vinyl siding, aluminum trim coil, and aluminum and steel siding and accessories. In addition, the Company distributes third-party manufactured products primarily through its supply centers. Vinyl windows, vinyl siding, metal products, and third-party manufactured products comprised approximately 36%, 20%, 17% and 21%, respectively, of the Company’s total net sales for the six month period ended July 3, 2010. These products are generally marketed under the Alside^®, Revere^® and Gentek^® brand names and sold on a wholesale basis to approximately 50,000 professional contractors engaged in home remodeling and new home construction principally through the Company’s network of 119 supply centers, as well as through approximately 250 independent distributors and dealers across the United States and Canada. Approximately 65% of the Company’s products are sold to contractors engaged in the home repair and remodeling market with approximately 35% sold to the new construction market. The supply centers provide “one-stop” shopping to the Company’s contractor customers, carrying products, accessories and tools necessary to complete a vinyl window or siding project. In addition, the supply centers provide product literature, product samples and installation training to these customers. During the six month period ended July 3, 2010, approximately 71% of the Company’s total net sales were generated through the network of supply centers, with the remainder sold to independent distributors and dealers.

Because its exterior residential building products are consumer durable goods, the Company’s sales are impacted by, among other things, the availability of consumer credit, consumer interest rates, employment trends, changes in levels of consumer confidence, national and regional trends in new housing starts and general economic conditions. The Company’s sales are also affected by changes in consumer preferences with respect to types of building products. Overall, the Company believes the long-term fundamentals for the building products industry remain strong as the population continues to age, homes continue to get older, household formation is expected to be strong and vinyl remains the optimal material for exterior cladding and window solutions, all of which the Company believes bodes well for the demand for its products in the future.

Sales of existing single-family homes have decreased from peak levels previously experienced and the inventory of resale homes available for sale has increased, and in many areas, home values have declined significantly since 2006. Current market data suggests that home prices have begun to stabilize and recover in selected markets and new home building starts have also improved from 2009 levels. According to the National Association of Home Builders (NAHB), United States new residential single housing construction is forecasted to grow from 441,000 starts in 2009 to 841,000 starts in 2011. The Company believes its products should benefit from improvements in the housing market. As the rate and extent of the market recovery remains uncertain, the Company believes it is well-positioned to benefit from a rebound in the residential remodeling and new construction markets as the demand for its products will continue to trend upward as the overall activity and demand for exterior residential building products improves.

The principal raw materials used by the Company are vinyl resin, aluminum, steel, resin stabilizers and pigments, glass, window hardware, and packaging materials, all of which have historically been subject to price changes. Raw material pricing on the Company’s key commodities has fluctuated significantly over the past three years. More recently, the price of resin and aluminum has increased due to increased demand. In response, the Company recently announced price increases on certain of its product offerings to offset the inflation of raw materials, and continually monitors market conditions for price changes as warranted. The Company’s ability to maintain gross margin levels on its products during periods of rising raw material costs depends on the Company’s ability to obtain selling price increases. Furthermore, the results of operations for individual quarters can and have been negatively impacted by a delay between the timing of raw material cost increases and price increases on the Company’s products. There can be no assurance that the Company will be able to maintain the selling price increases already implemented or achieve any future price increases.

The Company operates with significant operating and financial leverage. Significant portions of the Company’s manufacturing, selling, general and administrative expenses are fixed costs that neither increase nor decrease proportionately with sales. In addition, a significant portion of the Company’s interest expense is fixed. There can be no assurance that the Company will be able to continue to reduce its fixed costs in response to a decline in its net sales. As a result, a decline in the Company’s net sales could result in a higher percentage decline in its income from operations. Also, the Company’s gross margins and gross margin percentages may not be comparable to other companies as some companies include all of the costs of their distribution network in cost of sales, whereas the Company includes the operating costs of its supply centers in selling, general and administrative expenses.

Because most of the Company’s building products are intended for exterior use, sales tend to be lower during periods of inclement weather. Weather conditions in the first quarter of each calendar year usually result in that quarter producing significantly less net sales and net cash flows from operations than in any other period of the year. Consequently, the Company has historically had small profits or losses in the first quarter and reduced profits from operations in the fourth quarter of each calendar year. To meet seasonal cash flow needs, the Company typically utilizes its ABL Facility and repays such borrowings in periods of higher cash flow. The Company typically generates the majority of its cash flow in the third and fourth quarters.

The Company seeks to distinguish itself from other suppliers of residential building products and to sustain its profitability through a business strategy focused on increasing sales at existing supply centers, selectively expanding its supply center network, increasing sales through independent specialty distributor customers, developing innovative new products, expanding sales of third-party manufactured products through its supply center network, and driving operational excellence by reducing costs and increasing customer service levels. The Company continually analyzes new and existing markets for the selection of new supply center locations.

Results of Operations

The following table sets forth for the periods indicated the results of the Company’s operations (in thousands):


	Quarters Ended						Six Months Ended
	July 3,			July 4,			July 3,			July 4,
	2010			2009			2010			2009
Net sales	$	328,322		$	274,969		$	532,559		$	447,301
Cost of sales		236,464			196,988			392,262			339,067

Gross profit		91,858			77,981			140,297			108,234
Selling, general and administrative expenses		53,589			51,297			101,070			99,795
Gain on debt extinguishment		—			8,897			—			8,897
Manufacturing restructuring costs		—			5,255			—			5,255

Income from operations		38,269			30,326			39,227			12,081
Interest expense, net		18,718			18,015			37,335			35,701
Foreign currency loss (gain)		70			(274	)		(52	)		(222	)

Income (loss) before income taxes		19,481			12,585			1,944			(23,398	)
Income tax (benefit) provision		(300	)		3,249			778			2,254

Net income (loss)	$	19,781		$	9,336		$	1,166		$	(25,652	)


Other Data:
EBITDA (a)	$	43,832		$	36,104		$	50,545		$	23,248
Adjusted EBITDA (a)		45,130			32,558			51,946			19,937


(a)		EBITDA is calculated as net income plus interest, taxes, depreciation and amortization. Adjusted EBITDA excludes certain items. The Company considers EBITDA and adjusted EBITDA to be important indicators of its operational strength and performance of its business. The Company has included adjusted EBITDA because it is a key financial measure used by management to (i) assess the Company’s ability to service its debt and / or incur debt and meet the Company’s capital expenditure requirements; (ii) internally measure the Company’s operating performance; and (iii) determine the Company’s incentive compensation programs. In addition, the Company’s ABL Facility has certain covenants that apply ratios utilizing this measure of adjusted EBITDA. EBITDA and adjusted EBITDA have not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Adjusted EBITDA as presented by the Company may not be comparable to similarly titled measures reported by other companies. EBITDA and adjusted EBITDA are not measures determined in accordance with GAAP and should not be considered as an alternative to, or more meaningful than, net income (as determined in accordance with GAAP) as a measure of the Company’s operating results or cash flows from operations (as determined in accordance with GAAP) as a measure of the Company’s liquidity.


		The reconciliation of the Company’s net income (loss) to EBITDA and adjusted EBITDA is as follows (in thousands):


	Quarters Ended						Six Months Ended
	July 3, 2010			July 4, 2009			July 3, 2010		July 4, 2009
Net income (loss)	$	19,781		$	9,336		$	1,166	$	(25,652	)
Interest expense, net		18,718			18,015			37,335		35,701
Income tax (benefit) provision		(300	)		3,249			778		2,254
Depreciation and amortization		5,633			5,504			11,266		10,945

EBITDA		43,832			36,104			50,545		23,248
Amortization of management fee (b)		—			125			—		250
Manufacturing restructuring costs (c)		—			5,255			—		5,255
Bank audit fees (d)		35			(29	)		50		81
Tax restructuring costs (e)		—			—			88		—
Advisory fees (f)		1,263			—			1,263		—
Gain on debt extinguishment (g)		—			(8,897	)		—		(8,897	)

Adjusted EBITDA	$	45,130		$	32,558		$	51,946	$	19,937


(b)		Represents amortization of a prepaid management fee paid to Investcorp International Inc. in connection with the December 2004 recapitalization transaction.

(c)		During the first quarter of 2008, the Company committed to, and subsequently completed, relocating a portion of its vinyl siding production from Ennis, Texas to its vinyl manufacturing facilities in West Salem, Ohio and Burlington, Ontario. In addition, during 2008, the Company transitioned the majority of distribution of its U.S. vinyl siding products to a center located in Ashtabula, Ohio and committed to a plan to discontinue use of its warehouse facility adjacent to its Ennis, Texas vinyl manufacturing facility. The Company discontinued its use of the warehouse facility adjacent to the Ennis manufacturing plant during the second quarter of 2009. As a result, the related lease costs associated with the discontinued use of the warehouse facility were recorded as a restructuring charge of approximately $5.3 million for the quarter and six months ended July 4, 2009.

(d)		Represents bank audit fees incurred under the ABL Facility.

(e)		Represents legal and accounting fees incurred in connection with a 2009 tax restructuring project.

(f)		Represents advisory fees for strategic capital structure advice incurred during the second quarter of 2010.

(g)		Represents the Company’s gain on extinguishment of debt for the quarter and six months ended July 4, 2009.

The following table sets forth for the periods presented a summary of net sales by principal product offering (in thousands):


	Quarters Ended				Six Months Ended
	July 3,		July 4,		July 3,		July 4,
	2010		2009		2010		2009
Vinyl windows	$	115,443	$	99,031	$	191,780	$	160,087
Vinyl siding products		68,998		56,829		108,354		92,418
Metal products		52,086		44,421		88,461		73,404
Third-party manufactured products		72,329		57,305		109,892		90,021
Other products and services		19,466		17,383		34,072		31,371

	$	328,322	$	274,969	$	532,559	$	447,301

Quarter Ended July 3, 2010 Compared to Quarter Ended July 4, 2009

Net sales increased 19.4% to $328.3 million for the second quarter of 2010 compared to $275.0 million for the same period in 2009 primarily due to increased unit volumes across all product categories and the impact of the stronger Canadian dollar in 2010. During the second quarter of 2010 compared to the same period in 2009, vinyl window and vinyl siding unit volumes increased by approximately 12% and 16%, respectively.

Gross profit in the second quarter of 2010 was $91.9 million, or 28.0% of net sales, compared to gross profit of $78.0 million, or 28.4% of net sales, for the same period in 2009. The slight decrease in gross margin was the result of increased commodity costs, partially offset by the Company’s continued implementation of cost reduction initiatives.

Selling, general and administrative expenses increased approximately $2.3 million to $53.6 million, or 16.3% of net sales, for the second quarter of 2010 versus $51.3 million, or 18.7% of net sales, for the same period in 2009. Selling, general and administrative expenses for the quarter ended July 3, 2010 includes advisory fees for strategic capital structure advice of approximately $1.3 million. Excluding these costs, selling, general and administrative expenses for the quarter ended July 3, 2010 increased approximately $1.0 million when compared to the same period in 2009. The increase in selling, general and administrative expense was primarily due to increased sales-related commission and benefit accruals of approximately $2.6 million, increased consulting expenses of approximately $0.9 million, the translation impact on Canadian expenses as a result of a stronger Canadian dollar in 2010 of approximately $0.8 million and increased product delivery costs in the Company’s supply center network of approximately $0.3 million. These increases were partially offset by reduced bad debt expense of approximately $3.9 million, which was the result of the economic conditions that existed during the second quarter of 2009.

During the second quarter of 2009, the Company completed its plans to relocate a portion of its vinyl siding production and distribution and discontinued its use of the warehouse facility adjacent to the Ennis manufacturing plant. As a result, the related lease costs associated with the discontinued use of the warehouse facility were recorded as a restructuring charge of approximately $5.3 million for the quarter and six months July 4, 2009.

Income from operations was approximately $38.3 million for the quarter ended July 3, 2010 compared to income from operations of $30.3 million for the same period in 2009.

Interest expense increased $0.7 million for the second quarter of 2010 compared to the same period in 2009. The increase in interest expense was primarily due to the increased principal amount, and related amortization of deferred financing fees, of Associated Materials’ 9.875% notes issued in November 2009.

The income tax provision for the second quarter of 2010 reflects an effective income tax benefit rate of 1.5%, compared to an effective income tax rate of 25.8% for the same period in 2009. The change in the tax rate was primarily a result of the Company’s ability to utilize the year-to-date tax benefit of the U.S. loss in the second quarter of 2010.

The Company reported net income of $19.8 million during the second quarter of 2010 compared to $9.3 million for the same period in 2009.

EBITDA for the second quarter of 2010 was $43.8 million compared to $36.1 million for the same period in 2009. Adjusted EBITDA for the second quarter of 2010 was $45.1 million compared to $32.6 million for the same period in 2009. Adjusted EBITDA for the second quarter of 2010 excludes advisory fees for strategic capital structure advice of approximately $1.3 million and bank audit fees of less than $0.1 million. Adjusted EBITDA for the second quarter of 2009 excludes the gain on debt extinguishment of $8.9 million, manufacturing restructuring costs of $5.3 million and amortization related to prepaid management fees of approximately $0.1 million.

Six Months Ended July 3, 2010 Compared to Six Months Ended July 4, 2009

Net sales increased 19.1% to $532.6 million for the six months ended July 3, 2010 compared to $447.3 million for the same period in 2009 primarily due to increased unit volumes across all product categories and the impact of the stronger Canadian dollar in 2010. For the six months ended July 3, 2010 compared to the same period in 2009, vinyl window and vinyl siding unit volumes increased by approximately 15% and 13%, respectively.

Gross profit for the six months ended July 3, 2010 was $140.3 million, or 26.3% of net sales, compared to gross profit of $108.2 million, or 24.2% of net sales, for the same period in 2009. The increase in gross profit as a percentage of net sales was a result of higher volume and lower manufacturing costs resulting from the continued implementation of cost reduction initiatives, improved operational efficiencies, procurement savings and the reduction of scrap, partially offset by increased commodity costs.

Selling, general and administrative expenses increased approximately $1.3 million to $101.1 million, or 19.0% of net sales, for the six months ended July 3, 2010 versus $99.8 million, or 22.3% of net sales, for the same period in 2009. Selling, general and administrative expenses for the six months ended July 3, 2010 includes advisory fees for strategic capital structure advice of approximately $1.3 million. Excluding these costs, selling, general and administrative expenses for the six months ended July 3, 2010 were relatively consistent with the same period in 2009.

Income from operations was approximately $39.2 million for the six months ended July 3, 2010 compared to income from operations of approximately $12.1 million for the same period in 2009.

Interest expense increased $1.6 million for the six months ended July 3, 2010 compared to the same period in 2009. The increase in interest expense was primarily due to the increased principal amount, and related amortization of deferred financing fees, of Associated Materials’ 9.875% notes issued in November 2009.

The income tax provision for the six months ended July 3, 2010 reflects an effective income tax rate of 40.0%, compared to an effective income tax rate of 9.6% for the same period in 2009. The change in the tax rate was primarily a result of the Company’s ability to utilize the tax benefit of the U.S. loss in 2010. The tax rate increase was a result of the income levels reported for 2010, compared to reported losses for the same period in 2009.

Net income for the six months ended July 3, 2010 was $1.2 million compared to a net loss of $25.7 million for the same period in 2009.

EBITDA for the six months ended July 3, 2010 was $50.5 million compared to EBITDA of $23.2 million for the same period in 2009. Adjusted EBITDA for the six months ended July 3, 2010 was $51.9 million compared to adjusted EBITDA of $19.9 million for the same period in 2009. Adjusted EBITDA for the six months ended July 3, 2010 excludes advisory fees for strategic capital structure advice of approximately $1.3 million, tax restructuring costs of approximately $0.1 million and bank audit fees of approximately $0.1 million. Adjusted EBITDA for the six months ended July 4, 2009 excludes the gain on debt extinguishment of $8.9 million, manufacturing restructuring costs of $5.3 million, amortization related to prepaid management fees of $0.3 million and bank audit fees of approximately $0.1 million.

Recent Accounting Pronouncements

A description of recently issued accounting pronouncements is included in Note 1 to the unaudited condensed consolidated financial statements. The Company evaluates the potential impact, if any, on its financial position, results of operations and cash flows, of all recent accounting pronouncements, and, if significant, makes the appropriate disclosures. During the second quarter ended July 3, 2010, no material changes resulted from the adoption of recent accounting pronouncements.

Liquidity and Capital Resources

The following sets forth a summary of the Company’s cash flows for the six months ended July 3, 2010 and July 4, 2009 (in thousands):


	Six Months Ended
	July 3,			July 4,
	2010			2009
Net cash (used in) provided by operating activities	$	(19,323	)	$	44,171
Net cash used in investing activities		(8,263	)		(2,381	)
Net cash provided by (used in) financing activities		4,894			(32,616	)

Cash Flows

At July 3, 2010, the Company had cash and cash equivalents of $32.2 million and available borrowing capacity of approximately $158.0 million under Associated Materials’ ABL Facility. Outstanding letters of credit as of July 3, 2010 totaled approximately $9.1 million primarily securing deductibles of various insurance policies.

Cash Flows from Operating Activities

Net cash used in operating activities was $19.3 million for the six months ended July 3, 2010, compared to net cash provided by operating activities of $44.2 million for the same period in 2009. The factors typically impacting cash flows from operating activities during the first six months of the year include the seasonal increase of inventory levels and use of cash related to payments for accrued liabilities including payments of incentive compensation and customer sales incentives. Accounts receivable was a use of cash of $48.4 million for the six months ended July 3, 2010, compared to a use of cash of $32.5 million for the same period in 2009, resulting in a net decrease in cash flows of $15.9 million reflecting the increased sales in the current year. Inventory was a use of cash of $43.8 million during the six months ended July 3, 2010, compared to a source of cash of $7.2 million during the same period in 2009, resulting in a net decrease in cash flows of $51.0 million, which was primarily due to increased inventory levels and rising commodity costs. Accounts payable and accrued liabilities were a source of cash of $61.0 million for the six months ended July 3, 2010, compared to a source of cash of $69.9 million for the same period in 2009, resulting in a net decrease in cash flows of $8.9 million. Cash flows used in operating activities for the six months ended July 3, 2010 includes income tax payments of $6.2 million, compared to $3.8 million of income tax payments for the same period in 2009.

Cash Flows from Investing Activities

During the six months ended July 3, 2010, net cash used in investing activities consisted of capital expenditures of $8.3 million. Capital expenditures in 2010 were primarily at supply centers for continued operations and relocations, the continued development of the Company’s new glass insourcing process and various enhancements at plant locations. During the six months ended July 4, 2009, net cash used in investing activities included capital expenditures of $2.4 million. Capital expenditures in 2009 were primarily at supply centers for continued operations and relocations, various enhancements at plant locations and several Corporate information technology projects.

Cash Flows from Financing Activities

Net cash provided by financing activities for the six months ended July 3, 2010 included net borrowings of $5.0 million under the ABL Facility, partially offset by payments of financing costs of approximately $0.1 million. Net cash used in financing activities for the six months ended July 4, 2009 includes net repayments under Associated Materials’ ABL Facility of $16.5 million, an intercompany loan of $26.8 million paid to the Company’s direct parent company AMH II by Associated Materials in June 2009 and used in the AMH II debt exchange, payments of financing costs of $5.0 million and dividend payments of $4.3 million, partially offset by the $20.0 million issuance of Associated Materials’ 15% notes, which are no longer outstanding.

Description of the Company’s Outstanding Indebtedness

9.875% Notes

On November 5, 2009, Associated Materials issued in a private offering $200.0 million of its 9.875% Senior Secured Second Lien Notes due 2016. In February 2010, Associated Materials completed the offer to exchange all of its outstanding privately placed 9.875% Senior Secured Second Lien Notes due 2016 for newly registered 9.875% Senior Secured Second Lien Notes due 2016 (the “9.875% notes”). The 9.875% notes were issued by Associated Materials and Associated Materials Finance, Inc., a wholly owned subsidiary of Associated Materials (collectively, the “Issuers”). The 9.875% notes were originally issued at a price of 98.757%. The net proceeds from the offering were used to discharge and redeem Associated Materials’ outstanding 9 3/4% Senior Subordinated Notes due 2012 (the “9.75% notes”) and its outstanding 15% Senior Subordinated Notes due 2012 (the “15% notes”), and to pay fees and expenses related to the offering. As of July 3, 2010, the accreted balance of the 9.875% notes, net of the original issue discount, was $197.7 million. Interest on the 9.875% notes will be payable semi-annually in arrears on May 15th and November 15th of each year, with the first interest payment made on May 15, 2010.

The Issuers are required to redeem the 9.875% notes no later than December 1, 2013, if as of October 15, 2013, AMH’s 11 1/4% Senior Discount Notes due 2014 (the “11.25% notes”) remain outstanding, unless discharged or defeased, or if any indebtedness incurred by the Issuers or any of their holding companies to refinance such 11.25% notes matures prior to the maturity date of the 9.875% notes. As of July 3, 2010 AMH had $431.0 million in aggregate principal of its 11.25% notes outstanding. Prior to November 15, 2012, the Issuers may redeem all or a portion of the 9.875% notes at any time or from time to time at a price equal to 100% of the principal amount of the 9.875% notes plus accrued and unpaid interest, plus a “make-whole” premium. Beginning on November 15, 2012, the Issuers may redeem all or a portion of the 9.875% notes at a redemption price of 107.406%. The redemption price declines to 104.938% at November 15, 2013, to 102.469% at November 15, 2014 and to 100% on November 15, 2015 for the remaining life of the 9.875% notes. In addition, on or prior to November 15, 2012, the Issuers may redeem up to 35% of the 9.875% notes using the proceeds of certain equity offerings at a redemption price equal to 100% of the aggregate principal amount thereof, plus a premium equal to the interest rate per annum on the 9.875% notes, plus accrued and unpaid interest, if any, to the date of redemption.

Covenants. The indenture governing the 9.875% notes (the “9.875% notes indenture”) contains covenants that, among other things and subject in each case to certain specified exceptions, limit the ability of the Issuers and of certain restricted subsidiaries: (i) to incur additional indebtedness unless Associated Materials meets a 2 to 1 consolidated coverage ratio test, or as permitted under specified available baskets; (ii) to make restricted payments; (iii) to incur restrictions on subsidiaries’ ability to make distributions or transfer assets to Associated Materials; (iv) to create, incur, affirm or suffer to exist any liens, (v) to sell assets or stock of subsidiaries; (vi) to enter into transactions with affiliates; and (vii) to merge or consolidate with, or sell all or substantially all assets to, a third party or undergo a change of control.

Under the restricted payments covenant in the 9.875% notes indenture, Associated Materials and its restricted subsidiaries cannot, subject to specified exceptions, make restricted payments unless: (i) the amount available for distribution of restricted payments under the 9.875% notes indenture (the “restricted payments basket”) exceeds the aggregate amount of the proposed restricted payment; (ii) Associated Materials is not in default under the 9.875% notes indenture; and (iii) the consolidated coverage ratio of Associated Materials exceeds 2 to 1. Consolidated coverage ratio is defined in the 9.875% notes indenture as the ratio of Associated Materials’ EBITDA to consolidated interest expense (each as defined in such indenture). Restricted payments (with certain exceptions) and net losses erode the restricted payment basket, while net income (by a factor of 50%), proceeds from equity issuances, and proceeds from investments and returns of capital increase the restricted payment basket. Restricted payments include paying dividends or making other distributions in respect of Associated Materials’ capital stock, purchasing, redeeming or otherwise acquiring capital stock or subordinated indebtedness of Associated Materials and making investments (other than certain permitted investments).

Irrespective of whether it is otherwise able to pay dividends under the restricted payments test described above, the 9.875% notes indenture permits the payment of dividends by Associated Materials to Holdings (and AMH) for the payment of interest on AMH’s 11.25% notes (or any refinancing thereof), in an aggregate amount not to exceed $125.0 million or if Associated Materials’ leverage ratio (as defined in the 9.875% notes indenture) is equal to or less than 4.5 to 1.00. The 9.875% notes indenture also permits dividends for the payment of principal on the 11.25% notes or AMH II’s 20% Senior Notes due 2014 (the “20% notes”) in an aggregate amount not to exceed $50 million when Associated Materials’ leverage ratio is equal to or less than 4.5 to 1.00. In addition, subject to certain limitations, the 9.875% notes indenture permits the incurrence of additional indebtedness secured by liens senior to the liens securing the 9.875% notes or pari passu with the liens securing the 9.875% notes.

Associated Materials’ ability to make restricted payments under the 9.875% notes indenture is subject to compliance with the other conditions to making restricted payments provided for in such indenture, to compliance with the restricted payments covenants in the ABL Facility, and to statutory limitations on the payment of dividends. At July 3, 2010, subject to the limitations to both the Indenture for 9.875% notes and the ABL Facility, Associated Materials could have upstreamed an additional $134.1 million, which is comprised of availability under the borrowing base and the cash on hand at quarter end.

Events of default. The 9.875% notes indenture provides for the following events of default: (i) default for 30 days in payment of interest on the 9.875% notes; (ii) default in payment of principal on the 9.875% notes; (iii) the failure by the Issuers or any Subsidiary Guarantor to comply with other agreements in the Indenture or the 9.875% notes, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other indebtedness of the Issuers or any significant subsidiary if the amount accelerated (or so unpaid) exceeds $10.0 million; (v) certain events of bankruptcy or insolvency with respect to the Issuers or any significant subsidiary; (vi) certain judgments or decrees for the payment of money in excess of $10.0 million; and (vii) certain defaults with respect to the subsidiary guarantees and the security documents creating a security interest in assets to secure the obligations under the 9.875% notes, the subsidiary guarantees and other pari passu secured indebtedness. If an event of default occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the outstanding 9.875% notes may declare all the 9.875% notes to be due and payable. Certain events of bankruptcy or insolvency are events of default which will result in the 9.875% notes being due and payable immediately upon the occurrence of such events of default.

Change of control. In the event of a change of control of Associated Materials, as defined in the 9.875% notes indenture, holders of the 9.875% notes have the right to require Associated Materials to repurchase their 9.875% notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest to the repurchase date.

11.25% Notes

As of July 3, 2010, AMH had $431.0 million in aggregate principal amount of its 11.25% notes outstanding. The 11.25% notes are unsecured senior obligations of AMH, equal in right of payment with AMH’s existing and future unsecured senior indebtedness, senior in right of payment to any current or future indebtedness of AMH that is made subordinated to the 11.25% notes, effectively subordinated in right of payment to AMH’s existing and future secured debt, to the extent of the value of the assets securing such debt, and structurally subordinated to all obligations of existing and future subsidiaries of AMH, including Associated Materials. AMH’s payment obligations under the 11.25% notes are not guaranteed by Associated Materials or any other party. The 11.25% notes are redeemable at the option of AMH, currently at a redemption price of 103.750% (beginning on March 1, 2010), declining to 101.875% on March 1, 2011, and to 100% on March 1, 2012 for the remaining life of the 11.25% notes.

Prior to March 1, 2009, interest accrued at a rate of 11.25% per annum on the 11.25% notes in the form of an increase in the accreted value of the notes. Since March 1, 2009, cash interest has been accruing at a rate of 11.25% per annum on the 11.25% notes and is payable semi-annually in arrears on March 1st and September 1st of each year, with the first payment of cash interest under the 11.25% notes paid on September 1, 2009.

Because AMH is a holding company with no independent operations, it is dependent upon distributions, payments and loans from Associated Materials to service its indebtedness under the 11.25% notes. If Associated Materials were precluded from making restricted payments, either under its debt agreements or pursuant to statutory limitations on the payment of dividends, it would not be able to dividend or otherwise upstream sufficient funds to AMH to permit AMH to service its 11.25% notes. In that event, AMH would have to find alternative sources of liquidity to meet its obligations under the 11.25% notes.

Covenants. The indenture governing the 11.25% notes contains covenants that, among other things and subject in each case to certain specified exceptions, limit the ability of AMH and of certain restricted subsidiaries (including Holdings and Associated Materials): (i) to incur additional indebtedness unless (x) in the case of AMH, AMH meets a 2 to 1 consolidated coverage ratio test and (y) in the case of Associated Materials or its restricted subsidiaries, Associated Materials meets a 2 to 1 consolidated coverage ratio test, or as permitted under specified available baskets; (ii) to incur liens; (iii) to make restricted payments; (iv) to incur restrictions on the ability of the restricted subsidiaries of AMH to make distributions or transfer assets to AMH or its restricted subsidiaries; (v) to sell assets or stock of subsidiaries; (vi) to enter into transactions with affiliates; and (vi) to merge or consolidate with, or sell all or substantially all assets to, a third party or undergo a change of control.

Under the restricted payments covenant in the 11.25% notes indenture, AMH and its restricted subsidiaries (including Holdings and Associated Materials) cannot, subject to specified exceptions, make restricted payments unless: (i) the amount available for distribution of restricted payments under the 11.25% notes indenture (the “restricted payments basket”) exceeds the aggregate amount of the proposed restricted payment; (ii) AMH is not in default under the 11.25% notes indenture; and (iii) the consolidated coverage ratio of AMH exceeds 2 to 1.

Events of default. The 11.25% notes indenture provides for the following events of default: (i) default in the payment of interest, continued for 30 days; (ii) default in the payment of principal when due; (iii) failure by AMH to comply with its covenants in the 11.25% notes indenture, subject to applicable grace periods; (iv) payment default after maturity, or acceleration following other defaults with respect to, indebtedness of AMH or any significant subsidiary exceeding $10.0 million; (v) certain events of bankruptcy, insolvency or reorganization; and (vi) certain undischarged judgments or decrees for the payment of money exceeding a specified threshold. These events of default are generally similar to those provided for in the 9.875% notes indenture.

If an event of default occurs, the trustee or holders of 25% or more in aggregate principal amount of the notes may accelerate the notes. If an event of default relates to certain events of bankruptcy, insolvency or reorganization, the notes will automatically accelerate without any further action required by the trustee or holders of the notes.

Change of control. In the event of a change of control, as defined in the 11.25% notes indenture, of AMH, holders of the 11.25% notes have the right to require AMH to repurchase their notes at a purchase price in cash equal to 101% of the accreted value thereof plus accrued and unpaid interest to the repurchase date.

ABL Facility

On October 3, 2008, Associated Materials, Gentek Building Products, Inc. and Associated Materials Canada Limited (formerly known as Gentek Building Products Limited), as borrowers, entered into the ABL Facility with Wells Fargo Securities, LLC (formerly known as Wachovia Capital Markets, LLC) and CIT Capital Securities LLC, as joint lead arrangers, Wachovia Bank, N.A., as agent and the lenders party to the facility. Pursuant to a reorganization of certain Canadian subsidiaries of Associated Materials occurring in August and September of 2009 (the “Canadian Reorganization”), Gentek Building Products Limited Partnership, a newly formed Canadian operating entity, was added as a borrower under the Canadian portion of the ABL Facility. The ABL Facility provides for a senior secured asset-based revolving credit facility of up to $225.0 million, comprising a $165.0 million U.S. facility and a $60.0 million Canadian facility, in each case subject to borrowing base availability under the applicable facility. Pursuant to an amendment to the ABL Facility (the “ABL Facility Amendment”) entered into in connection with the issuance of the 9.875% notes, effective November 5, 2009, the maturity date of the ABL Facility is the earliest of (i) October 3, 2013 and (ii) the date three months prior to the stated maturity date of the 9.875% notes (as amended, supplemented or replaced), if any such notes remain outstanding at such date taking into account any stated maturity dates which may be contingent, conditional or alternative. As of July 3, 2010, there was $15.0 million drawn under the ABL Facility and $158.0 million available for additional borrowing.

As of July 3, 2010, the per annum interest rate applicable to borrowings under the ABL Facility was 5.0%. The weighted average interest rate for borrowings under the ABL Facility was 5.2% for the quarter ended July 3, 2010. As of July 3, 2010, Associated Materials had letters of credit outstanding of $9.1 million primarily securing deductibles of various insurance policies. Associated Materials is required to pay a commitment fee of 0.50% to 0.75% per annum on any unused amounts under the ABL Facility.

Associated Materials’ borrowing base under the ABL Facility, for each of the U.S. and Canadian facilities, is generally equal to (A) 85% of eligible accounts receivable plus (B) the lesser of (i) the sum of (x) 50% of the value of eligible raw materials inventory, other than painted coil, plus (y) the lesser of 35% of the value of painted coil and $2.5 million plus (z) 60% of the value of finished goods inventory, and (ii) 85% of the net orderly liquidation value of eligible inventory, plus (C) the lesser of fixed asset availability and $24.8 million (for the U.S. facility) or $9.0 million (for the Canadian facility), minus (D) attributable reserves. Fixed asset availability is generally defined as equal to 85% of the net orderly liquidation value of eligible equipment plus 70% of the appraised fair market value of eligible real property; provided that such amount decreases by a fixed amount each month. Associated Materials’ borrowing base will fluctuate during the course of the year based on a variety of factors impacting Associated Materials’ level of eligible accounts receivable and inventory, including seasonal builds in inventory immediately prior to and during the peak selling season and changes in the levels of accounts receivable, which tend to increase during the peak selling season and are at seasonal lows during the winter months. Associated Materials’ peak selling season is typically May through October. As of July 3, 2010, Associated Materials’ borrowing base was $182.1 million, which was based on the borrowing base calculation utilizing May month end account balances.

Covenants. The ABL Facility contains covenants that, among other things and subject in each case to certain specified exceptions, limit the ability of Holdings, Associated Materials and its subsidiaries to: (i) merge or consolidate with, or sell equity interests, indebtedness or assets to, a third party; (ii) wind up, liquidate or dissolve; (iii) create liens or other encumbrances on assets; (iv) incur additional indebtedness or make payments in respect of existing indebtedness; (v) make loans, investments and acquisitions; (vi) make certain restricted payments; (vii) enter into transactions with affiliates; (viii) engage in any business other than the business engaged in by Associated Materials at the time of entry into the ABL Facility; and (ix) incur restrictions on its subsidiaries’ ability to make distributions to Holdings or Associated Materials or transfer or encumber its subsidiaries’ assets. The ABL Facility also requires Associated Materials to obtain an unqualified audit opinion from its independent registered public accounting firm on its consolidated financial statements for each fiscal year.

•

excess availability under the ABL Facility exceeds $45.0 million for the total facility, and $24.8 million and $9.0 million for the U.S. and Canadian facilities, respectively, if the fixed asset availability (as defined) is greater than zero; or if the fixed asset availability is equal to zero, $33.8 million for the total facility, and $20.6 million and $7.5 million for the U.S. and Canadian facilities, respectively;

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the consolidated EBITDA (as defined under the ABL Facility) of Holdings and its subsidiaries in the most recent fiscal quarter for which financial statements have been delivered (or, if such quarter is the first fiscal quarter of Holdings and its subsidiaries of such year, then the fiscal quarter immediately preceding such quarter) is at least 50% of the consolidated EBITDA of such entities for the same quarter in the prior year; and

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no default has occurred and is continuing under the ABL Facility.

Excess availability is generally defined under the ABL Facility as the difference between the borrowing base and the outstanding obligations of the borrowers (as such obligations are adjusted for changes in the level of reserves and certain other short term payables). During the six months ended July 3, 2010, Holdings and Associated Materials were not prevented from making restricted payments by the ABL Facility’s restricted payments covenant. For the second quarter of 2010, the consolidated EBITDA of Holdings and its subsidiaries, as determined in accordance with the ABL Facility, exceeded 50% of the consolidated EBITDA for the second quarter of 2009.

Associated Materials’ excess availability under the ABL Facility was $158.0 million as of July 3, 2010. The excess availability will fluctuate throughout the course of the year based on a variety of factors impacting Associated Materials’ borrowing base and outstanding borrowings and other obligations. The borrowing base and the level of outstanding borrowings and other obligations are impacted by the seasonality of Associated Materials’ business, as sales and earnings are typically lower during the first quarter of each year, while working capital requirements increase prior to the peak selling season as inventories are built in advance of the peak selling season.

Events of Default. Events of default under the ABL Facility include: (i) nonpayment of principal or interest; (ii) failure to comply with covenants, subject to applicable grace periods; (iii) defaults on indebtedness in excess of $7.5 million; (iv) change of control events; (v) certain events of bankruptcy, insolvency or reorganization; (vi) any material provision of any ABL Facility document ceasing to be valid, binding and enforceable or any assertion of such invalidity; (vii) a guarantor denying, disaffirming or otherwise failing to perform its obligations under its guaranty; (viii) any event of default under any other document related to the ABL Facility; and (ix) certain undischarged judgments or decrees for the payment of money, certain ERISA events, and certain Canadian tax events, in each case in excess of specified thresholds.

If an event of default under the ABL Facility occurs and is continuing, amounts outstanding under the ABL Facility may be accelerated upon notice, in which case the obligations of the lenders to make loans and arrange for letters of credit under the ABL Facility would cease. If an event of default relates to certain events of bankruptcy, insolvency or reorganization of Holdings, Associated Materials, or the other borrowers and guarantors under the ABL Facility, the payment obligations of the borrowers under the ABL Facility will become automatically due and payable without any further action required.

Parent Company Indebtedness

AMH’s direct parent company, AMH II, is a holding company with no independent operations. In connection with a December 2004 recapitalization transaction, AMH II was formed and subsequently issued $75.0 million of 13.625% Senior Notes due 2014 (the “13.625% notes”). In June 2009, AMH II entered into an exchange agreement pursuant to which it paid $20.0 million in cash and issued $13.066 million original principal amount of its 20% notes in exchange for all of its outstanding 13.625% notes. Interest on AMH II’s 20% notes is payable in cash semi-annually in arrears or may be added to the then outstanding principal amount of the 20% notes and paid at maturity on December 1, 2014. The debt restructuring transaction was accounted for in accordance with the principles described in FASB ASC 470-60, Troubled Debt Restructurings by Debtors (“ASC 470-60”). As of July 3, 2010, AMH II has recorded liabilities for the $13.066 million original principal amount and $23.7 million of accrued interest related to all future interest payments on its 20% notes in accordance with ASC 470-60. As of July 3, 2010, total AMH II debt, including that of its consolidated subsidiaries, was approximately $680.5 million, which includes $23.7 million of accrued interest related to all future interest payments on AMH II’s 20% notes.

AMH, Holdings and Associated Materials are each restricted subsidiaries under the indenture for AMH II’s 20% notes and are therefore subject to the covenants and events of default described therein. Covenants and events of default with respect to AMH II’s 20% notes are generally similar to those provided for in the 9.875% notes indenture and the indenture governing AMH’s 11.25% notes.

Because AMH II has no independent operations, it is dependent upon distributions, payments and loans from Associated Materials and AMH to service its indebtedness obligations under the 20% notes. However, unlike AMH II’s previously outstanding 13.625% notes, all of which were exchanged for the 20% notes in June 2009, interest on AMH II’s 20% notes may be added to the then outstanding principal amount of the 20% notes and paid at maturity on December 1, 2014.

If Associated Materials and AMH were unable to or were precluded from making restricted payments, either under their debt agreements or pursuant to statutory limitations on the payment of dividends, AMH would not be able to dividend or otherwise upstream sufficient funds to AMH II to allow AMH II to make the payments due on its 20% notes at maturity. Under such a scenario, AMH II would have to find alternative sources of liquidity to meet its obligations under the 20% notes. AMH does not guarantee the 11.25% notes or the 20% notes and has no obligation to make any payments with respect thereto.

If Associated Materials were unable to meet its indebtedness obligations with respect to the ABL Facility or the 9.875% notes, or if either of AMH or AMH II, were not able to meet its indebtedness obligations under the 11.25% notes or the 20% notes, as the case may be, or if an event of default were otherwise to occur with respect to any of such indebtedness obligations, and such indebtedness obligations could not be refinanced or amended to eliminate the default, then the lenders under the ABL Facility (in the case of an event of default under that facility) or the holders of the applicable series of notes (in the case of an event of default under those notes) could declare the applicable indebtedness obligations due and payable and exercise any remedies available to them. Any event of default under the 9.875% notes could in turn trigger a cross-default under the ABL Facility, and any acceleration of the ABL Facility, the 9.875% notes or the 11.25% notes could, in turn, result in an event of default under the other indebtedness obligations of the relevant obligor on such indebtedness and its parent companies, allowing the holders of such indebtedness likewise to declare all such indebtedness obligations due and payable and exercise any remedies available to them.

In June 2009, at the time Associated Materials entered into the purchase agreement pursuant to which it issued its 15% notes (which were redeemed and discharged in connection with the issuance of its 9.875% notes in November 2009), Associated Materials entered into an intercompany loan agreement with AMH II, pursuant to which Associated Materials agreed to periodically make loans to AMH II in an amount not to exceed an aggregate outstanding principal amount of approximately $33.0 million at any one time, plus accrued interest. Interest accrues at a rate of 3% per annum and is added to the then outstanding principal amount on a semi-annual basis. The principal amount and accrued but unpaid interest thereon will mature on May 1, 2015. As of July 3, 2010, the principal amount of borrowings by AMH II under this intercompany loan agreement and accrued interest thereon was $27.6 million. The Company believes that AMH II will have the ability to repay the loan in accordance with its stated terms. Due to the related party nature and the underlying terms of the intercompany loan with AMH II, the Company has deemed it not practical to assign and disclose a fair value estimate.

The Company believes its cash flows from operations and Associated Materials’ borrowing capacity under the ABL Facility will be sufficient to satisfy its obligations to pay principal and interest on its outstanding debt, maintain current operations and provide sufficient capital, as well as pay dividends or make other upstream payments sufficient for AMH to be able to service its debt obligations through 2010. However, if there is a significant decline in demand for the Company’s products, the Company’s ability to generate cash sufficient to meet its existing indebtedness obligations could be adversely affected, and the Company could be required either to find alternate sources of liquidity or to refinance its existing indebtedness in order to avoid defaulting on its debt obligations.

The ability of the Company to generate sufficient funds and have sufficient restricted payments capability both to service its own debt obligations and to allow the Company to pay dividends or make other upstream payments sufficient for AMH II to be able to service its obligations will be dependent in large part on the impact of building products industry conditions on the Company’s business, profitability and cash flows and on the ability of the Company and/or its parent company to refinance its indebtedness. There can be no assurance that the Company and/or AMH II would be able to obtain any necessary consents or waivers in the event any of them is unable to service or were to otherwise default under their debt obligations, or that any of them would be able to successfully refinance their indebtedness. The ability to refinance any indebtedness may be made more difficult to the extent that current building products industry and credit market conditions continue to persist. The inability of the Company and/or AMH II to service or refinance their indebtedness would likely have a material adverse effect on the Company and/or AMH II.

Effects of Inflation

The principal raw materials used by the Company are vinyl resin, aluminum, steel, resin stabilizers and pigments, glass, window hardware, and packaging materials, all of which have historically been subject to price changes. Raw material pricing on the Company’s key commodities have fluctuated significantly over the past three years. More recently, the price of resin and aluminum has increased in response to higher demand and tight supply. In response, the Company recently announced price increases on certain of its product offerings to offset the inflation of raw materials, and continually monitors market conditions for price changes as warranted. The Company’s ability to maintain gross margin levels on its products during periods of rising raw material costs depends on the Company’s ability to obtain selling price increases. Furthermore, the results of operations for individual quarters can and have been negatively impacted by a delay between the timing of raw material cost increases and price increases on the Company’s products. There can be no assurance that the Company will be able to maintain the selling price increases already implemented or achieve any future price increases. At July 3, 2010, the Company had no raw material hedge contracts in place.

Certain Forward-Looking Statements

All statements other than statements of historical facts included in this report regarding the prospects of the industry and the Company’s prospects, plans, financial position and business strategy may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “should,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “predict,” “potential” or “continue” or the negatives of these terms or variations of them or similar terminology. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it does not assure that these expectations will prove to be correct. Such statements reflect the current views of the Company’s management with respect to its operations, results of operations and future financial performance. The following factors are among those that may cause actual results to differ materially from the forward-looking statements:

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the Company’s operations and results of operations;

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declines in home building and remodeling industries, economic conditions and changes in interest rates, foreign currency exchange rates and other conditions;

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deteriorations in availability of consumer credit, employment trends, levels of consumer confidence and spending, and consumer preferences;

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changes in raw material costs and availability;

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market acceptance of price increases;

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declines in national and regional trends in new housing starts and home remodeling;

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changes in weather conditions;

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Associated Materials’ ability to comply with certain financial covenants in its ABL Facility with Wells Fargo Securities, LLC (formerly known as Wachovia Capital Markets) and CIT Capital Securities LLC, as joint lead arrangers, Wachovia Bank, N.A., as agent, and the lenders party thereto and indentures governing the 9.875% notes and 11.25% notes;

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the Company’s ability to make distributions, payments or loans to its parent company to allow it to make required payments on its debt;

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the ability of the Company and its parent company to refinance indebtedness when required;

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increases in competition from other manufacturers of vinyl and metal exterior residential building products as well as alternative building products;

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declines in market demand;

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increases in the Company’s indebtedness;

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increases in costs of environmental compliance or environmental liabilities;

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increases in unanticipated warranty or product liability claims;

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increases in capital expenditure requirements; and

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the other factors discussed under Item 1A. “Risk Factors” as filed in the Company’s Annual Report on Form 10-K for the year ended January 2, 2010 and elsewhere in this report.

All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements included in this report. These forward-looking statements speak only as of the date of this report. The Company does not intend to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, unless the securities laws require it to do so.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The Company has outstanding borrowings under its ABL Facility and may incur additional borrowings from time to time for general corporate purposes, including working capital and capital expenditures. The interest rate applicable to outstanding loans under the ABL Facility is, at the Company’s option, equal to either a United States or Canadian adjusted base rate plus an applicable margin ranging from 1.25% to 2.25%, or LIBOR plus an applicable margin ranging from 3.00% to 4.00%, with the applicable margin in each case depending on the Company’s quarterly average “excess availability” (as defined). At July 3, 2010, the Company had borrowings outstanding of $15.0 million under the ABL Facility. The effect of a 1.00% increase or decrease in interest rates would increase or decrease total annual interest expense by approximately $0.2 million.

The Company has $200.0 million aggregate principal at maturity in 2016 of senior secured second lien notes that bear a fixed interest rate of 9.875% and $431.0 million of senior discount notes due 2014 that bear a fixed interest rate of 11.25%. The fair value of the 9.875% notes and 11.25% notes is sensitive to changes in interest rates. In addition, the fair value is affected by the Company’s overall credit rating, which could be impacted by changes in the Company’s future operating results. At July 3, 2010, the fair value of the 9.875% notes and 11.25% notes was $214.5 million and $438.5 million, respectively, based upon their quoted market prices.

Foreign Currency Exchange Risk

The Company’s revenues are primarily from domestic customers and are realized in U.S. dollars. However, the Company realizes revenues from sales made through Gentek’s Canadian distribution centers in Canadian dollars. The Company’s Canadian manufacturing facilities acquire raw materials and supplies from U.S. vendors, which results in foreign currency transactional gains and losses upon settlement of the obligations. Payment terms among Canadian manufacturing facilities and these vendors are short-term in nature. The Company may, from time to time, enter into foreign exchange forward contracts with maturities of less than three months to reduce its exposure to fluctuations in the Canadian dollar. At July 3, 2010, the Company was a party to foreign exchange forward contracts for Canadian dollars, the value of which was immaterial. A 10% strengthening or weakening of the U.S. dollar relative to the Canadian dollar would have resulted in an approximately $0.9 million decrease or increase, respectively, in net income for the quarter ended July 3, 2010. A 10% strengthening or weakening of the U.S. dollar relative to the Canadian dollar would have resulted in an approximately $1.1 million decrease or increase, respectively, in net income for the six months ended July 3, 2010.

Commodity Price Risk

See Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Effects of Inflation” for a discussion of the market risk related to the Company’s principal raw materials — vinyl resin, aluminum and steel.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the fiscal period covered by this report, the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, completed an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Based upon this evaluation, for the reasons discussed below, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the fiscal period covered by this report, the disclosure controls and procedures (including the additional review necessary to confirm the fair presentation in the financial statements, in light of the material weakness discussed below) were functioning effectively.

As previously disclosed in the Company’s Form 10-K for the year ended January 2, 2010, the Company did not maintain effective controls over the completeness and accuracy of the income tax provision and the related balance sheet accounts. The Company’s income tax accounting in 2009 had significant complexity due to multiple debt transactions during the year including the restructuring of debt at an indirect parent company, the impact of repatriation of foreign earnings and the related foreign tax credit calculations, changes in the valuation allowance for deferred tax assets, and the related impact of the Company’s tax sharing agreement. Specifically, the Company’s controls over the processes and procedures related to the calculation and review of the annual tax provision were not adequate to ensure that the income tax provision was prepared in accordance with generally accepted accounting principles. Additionally, these control deficiencies could result in a misstatement of the income tax provision, the related balance sheet accounts and note disclosures that would result in a material misstatement to the annual consolidated financial statements that would not be prevented or detected. Accordingly, management has concluded as a result of these control deficiencies that a material weakness in the Company’s internal control over financial reporting existed as of January 2, 2010 and continues to exist as of July 3, 2010. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

In light of the material weakness identified, the Company performed additional analyses to ensure the consolidated financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the consolidated financial statements included in this Form 10-Q, fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented.

Changes in Internal Control over Financial Reporting

Income Tax Material Weakness Remediation Steps

The Company engaged an independent registered public accounting firm (other than its auditors, Deloitte & Touche LLP) during the first and second quarters of 2010 to perform additional detail reviews of complex transactions, the income tax calculations and disclosures on a quarterly and annual basis, and to advise the Company on matters beyond its in-house expertise. The accounting firm performed a review of the income tax calculations and disclosures for the quarters ended April 3, 2010 and July 3, 2010.

Management will continue to evaluate the design and effectiveness of the enhanced internal controls, and once placed in operation for a sufficient period of time, these internal controls will be subject to appropriate testing in order to determine whether they are operating effectively. Testing related to the annual tax provision calculations and disclosure reviews will be conducted during the year end financial closing process.

Until the appropriate testing of the change in controls from these enhanced internal controls is complete, management will continue to perform the evaluations and analyses believed to be adequate to provide reasonable assurance that there are no material misstatements of the Company’s consolidated financial statements.

Other Changes

There have been no changes to the Company’s internal control over financial reporting during the quarter ended July 3, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitations on the Effectiveness of Internal Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are achieved. Because of the inherent limitations in any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, the Company’s disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of the disclosure control system are met.

PART II. OTHER INFORMATION

Item 6. Exhibits


Exhibit
Number		Description
	31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Exchange Act, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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


*		This document is being furnished in accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986.

SIGNATURES

Pursuant to the requirements 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.


	AMH HOLDINGS, LLC
	(Registrant)
Date: August 11, 2010	By:	/s/ Thomas N. Chieffe
		Thomas N. Chieffe
		President and Chief Executive Officer (Principal Executive Officer)

Date: August 11, 2010	By:	/s/ Stephen E. Graham
		Stephen E. Graham
		Vice President — Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer)

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AMH HOLDINGS, LLC 10-Q