American Architectural Products S&POutlk Now Negative.NEW YORK--(BUSINESS WIRE)--S&P's CreditWire 10/21/98--Standard & Poor's today revised its outlook on American Architectural Products Corp. to negative from stable and affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. its single-'B' corporate credit and senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. ratings on the company. The outlook revision reflects concerns about the company's ability to maintain a reasonable degree of liquidity given current financial market conditions. Availability under the existing credit facility is limited, but should increase over the next few months in conjunction with a seasonal decline in the company's working capital needs. American Architectural recently shelved plans for a public offering of common stock. Additionally, recent results are below expectations. Ratings on American Architectural reflect expectations of improved operating results following the integration of recently acquired operations, offset by risks associated with a short operating history, an aggressive acquisition strategy, a highly leveraged capital structure, and cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. markets. American Architectural, formed in 1996 through the consolidation of several manufacturers, produces windows and doors used primarily in residential repair/remodeling and new construction. Product offerings include aluminum, wood, and vinyl windows, with emphasis on upper Midwestern markets. Although sales to more stable repair/remodeling markets are growing, demand for the company's products is cyclical and is closely tied to the level of housing starts and interest rates. American Architectural has completed several acquisitions over the past year, more than doubling sales. Operating performance is expected to remain weak until acquired operations are fully integrated, and improvement could be slowed if economic conditions worsen wors·en tr. & intr.v. wors·ened, wors·en·ing, wors·ens To make or become worse. worsen Verb to make or become worse worsening adjn . Nevertheless, operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: could improve from very low levels of about 7%-8% to the 10%-12% range during the next few years. However, even with expected improvements in the cost structure, high debt levels will keep credit protection measures thin. Funds from operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. to total debt is expected to reach only about 10% during the next two to three years, while earnings before interest, taxes, depreciation, and amortization Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. to interest should be above 1.5 times. OUTLOOK: NEGATIVE Difficult financial market conditions may reduce liquidity, increase financing costs, or delay planned acquisitions. If there is a deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. in already weak credit protection measures, ratings could be lowered, Standard & Poor's said.--CreditWire |
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