Third Quarter 2016 Financial Highlights versus the Prior
Year Period
PGT, Inc. (NASDAQ:PGTI), the leading U.S. manufacturer and supplier
of impact-resistant windows and doors, announced financial results
for its third quarter and nine months ended October 1, 2016.
“We delivered another period of solid financial and operating
performance in the third quarter,” commented PGTI’s Chairman of the
Board and Chief Executive Officer, Rod Hershberger. “We grew
revenue, gross margin and net income on both a sequential and
year-over-year basis, which was the result of sales and
profitability from both of our acquired businesses, CGI and
WinDoor, as well as from our legacy business, PGT Custom Windows
& Doors.”
“Our strategic priorities remain focused on our three brand
go-to-market strategy, continuing to drive product innovation and
accretive acquisitions,” Hershberger continued. “Our consistent
strong performance is a direct result of our team’s ability to
effectively execute these strategies.”
“Hurricane Matthew was the first hurricane of its magnitude to
hit the East Coast of the U.S. in over a decade,” Hershberger
continued. “Thankfully, the destruction was much more limited than
originally predicted. However, many of our East Coast customers
experienced approximately a two-week disruption to their businesses
in October, which may have a slight impact on our sales for the
fourth quarter. In 2017, however, we expect some heightened
consumer awareness and additional sales related to that
awareness.”
Nine Months 2016 Financial Highlights
versus the Prior Year Period
- Net sales of $349.0 million, an increase of $52.2 million, or
18 percent;
- Gross margin of 31.1 percent, compared to 31.5 percent;
- Gross margin, as adjusted, of 31.3 percent, compared to 32.4
percent;
- Net income of $19.6 million, compared to $19.8 million;
- Net income, as adjusted, of $21.5 million, compared to $23.5
million;
- Net income per diluted share of $0.39, compared to $0.39;
- Adjusted net income per diluted share of $0.43, compared to
$0.47;
- EBITDA, as adjusted, of $59.3 million, compared to $53.0
million.
“Looking to the balance of 2016, we have seen some softness in
the luxury market; however, we continue to see steady demand in the
mass-custom market. We were able to reach our financial objectives
and shorten lead-times by reducing our backlog to $47 million,”
commented Jeff Jackson, PGTI’s President and Chief Operating
Officer. “Our first new Thermal Plastic Spacer (TPS) system, which
is an innovative and cutting-edge technology that we believe will
enable us to produce better quality insulated glass units, was
fully operational as of September. We are also strengthening our
team with a deeper bench of talent and leadership across the
organization. In August, we added a new Vice President of Sales,
Brent Boydston, in addition to approximately ten other senior
managers that we have added to our team during 2016. We also
continue to invest in our team with comprehensive training programs
as our total team members now stand at over 2,600.”
“Our three brands are also integrating efficiently and operating
more effectively as one company, providing best-in-class products
to our customer,” Jackson continued. “In January at the
International Builders Show in Orlando, we are unveiling a
comprehensive three brand go-to-market strategy with newly-enhanced
brand positions and innovative new products.”
“While our steadfast focus remains on executing our overall
financial and operational objectives, we are excited about the
future of PGTI,” Jackson stated. “We believe our strategies
for profitable organic growth and accretive acquisitions, combined
with our ability to execute, strong balance sheet and disciplined
approach to capital allocation, will continue to create shareholder
value.”
Fiscal Year 2016 Outlook
Our fiscal year 2016 outlook for total consolidated sales is
between $458 and $460 million.
Conference Call
As previously announced, PGTI will hold a conference call
Thursday, November 3, 2016, at 8:30 a.m. eastern time and will
simultaneously broadcast the call live over the Internet. To
participate in the teleconference, kindly dial into the call a few
minutes before the start time: 877-769-6798 (U.S. and Canada) and
678-894-3060 (international). A replay of the call will be
available beginning November 3, 2016, at 11:30 a.m. eastern time
through November 10, 2016, at 10:30 a.m. To access the replay, dial
855-859-2056 (U.S. and Canada) and 404-537-3406 (international) and
refer to pass code 86046512.
The Company's press release announcing its financial results
will be issued pre-market at approximately 6:00 a.m. on November
3rd and will be available at the same time through the Investor
Relations section of the PGT, Inc. website,
http://ir.pgtindustries.com/releases.cfm. The webcast will also be
available on the Investor Relations section of the PGT, Inc.
website, http://ir.pgtindustries.com/events.cfm.
About PGT, Inc.
PGT, Inc. (NASDAQ:PGTI), headquartered in North Venice, Florida,
through its wholly-owned subsidiaries, creates products which focus
on protecting and enhancing the beauty and functionality of homes
and businesses. The Company's trusted brands include PGT Custom
Windows & Doors, CGI Windows & Doors and WinDoor. PGT, Inc.
holds the leadership position in its primary market and is part of
the S&P SmallCap 400 Index. For additional information, visit
http://ir.pgtindustries.com.
Forward-Looking Statements
From time to time, we have made or will make forward-looking
statements within the meaning of Section 21E of the Exchange Act.
These statements do not relate strictly to historical or current
facts. Forward-looking statements usually can be identified by the
use of words such as "goal", "objective", "plan", "expect",
"anticipate", "intend", "project", "believe", "estimate", "may",
"could", or other words of similar meaning. Forward-looking
statements provide our current expectations or forecasts of future
events, results, circumstances or aspirations. Our disclosures in
this report contain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. We may
also make forward-looking statements in our other documents filed
or furnished with the Securities and Exchange Commission and in
oral presentations. Forward-looking statements are based on
assumptions and by their nature are subject to risks and
uncertainties, many of which are outside of our control. Our actual
results may differ materially from those set forth in our
forward-looking statements. There is no assurance that any list of
risks and uncertainties or risk factors is complete. Factors that
could cause actual results to differ materially from those
described in our forward-looking statements include, but are not
limited to:
- Changes in new home starts and home remodeling trends
- The economy in the U.S. generally or in Florida where the
substantial portion of our sales are generated
- Raw material prices, especially aluminum
- Transportation costs
- Level of indebtedness
- Dependence on our impact-resistant product lines
- Integration of acquisitions
- Product liability and warranty claims
- Federal and state regulations, and
- Dependence on our manufacturing facilities
Any forward-looking statements made by us or on our behalf speak
only as of the date they are made, and we do not undertake any
obligation to update any forward-looking statement to reflect the
impact of subsequent events or circumstances. Before making any
investment decision, you should carefully consider all risks and
uncertainties disclosed in all our SEC filings, including our
reports on Forms 8-K, 10-Q, and 10-K and our registration
statements under the Securities Act of 1933, as amended, all of
which are accessible on the SEC's website at www.sec.gov and
http://www.pgtindustries.com.
Use of Non-GAAP Financial
Measures
This Press Release and the financial schedules include financial
measures and terms not calculated in accordance with U.S. generally
accepted accounting principles (GAAP). We believe that presentation
of non-GAAP measures such as adjusted net income, adjusted net
income per share, EBITDA and adjusted EBITDA provides investors and
analysts with an alternative method for assessing our operating
results in a manner that enables investors and analysts to more
thoroughly evaluate our current performance compared to past
performance. We also believe these non-GAAP measures provide
investors with a better baseline for assessing our future earnings
potential. The non-GAAP measures included in this release are
provided to give investors access to types of measures that we use
in analyzing our results.
Adjusted net income consists of GAAP net income adjusted for the
items included in the accompanying reconciliation. Adjusted net
income per share consists of GAAP net income per share adjusted for
the items included in the accompanying reconciliation. We believe
these measures enable investors and analysts to more thoroughly
evaluate our current performance as compared to the past
performance and provide a better baseline for assessing the
Company's future earnings potential. However, these measures do not
provide a complete picture of our operations.
EBITDA consists of GAAP net income adjusted for the items
included in the accompanying reconciliation. Adjusted EBITDA
consists of EBITDA adjusted for the items included in the
accompanying reconciliation. We believe that EBITDA and adjusted
EBITDA provide useful information to investors and analysts about
the Company's performance because they eliminate the effects of
period-to-period changes in taxes, costs associated with capital
investments and interest expense. EBITDA and adjusted EBITDA do not
give effect to the cash the Company must use to service its debt or
pay its income taxes and thus do not reflect the funds generated
from operations or actually available for capital investments.
Our calculations of adjusted net income, adjusted net income per
share, EBITDA and adjusted EBITDA are not necessarily comparable to
calculations performed by other companies and reported as similarly
titled measures. These non-GAAP measures should be considered in
addition to results prepared in accordance with GAAP, but should
not be considered a substitute for or superior to GAAP measures.
Schedules that reconcile adjusted net income, adjusted net income
per share, EBITDA and adjusted EBITDA to GAAP net income are
included in the financial schedules accompanying this release.
PGT,
INC. |
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
(unaudited - in
thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
Nine Months
Ended |
|
|
October
1, |
|
October
3, |
|
October
1, |
|
October
3, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
129,807 |
|
|
$ |
100,668 |
|
|
$ |
349,046 |
|
|
$ |
296,802 |
|
Cost of sales |
|
|
88,721 |
|
|
|
71,247 |
|
|
|
240,507 |
|
|
|
203,395 |
|
Gross profit |
|
|
41,086 |
|
|
|
29,421 |
|
|
|
108,539 |
|
|
|
93,407 |
|
Selling, general and
administrative expenses |
|
|
22,533 |
|
|
|
16,364 |
|
|
|
63,209 |
|
|
|
50,804 |
|
Fair value adjustment
to contingent consideration |
|
|
(3,000 |
) |
|
|
- |
|
|
|
(3,000 |
) |
|
|
- |
|
Income from operations |
|
|
21,553 |
|
|
|
13,057 |
|
|
|
48,330 |
|
|
|
42,603 |
|
Interest expense,
net |
|
|
5,495 |
|
|
|
2,934 |
|
|
|
14,935 |
|
|
|
8,787 |
|
Debt extinguishment
costs |
|
|
- |
|
|
|
- |
|
|
|
3,431 |
|
|
|
- |
|
Other expenses,
net |
|
|
- |
|
|
|
131 |
|
|
|
- |
|
|
|
357 |
|
Income before income taxes |
|
|
16,058 |
|
|
|
9,992 |
|
|
|
29,964 |
|
|
|
33,459 |
|
Income tax expense |
|
|
5,262 |
|
|
|
3,646 |
|
|
|
10,339 |
|
|
|
13,681 |
|
Net income |
|
$ |
10,796 |
|
|
$ |
6,346 |
|
|
$ |
19,625 |
|
|
$ |
19,778 |
|
|
|
|
|
|
|
|
|
|
Basic net income per
common share |
|
$ |
0.22 |
|
|
$ |
0.13 |
|
|
$ |
0.40 |
|
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
Diluted net income per
common share |
|
$ |
0.21 |
|
|
$ |
0.13 |
|
|
$ |
0.39 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
48,941 |
|
|
|
48,596 |
|
|
|
48,782 |
|
|
|
48,131 |
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
50,672 |
|
|
|
50,563 |
|
|
|
50,528 |
|
|
|
50,290 |
|
|
|
|
|
|
|
|
|
|
PGT,
INC. |
CONDENSED
CONSOLIDATED BALANCE SHEETS |
(unaudited - in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
October
1, |
|
January
2, |
|
|
2016 |
|
2016 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
29,904 |
|
$ |
61,493 |
Accounts receivable, net |
|
|
50,915 |
|
|
31,783 |
Inventories |
|
|
30,846 |
|
|
23,053 |
Prepaid expenses and other current
assets |
|
|
8,226 |
|
|
10,643 |
Total current assets |
|
|
119,891 |
|
|
126,972 |
|
|
|
|
|
Property, plant and
equipment, net |
|
|
83,307 |
|
|
71,503 |
Intangible assets,
net |
|
|
122,701 |
|
|
79,311 |
Goodwill |
|
|
107,872 |
|
|
65,635 |
Other assets, net |
|
|
1,152 |
|
|
607 |
Total assets |
|
$ |
434,923 |
|
$ |
344,028 |
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts payable and accrued
expenses |
|
$ |
32,242 |
|
$ |
19,578 |
Current portion of long-term
debt |
|
|
- |
|
|
1,949 |
Total current liabilities |
|
|
32,242 |
|
|
21,527 |
|
|
|
|
|
Long-term debt, less
current portion |
|
|
247,202 |
|
|
188,818 |
Deferred income taxes,
net |
|
|
26,527 |
|
|
25,894 |
Other liabilities |
|
|
1,280 |
|
|
828 |
Total liabilities |
|
|
307,251 |
|
|
237,067 |
|
|
|
|
|
|
|
Total
shareholders' equity |
|
|
127,672 |
|
|
106,961 |
Total liabilities and shareholders'
equity |
|
$ |
434,923 |
|
$ |
344,028 |
|
|
|
|
|
PGT,
INC. |
RECONCILIATION
OF NON-GAAP FINANCIAL MEASURES TO THEIR GAAP
EQUIVALENTS |
(unaudited - in
thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
Nine Months
Ended |
|
|
October
1, |
|
October
3, |
|
October
1, |
|
October
3, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Reconciliation
to Adjusted Net Income and |
|
|
|
|
|
|
|
|
Adjusted Net Income per
share (1): |
|
|
|
|
|
|
|
|
Net income |
|
$ |
10,796 |
|
|
$ |
6,346 |
|
|
$ |
19,625 |
|
|
$ |
19,778 |
|
Reconciling items: |
|
|
|
|
|
|
|
|
Fair value adjustment
to contingent consideration (2) |
|
(3,000 |
) |
|
|
- |
|
|
|
(3,000 |
) |
|
|
- |
|
Refinancing- and
acquisition-related costs (3) |
|
|
299 |
|
|
|
- |
|
|
|
4,632 |
|
|
|
- |
|
Product line termination costs
(4) |
|
|
833 |
|
|
|
- |
|
|
|
1,108 |
|
|
|
- |
|
System conversion costs (5) |
|
|
- |
|
|
|
1,622 |
|
|
|
- |
|
|
|
1,622 |
|
New product launch costs (6) |
|
|
- |
|
|
|
284 |
|
|
|
- |
|
|
|
1,198 |
|
Laminated glass line installation
costs (7) |
|
|
- |
|
|
|
141 |
|
|
|
- |
|
|
|
141 |
|
Other corporate costs (8) |
|
|
214 |
|
|
|
272 |
|
|
|
214 |
|
|
|
272 |
|
Tax effect of reconciling
items |
|
|
587 |
|
|
|
(787 |
) |
|
|
(1,039 |
) |
|
|
(1,141 |
) |
Discrete item in income tax expense
(9) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,595 |
|
Adjusted
net income |
|
$ |
9,729 |
|
|
$ |
7,878 |
|
|
$ |
21,540 |
|
|
$ |
23,465 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
Diluted |
|
|
50,672 |
|
|
|
50,563 |
|
|
|
50,528 |
|
|
|
50,290 |
|
|
|
|
|
|
|
|
|
|
Adjusted net income per
share - diluted |
|
$ |
0.19 |
|
|
$ |
0.16 |
|
|
$ |
0.43 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
Reconciliation
to EBITDA and Adjusted EBITDA: |
|
|
|
|
|
|
|
|
Net
income |
|
$ |
10,796 |
|
|
$ |
6,346 |
|
|
$ |
19,625 |
|
|
$ |
19,778 |
|
Reconciling items: |
|
|
|
|
|
|
|
|
Depreciation and amortization
expense |
|
|
4,066 |
|
|
|
2,620 |
|
|
|
11,484 |
|
|
|
7,545 |
|
Interest expense, net |
|
|
5,495 |
|
|
|
2,934 |
|
|
|
14,935 |
|
|
|
8,787 |
|
Income tax expense |
|
|
5,262 |
|
|
|
3,646 |
|
|
|
10,339 |
|
|
|
13,681 |
|
EBITDA |
|
|
25,619 |
|
|
|
15,546 |
|
|
|
56,383 |
|
|
|
49,791 |
|
Add-backs: |
|
|
|
|
|
|
|
|
Fair value adjustment
to contingent consideration (2) |
|
(3,000 |
) |
|
|
- |
|
|
|
(3,000 |
) |
|
|
- |
|
Refinancing- and
acquisition-related costs (3) |
|
|
299 |
|
|
|
- |
|
|
|
4,632 |
|
|
|
- |
|
Product line termination costs
(4) |
|
|
833 |
|
|
|
- |
|
|
|
1,108 |
|
|
|
- |
|
System conversion costs (5) |
|
|
- |
|
|
|
1,622 |
|
|
|
- |
|
|
|
1,622 |
|
New product launch costs (6) |
|
|
- |
|
|
|
284 |
|
|
|
- |
|
|
|
1,198 |
|
Laminated glass line installation
costs (7) |
|
|
- |
|
|
|
141 |
|
|
|
- |
|
|
|
141 |
|
Other corporate costs (8) |
|
|
214 |
|
|
|
272 |
|
|
|
214 |
|
|
|
272 |
|
Adjusted EBITDA |
|
$ |
23,965 |
|
|
$ |
17,865 |
|
|
$ |
59,337 |
|
|
$ |
53,024 |
|
Adjusted EBITDA as
percentage of net sales |
|
|
18.5 |
% |
|
|
17.7 |
% |
|
|
17.0 |
% |
|
|
17.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The Company's non-GAAP financial measures were explained
in its Form 8-K filed November 3, 2016. |
|
|
|
|
|
|
|
|
|
(2) Represents fair value adjustment resulting in the reversal
of the liability for the earn-out contingency of $3.0 million
established in the acquisition of WinDoor on February 16, 2016. The
stock purchase agreement provides for a potential additional
payment to the sellers based on WinDoor’s 2016 calendar-year sales.
If WinDoor’s 2016 sales reach $46 million, the additional payment
is 5.9% of sales, or $2.7 million, up to a maximum sales amount of
$51 million, or $3.0 million. If WinDoor’s 2016 calendar-year
sales are less than $46 million, no payment is required. Based on
WinDoor’s sales through the end of the second quarter, we believed
that WinDoor would achieve 2016 calendar-year sales of at least the
minimum sales level of $46 million requiring payment under the
arrangement. Therefore, we made no adjustment to our payable for
contingent consideration. However, based on WinDoor’s sales through
the end of the third quarter of 2016, we concluded that it is
unlikely that WinDoor’s 2016 calendar-year sales will reach $46
million, and as required by the accounting rules, we recorded a
fair value adjustment of $3.0 million to the liability for
contingent consideration included in income from operations in the
three and nine months ended October 1, 2016. |
|
|
|
|
|
|
|
|
|
(3) Represents costs and expenses relating to our February 16,
2016 acquisition of WinDoor, Inc., and simultaneous refinancing of
our then existing credit facility into the 2016 Credit Agreement,
as well as the minor acquisition completed in the 2016 third
quarter. Of the $4.6 million, $3.4 million represents and is
classified as debt extinguishment costs, and $0.9 million
represents transaction- and refinancing-related costs and expenses
classified within selling, general and administrative expenses in
the nine months ended October 1, 2016. Costs of $0.3 million in the
three months ended October 1, 2016, were included in selling,
general and administrative expenses. |
|
|
|
|
|
|
|
|
|
(4) Represents estimated charges relating to product
discontinuances, including our Architectural Systems aluminum and
PremierVue vinyl impact products, of which $833 thousand is
classified within cost of sales in the three and nine months ended
October 1, 2016, and $275 thousand is classified within selling,
general and administrative expenses in the nine months ended
October 1, 2016. |
|
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(5) Represents costs associated with ERP system conversion, of
which $1.6 million is included in cost of sales and $47 thousand is
included in selling, general and administrative expenses in the
three and nine months ended October 3, 2015. |
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(6) Represents costs associated with new product launches, of
which $284 thousand is included in cost of sales in the three
months ended October 3, 2015, and $894 thousand is included in cost
of sales and $304 thousand is included in selling, general and
administrative expenses in the nine months ended October 3,
2015. |
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(7) Represents costs associated with start-up of the laminated
glass line, of which $141 thousand is included in cost of sales in
the three and nine months ended October 3, 2015. |
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(8) Represents special project costs relating to outside
efficiency improvement experts, included in selling, general and
administrative expenses in the three and nine months ended October
1, 2016. In the three and nine months ended October 3, 2015,
represents costs associated with legal settlement of $100 thousand
and other corporate costs of $41 thousand, all of which are
included in selling, general and administrative expenses, and fair
value adjustments due to losses on non-hedge commodity-related
contracts of $131 thousand, included in other expenses, net. |
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(9) Represents income tax expense previously classified within
accumulated other comprehensive losses, relating to the intraperiod
income taxes on our effective aluminum hedges. This amount,
previously allocated to other comprehensive income, was reversed in
the second quarter of 2015. |
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CONTACT: PGT, Inc.
Brad West, Senior Vice President and CFO
941-480-1600
bwest@pgtindustries.com
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