Market Overview

PGTI Reports First Quarter 2018 Results

Share:

Strong Top-Line Sales of $140 million delivers solid operating
performance

PGT Innovations, Inc. (NYSE:PGTI), the leading U.S. manufacturer and
supplier of impact-resistant windows and doors, announces financial
results for its first quarter ended March 31, 2018.

"PGT Innovations delivered a solid top-line performance in our first
quarter of 2018. Sales of $140 million increased $28 million, or 24
percent, over the first quarter of last year. We continued to increase
our share of the Florida market in the first quarter, as our sales into
the repair and remodeling market increased 32 percent compared to last
year's first quarter, and represented 63 percent of sales," stated Jeff
Jackson, CEO of PGT Innovations. "Our strategy of investing in marketing
and advertising, combined with the heightened awareness of the benefits
of impact-resistant products from an active 2017 hurricane season,
continued to benefit our sales during the first quarter of 2018.
Homeowners are preparing for what experts are forecasting to be another
active hurricane season in 2018, and, we believe they are selecting our
products at an increasing rate for their impact protection needs, and to
comply with Florida's building codes, which are the strongest, safest
building codes in the country."

Financial Highlights for First Quarter 2018 versus First Quarter 2017

  • Net sales of $140.3 million, an increase of $27.5 million, or 24
    percent
  • Gross margin of 31.9 percent, compared to 28.2 percent
  • Net income of $7.3 million, compared to $3.0 million
  • Adjusted net income of $9.9 million, compared to $3.8 million
  • Net income per diluted share of $0.14, compared to $0.06
  • Adjusted net income per diluted share of $0.19, compared to $0.07

"Our strong top-line results delivered a solid operating performance due
to our increased ability to leverage fixed costs, resulting in improved
margins in the first quarter of 2018, compared to last year's first
quarter. This leverage, combined with manufacturing and operating
efficiencies we achieved during the first quarter delivered a nearly 4
percentage-point increase in gross margin compared to last year,"
Jackson continued. "The inflationary headwinds we experienced in the
second half of last year were still a factor during the first quarter of
2018, especially a higher cost for aluminum. We took actions to offset
the unfavorable impact of this cost increase, including announcing a
price increase during the first quarter, the benefits of which we began
to see in March."

"Our team delivered adjusted EBITDA of $21.7 million in the first
quarter of 2018, up 42 percent from the first quarter of last year, and
adjusted diluted earnings per share of 19 cents, increasing 12 cents,"
stated Brad West, PGT Innovations CFO. "We are pleased with these
metrics, which confirm our ability to profitably leverage our growth."

"During the first quarter of 2018, we amended our credit facility, which
resulted in a 125 basis-point reduction in our interest rate margin,
which we estimate should reduce our cash debt service costs by an
aggregate of nearly $2.8 million over the next twelve months. We
accomplished this refinancing at minimal cost to the company and
recorded a non-cash charge of $3.1 million for the write-off of deferred
financing costs," continued West. "Including last year's refinancing, we
have lowered our interest margin by a total of 225 basis points in a
little more than one year, a reflection we believe of our strong
financial position and ability to generate cash."

Fiscal Year 2018 Outlook

The Company remains confident in its core market of Florida and expects
to finish its 2018 fiscal year at the higher end of the ranges that was
previously provided as guidance for its 2018 fiscal year, which are
listed below. All comparisons are to fiscal year 2017:

  • Net sales of $550 million to $575 million, increasing 8 percent to 13
    percent;
  • Adjusted EBITDA of $95 million to $105 million, increasing 10 percent
    to 22 percent;
  • Net income per diluted share of $0.81 to $0.98; and
  • Free cash flow of $59 million to $67 million

Beginning in 2018, the Company updated its reporting of adjusted EBITDA
to exclude non-cash stock-based compensation expense. In the above
outlook comparison, adjusted EBITDA for 2017 has been adjusted to
reflect this change. Comparisons to prior periods in future earnings
releases will also be adjusted to reflect this change.

Conference Call

PGT Innovations will host a conference call on Tuesday, May 1, 2018, at
10:30 a.m. The conference call will be available at the same time
through the Investor Relations section of the PGT Innovations, Inc.
website, http://ir.pgtinnovations.com/events.cfm.

To participate in the teleconference, kindly dial into the call a few
minutes before the start time: 877-883-0383 (U.S.) and 412-902-6506
(Canada and international). The conference ID is 6617629. A replay of
the call will be available within one hour after the end of the call on
May 1, 2018, through May 15, 2018. To access the replay, dial
877-344-7529 (U.S.), 855-669-9658 (Canada) and 412-317-0088
(international) and refer to pass code 10119077.

You may also provide your contact information in advance by using the
following link: https://hd.choruscall.com/?callme=true&passcode=6617629&r=true&info=company&b=16.
At the time of the call, the phone number you provided will be
automatically called and connected to the conference.

About PGT Innovations, Inc.

PGT INNOVATIONS, INC. (NYSE: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 Innovations, 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.pgtinnovations.com.

Forward-Looking Statements

Statements in this press release regarding our business that are not
historical facts are "forward-looking statements" that involve risks and
uncertainties which could cause actual results to differ materially from
those contained in the forward-looking statements. Such forward-looking
statements generally can be identified by the use of forward-looking
terminology, such as "may," "expect," "expectations," "outlook,"
"forecast," "guidance," "intend," "believe," "could," "project,"
"estimate," "anticipate," "should" and similar terminology. These risks
and uncertainties include factors such as:

  • unfavorable changes in new home starts and home remodeling trends,
    especially in the State of Florida, where the substantial portion of
    our sales are generated;
  • unfavorable changes in the economy in the United States in general and
    in the State of Florida, where the substantial portion of our sales
    are generated;
  • increases in our cost of raw materials, including aluminum, glass and
    vinyl, including, without limitation, due to the implementation of
    tariffs and other trade-related restrictions;
  • our dependence on a limited number of suppliers for certain of our key
    materials;
  • increases in our transportation costs;
  • our level of indebtedness;
  • our dependence on our impact-resistant product lines;
  • our ability to successfully integrate businesses we may acquire;
  • product liability and warranty claims brought against us;
  • federal, state and local laws and regulations, including unfavorable
    changes in local building codes;
  • our dependence on a limited number of manufacturing facilities;
  • the continuing post-storm impact of Hurricane Irma on our customers
    and markets, demand for our products, and our financial and
    operational performance related thereto;
  • risks associated with our information technology systems, including
    cybersecurity-related risks, such as unauthorized intrusions into our
    systems by "hackers" and theft of data and information from our
    systems, and,
  • the other risks and uncertainties discussed under "Risk Factors" in
    our Annual Report on Form 10-K for the year ended December 30, 2017.

Statements in this press release that are forward-looking statements
include, without limitation, our expectations regarding: (1) demand for
our products going forward, including the demand for our products from
homeowners who are preparing for the 2018 and future hurricane seasons;
(2) our ability to continue to leverage fixed costs in a favorable
manner; (3) the heightened awareness brought by Hurricane Irma and our
post-Irma advertising initiatives about the benefits of impact-resistant
window and door products; (4) the favorable impact that the increase in
our product prices may have on our performance, and our ability to take
future price increases to offset further increases in our costs; (5) the
amount of the decrease in our cash interests costs going forward; (6)
the Company's ability to capture a meaningful share of any increased
demand for impact-resistant products; and (7) our financial and
operational performance for our 2018 fiscal year, including our "Fiscal
Year 2018 Outlook" set forth in this press release. You are cautioned
not to place undue reliance on these forward-looking statements, which
speak only as of the date of this press release. Except as required by
law, the Company undertakes no obligation to update these
forward-looking statements to reflect subsequent events or circumstances
from the date of this press release.

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, 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.

Adjusted EBITDA consists of net income, adjusted for the items included
in the accompanying reconciliation. We believe that adjusted EBITDA
provides 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. Adjusted EBITDA does not give effect
to the cash the Company must use to service its debt or pay its income
taxes and thus does not reflect the actual funds generated from
operations or available for capital investments.

Our calculations of adjusted net income, adjusted net income per share,
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, and adjusted EBITDA
to GAAP net income are included in the financial schedules accompanying
this release.

 
PGT INNOVATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited - in thousands, except per share amounts)
       
Three Months Ended
March 31, April 1,
2018 2017
 
Net sales $ 140,253 $ 112,721
Cost of sales   95,480   80,982
Gross profit 44,773 31,739
Selling, general and administrative expenses   28,657   22,785
Income from operations 16,116 8,954
Interest expense, net 4,043 4,910
Debt extinguishment costs   3,079   -
Income before income taxes 8,994 4,044
Income tax expense   1,654   1,045
Net income $ 7,340 $ 2,999
 
Basic net income per common share $ 0.15 $ 0.06
 
Diluted net income per common share $ 0.14 $ 0.06
 
Weighted average common shares outstanding:
Basic   49,858   49,263
 
Diluted   51,998   51,628
 
 
PGT INNOVATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited - in thousands)
       
 
March 31, December 30,
2018 2017
ASSETS
Current assets:
Cash and cash equivalents $ 34,048 $ 34,029
Accounts receivable, net 66,434 60,308
Inventories 35,506 37,816
Prepaid expenses, other current assets and assets held for sale
(1)(2)
  23,786   12,363
Total current assets 159,774 144,516
 
Property, plant and equipment, net 88,193 84,133
Intangible assets, net 113,384 115,043
Goodwill 108,060 108,060
Other assets, net   1,363   1,367
Total assets $ 470,774 $ 453,119
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses (3) $ 39,610 $ 41,085
Current portion of long-term debt   299   294
Total current liabilities 39,909 41,379
 
Long-term debt, less current portion 214,609 212,679
Deferred income taxes, net 23,398 22,772
Other liabilities (3)   8,317   964
Total liabilities 286,233 277,794
 
Total shareholders' equity   184,541   175,325
Total liabilities and shareholders' equity $ 470,774 $ 453,119
 

(1)

At March 31, 2018, and December 30, 2017, includes $3.2 million of
assets held for sale related to the sale of machinery and
equipment to Cardinal Glass Industries.

 

(2)

At March 31, 2018, includes net contract assets of $9.2 million,
representing contract assets of $9.7 million, less contract
liabilities of $0.5 million, related to revenues recognized as
sales in the three months ended March 31, 2018, but not yet
invoiced.

 

(3)

At March 31, 2018, includes $2.8 million within accrued expenses
and $7.0 million within other liabilities of deferred trade
discount related to the supply agreement with Cardinal Glass
Industries being amortized through 2024.

 
 
PGT INNOVATIONS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO THEIR GAAP
EQUIVALENTS
(unaudited - in thousands, except per share amounts)
       
Three Months Ended
March 31, April 1,
2018 2017

Reconciliation to Adjusted Net Income and Adjusted Net Income
per share from Net Income according to GAAP (1):

Net income (2) $ 7,340 $ 2,999
Reconciling items:
Debt extinguishment costs (2) 3,079 -
Facility and equipment relocation costs (3) 435 -
Management reorganization and other corporate costs (4) - 715
Thermal Plastic System start-up costs (5) - 517
Tax effect of reconciling items   (906 )   (435 )
Adjusted net income $ 9,948     $ 3,796  
Weighted-average diluted shares (2) 51,998 51,628
Adjusted net income per share - diluted $ 0.19   $ 0.07  
Reconciliation to Adjusted EBITDA from Net Income according to
GAAP (1):
Depreciation and amortization expense 4,620 4,597
Interest expense, net 4,043 4,910
Income tax expense 1,654 1,045
Reversal of tax effect of reconciling items for adjusted net income
above
906 435
Stock-based compensation expense (6)   514     458  
Adjusted EBITDA $ 21,685   $ 15,241  
Adjusted EBITDA as percentage of net sales   15.5 %   13.5 %
 

(1)

The Company's non-GAAP financial measures were explained in its
Form 8-K filed May 1, 2018.

 

(2)

Represents debt extinguishment costs for the three months ended
March 31, 2018, relating to the Company's March 16, 2018,
refinancing and second amendment of the 2016 Credit Agreement. On
February 17, 2017, we repriced and amended our 2016 Credit
Agreement for the first time. Because there were no changes in
lender positions, this action did not result in any modifications
or extinguishments of debt. Therefore, there was no charge for
debt extinguishment costs in the three months ended April 1, 2017.

 

(3)

Represents costs associated with planned relocation of the CGI
Windows & Doors manufacturing operations to its new facility in
Miami, FL, and costs associated with machinery and equipment
relocations within our glass plant operations in Venice, FL, as
the result of our planned disposal of certain glass manufacturing
assets to Cardinal Glass Industries. Of the $435 thousand, $416
thousand is classified within cost of sales during the three
months ended March 31, 2018, with the remainder classified within
selling, general and administrative expenses.

 

(4)

Represents costs associated with planned changes in our management
structure in the first quarter of 2017, directed towards
maximizing the effectiveness and efficiency of the Company's
leadership team, classified within selling, general and
administrative expenses in the three months ended April 1, 2017.

 

(5)

Represents costs incurred in January and February 2017 associated
with the start-up of our second Thermal Plastic Spacer system
insulated glass line, all of which is classified within cost of
sales in the three months ended April 1, 2017.

 

(6)

Beginning in 2018, we updated our reporting of adjusted EBITDA to
exclude non-cash stock-based compensation expense. Prior periods
have been revised to reflect this change for consistency of
comparisons.

View Comments and Join the Discussion!