First Quarter Sales Growth of $33 Million Driven by Inclusion of
Western Window Systems and Growth in Legacy New Construction Channel
VENICE, Fla.–(BUSINESS WIRE)–PGT Innovations, Inc. (NYSE: PGTI), a national leader in premium windows
and doors, including impact-resistant products and products designed to
unify indoor/outdoor living spaces, today announced financial results
for its first quarter ended March 30, 2019.
Financial Highlights for First Quarter 2019 versus First Quarter 2018
-
Net sales for the first quarter increased 24 percent, to $174 million,
including $32 million from Western Window Systems - Gross profit grew 37 percent, to $61.3 million
- Net income for the quarter grew 13 percent, to $8.3 million
-
Net income per diluted share was flat at $0.14, and adjusted net
income per diluted share of $0.16, decreased $0.03 from the prior
year; both affected by the higher number of shares outstanding,
resulting from the 2018 equity offering - Adjusted EBITDA grew 30 percent, to $28.3 million
“In the first quarter, PGT Innovations’ significant growth in sales and
EBITDA was driven by the inclusion of Western Window Systems and the
strength in our new construction channel. In our legacy markets, our
corporate builder program grew significantly versus the prior year
quarter as adoption of our impact products continues to accelerate,”
stated Jeff Jackson, President and Chief Executive Officer of PGT
Innovations.
“First quarter sales for Western Window Systems grew versus the
prior-year quarter as its penetration continued to increase in the
indoor/outdoor living market. Integration continues to remain on track,
as expected cost synergies began to be realized in the first quarter and
meaningful progress was achieved in building the infrastructure to begin
selling Western products in our legacy markets,” added Jackson.
“Despite the slight decline in the repair and remodel market overlapping
significant growth in the prior year period, we were able to deliver
solid results in the first quarter of 2019, including the growth of
Western Window Systems’ sales and EBITDA compared to its pre-acquisition
prior year period. As we enter hurricane season, we are reaffirming full
year guidance for 2019,” stated Sherri Baker, Senior Vice President and
Chief Financial Officer of PGT Innovations. “Our balance sheet remained
strong at the end of the first quarter, with cash of $45 million and a
net debt-to-adjusted EBITDA ratio, adjusted for the Western Window
Systems acquisition, of 2.2 times,” concluded Baker.
Conference Call
PGT Innovations will host a conference call on Thursday, May 2, 2019, 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: 888-205-6786 (U.S. and Canada) and
786-789-4840 (U.S.). The conference ID is 987008. Please note that these
are new dial-in phone numbers. A replay of the call will be available
within approximately two hours after the scheduled end of the call on
May 2, 2019, through 1:30 p.m. on May 9, 2019. To access the replay,
dial 888-203-1112 (U.S. and Canada) and 719-457-0820 (U.S.) and refer to
pass code 2132984.
You may also join the conference online by using the following link: https://services.choruscall.com/links/pgti190502D1RN8jkQ.html.
The webcast will also be available through the Investors section of the
PGT Innovations, Inc. website: http://ir.pgtinnovations.com/events.cfm.
About PGT Innovations, Inc.
PGT Innovations manufactures and supplies premium windows and doors. Its
highly-engineered and technically-advanced products can withstand some
of the toughest weather conditions on earth and unify indoor/outdoor
living spaces.
PGT Innovations creates value through deep customer relationships,
understanding the unstated needs of the markets it serves and a drive to
develop category-defining products. PGT Innovations is also the nation’s
largest manufacturer of impact-resistant windows and doors, holds the
leadership position in its primary markets, and is part of the S&P
SmallCap 400 Index.
The PGT Innovations’ family of brands include CGI®, PGT® Custom Windows
& Doors, WinDoor®, Western Window Systems®, CGI Commercial® and
Eze-Breeze®. The Company’s brands, in their respective markets, are a
preferred choice of architects, builders, and homeowners throughout
North America and the Caribbean. The Company’s high-quality products are
available in custom and standard sizes with multiple dimensions that
allow for greater design possibilities in residential, multi-family, and
commercial projects. For additional information, visit www.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,” “plan” and similar terminology.
These risks and uncertainties include factors such as:
-
adverse changes in new home starts and home repair and remodeling
trends, especially in the state of Florida, where the substantial
portion of our sales are currently generated, and in the western
United States, where the substantial portion of the sales of Western
Window Systems’ operations are generated, and in the U.S. generally; -
macroeconomic conditions in Florida, where the substantial portion of
our sales are generated, and in California, Texas, Arizona, Nevada,
Colorado, Oregon, Washington and Hawaii, where the substantial portion
of the sales of Western Window Systems are currently generated, and in
the U.S. generally; -
our level of indebtedness, which increased in connection with our
acquisition of Western Window Systems; -
the effects of increased expenses or unanticipated liabilities
incurred as a result of, or due to activities related to, the Western
Window Systems acquisition; -
the risk that the anticipated cost savings, synergies, revenue
enhancement strategies and other benefits expected from the Western
Window Systems acquisition may not be fully realized or may take
longer to realize than expected or that our actual integration costs
may exceed our estimates; -
raw material prices, especially for aluminum, glass and vinyl,
including, price increases 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; -
sales fluctuations to and changes in our relationships with key
customers; -
increases in bad debt owed to us by our customers in the event of a
downturn in the home repair and remodeling or new home construction
channels in our core markets and our inability to collect such debt; -
in addition to the Western Window Systems acquisition, our ability to
successfully integrate businesses we may acquire, or that any business
we acquire may not perform as we expected at the time we acquired it; -
increases in transportation costs, including due to increases in fuel
prices; -
our dependence on our impact-resistant product lines and contemporary
indoor/outdoor window and door systems, and on consumer preferences
for those types and styles of products; - product liability and warranty claims brought against us;
-
federal, state and local laws and regulations, including unfavorable
changes in local building codes and environmental and energy code
regulations; -
our dependence on our limited number of geographically concentrated
manufacturing facilities; -
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 risks that our information technology systems do not
function as intended or experience temporary or long-term failures to
perform as intended; and -
the risks and uncertainties discussed under Part I, Item 1A, “Risk
Factors” in the Company’s Annual Report on Form 10-K for the year
ended December 29, 2018.
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
impact-resistant products and the products of Western Window Systems;
(2) our ability to gain market share in 2019 and beyond; (3) the
Company’s ability to continue to grow its sales and earnings in 2019 and
going forward; (4) our ability to position ourselves as a national
leader in the premium window and door market, and our performance in
that market; (5) our integration of Western Windows Systems and
achievement of synergies related thereto; and (6) our financial and
operational performance for our 2019 fiscal year, including our 2019
fiscal year outlook reaffirmed and 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 press
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 calculation 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.
Adjusted EBITDA as used in the calculation of the net debt-to-Adjusted
EBITDA ratio, consists of our adjusted EBITDA as described above, but
for the trailing twelve-month period, adjusted pursuant to the covenants
contained in the 2016 Credit Agreement due 2022 for the acquisition of
Western Window Systems.
| PGT INNOVATIONS, INC. | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (unaudited – in thousands, except per share amounts) | ||||
| Three Months Ended | ||||
| March 30, | March 31, | |||
| 2019 | 2018 | |||
| Net sales | $ 173,737 | $ 140,253 | ||
| Cost of sales | 112,467 | 95,480 | ||
| Gross profit | 61,270 | 44,773 | ||
| Selling, general and administrative expenses | 44,014 | 28,657 | ||
| Income from operations | 17,256 | 16,116 | ||
| Interest expense, net | 6,714 | 4,043 | ||
| Debt extinguishment costs | – | 3,079 | ||
| Income before income taxes | 10,542 | 8,994 | ||
| Income tax expense | 2,285 | 1,654 | ||
| Net income | $ 8,257 | $ 7,340 | ||
| Basic net income per common share | $ 0.14 | $ 0.15 | ||
| Diluted net income per common share | $ 0.14 | $ 0.14 | ||
| Weighted average common shares outstanding: | ||||
| Basic | 58,134 | 49,858 | ||
| Diluted | 59,220 | 51,998 | ||
| PGT INNOVATIONS, INC. | |||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||
| (unaudited – in thousands) | |||||
| March 30, | December 29, | ||||
| 2019 | 2018 | ||||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ 44,936 | $ 52,650 | |||
| Accounts receivable, net | 76,035 | 80,717 | |||
| Inventories | 47,962 | 44,666 | |||
| Contract assets, net | 9,375 | 6,757 | |||
| Prepaid expenses and other current assets | 15,812 | 10,771 | |||
| Total current assets | 194,120 | 195,561 | |||
| Property, plant and equipment, net | 120,238 | 115,707 | |||
| Operating lease right-of-use asset, net | 29,568 | – | |||
| Intangible assets, net | 267,803 | 271,818 | |||
| Goodwill | 277,827 | 277,827 | |||
| Other assets, net | 1,192 | 1,240 | |||
| Total assets | $ 890,748 | $ 862,153 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable and accrued expenses | $ 56,963 | $ 68,557 | |||
| Current portion of long-term debt | 87 | 163 | |||
| Current portion of operating lease liability | 7,016 | – | |||
| Total current liabilities | 64,066 | 68,720 | |||
| Long-term debt, less current portion | 367,041 | 366,614 | |||
| Operating lease liability, less current portion | 25,510 | – | |||
| Deferred income taxes, net | 23,144 | 22,758 | |||
| Other liabilities | 15,139 | 18,517 | |||
| Total liabilities | 494,900 | 476,609 | |||
| Total shareholders’ equity | 395,848 | 385,544 | |||
| Total liabilities and shareholders’ equity | $ 890,748 | $ 862,153 | |||
| PGT INNOVATIONS, INC. | ||||
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO THEIR GAAP EQUIVALENTS |
||||
|
(unaudited – in thousands, except per share amounts and percentages) |
||||
| Three Months Ended | ||||
| March 30, | March 31, | |||
| 2019 | 2018 | |||
| Reconciliation to Adjusted Net Income and | ||||
| Adjusted Net Income per share (1): | ||||
| Net income | $ 8,257 | $ 7,340 | ||
| Reconciling items: | ||||
| Product line transition costs (2) | 641 | – | ||
| Acquisition costs (3) | 650 | – | ||
| Debt extinguishment costs (4) | – | 3,079 | ||
| Facility and equipment relocation costs (5) | – | 435 | ||
| Tax effect of reconciling items | (332) | (906) | ||
| Adjusted net income | $ 9,216 | $ 9,948 | ||
| Weighted-average diluted shares | 59,220 | 51,998 | ||
| Adjusted net income per share – diluted | $0.16 | $0.19 | ||
| Reconciliation to Adjusted EBITDA (1): | ||||
| Depreciation and amortization expense | $ 8,512 | $ 4,620 | ||
| Interest expense, net | 6,714 | 4,043 | ||
| Income tax expense | 2,285 | 1,654 | ||
| Reversal of tax effect of reconciling items for | ||||
| adjusted net income above | 332 | 906 | ||
| Stock-based compensation expense | 1,198 | 514 | ||
| Adjusted EBITDA | $ 28,257 | $ 21,685 | ||
| Adjusted EBITDA as percentage of net sales | 16.3% | 15.5% | ||
|
Net debt-to-Adjusted EBITDA ratio as adjusted for Western Window |
2.2x |
|||
|
(1) The Company’s non-GAAP financial measures were explained in its Form 8-K filed May 2, 2019. |
|
(2) Represents costs relating to product line transitions, classified within cost of sales for the three months ended March 30, 2019. |
|
(3) Represents costs relating to the Western Window Systems acquisition, classified within selling, general and administrative expenses for the three months ended March 30, 2019. |
|
(4) Represents debt extinguishment costs for the three months |
|
(5) 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. |
|
(6) Calculated in accordance with the covenants pursuant to the |
Contacts
Investor Relations:
Sherri Baker, 941-480-1600
Senior
Vice President and CFO
[email protected]
Media Relations:
Brent Boydston, 941-480-1600
Senior
Vice President, Corporate Sales and Marketing
[email protected]
