UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 8-K

 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 12, 2020

 
PGT Innovations, Inc.
(Exact name of Registrant as Specified in Its Charter)

 
 
Delaware
001-37971
20-0634715
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
     
1070 TECHNOLOGY DRIVE
NORTH VENICE, Florida
 
34275
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s Telephone Number, Including Area Code: (941) 480-1600
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):


Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Trading
Symbol(s)
 
Name of each exchange on which registered
Common Stock, Par Value $0.01 Per Share
 
PGTI
 
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 





ITEM 2.02. Results of Operations and Financial Condition

On August 12, 2020, PGT Innovations, Inc. (the “Company”) issued a press release announcing its financial results for its second quarter ended July 4, 2020.

On the same date, the Company posted an earnings presentation on its investor relations website at http://ir.pgtinnovations.com. The earnings presentation is being made available in connection with the Company’s earnings conference call and audio webcast on August 12, 2020 at 10:30 a.m. E.T. The press release and the earnings presentation are furnished as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K and are hereby incorporated herein by reference.

ITEM 7.01. Regulation FD Disclosure

The information set forth above under Item 2.02 is hereby incorporated herein by reference.

The information contained in this paragraph, as well as Exhibit 99.1 and Exhibit 99.2 referenced herein, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933.

ITEM 9.01.
FINANCIAL STATEMENTS AND EXHIBITS
 
(d)
Exhibits
 
     
Exhibit No.
  
Description
  
 
  
 
104
  
Cover Page Interactive Date File - the cover page XBRL tags are embedded within the Inline XBRL document
 
     


2


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 hereunto duly authorized.

PGT INNOVATIONS, INC.


By: /s/ Sherri Baker_____________________________        
       Name:  Sherri Baker
       Title:  Senior Vice President, and Chief Financial Officer



    Dated:  August 12, 2020



3


EXHIBIT INDEX


 
     
Exhibit No.
  
Description
  
 
  
 
104
  
Cover Page Interactive Date File - the cover page XBRL tags are embedded within the Inline XBRL document
 
     

4



EXHIBIT 99.1



NEWS RELEASE

PGTI Reports 2020 Second Quarter Results

VENICE, Fla., August 12, 2020 – 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 second quarter ended July 4, 2020.

Financial Highlights for Second Quarter 2020 compared to Second Quarter 2019


Net sales increased 2 percent, to $203 million, including $23 million from our NewSouth acquisition

Gross profit increased 2 percent, to $74 million

Net income decreased 87 percent, to $2 million, negatively impacted by an $8 million non-cash impairment charge and $4 million in costs and charges relating to our Florida facilities consolidation, both before tax-effect

Net income per diluted share decreased 86 percent, to $0.04, and adjusted net income per diluted share decreased 34 percent, to $0.21

Adjusted EBITDA decreased 15 percent, to $35 million

“Our sales results for the quarter exceeded our internal forecasts, reflecting what we believe is solid demand recovery as the economy reopens,” said Jeff Jackson, President and Chief Executive Officer. “While our organic sales were down 9 percent compared to the prior-year quarter, June order entry for our legacy businesses was up 13 percent versus June in the prior-year, and also showed sequential improvement. Our subsidiary NewSouth Window Solutions, which we acquired earlier this year, had a strong quarter, contributing $23 million of revenue and growing orders more than 80 percent compared to the prior-year quarter.”

“While we continue to face macro-economic headwinds in our core Western markets due to the pandemic, solid demand exists in the market for our impact-resistant windows and doors, particularly now that we have entered hurricane season,” added Jackson. “Our ability to capture sales growth in a challenging market is also the result of an overarching strategy of continuous improvement and strong execution of our selling initiatives in recent quarters that are having a favorable impact on our current strength in the market.”

- 1 -


“Adjusted EBITDA decreased by 15 percent to $35 million, driven by lower sales in our organic business and less favorable product mix for the quarter, although we continue to achieve lower direct labor costs and improved operating efficiencies,” said Sherri Baker, Senior Vice President and Chief Financial Officer. “We recently completed the consolidation of our Orlando, Florida manufacturing facility in order to further improve our operational efficiency, and we expect annual operating expense savings of approximately $3.5 million going forward. We’ve made meaningful progress in improving our Western business unit's direct labor and distribution costs, driving a 140-basis point improvement in each category versus the prior year quarter. However, due to the impacts of the pandemic on the economy and our sales in the west, we recorded a non-cash impairment charge in the second quarter relating to our Western Window Systems trade name.”

“We believe our balance sheet is strong, and we continue to deliver solid free cash flow. We ended the second quarter with total liquidity of $174 million, including a cash balance of $98 million and undrawn revolver capacity of $76 million. Give our cash position and overall liquidity, since the end of our second quarter of 2020, we made voluntary prepayments or borrowings under the term loan totaling $10 million,” added Ms. Baker. “However, because of the difficulty in making longer term forecasts in this environment, we intend to maintain a conservative position towards our capital allocation priorities and preserve cash by reducing discretionary costs and capital expenditures.”

“In lieu of giving guidance for the remainder of the year, we are providing a limited outlook for the quarter ahead. We expect our third quarter 2020 consolidated net sales, inclusive of NewSouth, to increase in the range of 14 to 19 percent as compared to the prior year, reflecting the strength of our order entries during the back half of the second quarter and into July,” concluded Baker.

“I am extremely proud of all our employees for doing an excellent job delivering high-quality products and services for our customers during this difficult period, when all have been personally affected by the COVID-19 pandemic and related lockdowns, and we have demonstrated our commitment to the safety of our team and customers by our willingness to continue to invest in protecting against this threat,” added Jackson. “We believe we are well positioned to continue our growth trajectory by expanding the markets we serve and offering high-quality innovative products as the economy continues to recover.”

- 2 -


Conference Call

PGT Innovations will host a conference call today 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 about 10 minutes before the start time: 866-807-9684 (U.S. toll-free) and 412-317-5415 (International). A replay of the call will be available within approximately one hour after the scheduled end of the call on August 12, 2020, through approximately 12:30 p.m. on August 19, 2020. To access the replay, dial 877-344-7529 (U.S. Only toll-free), 855-669-9658 (Canada Only toll-free) and 412-317-0088 (International) and refer to pass code 10145632.

You may join the conference online by using the following link:
https://services.choruscall.com/links/pgti2008120owugfk6.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®, Eze-Breeze® and NewSouth Window Solutions®. 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.


- 3 -


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 “believe,” “expect,” “intend,” “positioned,” “assumptions” and similar terminology. These risks and uncertainties include factors such as:

the impact of the COVID-19 pandemic and related measures taken by governmental or regulatory authorities to combat the pandemic, including the impact of the pandemic and these measures on the economies and demand for our products in the states where we sell them, and on our customers, suppliers, labor force, business, operations and financial performance;
unpredictable weather and macroeconomic factors that may negatively impact the repair and remodel and new construction markets and the construction industry generally, especially in the state of Florida and the western United States, where the substantial portion of our sales are currently generated, and in the U.S. generally;
changes in 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;
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;
the effects of increased expenses or unanticipated liabilities incurred as a result of, or due to activities related to, our acquisitions of NewSouth and Western Window Systems;
our level of indebtedness, which increased in connection with our acquisition of Western Window Systems, and increased further in connection with our acquisition of NewSouth;
increases in bad debt owed to us by our customers in the event of a downturn in the home repair and remodel or new home construction channels in our core markets and our inability to collect such debt;
the risks that the anticipated cost savings, synergies, revenue enhancement strategies and other benefits expected from our acquisitions of NewSouth and Western Window Systems may not be fully realized or may take longer to realize than expected or that our actual integration costs may exceed our estimates;
increases in transportation costs, including increases in fuel prices;
our dependence on our limited number of geographically concentrated manufacturing facilities;
sales fluctuations to and changes in our relationships with key customers;
federal, state and local laws and regulations, including unfavorable changes in local building codes and environmental and energy code regulations;


- 4 -


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;
product liability and warranty claims brought against us;
in addition to the acquisitions of NewSouth and Western Window Systems, our ability to successfully integrate businesses we may acquire in the future, or that any business we acquire may not perform as we expected at the time we acquired it; and
the other risks and uncertainties discussed under “Risk Factors” in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended July 4, 2020, and “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 28, 2019 and our other SEC filings.

Statements in this press release that are forward-looking statements include, without limitation, our expectations regarding: (1) demand for our products in future periods, as the economies in our markets continue to reopen, and thereafter; (2) our ability to capture sales and sales growth; (3) the amount of operating expense savings and other possible benefits arising from the closure of our Orlando, Florida manufacturing facility and the consolidation of its operations into our Venice and Tampa, Florida facilities, and the timing of those benefits; (4) our ability to lower labor and other costs and improve operating efficiencies; (5) the strength of our balance sheet, our liquidity, our capital allocation priorities, and ability to preserve cash and liquidity generally; (6) our net sales and EBITDA margins for the third quarter of 2020; (7) our growth trajectory and market expansion; and (8) our inability to forecast and provide guidance regarding our financial performance for the 2020 fiscal year. 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.


- 5 -



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 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 and 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.

SOURCE: PGT Innovations, Inc.

PGT Innovations Contacts:

Investor Relations:
Sherri Baker, 941-480-1600
Senior Vice President and CFO
SBaker@PGTInnovations.com

Media Relations:
Stephanie Cz, 941-480-1600
Corporate Communications Manager


- 6 -


PGT INNOVATIONS, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(unaudited - in thousands, except per share amounts)
 
 
               
 
Three Months Ended
 
Six Months Ended
 
 
July 4,
 
June 29,
 
July 4,
 
June 29,
 
 
2020
 
2019
 
2020
 
2019
 
 
               
Net sales
$
202,783
 
$
198,570
 
$
422,987
 
$
372,307
 
Cost of sales
 
128,320
   
125,630
   
267,397
   
238,097
 
   Gross profit
 
74,463
   
72,940
   
155,590
   
134,210
 
Selling, general and administrative expenses
 
53,969
   
44,026
   
108,189
   
88,040
 
Impairment of trade name
 
8,000
   
-
   
8,000
   
-
 
Restructuring costs and charges
 
3,906
   
-
   
3,906
   
-
 
   Income from operations
 
8,588
   
28,914
   
35,495
   
46,170
 
Interest expense, net
 
6,856
   
6,756
   
14,025
   
13,470
 
   Income before income taxes
 
1,732
   
22,158
   
21,470
   
32,700
 
Income tax (benefit) expense
 
(467
)
 
5,113
   
3,671
   
7,398
 
   Net income
$
2,199
 
$
17,045
 
$
17,799
 
$
25,302
 
 
                       
Basic net income per common share
$
0.04
 
$
0.29
 
$
0.30
 
$
0.43
 
 
                       
Diluted net income per common share
$
0.04
 
$
0.29
 
$
0.30
 
$
0.43
 
 
                       
   Weighted average common shares outstanding:
                       
Basic
 
58,943
   
58,394
   
58,806
   
58,264
 
 
                       
Diluted
 
59,140
   
59,291
   
59,147
   
59,248
 


- 7 -


PGT INNOVATIONS, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(unaudited - in thousands)
 
 
       
 
       
 
July 4,
 
December 28,
 
 
2020
 
2019
 
ASSETS
       
Current assets:
       
Cash and cash equivalents
$
98,353
 
$
97,243
 
Accounts receivable, net
 
93,140
   
68,091
 
Inventories
 
51,560
   
43,851
 
Contract assets, net
 
15,387
   
10,547
 
Prepaid expenses and other current assets
 
18,653
   
13,878
 
Total current assets
 
277,093
   
233,610
 
 
           
Property, plant and equipment, net
 
132,075
   
128,199
 
Operating lease right-of-use asset, net
 
37,335
   
26,390
 
Intangible assets, net
 
265,908
   
255,962
 
Goodwill
 
327,507
   
277,600
 
Other assets, net
 
978
   
972
 
     Total assets
$
1,040,896
 
$
922,733
 
 
           
LIABILITIES AND SHAREHOLDERS' EQUITY
           
Current liabilities:
           
Accounts payable and accrued expenses
$
89,459
 
$
51,394
 
Current portion of operating lease liability
 
6,114
   
4,703
 
Total current liabilities
 
95,573
   
56,097
 
 
           
Long-term debt, less current portion
 
421,481
   
368,971
 
Operating lease liability, less current portion
 
34,402
   
24,040
 
Deferred income taxes, net
 
25,575
   
27,945
 
Other liabilities
 
12,855
   
14,132
 
Total liabilities
 
589,886
   
491,185
 
 
           
Total shareholders' equity
 
451,010
   
431,548
 
Total liabilities and shareholders' equity
$
1,040,896
 
$
922,733
 


- 8 -


PGT INNOVATIONS, INC.
 
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO THEIR
 
MOST DIRECTLY COMPARABLE GAAP EQUIVALENTS
 
(unaudited - in thousands, except per share amounts and percentages)
 
 
               
 
Three Months Ended
 
Six Months Ended
 
 
July 4,
 
June 29,
 
July 4,
 
June 29,
 
 
2020
 
2019
 
2020
 
2019
 
Reconciliation to Adjusted Net Income and
               
Adjusted Net Income per share (1):
               
Net income
$
2,199
 
$
17,045
 
$
17,799
 
$
25,302
 
Reconciling items:
                       
Impairment of trade name (2)
 
8,000
   
-
   
8,000
   
-
 
Restructuring costs and charges (3)
 
3,906
   
-
   
3,906
   
-
 
Product line transition costs (4)
 
-
   
492
   
382
   
1,133
 
Acquisition-related costs (5)
 
379
   
1,709
   
922
   
2,359
 
Pandemic-related costs (6)
 
1,500
   
-
   
1,585
   
-
 
Tax effect of reconciling items
 
(3,447
)
 
(565
)
 
(3,700
)
 
(897
)
Adjusted net income
$
12,537
 
$
18,681
 
$
28,894
 
$
27,897
 
Weighted-average diluted shares
 
59,140
   
59,291
   
59,147
   
59,248
 
Adjusted net income per share - diluted
$
0.21
 
$
0.32
 
$
0.49
 
$
0.47
 
Reconciliation to Adjusted EBITDA (1):
                       
Depreciation and amortization expense
$
10,947
 
$
8,661
 
$
20,875
 
$
17,173
 
Interest expense, net
 
6,856
   
6,756
   
14,025
   
13,470
 
Income tax (benefit) expense
 
(467
)
 
5,113
   
3,671
   
7,398
 
Reversal of tax effect of reconciling items for
                       
  adjusted net income above
 
3,447
   
565
   
3,700
   
897
 
Stock-based compensation expense
 
1,388
   
1,078
   
2,918
   
2,276
 
Adjusted EBITDA
$
34,708
 
$
40,854
 
$
74,083
 
$
69,111
 
Adjusted EBITDA as percentage of net sales
 
17.1%

 
20.6%

 
17.5%

 
18.6%

 
                       
Net debt-to-Adjusted EBITDA ratio (7)
             
2.4x

     


- 9 -


(1) The Company's non-GAAP financial measures were explained in its Form 8-K filed August 12, 2020.
 
(2) Represents impairment charge relating to our Western Window Systems trade name, for the three and six months ended July 4, 2020.
 
(3) Represents restructuring costs and charges relating to our previously announced Florida facilities consolidation, which includes closure of our Orlando, Florida manufacturing facility, and relocation of the manufacturing of our Eze-Breeze products to our N. Venice, Florida manufacturing facility, and of our WinDoor products to our Tampa, Florida manufacturing facility, totaling $3.9 million, as classified within the line item on the condensed consolidated statement of operations for the three and six months ended July 4, 2020 described as restructuring costs and charges. Of the $3.9 million of restructuring costs and charges, $1.6 million represents write-offs of property, plant and equipment, including the impairment of the right-of-use asset of the lease of the Orlando, Florida facility, $1.2 million represents charges relating to inventory we do not expect to use due to product rationalization, which we chose to dispose of, and $1.1 million represents personnel-related costs. Substantially all of the personnel-related costs had been paid in cash by the end of our 2020 second quarter.
 
(4) Represents costs relating to product line transitions, classified within cost of sales for the six months ended July 4, 2020 and the three and six months ended June 29, 2019.
 
(5) In 2020, represents costs relating to the acquisition of NewSouth Window Solutions, and in 2019, relating to the acquisition of Western Window Systems, classified within selling, general and administrative expenses for the three and six months ended July 4, 2020 and June 29, 2019.
 
(6)  Represents incremental costs incurred relating to the coronavirus pandemic, including cleaning and sanitization costs for the protection of the health of our employees and safety of our facilities, classified within selling, general and administrative expenses for the three and six months ended July 4, 2020.
 
(7) Calculated using an adjusted EBITDA amount pursuant to the covenants included in our 2016 Credit Agreement due 2022 which includes the EBITDA of our NewSouth acquisition on a proforma trailing twelve-month basis.




- 10 -


EXHIBIT 99.2


 Q2 2020 Financial results  August 12, 2020 
 
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 FORWARD LOOKING STATEMENTS  Statements in this presentation 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 “expected,” “excited,” “guidance,” “believe,” “expect,” “may,” “outlook,” “forecast,” “intend,” “could,” “project,” “estimate,” “anticipate,” “should,” “plan” and similar terminology. These risks and uncertainties include factors such as:the impact of the global COVID-19 pandemic (“Pandemic”) and related measures taken by governmental or regulatory authorities to combat the Pandemic, including the impact of the Pandemic and these measures on the economies and demand for our products in the states where we sell them, and on our customers, suppliers, labor force, business, operations and financial performance;unpredictable weather and macroeconomic factors that may negatively impact the repair and remodel and new construction markets and the construction industry generally, especially in the state of Florida and the western United States, where the substantial portion of our sales are currently generated, and in the U.S. generally;changes in 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;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;the effects of increased expenses or unanticipated liabilities incurred as a result of, or due to activities related to, our acquisitions of NewSouth and Western Window Systems;our level of indebtedness, which increased in connection with our acquisition of Western Window Systems, and increased further in connection with our acquisition of NewSouth;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;the risks that the anticipated cost savings, synergies, revenue enhancement strategies and other benefits expected from our acquisitions of NewSouth and Western Window Systems may not be fully realized or may take longer to realize than expected or that our actual integration costs may exceed our estimates;increases in transportation costs, including due to increases in fuel prices;our dependence on our limited number of geographically concentrated manufacturing facilities;sales fluctuations to and changes in our relationships with key customers;federal, state and local laws and regulations, including unfavorable changes in local building codes and environmental and energy code regulations;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;product liability and warranty claims brought against us;in addition to the acquisitions of NewSouth and Western Window Systems, our ability to successfully integrate businesses we may acquire in the future, or that any business we acquire may not perform as we expected when we acquired it; andthe other risks and uncertainties discussed under “Risk Factors” in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended July 4, 2020, and “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 28, 2019 and our other SEC filings.Forward looking statements in this presentation include our expectations regarding: (i) the impact of our strategic pillars on customer and shareholder value; (ii) continued growth momentum in sales and margins expected in the second half of 2020; (iii) expected sequential improvement in margins with organic volume growth assumed in the second half of 2020; (iv) the expected reduction to annualized operating expenses from the Orlando plant closure; (v) our strong and flexible balance sheet positioning us to navigate downturn due to the Pandemic; (vi) the success of our planned cost management initiatives and prioritized capital expenditure actions; (vii) expected margin growth from investment in continuous improvement; (viii) strategic selling initiatives and marketing enhancements driving future sales; (ix) our ability to maintain a strong balance sheet, conservative capital structure, target leverage ratios and to preserve liquidity; (x) aspects of strategic acquisitions, including integration of NewSouth, and expansion into new regions, channels and products; (xi) the possible benefits of investing in talent and R&D; (xii) operational efficiencies and margin expansion; (xiii) execution of our strategy expected to create long-term customer and shareholder value; and (xiv) our ability to capture profitable growth in the new construction and repair and remodel markets. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. 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 presentation.  2 
 
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 Use of Non-GAAP Financial Measures  This presentation 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 and 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 our credit agreements.  3 
 
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   COVID-19 update  Team Members, Customers and Communities Remain Our Top Priority  Operating with Safeguards in Place  Continuing to place health and personal safety of our team members and their families as our greatest focus Following health authorities’ guidelines for personal health and safetyIncreasing cleaning frequency and enhancing sanitization of all facilitiesAdjusting production schedules and operations to enable social distancingRequiring employees and essential visitors to wear masksPerforming daily temperature checks and thermal scans to maintain safe work environment for all employees and essential visitors  Financial Flexibility  Ended Q2 2020 with available liquidity of $174M, including cash on hand of $98M and undrawn revolver capacity of $76MNo scheduled debt payments required until maturity of term loan due October 2022Delaying or canceling planned capital expendituresEliminating discretionary spending, with a primary focus on reducing selling, general and administrative expensesAssessing overall network capacityOptimizing net working capitalFocusing on preserving cash  4 
 
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 Executing 4 strategic pillars expected to create long-term  Customer and Shareholder Value   01.Driving brand recognition, loyalty and growth with customer-centric innovation  02.Attracting and retaining talented, dedicated leaders to drive our business  03.Investing in our business and scaling our operations to meet expected increasing long-term demand  04.Strategically allocating capital generated from our free cash flow to support profitable growth                                                  5 
 
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 SECOND Quarter key Messages    Q2 2020  vs. Q2 2019    Net Sales  $203M  2%   ↑  Gross Profit  $74.5M  2%  ↑  Adj. EBITDA1 Margin  17%  3.5%  ↓  1. Refer to reconciliation to GAAP.  6  HighlightsStrong sales with NewSouth contribution of $23M with pipeline continuing to build from order entries continuing at improving levels YoY Positive inflection in Florida sales with continued growth momentum in sales and margins expected in 2H20 Legacy SEBU and WEBU saw sequential improvement in order entries as the quarter progressed versus the prior-year growth rate with continued momentum into July and August 2020Margins YoY negatively impacted by mix 
 
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 Market Performance: LEGACY BUSINESS (SEBU1 & WEBU2)  CommentaryQ2’20 order entry up 7% in legacy SEBU and down 20% in WEBU; April organic orders decline of 13% with sequential recovery leading to June organic orders growth YoY of 13%Q2’20 legacy backlog up 50% YoY driven by 60% increase in legacy SEBU backlog; WEBU backlog grew 3% YoYNewSouth retail orders increased over 80% YoY in Q2’20; retail backlog of $37M at end of Q2’20, up over 110% vs. PY  Legacy Backlog3 ($M)  1. Southeastern Business Unit, excluding NewSouth; 2. Western Business Unit; 3. Excludes NewSouth.    50%  GROWTH  7  SEBU1 YoY Order Growth  WEBU2 YoY Order Growth 
 
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 Q2 2020 RESULTS    Q2 2020  vs. Q2 2019    Net Sales  $203M  2%   ↑  Gross Margin  36.7%  -%  -  Adjusted EBITDA1  $34.7M  15.0%  ↓  Adj. Diluted EPS1  $0.21  34%  ↓  HighlightsOrganic sales decline of 9% in the second quarter offset by NewSouth sales contribution of $23MMargins impacted by product mix and organic volume declineExpecting sequential improvement in margins with organic volume growth assumed in 2H20 Orlando plant closure completed in July; expected to reduce annualized operating expenses by $3.5M beginning in Q3 2020  1. Refer to reconciliation to GAAP.  8 
 
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 Balance sheet and Liquidity Update  NET LEVERAGE    Total Debt Outstanding   $429.0M  Less: Cash   $98.4M  Net Debt   $330.6M  LTM Adj EBITDA1  $140.3M  Net Debt to Adj EBITDA1  2.4x  LIQUIDITY PROFILE    Cash   $98.4M  Unused Credit Capacity   $76.0M  Total Available Liquidity   $174.4M  Senior Notes (Aug 2026)  $365.0M  Revolving Credit (Oct 2022)  $64.0M  Total Debt Outstanding  $429.0M  Debt Maturity Schedule ($M) End of Q2 2020    Term Loan  Senior Notes  COMMENTARYStrong and flexible balance sheet positions the Company to navigate downturn$10M term loan paydowns made since the end of Q2 2020, with the remaining $54M term loan maturing in 2022, $365M senior notes due 2026Net debt to adjusted EBITDA1 ratio of 2.4xCost management initiatives and prioritized capital expenditures implemented to conserve cash and maintain strong liquidity position  9  1. Refer to reconciliation to GAAP. 
 
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 Strong balance sheet  1. Net debt is total consolidated funded indebtedness as of the end of the respective quarter, calculated on an all cash netted basis. Adjusted EBITDA is calculated in accordance with our credit agreement. Refer to reconciliation to GAAP. 2. Leverage ratio defined as net debt divided by trailing-twelve-month adjusted EBITDA; refer to reconciliation to GAAP.  HighlightsEnded Q2 2020 with net debt of $331 million, up from $282 million in Q4 2019 driven by $50 million of senior notes issued in conjunction with NewSouth acquisitionNet debt to trailing-twelve month adjusted EBITDA of 2.4 times, pro forma for NewSouth acquisitionProven track record of deleveraging by prepaying debt following acquisitions  Net Debt1 and Leverage Ratio2  10  ACQUIRED  ACQUIRED  ACQUIRED  ACQUIRED 
 
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 Long-Term Capital Allocation priorities    11  INTERNAL INVESTMENT      Investment in continuous improvement expected to drive margin growthStrategic selling initiatives and marketing enhancements driving sales in 2020 and beyond  01  DEBT REDUCTION      Expect to maintain a strong balance sheet and conservative capital structureLong-term target Leverage Ratio of 2x – 3xContinued focus on preserving liquidity  02  STRATEGIC ACQUISITIONS      Focus on integration of NewSouth for remainder of 2020Strategic acquisitions are expected to grow customer and shareholder value over the long-termExpansion into new regions, channels or products  03 
 
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 12  Why Invest inPGT Innovations    01  National leader in growing premium impact-resistant and indoor / outdoor window and door category  02  Expect to continue investing in talent and R&D to remain an industry leader in innovation and product development  03  Continued focus on operational efficiencies expected to drive additional margin expansion  04  Execution of our strategy expected to create long-term customer and shareholder value  05  Well positioned with diversified product portfolio to capture profitable growth in new construction and R&R channels 
 
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 Q&A   
 
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 Appendix  Reconciliation to Adjusted Net Income, Adjusted Net Income per Share-diluted, Adjusted EBITDA, and Adjusted EBITDA per our bank covenants  
 
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 15  Reconciliation of GAAP to NON-gaap MEASURES(unaudited - in thousands, except per share amounts)THREE MONTHS ENDED JULY 4, 2020 AND JUNE 29, 2019      THREE MONTHS ENDED          7/4/2020    6/29/2019                                                                                                                                                                                                                                                                                                            
 
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 16  Reconciliation of GAAP to NON-gaap MEASURES(unaudited - in thousands, except per share amounts)THREE MONTHS ENDED JULY 4, 2020 AND JUNE 29, 2019 
 
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 17  Reconciliation of GAAP to NON-gaap MEASURES(in MILLIONS) 
 
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 Reconciliation of GAAP to NON-gaap MEASURES  18  Represents the total of the adjustments consistent with previously published and publicly available earnings releases as issued by the Company relating to the period for which the total adjustments is presented.Beginning in 2018, the Company updated its reporting of adjusted EBITDA for its publicly issued earnings to exclude non-cash stock-based compensation expense. As such, the total of the adjustments per previously published earnings as presented herein will not agree to the total adjustments as previously issued for periods prior to 2018, as they have been revised as a result of this change in presentation.Calculated in accordance with covenants pursuant to the Company’s then existing credit agreements, which includes adjustments for expected cost savings, operating expense reductions and synergies related to acquisitions, as well as the earnings of acquired entities on a pro forma basis for any pre-acquisition period within the trailing twelve-months relating to the period of the calculation. 
 
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v3.20.2
Document and Entity Information
Aug. 12, 2020
Cover [Abstract]  
Document Type 8-K
Amendment Flag false
Document Period End Date Aug. 12, 2020
Entity Registrant Name PGT Innovations, Inc.
Entity Incorporation, State or Country Code DE
Entity File Number 001-37971
Entity Tax Identification Number 20-0634715
Entity Address, Address Line One 1070 TECHNOLOGY DRIVE
Entity Address, City or Town NORTH VENICE
Entity Address, State or Province FL
Entity Address, Postal Zip Code 34275
City Area Code 941
Local Phone Number 480-1600
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Entity Central Index Key 0001354327
Title of 12(b) Security Common Stock, Par Value $0.01 Per Share
Trading Symbol PGTI
Security Exchange Name NYSE