pgt, inc. deutsche bank 23rd annual leveraged finance...
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PGT, Inc.
Deutsche Bank 23rd Annual Leveraged Finance Conference
September 2015
Management Presenters
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Brad West Chief Financial Officer
PGT is led by a strong and experienced management team
8 Executive Team Members – combined have over 100 years window experience
Jeff Jackson President
and
Chief Operating Officer
Joined PGT in 2005 as CFO and led the Company’s
IPO, appointed to EVP of Operations in 2008 and
subsequently appointed President and COO in 2014
25 years of operational and financial experience with
various Fortune 500 companies
Responsible for PGT’s strategic and operational results
Joined PGT in 2006, appointed CFO in 2014
23 years of financial and accounting experience
including 17 years of management experience in the
manufacturing organizations
Responsible for PGT’s Accounting and Finance
Departments as well as its Risk Management function
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, our primary market
• Raw material prices, especially aluminum
• Integration of CGI
• Transportation costs
• Level of indebtedness
• Dependence on our WinGuard branded product lines
• Product liability and warranty claims
• Federal and state regulations
• 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 at
http://ir.pgtindustries.com/sec.cfm.
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Introduction to PGT PGT is the leading manufacturer of impact-resistant windows and doors in Florida
Non-Impact-Resistant
19%
Impact-Resistant
81%
New Residential
Construction 40%
Residential Repair & Remodel
60%
PGT manufactures both impact-resistant products as
well as non-impact resistant products both in aluminum
and vinyl frames. Impact-resistant products represented
81% of our year to date in 2015. Non-impact products
represented 19% of sales.
PGT has the #1 position in the market for impact-
resistant windows and doors in Florida, and with the
recent acquisition of CGI, has approximately 60% of said
market.
New residential construction accounted for 40% of our
year to date sales growing 36% over last year while sales
into the repair and remodeling represented 60% of sales
growing 11%.
PGT operates manufacturing facilities in Venice, Florida,
including its new glass processing facility. With the
acquisition of CGI, PGT added manufacturing operations
in Miami, Florida, a leading impact-resistant product
market.
Key brands include WinGuard, Estate, Sentinel,
PremierVue, Eze-Breeze and EnergyVue
Founded in 1980 and is listed on NASDAQ (ticker: PGTI)
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Q2 Highlights
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• Sales of $101M, highest since 2006
• Significant margin improvement to 32.7% vs 32.0%
in Q2 of last year
• Adjusted EBITDA of $18.9M or 18.8%
• CapEx spend $4.9M
• Total employee count – 2,170
Nation’s Leader for Impact Resistant
Window and Doors
(1) as of TTM June 2015, Proforma for full year of CGI ~ $371M
$358M Revenue(1)
Market Leader 35-year History of Quality & Innovation
Nationally Recognized Brands
Pioneered Impact-Resistant Market
Strong Presence in Both New Construction
and Repair and Remodel
Superior Value Proposition Customer First
− 360-Degree Service Model
Premium Positioning
Highest Quality
In-House Glass Processing
Deliveries made by our trucks and drivers
Proven Management Team Over 100 collective years in Fenestration
Industry
− 46 years of financial, sales & operations
with various Fortune 500 companies
Positive EBITDA every quarter through Great
Recession
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Industry Leadership
Overview of Industry Participants
Expertise in highly technical, time consuming and expensive regulatory
approval process
Entrenched relationship with dealers, architects and homebuilders
Embedded industry, product, and manufacturing expertise
Superior product performance, quality, features and customer service
Existing foothold within the largest U.S. impact-resistant window and door market
PGT’s leading position in the U.S. impact-resistant window and door market and its unrivaled designs and products enable the Company to consistently
deliver best-in-class solutions
Significant Barriers to Entry
Florida Fabricators
National Fabricators
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Customers, Suppliers and End
Market Breakdown Customers and Suppliers
Highly diversified customer base that is comprised of approximately 1,100 window distributors, building supply distributors, window replacement dealers and enclosure contractors
Largest customer accounts for approximately 3.8% of net sales, and top ten customers account for approximately 20% of net sales
Sales are comprised of residential new construction and repair and remodeling end markets, which represented approximately 40% and 60% of PGT’s sales, respectively, during the second quarter of 2015. This compares to 38% and 62% in 2014.
The Company does not supply its products directly to homebuilders, but demand for its products is also a function of relationships with a number of national homebuilders, which are strong
PGT’s primary manufacturing materials include aluminum and vinyl extrusions, glass, and polyvinyl butyral. Although in many instances PGT has agreements with its suppliers, these agreements are generally terminable by either party on limited notice
All of the Company’s needed materials are typically readily available from other sources
PGT End Market Breakdown
54%
63%
73% 75% 76% 72%
68% 64%
60% 60%
46%
37%
27% 25% 24% 28%
32% 36%
40% 40%
0%
20%
40%
60%
80%
2007 2008 2009 2010 2011 2012 2013 2014 Q1 2015 Q2 2015
Repair and Remodeling New Construction 8
Comprehensive Product Offering
Windows and Doors Porch
Enclosures
Product Category WinGuard CGI Architectural
Systems PremierVue Vinyl Aluminum Eze-Breeze
PGT Branding
Product Description Impact-resistant windows and doors Combine heavy-duty frames (aluminum and vinyl) with special laminated glass
Impact-resistant windows and doors Estate, Sentinel, and Targa product lines
Heavy duty aluminum frame construction Designed for increased wind and water loads required for taller buildings
Newest product offering; heavy duty vinyl frame impact window for high end residential and commercial First R-5 impact window in the industry
Vinyl frame windows and doors Energy efficient product for any climate; meets 30/30 requirement of 09 ARRA
Aluminum frame windows and doors Target markets with warmer/humid climates due to strength and durability
Lighter-weight non-glass porch enclosure products Used for repair/remodel additions and enclosures
% of 2014 Proforma (1) Sales 62% 13% 2% 3% 7% 8% 4%
PGT offers premium brands across a diverse and comprehensive line of products
Impact-resistant sales increased as a percentage of total sales from 61% in 2005 to 81% 2015
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% of Q2 Sales 60% 16% 2% 3% 7% 7% 5%
(1) 2014 Proforma sales include CGI sales prior to acquisition date
Investment Highlights
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Why Invest in PGT?
• Market leader in attractive impact-resistant window and door market
Public peer-leading growth and margins
Diversified and loyal customer base
Flexible and Vertically-Integrated Manufacturing Capabilities & Technical Expertise
Well positioned for Florida market recovery
Competitive advantages
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Market Leader in Attractive Impact-Resistant
Window and Door Market PGT is the leader in the impact-resistant window and door market
− Significantly greater market share than any competitors in our core Florida market
We believe there is significant opportunity in the impact-resistant window market
− Target market in hurricane-prone coastal states
− Increasingly stringent building codes and protocols
−Continued increase in awareness of benefits of impact-resistant windows and doors compared to shutters, etc.
Florida is PGT’s largest market accounting for approximately 88% of sales in FY 2014
* Impact protection required in Florida.
Impact-Resistant Market
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Customer Intimate Company − Highly loyal customer base with over 1,000 partners
Brand Recognition − PGT WinGuard® is synonymous with impact-resistant windows &
doors
Industry Leading Service Model − World Class Capabilities & Services
Unprecedented Quality − Over 3.5 Million WinGuard® Units have been installed
› Zero (0) Reported Impact Failures
Superior Product Portfolio − Ranging from Niche to Commercial
− More Impact SKUs than any other manufacturer
− History of pioneering new products allows us to address continually
evolving customer needs
Training and accredited courses offered at PGT
University educate all constituents in the industry − Trained more than 40,000 customers, installers, architects and
building code officials
Key Competitive Advantages
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Flexible and Vertically-Integrated Manufacturing
Capabilities and Technical Expertise
Vertically integrated manufacturing
In-house glass cutting, tempering, and laminating lowers costs / reduces lead-time
Synchronous flow manufacturing enables efficient production
Custom made-to-order products can be delivered in as little as 1-2 days
Consistent focus on continuous improvement drives manufacturing efficiencies
Recognized as industry expert / pioneer of impact-resistant windows
Actively involved in creation of standards / building codes
More Miami-Dade County Notice of Acceptances than any competitor
Complete in-house product design and testing
Le
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Florida Single-Family Housing Starts (‘000s)
Well Positioned for Florida Housing
Market Recovery
(1) 20-year average represents 1988 – 2007 Source: Moody’s
20-year(1) average: 114
96 102
91 96 94 103 107 106 120 129
153 179
206
152
73
39 26 32 32 42 54 56 64 77
-10
40
90
140
190
240
1993 1994 2995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Single-family housing starts in Florida finished up 4% in 2014 at approximately 56,000 – Still early in the housing recovery cycle
Florida’s population, named 3rd most populated state in 2014, has supported housing starts well in excess of recent annual totals. Past averages suggest 110,000 starts mid-cycle.
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Diversified and Loyal Customer Base
Across Multiple Distribution Channels
Top 10 customers represented
20% of 2014 sales
Largest customer represented
only 3.8% of 2014 sales
Highly loyal distribution base
Little turnover in top 10 customers despite
challenging home construction market
over past several years
A broad, diversified distribution network allows PGT to both effectively serve its large
customer base and maintain a significant barrier to entry
3rd Lami line installed in July
Additional glass plant equipment coming online within
the next 6 months
Diversified Loyal
Expansion
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2015 Adj EBITDA Margin 2015 Q2 Gross Margin
Public Peer(1) Leading Growth and Margins
(1) Peer group includes Fortune Brands Home and Security, Masco, Masonite and Ply Gem Holdings
Peer Average Median
Peer Average Median
2015 Q2 Revenue Growth
Peer Average Median
24%
12%
32.7%
24.0%
18.8%
11%
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Attractive Cash Flow Characteristics…
Capex as % of Sales Free Cash Flow Conversion: (EBITDA – Capex) / EBITDA
68.0%
82.0% 84.5%
80.0% 75.0%
85.4%
80.5%
49.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014
FCF
con
vers
ion
%
Average: 75.6%
$15M of capital outlay in 2013-2014 related to new glass plant
3.8%
2.1%
1.4%
1.8% 2.1%
2.2%
3.2%
6.3%
0%
1%
2%
3%
4%
5%
6%
7%
2007 2008 2009 2010 2011 2012 2013 2014 %
of
sale
s
Average: 2.9%
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Pro Forma Capitalization ($ in thousands)
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$ % X
EBITDA
$ % X
EBITDACash 43,672$ 47,487$
Term Loan A 200,000$ 198,500$
Total First Lien Debt 200,000$ 30.1% 3.8X 198,500$ 22.2% 3.1X
Market Capitalization 464,911 69.9% 696,151$ 77.8%
Total Capitalization 664,911$ 100.0% 894,651$ 100.0%
TTM EBITDA * 53,031$ 64,099$
Net Leverage 2.9X 2.3X
* TTM EBITDA is pro-forma EBITDA to include CGI. Excludes any adjustment for Synergies
As of September 2014 As of June 2015
APPENDIX
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Financial Summary
Use of Non-GAAP Measures
This presentation includes financial measures and terms not calculated in accordance with generally accepted
accounting principles in the United States (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 presentation 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 following financial schedules accompanying this presentation.
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Historical Financial Summary Fiscal year
($ in millions)
2006 2007 2008 2009 2010 2011 2012 2013 2014
Q1
2015
Q2
2015
FL Single Family
Housing Starts
(000s)(1)
152 73 39 26 32 32 42 54 57 58 68
Total revenue $372 $278 $219 $166 $176 $167 $175 $239 $306 $95.3 $100.8
% growth 11.7% (25.1%) (21.5%) (24.0%) 5.9% (4.8%) 4.3% 37.1% 28.0% 51.9% 23.5%
Gross profit 142 91 68 44 50 39 60 80 93 31.0 32.9
% margin 38.1% 32.5% 31.1% 26.6% 28.5% 23.4% 34.2% 33.5% 30.3% 32.6% 32.7%
SG&A 86 77 63 52 54 49 47 55 56 17.7 16.8
% of sales 23.2% 27.5% 28.7% 31.1% 30.7% 29.0% 27.0% 22.8% 18.4% 18.6% 16.6%
Adjusted EBITDA(2) 73 33 25 15 16 14 26 38.8 46.3 16.2 18.9
% margin 19.6% 11.9% 11.5% 8.8% 9.0% 8.6% 14.9% 16.2% 15.1% 17.0% 18.8%
New construction and repair & remodeling accounted for 67% and 33% of FY2005 sales
as compared to 40% and 60% of Q1 2015 sales
(1) Independent third party source
(2) See GAAP reconciliation in appendix
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Adjusted EBITDA Reconciliation Fiscal year
($ in millions)
2006 2007 2008 2009 2010 2011 2012 2013 2014
Q1
2015
Q2
2015
Net Income/(Loss) ($1) $1 ($163) ($9) ($15) ($17) $9 $27 $16 $6.7 $6.8
Depreciation and Amortization 16 16 17 16 15 14 12 11 6 2.3 2.6
Interest Expense 29 11 9 7 5 4 3 3 6 2.9 2.9
Income Tax Expense/(Benefit) 0 1 (29) (6) 0 (2) 0 (3) 10 3.7 6.3
EBITDA 43 29
(165) 8 6 (1) 25 38 38 15.6 18.6
Cash payment to Option Holders 27 - - - - - - - - - -
Impairment Charges 1 1 188 1 6 6 - - - - -
Management Fees 1 - - - - - - - - - -
Consolidation Charges - - - - 2 4 - - - - -
Manufacturing Inefficiencies - - - - - 4 - - 1 - -
Restructuring Charges - 2 2 5 - - - - - - -
Gain on Asset Sales - - - - - (1) - (2) - - -
Write-off Deferred Financing
Costs - - - - - 0 - - - - -
Secondary Offering & Debt
Refinancing related expenses - - - - - - - 2 - - -
Non-Cash Stock Compensation 0 2 1 1 2 2 1 1 - - -
Debt Extinguishment - - - - - - - - 3 - -
Ineffective Hedges - - - - - - - - 2 - -
CGI Acquisition - - - - - - - - 2 - -
New Product/Start Up Costs - - - - - - - - 0 0.6 0.3
Adjusted EBITDA 73 33 25 15 16 14 26 39 46 16.2 18.9
Adjusted EBITDA Reconciliation
24 24
25 25