pgti data gathering report1

102 Weatherby Court Savannah, GA 31405

912-777-6007 or 954-554-5370

Description of Company and Products or Services:

PGT, Inc. is a Delaware corporation formed on December 16, 2003, and on June 27, 2006, PGT

became a publicly listed company on the NASDAQ Global Market under the symbol “PGTI”. PGT, Inc.

manufactures and supplies residential impact-resistant windows and doors in the Southeastern United

States, the Gulf Coast, Coastal mid-Atlantic, the Caribbean, and Canada. PGT, Inc. focuses their efforts

on marketing their products to a highly diversified customer base that is comprised of approximately

1,200 window distributors, building supply distributors, window replacement dealers, and enclosure

contractors. PGT’s diverse product line is broken up into two components, impact windows and doors and

other windows and door products. The company has seven different impact-resistant product lines and

four high quality window and door product lines. Approximately 22% of net sales are attributed from

PGT’s top 11 customer accounts. Other business is generated through new construction, home repair, and

remodeling end markets. This organization does not distribute their products directly to homebuilders, but

believes a majority of their demand for their products is a function of the relationships they have with

national homebuilders. PGT Industries will continue to grow with the help of hurricane impact-resistant

building codes that have the potential of being passed into law by the hurricane-prone southern coast

states. The company also has potential growth by expanding sales through contracts for the higher end

store front window market, the high rise condominium window market, and the electricity efficient

homeowner market.

Culture:

PGT’s business is order-based with a strong sales strategy that primarily focuses on attracting and

retaining distributors and dealers. They do this by consistently providing exceptional customer service,

leading product design and quality, and competitive pricing all using their advanced knowledge of

building code requirements and technical expertise.

PGT Industries (PGTI) 1070 Technology Drive North

Venice, FL 34275

Prepared by Ryan Emmons

May 19, 2016


912-777-6007 or 954-554-5370

Management Team

Manager Position/Background Start Date

Rodney Hershberger

(CEO and Chairman)

Mr. Hershberger, co-founder of PGT Industries, Inc., has served the

Company since its founding in 1980. Appointed in 2005 as Chief Executive

Officer, Mr. Hershberger led the company's IPO in 2006 and was elected as

Chairman of the Board in 2014. Previously, he served as President,

Executive Vice President and Chief Operating Officer. Throughout his

tenure, Mr. Hershberger has led all aspects of PGT, including Engineering,

Marketing, Sales, Manufacturing, Transportation, Logistics and Customer

Service

1980

Jeffery T. Jackson

(CPA/ President and

COO)

Mr. Jackson joined PGT in November 2005 as Vice President and Chief

Financial Officer. The following year, he helped lead the Company's IPO,

and was later named Executive Vice President. In 2014, Mr. Jackson was

named President and Chief Operating Officer with responsibilities of

overseeing the Company’s strategic plan, as well as all aspects of operations

in 2016 Mr. Jackson was appointed Director. Prior to joining PGT, he served

in various Executive Management roles, including Division Chief Financial

Officer, Vice President Corporate Controller, and Senior Vice President of

Operations. Mr. Jackson earned a B.B.A. from the University of West

Georgia and is a Certified Public Accountant in both Georgia and

California. The Board recognizes Mr. Jackson’s experience with the

Company and within the Building Products Industry as driving the

Company’s business strategy and creating value to its stockholders.

November 2005

Bradley West

(Senior Vice President-

CFO)

Mr. West joined PGT in 2006, and has held increasing responsibilities

during his career in Finance and Accounting, currently serving as Chief

Financial Officer, serving as Director of Financial Planning and Analysis,

Director of Accounting and Finance, and Vice President and Controller

through 2014. With his most recent appointment as Chief Financial Officer,

Mr. West is responsible for PGT’s Accounting and Finance Departments, as

well as its Investor Relations, Treasury, and Risk Management functions.

Mr. West has over 18 years of management experience in manufacturing

organizations, earned a B.B.A. degree from the University of Michigan, and

is a Certified Public Accountant in Georgia.

2006

Mario Ferrucci III

(Vice President and

General Counsel)

Mr. Ferrucci joined PGT in April 2006 and is responsible for PGT's

Corporate Governance and Compliance, our Strategic Purchasing and

Material Handling functions, and our acquisition and integration activities.

At various times since joining PGT, Mr. Ferrucci led the Company’s Design

Engineering, Code Compliance, IT and Field Service departments.

Previously an M&A Attorney at Skadden, Arps, Slate, Meagher & Flom

LLP. Mr. Ferrucci graduated magna cum laude from the Widener University

School of Law, earning an M.A.A.B.T. from the University of Connecticut

and B.A. from Colby College. A member of the Delaware Bar Association.

April 2006


912-777-6007 or 954-554-5370

Martin Bracamonte

(Vice President and GM

of PGT Glass

Opperations)

Mr. Bracamonte joined PGT in 2015, and as a seasoned operations

professional since 1990, Martin brings to PGT extensive experience and

leadership in glass, international operations, and innovation. Martin has a

University Degree in Industrial Engineering which he received in Buenos

Aries, Argentina. He also has completed numerous post-graduate programs

such as Business Marketing with Tuck School of Business at Dartmouth

(2012), Business Marketing with Kellogg School of Business (2011),

Strategic Marketing Management with Harvard Business School (2007),

Manufacturing with Cranfield University in London (2003) and holds a

Quality Assurance Degree from ITBA Arg (1995).

2015

Debbie L. Lapinska

(Vice President, Human

Resources)

Mrs. LaPinska joined PGT in 1991 and has held increasing responsibilities

during her career, currently serving as Vice President of Human Resources.

She has led Human Resources, Workforce and Dealer Development,

Customer Service and Field Service, Transportation, and Sales and

Marketing departments. Mrs. LaPinska earned a B.A. in Business

Management from Eckerd College.

1991

David McCutcheon

(Vice President,

Manufacturing and

Logistics)

Mr. McCutcheon joined PGT in 1997. He directs Manufacturing

Engineering, Quality, Production, Scheduling, Transportation, and Logistics.

Mr. McCutcheon has over twenty years of management experience in

Manufacturing Operations and Engineering. Mr. McCutcheon earned a B.S.

in Electrical Engineering from Purdue University and an M.B.A. from The

Ohio State University.

1997

Danielle Mikesell

(Vice President,

Marketing, R&D and

Customer Service)

Mrs. Mikesell joined PGT in 2014, serving as Director of Marketing. Within

a few months, she was also given the responsibility of Design Engineering.

With her most recent appointment, she is responsible for brand and product

management, market research and analytics, customer and field service,

design engineering, and code compliance. Mrs. Mikesell has been in the

building industry for over 20 years. Her extensive and diverse experience

includes leading nationally recognized brands, complex configurable

product lines and working with various channels of distribution to include

Independent Dealer Networks, Architects and Designers, National Builders,

and Big Box Retailers.

2014

Who is the typical shareholder? Institutional

Institutional Holdings: 93.72%

Total Number of Holders: 154

Total Shares Held: 45,624,665

Total Value of Holdings: 437,996,784

Net Activity (3,067,461)

Market capitalization of company:

$471.74 Million


912-777-6007 or 954-554-5370

Historical Financials

Income Statement

Year Ended Percent Change

January 2,

2016

January 3,

2015

December 28,

2013

Increase / (Decrease)

(in thousands, except per share amounts)

2015-

2014

2014-

2013

Net sales $ 389,810 $ 306,388 $ 239,303 27.2 % 28.0 %

Cost of sales 270,678 213,596 159,169 26.7 % 34.2 %

Gross profit 119,132 92,792 80,134 28.4 % 15.8 %

Gross margin 30.6 % 30.3 % 33.5 %

Gain on sale of assets held — — (2,195 )

SG&A expenses 68,190 56,377 54,594 21.0 % 3.3 %

SG&A expenses as a percentage of sales 17.5 % 18.4 % 22.8 %

Income from operations 50,942 36,415 27,735

Interest expense, net 11,705 5,960 3,520

Debt extinguishment costs — 2,625 333

Other expenses, net 388 1,750 437

Income tax expense (benefit) 15,297 9,675 (3,374 )

Net income $ 23,552 $ 16,405 $ 26,819

Net income per common share:

Basic $ 0.49 $ 0.35 $ 0.55

Diluted $ 0.47 $ 0.33 $ 0.51


912-777-6007 or 954-554-5370

Balance Sheet

Period Ending Jan 2, 2016 Jan 3, 2015 Dec 28, 2013

Assets

Current Assets

Cash And Cash Equivalents 61,493 42,469 30,204

Short Term Investments - - -

Net Receivables 31,783 25,374 23,584

Inventory 23,053 19,970 12,908

Other Current Assets 10,660 6,464 4,704

Total Current Assets 126,989 94,277 71,400

Long Term Investments - - -

Property Plant and Equipment 71,503 60,898 44,123

Goodwill 65,635 66,580 -

Intangible Assets 79,311 82,724 38,869

Accumulated Amortization - - -

Other Assets 2,291 2,110 2,240

Deferred Long Term Asset

Charges - - -

Total Assets 345,729 306,589 156,632


912-777-6007 or 954-554-5370

Liabilities

Period Ending Jan 2, 2016 Jan 3, 2015 Dec 28, 2013

Accounts Payable 19,578 17,328 15,522

Short/Current Long Term Debt 1,966 1,962 4,890

Other Current Liabilities - - -

Total Current Liabilities 21,544 19,290 20,412

Long Term Debt 190,502 191,792 72,365

Other Liabilities 828 735 1,400

Deferred Long Term Liability

Charges 25,894 20,796 13,380

Minority Interest - - -

Negative Goodwill - - -

Total Liabilities 238,768 232,613 107,557

Stockholders' Equity

Misc Stocks Options Warrants - - -

Redeemable Preferred Stock - - -

Preferred Stock - - -

Common Stock 511 498 489

Retained Earnings (128,457) (152,009) (168,414)

Treasury Stock (10,037) (11,071) (10,046)

Capital Surplus 244,944 238,229 229,269

Other Stockholder Equity - (1,671) (2,223)

Total Stockholder Equity 106,961 73,976 49,075

Net Tangible Assets (37,985) (75,328) 10,206


912-777-6007 or 954-554-5370

Cash Flows

Direct cash flows from operations for 2015, 2014, and 2013 are presented below:

Direct Operating Cash Flows

(in millions) 2015 2014 2013

Collections from customers $ 390.8 $ 313.4 $ 238.5

Other collections of cash 3.6 3.0 5.3

Disbursements to vendors (231.4 ) (191.1 ) (147.0 )

Personnel related disbursements (111.9 ) (97.9 ) (68.2 )

Debt service costs (11.5 ) (4.5 ) (2.8 )

Income tax payments (6.8 ) (1.2 ) —

Other cash activity, net (0.3 ) 0.6 (0.1 )

Cash from operations $ 32.5 $ 22.3 $ 25.7


912-777-6007 or 954-554-5370

How much personal investment does management have in the company?

Name and Address of Beneficial Owner (1)

Number of Shares

of Common Stock

Beneficially

Owned

Percentage of

Voting Shares

Beneficial Owners of More Than 5%:

BlackRock, Inc. 5,514,191 (2) 11.2%

Columbia Wanger Asset Management, LLC 3,789,069 (3) 7.7%

Renaissance Technologies Holdings Corporation 3,103,329 (4) 6.3%

Non-Employee Directors and Nominees:

Sheree L. Bargabos 1,736 *

Alexander R. Castaldi 114,320 *

Richard D. Feintuch 186,933 (5) *

M. Joseph McHugh 134,213 (6) *

Brett N. Milgrim 62,447 *

William J. Morgan 81,540 (7) *

Floyd F. Sherman 72,538 (8) *

Named Executive Officers:

Rodney Hershberger 1,971,888 (9) 4.0%

Jeffrey T. Jackson 389,018 (10) *

Bradley West 110,116 (11) *

Mario Ferrucci III 62,313 (12) *

Directors and executive officers as a group 3,187,062 (13) 6.5%

* Percentage does not exceed one percent of the total shares eligible to vote.


912-777-6007 or 954-554-5370

Valuation:

Company Ticker ROE P/E EPS BETA

TREX 19.32 24.06 1.73 2.44

AAON 20.43 31.73 0.89 1.05

ROCK 6.03 36.58 0.76 1.97

PGEM n/a 17.92 0.78 2.57

EXP 15.85 23.97 3.19 1.14

AMWD 22.48 21.14 3.45 1.48

SSD 8.63 24.97 1.52 1.67

ATRBF(International competition) 0.23 n/a n/a n/a

PGTI 19.53 26.03 0.37 0.95

Mean of Valuation Parameters 14.0625 25.8 1.58625 1.65875

Building Materials Industry Statistics 4.2 80.1 n/a n/a

(Data from Yahoo Finance)

PGT’s Valuation Summary

PGT, Inc. has a strong valuation in comparison to the Industry averages and is also performing

strong relative to a selected group of companies that are currently publicly traded companies

within the building materials industry. These companies, included in the table above, are relevant

to PGT because of their revenue size, investor comparisons, and competition factors.

The P/E for PGT is higher than the average of its closely related companies but it is significantly

lower than that of the industry P/E statistic. The five-year average for PGT’s P/E is approximately

21.5. This average is good when compared to the P/E five-year average of the S+P 500. In

Reference to Russel’s Small Cap Completeness Index, PGT’s P/E ratio is slightly above this

index’s P/E ratio.

ROE and ROA are strong relative to the direct industry comparison. Management is strong and

effectively increased ROE in 2015 by reaching positive net income levels.

Board of directors approved a $20 Million share buyback program that started in January 2016.

Buy back could be a representation that PGT is somewhat undervalued in the eyes of

management.


912-777-6007 or 954-554-5370

Which analysts follow the stock?

The stock is currently being followed by the following research companies.

Jaywalk ConvergEx Group

ResearchTeam (Market on Demand , Inc)

Standard and Poor’s Rating Services (Capital IG)

Zacks Research

What are the analyst recommendations?

Research Company Date research was conducted Reccomendation

Jaywalk ConvergEx Group 5/11/16 Consensus: Positive outlook on

the stock with a buy rating of

2.58 considered by an average

of 12 Independent Research

Providers.

Rank in industry(Building

Materials): 60.5%

39.5% of the industry has a

better Jaywalk Consensus.

Rank in Sector: 79.1%

20.9% of the sector has a better

Jaywalk Consensus.

ResearchTeam 5/12/16 Research Rating: Hold

Based off of a past rating to

hold 7/31/15.

Total return since this consensus

has dropped 40%.

S+P Capital IQ 5/05/16 Quantitative model drivers:

Hold

Zacks Research 5/13/16 Zacks Rank: 4-Sell

Position in industry: 22 of 26


912-777-6007 or 954-554-5370

Financial ratios:

Financial Ratios PGT 2012 2013 2014 2015 1Q 2016

Operating Margin 7.2% 10.7% 12.4% 13.1% 9.9%

Net Margin 5.1% 11.2% 5.4% 6.0% 1.5%

Cash Flow to Sales 13% 10.80% 7.30% 8.30% 5.90%

Debt Ratio 12.13% 54.58% 22.16% 22.10% 60.70%

SG&A Margin (As

Percentage Of Sales) - 22.8% 18.4% 17.5% 20.01%

Competition


912-777-6007 or 954-554-5370

Financial Ratio Analysis

PGT has increased their profit margins over the last 4 years. However, the first quarter profit

margin is actually below that of the four year average which is 10.85%. The company has

concluded that the decrease in margins for the first quarter are a result of acquiring new labor

to meet the demand of WinDoor product lines that were part of the business acquisition back

in February. New transportation costs associated with the acquisition were another reason

that contributed to a decrease in profit margins. The Net margin for the first quarter of 2016

is also is lower as a result the company says is due to acquisition costs.

Cash flows to sales ration has diminished over the last 4 years. This is not a draw for

concern, as long as the company has made essential purchases, acquisitions, and

improvements that will lead to potential growth. After analyzing the sales from the first

quarter of the recently acquired WinDoor product line it is important to note that sales for

this specific line exceeded the companies expected sales for the first quarter. From the date of

acquisition in February, PGT management projected sales of $3.5 million, and actual sales

came in at $4.1 million just from WinDoor. The decrease in the ratio is obviously a result of

the use of cash flows for the WinDoor purchase that cost PGT $100.3 million. $57.3 million

was financed under PGT’s new credit facility and the remaining $43.0 million was cash on

hand. A reason why the debt ratio is much higher this first quarter of 2016.

Selling, general and administrative expenses were a bigger part of sales in 2013 than in 2014

or 2015. That leverage was expected to maintain until the new expenses from property and

equipment added with the WinDoor in February 2016. The expense of WinDoor is expected

to increase SG&A by $4.0 million annually. That’s why this value is significantly higher in

the 1Q of 2016

Concerns and challenges the company faces.

PGT, Inc. hires contract workers as the business grows. They are subject to the availability of

labor and labor costs in Southwest Florida. They are also dependent on the availability of

credit. Most of PGT’s business is associated with homebuilding construction. As we reach

the end of the business cycle there is downside risk the slowdown in housing. This could

impact the demand for PGT products. Transportation costs are a big portion of PGT’s cost

structure. With the recent acquisition of WinDoor, there is an increase in costs between both

manufacturing in Venice and Orlando. An increase in gasoline prices could have a negative

effect on PGT’s business.

There are also risks associated with the integration of WinDoor. Amortizable intangibles,

property, and equipment acquired from WinDoor will become inventoried, and are expected

to increase the cost of SG&A. Incorporating the new WinDoor line could present short-run

draw backs regarding marginal product of labor due to integration of PGT standards at the

Orlando facility.


912-777-6007 or 954-554-5370

Positive developments in the company: growth prospects for the stock and

the company.

Acquisition of WinDoor allows for continued growth of sales. PGT has potential to

increase revenue if there is future home builder growth. PGT’s impact resistant lines are

Hurricane code certified. This means that if new counties pass new housing code laws in Florida,

and neighboring states, there might be an increase in demand for the required hurricane impact

resistant windows and doors to be installed on the house.

Industry concerns

Raw materials that are used to make some portion of PGT’s product lines are bought

through third party suppliers. This creates a concern because the quality in which PGT materials

are acquired is important to compete with other companies within the industry. Building

Materials is an economic driven industry and as we come to the end of a strong business cycle

there is potential that the market for new homebuilding will decrease substantially. An increase

in interest rates could also slow the demand of PGT products.

Contingent Liabilities (eg. Outstanding lawsuits)

PGT is involved in various claims and lawsuits incidental to the conduct of their business

in the ordinary course. The Company carries insurance coverage in such amounts in excess of

their self-insured retention as they believe that they have the potential to cover all liabilities in

respect to claims and lawsuits. These law suits should not have an impact on their financial

position, cash flows or results of operation.


912-777-6007 or 954-554-5370

Performance analysis of the stock

Performance history

Stock Performance (%) 1M 3M 6M YTD 1YR 5YR 10Yr

Price change (PGTI) -1.5% 0.58% -7.61% -9.39% -15.55% 339.15% -34.68%

Price change (S+P500) -2.89% 6.37% -1.99% -0.20% -3.89% 52.49% 116.92%

Price change (Nasdaq) -4.62% 4.59% -7.12% -5.90% -6.67% 66.57% 116.92%

Price Change

(Russel 3000 Index) -2.56% 7.50% -2.39% -0.04% -5.08% 51.22% 65.25%

*Data From Google finance

Performance vs benchmark

The S+P 500 index has performed better than PGT’s price YTD. The stock’s price change shows

higher volatility than this index.

Performance vs universe

The last three months the NASDAQ price change has been slightly higher than that of PGT.

YTD data shows that PGT’s price is performing below all benchmarks.


912-777-6007 or 954-554-5370

Performance vs industry and Cratus Capital benchmark

PGT has underperformed relative to the Russel 3000 over a 10 year time horizon. The only time

frame PGT beat the indices in the above table is the last 5 year period.

PGT has underperformed this month, 6 months, and year to date compared to the Russell 3000

index.

pgti data gathering report1

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