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PGT, Inc. (PGTI)

Q4 2010 Earnings Call

February 25, 2011 10:30 AM ET


Brad West – Corporate Controller

Rod Hershberger – President and CEO

Jeff Jackson – EVP and CFO


Rob Hansen – Deutsche Bank

Sam Darkatsh – Raymond James

Will Wong – JP Morgan



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Good day, ladies and gentlemen, and welcome to the PGT Incorporated Fourth Quarter 2010 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. (Operator instructions) As a reminder, today’s conference is being recorded.

I would like to introduce your host for today’s conference Mr. Brad West. Sir, please go ahead.

Brad West

Good morning and thank you for joining us for PGT’s Fourth Quarter and Fiscal Year 2010 conference call. I am Brad West, Corporate Controller, and I am joined today by Rod Hershberger, President and CEO, and Jeff Jackson, Executive Vice President and CFO, and Rod and Jeff will represent PGT in this morning’s call.

Before we begin, let me remind everyone that today’s conference call may contain statements concerning the company’s future prospects, business strategies, and industry trends. Such statements are considered to be forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations and are subject to risk and uncertainty.

Actual results may vary materially from those contained in the forward-looking statements. Please refer to the February 24th press release, and our most recent Form 10 – 8K, and other documents filed with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements.

A copy of our press release is posted on the Investor Relations section of our corporate website at Included in the press release are, the unaudited consolidated balance sheet and statements of operations prepared in accordance with GAAP and adjusted information, which was quantitatively reconciled to GAAP. Our company uses non-GAAP measurements as key metrics for evaluating performance internally.

A detailed explanation on these non-GAAP measurements can be found in our Form 8-K filed February 24th with the SEC. These non-GAAP measurements are not intended to replace the presentation of financial results in accordance with GAAP. Rather, we believe these non-GAAP measurements provide additional information for investors to facilitate the comparison of past and present performance.

For today’s call, Rod will provide an overview of our performance for the fourth quarter and full-year then Jeff will discuss our results in more detail. After their prepared remarks, they will take your questions.

With that, let me turn the call over to Rod Hershberger. Rod?

Rod Hershberger

Thanks Brad. Good morning, everyone. I am pleased to report that we closed out 2010 with a 5.9% increase in sales, our first year-over-year sales increase since 2006. This includes an 8.4% increase in our fourth quarter 2010 sales compared to the fourth quarter of 2009. Our growth was driven by our Florida market sales with an increase of $4 million or 14.4% compared to prior year. WinGuard sales increased by $1.7 million or 8% due to both the success of our new aluminum door launch last fall and an increase in vinyl WinGuard sales where many replacement customers took advantage of tax credits offered.

Vinyl WinGuard sales into Florida increased a $1 million, including $542,000 in sales into the Southern Part of Florida. Our new PremierVue line of high end vinyl impact products contributed $300,000 in additional sales. Finally, a version of our new vinyl non-impact product SpectraGuard designed for the Florida market and launched last year contributed $1.1 million in additional sales. This growth was partially offset by a decrease in international sales down $400,000 for the quarter and a decrease in our out of state sales of $600,000 or 9.4% driven by curtain-wall revenue down $500,000.

Exclusive of curtain-wall revenues, sales in the fourth quarter were up 10% led by increases into both the R&R and new construction markets, both of which increased 10% over a year ago. As a percentage of total sales for the fourth quarter of 2010, R&R sales accounted for 74% and new construction sales accounted for 26% of sales.

Comparing our fourth quarter to the prior year fourth quarter, the gross margin contribution from our fourth quarter sales increase was offset by a shift in mix between impact and non-impact and product mix within impact sales. In 2010, we recorded consolidation charges of $885,000 compared to restructuring charges of $1.1 million in 2009.

As a percentage of sales, adjusted gross margin was 25.8% in 2010 versus an adjusted gross margin of 28.2% in 2009. SG&A cost, adjusted for the 2010 consolidation charges and 2009 restructuring charges increased $2.1 million due mainly to an increase of $1 million in bonuses, $500,000 in increased salaries resulting from returning employees to their 2009 base, a $600,000 increase in non-cash stock compensation expense and a $300,000 increase in healthcare costs. Driven by our non-cash impairment charges of $5.6 million and a consolidation charges of $2.1 million, we recorded the net loss of $12.2 million for the fourth quarter of 2010.

These charges are result of our decision to consolidate our operations into our Florida facility. Adjusted EBITDA was $228,000 in the fourth quarter of 2010, which is down from adjusted EBITDA of $2.9 million from prior year. The decrease in adjusted EBITDA was driven mainly by a shift in mix toward lower margin non-impact products which offset contribution margin gained on additional sales as well as the SG&A increases just described. We recorded an adjusted net loss of $4.6 million in the fourth quarter, compared to an adjusted net income of $2.5 million in the fourth quarter of 2009.

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