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PGT, Inc. (



Q4 2011 Earnings Call

February 24, 2012 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

Saquib Toor - Knighthead Capital



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Good day, ladies and gentlemen, and welcome to the PGT Incorporated fourth quarter 2011 earnings conference call. (Operator Instructions) I would now like to introduce your host for the conference, Mr. Brad West.

Brad West

Thank you. Good morning and thank you for joining us for PGT's fourth quarter 2011 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. 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 23 press release, our most recent Form 10-K, 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 releases are the unaudited consolidated balance sheets 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 to evaluate performance internally.

A detailed explanation of these non-GAAP measurements can be found in our Form 8-K filed February 23, 2012 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. Then Jeff will discuss our results in more detail. After their prepared remarks, they will take the questions.

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

Rod Hershberger

Thanks Brad. Good morning everyone. 2011 will be remembered as the year of transition. We started and completed the consolidation of our North Carolina facility into our Florida operations. This required moving a 347,000 square foot facility, generating $42 million of sales into our existing Florida facility.

In addition, we hired and trained over 500 new employees. We accomplished all this during a year, where we refocused our sale strategy back to our core market at Florida and shored up our international sales force, while working in an industry that from a residential point of view may have been the most difficult since the recession began.

Annually, single-family home starts were the lowest in recent history. As a reminder, these do not include multi-family, town homes, condo's et cetera. Through this recession, new construction in our core market fell 90%. An analogy would be slowing from 50 miles per hour to 5 miles per hour. Even if it were to double 10 miles per hour, it still feels really slow.

The uncertainly in the economy, lack of home equity and high-end employment affected Q3 and Q4 sales. However, December's numbers showed a rebound in their slight optimism heading into 2012. The window industry expects a relatively flat year in 2012 with certain MSA seeing slight to moderate improvement, while others struggle with foreclosures and short sales.

Continued industry consolidation, either in plant closings or companies merging will take supply out of the market, and companies that manage cash well and have positive EBITDA like PGT are poised to benefit from the gradually improving economy.

Sales in the fourth quarter decreased $3.3 million or 8.5% from a year ago due mainly to decreased sales in out of state markets, where sales decreased $2.2 million or 37.9%. This decrease is due mainly to our previously announced reduction of out of state efforts. Additionally, Architectural Systems products decreased $900,000 or 60%.

In addition to the decreased sales in our out of state market, Florida sales, which represent 85% of total sales compare to 81% a year ago, decreased $1.3 million or 4.1%. However, $900,000 of the decrease was in the Architectural Systems product. Our international sales increased $200,000 or 13.3%, mainly driven by our impact products.

By product line, our impact products decreased $700,000 or 2.7% to $25.6 million, included in our impact line as Architectural Systems, which decreased $900,000 and Vinyl WinGuard whose sales decreased $800,000. Offsetting these decreases on our impact line are Aluminum WinGuard products, which increased $300,000 and our PremierVue products, which increased to $800,000 when compared to prior year.

We launched two consecutive Crystal Award winning sliding glass doors in the past two years. The most current launch was the Vinyl sliding glass door, launched in the beginning of 2011, which contributed $1 million in additional revenue in the fourth quarter.

Our non-impact products decreased $2.6 million or 20.4% to $10.1 million. This decrease is driven entirely by a decrease in our Vinyl non-impact products, which decreased $2 million in our out of state markets.

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