PGTI CEO Discusses Q3 2010 Results - Earnings Call Transcript

PGT, Inc ( PGTI)

Q3 2010 Earnings Call

November 04, 2010 10:30 a.m. ET


Brad West - Corporate Controller

Rod Hershberger - President & CEO

Jeff Jackson - EVP & CFO


Robin Hansen - Deutsche Bank

Will Wong - JPMorgan

Sam Darkatsh - Raymond James

Jim Wilson - JMP Securities



Good day, ladies and gentlemen, and welcome to your PGT, Inc. Third Quarter 2010 Earnings Conference Call. (Operator instructions) As a reminder, today's conference call is being recorded.

And now I would like to introduce your host for today turn the conference over to your host Brad West.

Brad West

Good morning and thank you for joining us for PGT's third quarter 2010 conference call. I am Brad West, Corporate Controller and I am joined today by Rod Hershberger, President and CEO, as well as Jeff Jackson, Executive Vice President and CFO. Rod and Jeff will represent PGT on 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 November 3 press release, and 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 at our corporate Web site 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 of these non-GAAP measurements can be found in our Form 8-K filed November 3 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 third quarter 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 for the second straight quarter we recorded year-over-year sales growth as sales in the third quarter increased 13.4% compared to the third quarter of 2009. Our growth was driven by our Florida sales up 6 million or 18.5% compared to prior year. We experienced increased sales in our WinGuard aluminum and vinyl products, high end PremierVue line and in our non-impact vinyl products.

WinGuard sales increased by 3.7 million or 14%, due to both the success of our new aluminum door that was launched last fall and an increase in vinyl WinGuard sales where many replacement customers took advantage of tax credits offered.

Vinyl WinGuard sales in the Florida increased 1.3 million including 600,000 in sales into the Southern Part of Florida. Our new PremierVue of high end vinyl impact products contributed an additional 800,000 in sales compared to Q3 in 2009.

Finally, a version of our new vinyl non-impact products SpectraGuard specifically designed for the Florida market and launched last year contributed 700,000 in additional sales. This growth is partially offset by a decrease in our audit paid sales of 400,000 or 6% driven by decreases in curtain-wall sales and vinyl sales each down 200,000.

Our international sales were essentially flat for the quarter. Sales into the R&R market increased 19% over a year ago while sales under the new construction market were flat. As a percentage of total sales for the third quarter of 2010, R&R sales accounted for 75% and new construction sales accounted for 25% of sales.

Comparing our third quarter to the prior year third quarter, net sales increased 5.6 million or 13.4%, driven by an increase in our repair and new modeling markets in Florida. Gross margin increased 3.7 million from last year, due mainly to our increase in sales and a decrease in restructuring charges of 500,000.

As a percentage of sales, gross margin was 30.9% versus an adjusted gross margin of 27.4%. SG&A cost, adjusted for the 2009 restructuring charges increased 1.3 million due mainly to an increase of 618,000 in non cash stock compensation expense and other compensation expense of approximately 426,000.

EBITDA was 4.7 million in the third quarter of 2010, which is up from adjusted EBITDA of 3.2 million from prior year. The increase in adjusted EBITDA was driven mainly by the increase in sales. We recorded a net loss of 207,000 in the third quarter, compared to an adjusted net loss of 2.5 million in the third quarter 2009.

Within our core market, total housing starts were up 15%, driven by increases in multi family starts. Single family starts were essentially flat compared to a year ago. Market conditions remain difficult but overall housing starts and permits appear to have reached a bottom and are starting to show signs of life.

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