PGT's CEO Discusses Q1 2011 Results - Earnings Call Transcript

PGT, Inc. ( PGTI)

Q1 2011 Earnings Call

May 6, 2011 1:00 pm ET


Brad West - Corporate Controller

Rod Hershberger - President and CEO

Jeff Jackson - EVP and CFO


Sam Darkatsh - Raymond James

Will Wong - JP Morgan



Good day ladies and gentlemen and welcome to PGT Incorporated First Quarter 2011 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 be given at that time. (Operator instructions) As a reminder, today’s conference is being recorded.

I would like to introduce Mr. Brad West, Corporate Controller. You may begin.

Brad West

Good morning and thank you for joining us for PGT’s First 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 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 May 5th, 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 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 of these non-GAAP measurements can be found in our Form 8-K filed May 5 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 first, 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 and good afternoon everyone. I am pleased to report that we began 2011 with growth in our Florida market. Sales increased $2.6 million or 7.9% compared to prior year. WinGuard sales increased by $1.6 million or 6.8% with vinyl WinGuard sales up $1.3 million or 43.2% and our new PremierVue line of high end vinyl impact products contributing $500,000 in additional sales.

Our vinyl non-impact product SpectraGuard performed well with an increase in sales of $700,000. This growth in our Florida market was largely driven by efforts concentrated from our change in market strategy. At the end of 2010 we decided to focus our resource on our core Florida market and with these results it appears our strategy change is well underway.

The growth in Florida sales is largely offset by a decrease in our out of state sales of $1.9 million or 32.3% driven by a decrease in vinyl sales of $1.1 million and curtain wall revenue down $500,000.

In addition international sales decreased $600,000 for the quarter. We are addressing this decrease in international sales by adding additional resources to further expand our presence. We continue to believe there is a strong international market for both our impact and non-impact products.

We also experienced that inconsistent economic housing recovery with January and February sales lower than prior year but we’re encouraged to see March sales increased over prior year. Excluding curtain wall revenues, sales in the first quarter was slightly up, 1.6% led by an increase into the new construction market, which increased 15% over a year ago.

Sales essentially R&R market decreased 3% as compared to first quarter 2010. As a percentage of total sales for the first quarter of 2011 R&R sales accounted for 74% and new constructions sales of kind of 26% of sales.

Comparing the first quarter to the prior year first quarter, our adjusted gross margin was 25.8% versus a gross margin of 27.9% in 2010. Adjusted gross margin decreased due to an increase in the cost of aluminum, which is up 6% over prior year, and increase in other material including glass, startup cost associated with our new vinyl door and PremierVue and temporary operating inefficiencies related to our plant consolidation.

SG&A cost adjusted for the 2011 consolidation charges increased $600,000 due mainly to an increase in selling and marketing expenses of $600,000 and $500,000 increase in non-cash stock compensation expense. Partially offsetting these increases were the decrease in depreciation expense of $300,000. Driven by our consolidation charges of $2.6 million, we recorded a net loss of $5.8 million for the first quarter of 2011. Our adjusted net loss was $3.2 million compared to a net loss of $2.1 million in the first quarter of 2010.

Adjusted EBITDA was $1.5 million in the first quarter of 2011, which is down from adjusted EBITDA of $3.4 million from prior year. The decrease in adjusted EBITDA was driven mainly by an increase in the cost of materials, temporary operating in efficiencies related to our plant consolidation as well as the increase in selling, marketing and stock compensation expenses I just described.

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