PGT Inc. ( PGTI)

Q2 2011 Earnings Call

August 4, 2011 10:30 am ET


Brad West - Director of Finance and Control

Rod Hershberger - President and CEO

Jeff Jackson - EVP and CFO


Josh Chan - Raymond James

Will Wong - JPMorgan

Rob Hansen- Deutsche Bank



Good day, ladies and gentlemen, and welcome to PGT Second 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, this conference is being recorded.

I would like to introduce Mr. Brad West, Director of Finance and Control. You may begin.

Brad West

Good morning, and thank you for joining us for PGT’s Second Quarter 2011 conference call. I am Brad West, Corporate Controller. I am joined 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 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 August 3 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 August 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 second quarter, then Jeff will discuss our results in more detail. After their prepared remarks, we will take your questions.

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

Rod Hershberger

Thanks Brad. Good morning everyone. During the fourth quarter of 2010, we announced the decision to consolidate our North Carolina operations into our Florida facility. All manufacturing lines have been moved and we have filled approximately 400 new positions. These new employees along with our existing ones are working hard to produce high quality products with industry leading lead times, which is no less than we, or our customers expect form PGT. Vacating a 400,000 square feet building in consolidating all the production lines into our existing North Venice facility has been a Herculean task and I congratulate our team for accomplishing the move on schedule.

Sales in the second quarter decreased $3.8 million or 7.8% from a year ago. This includes a reduction in WinGuard sales, which were down $1.8 million or 5.9%, mainly as a result of temporary capacity constraints. For example, in April 2011, our Vinyl WinGuard lines were able to produce approximately 50% of the units that we produced in April 2010. This was due to the shut down of those production lines in North Carolina, the move to Florida and the subsequent ramp up of the lines. As a result, the lines could not meet demand and Vinyl WinGuard sales were down $400,000 or 8% from prior year. That particular product line had seen year over year sales growth in each of the previous four quarters and we believe this trend will continue.

I am pleased to report that we have experienced substantial improvement on these lines due to the efforts of our employees and leadership. In June, that line produced 90% of the units produced in June 2010. We returned to normal production capacity on these lines in July.

Although our Aluminum WinGuard line did not move from North Carolina, production was negatively affected by the increased pressure on our glass operations. In order to meet demand, we extended our lead times during April. This increase in lead time along with the ship towards vinyl products contributed to the decline in Aluminum WinGuard sales, which were down $1.4 million or 6% for the quarter. Lead times for this product line return to normal which is 10 days at the end of July.

Our vinyl non-impact products including SpectraGuard reported a $1.6 million decline in sales or 33% due both to our decreased efforts out of state, as well as capacity constraints caused by moving those lines during the second quarter. We also experienced a $1.6 decrease in Architectural Systems sales due to ongoing softness in the commercial market.

Our PremierVue line of high end vinyl impact products continues to grow with a $1.1 million increase in sales to $2.2 million for the second quarter. The growth at this line shows that consumers in Florida are interested in energy efficient products meeting the highest structural demand.

In terms of sales by region, out of state sales were down $3 million or 39%. This decline was not unexpected as we have intentionally decreased our efforts out of state and narrowed our focus to Florida and international markets. Sales in the quarter were down to $1.1 million or 2.8% from a year ago due mainly to temporary capacity constrains just described.

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