PGT's CEO Discusses Q2 2012 Results - Earnings Call Transcript

PGT, Inc. (PGTI)

Q2 2012 Results Earnings Call

August 2, 2012 4:30 PM ET

Executives

Brad West – Director, Finance and Corporate Controller

Rod Hershberger – President and CEO

Jeff Jackson – Executive Vice President and CFO

Analysts

Sam Darkatsh – Raymond James

Rob Hansen – Deutsche Bank

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the PGT, Inc. Second Quarter 2012 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 now to introduce your host for today's conference call, Mr. Brad West. You may begin, sir.

Brad West

Good morning and thank you for joining us for PGT's second quarter 2011 conference call. I am Brad West, Corporate Controller, and I'm 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 do not relate strictly to historical or current facts, rather they 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 1st 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 www.pgtinc.com. 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 evaluating performance internally.

A detailed explanation of these non-GAAP measurements can be found in our press release, which was included as an exhibit to our Form 8-K filed August, 1st, 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 six months ended June 30th, 2012 then Jeff will discuss our results in more details. After their prepared remarks they will take your questions.

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

Rod Hershberger

Thanks, Brad. Good morning, everyone. Thanks for joining us on this call. Second quarter 2012, continued our upward trend. We had a very successful quarter, in which we increased sales 2.9% over the prior year, generated cash from operations of $4.9 million and made an optional of $2 million payment on our debt. We also had net income for the second quarter of 2012 of $3.7 million.

The achievements of the second quarter are the direct results of the great work done by our employees, as we continue to realize benefits from the consolidations completed in 2011. Second quarter of 2012 was also our most successful in terms of EBITDA, as a percent of sales into 2006.

EBITDA in the second quarter was $7.8 million or 16.8% of sales. This is a $3.2 million increase over the second quarter of 2011 EBITDA after adjusting 2011, for consolidation charges, manufacturing inefficiencies caused by the consolidation, and the write-off of deferred financing costs. One of the contributors to this higher EBITDA was an increase in sales, sales improved in the second quarter by $1.3 million or 2.9%.

Our WinGuard sales increased in new construction markets by $1.8 million and in the remodeling markets by $1.9 million over 2011. These areas of growth reflect improving market conditions including increased housing starts mainly in the Southwest region of Florida, and targeted efforts to increase share in both Southeast and Southwest Florida.

We did experience floor sales in our non-impact products of $600,000 and our Architectural Systems products decreased by $900,000 primarily driven by the completion of some large projects. Another EBITDA contributor was our gross margin improvement, for the second quarter of 2012, our gross margin was 35.5% compared to 19.9% for the second quarter of 2011, which after adding back consolidation charges and manufacturing inefficiencies, would have been 29.9%.

The increase of 5.6% in gross margin in 2012, was driven by a significant reduction in scrap, mixed improvements and consolidation savings. SG&A cost for the second quarter of 2012, decreased $400,000 or 3% after adjusting for consolidation costs from the prior year. This was driven by consolidation savings of $1 million and $200,000 in decrease in warranty costs offset with an increase of $800,000 in employee benefit costs.

Within our core market, total housing starts were up 41% for the second quarter of 2012, when compared to 2011. Single-family starts were up 29% compared to a year-ago. Our growth in housing starts is encouraging, as reminder, this growth is off a very low base.

Results for the first six months of 2012, include; sales down 1.4% from the prior year, primarily from exiting certain out-of-state markets, gross margin percentage of 33.6%, net income of $3 million EBITDA of $11.1 million.

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