MRO Magazine

Ply Gem Reports Third Quarter 2015 Results


November 9, 2015
By Business Wire News

CARY, N.C.

Ply Gem Holdings, Inc. (“Ply Gem” or the “Company”) (NYSE: PGEM), a leading manufacturer of exterior building products in North America, today announced financial results for the quarter ended October 3, 2015.

Third Quarter 2015 Highlights

  • Total net sales for the third quarter increased 21.2% to $530.9 million. Excluding the favorable impact of acquisitions of $89.7 million and the unfavorable impact of foreign currency of $11.4 million, our comparable net sales increased 3.4% for the third quarter of 2015.
  • Net sales in our U.S. business increased $115.9 million or 32.9%. Excluding acquisitions, our U.S. business net sales increased $26.2 million or 7.4%, while our Canadian business decreased $22.9 million or 26.9%.
  • Operating earnings increased $20.1 million to $62.0 million compared to the third quarter of 2014, a 47.9% increase.
  • Adjusted EBITDA was $76.6 million compared to $55.4 million for the third quarter of 2014.
  • Adjusted earnings per share was $0.60 for the third quarter of 2015 compared to $0.48 for the third quarter of 2014.

“Overall, I am pleased with our third quarter financial and operating performance. Both businesses continued to make substantial contributions to adjusted EBITDA which allowed us to deliver the sixth consecutive quarterly year-over-year growth in both net sales and adjusted EBITDA,” said Gary E. Robinette, Ply Gem’s Chairman and CEO. While the overall Canadian housing market has softened during 2015, we continue to benefit from the sustained improvement in the U.S. housing market. We remain encouraged by the macro-economic trends that support the long-term recovery of the North American housing industry, and Ply Gem is well positioned to participate in the recovery.”

Commenting on the Company’s results, Shawn K. Poe, Ply Gem’s Chief Financial Officer added, “In the third quarter, we continued to drive financial improvements and profitability within our business segments. Excluding the impact of acquisitions, we achieved a 210 basis point improvement in our gross profit margin as a result of our improved pricing and operational performance initiatives. In addition, our year-over-year quarterly adjusted EBITDA grew by $21.2 million to $76.6 million.”

Third Quarter 2015 Financial Results

Net sales increased $93.0 million, or 21.2%, to $530.9 million compared to $437.8 million for the third quarter of 2014. Our acquisitions of Simonton and Canyon Stone, which were completed during the third quarter of 2014 and second quarter of 2015, respectively, drove a net sales increase of $89.7 million during the third quarter of 2015 relative to the third quarter of 2014.

Gross profit margin was 25.4%, which represented an increase of 290 basis points from the third quarter of 2014. The increase in gross profit margin was favorably impacted by acquisitions which generated a gross profit increase of $26.0 million during the quarter ended October 3, 2015. Excluding acquisitions, our gross profit would have increased $10.2 million relative to the third quarter of 2014.

Operating earnings were $62.0 million, an improvement of $20.1 million from the third quarter of 2014 from improved gross profit margins.

Adjusted EBITDA was $76.6 million compared to $55.4 million in the third quarter of 2014. Net income was $41.7 million compared to $21.4 million for the third quarter of 2014. Our EPS for the third quarter of 2015 was $0.61 as compared to $0.32 for the comparable period in 2014, and Adjusted EPS for the third quarter of 2015 was $0.60 as compared to $0.48 for the comparable period in 2014. A reconciliation of non-GAAP (adjusted) financial measures to comparable GAAP financial measures is provided in the notes to this release.

Siding, Fencing and Stone

Siding, Fencing and Stone’s net sales totaled $255.1 million, up $10.7 million, or 4.4%, compared to $244.4 million in the third quarter of 2014. The net sales increase for the third quarter of 2015 was predominantly related to our acquisition of Canyon Stone, which was completed on May 29, 2015 and accounted for increased net sales of $7.8 million during the third quarter of 2015. Excluding Canyon Stone, our Siding, Fencing and Stone net sales increased $2.9 million or 1.2% for the third quarter of 2015. The net sales increase was driven by higher unit volume sales in the United States and Canada and higher net selling prices partially offset by unfavorable foreign currency of $5.5 million due to a weakening Canadian dollar relative to the U.S. dollar.

Gross profit margin for the third quarter of 2015 was 30.3%, an increase of 220 basis points from the 28.1% for the third quarter of 2014. The margin improvement primarily resulted from improved selling prices, favorable material costs, and lower freight expense.

Windows and Doors

Windows and Doors’ net sales totaled $275.8 million, up $82.4 million, or 42.6%, compared to $193.4 million in the third quarter of 2014. The net sales increase for the third quarter of 2015 was primarily related to our acquisition of Simonton, which was completed on September 19, 2014 and accounted for increased net sales of $81.9 million during the third quarter of 2015. Excluding Simonton, our Windows and Doors’ net sales increased $0.4 million, or 0.2%, for the third quarter of 2015. The net sales increase resulted from higher net sales in the United States for our U.S. window products of approximately $17.5 million offset by lower net sales for our Western Canadian business of approximately $17.1 million caused by a softening in the Western Canada market and a weakening Canadian dollar exchange rate relative to the U.S. dollar.

Gross profit margin was 20.8% for the third quarter of 2015 increasing from 15.5% for the third quarter of 2014. Adjusting for the Simonton acquisition, our gross profit would have been 17.1% for the third quarter of 2015 relative to 15.1% for the third quarter of 2014, an increase of 200 basis points. The margin improvement primarily resulted from improved selling prices, favorable product mix and lower freight expense.

Outlook

“As the housing market in the U.S. continues to recover, we expect to generate meaningful operating leverage and earnings in our long-term outlook. We expect to continue to improve the margins and profitability in our Windows and Doors segment by gaining operating leverage and realizing the benefits of our recent acquisitions over the last two years. These acquisitions provide the platform to capitalize on both the new construction and repair and remodeling markets by leveraging our market presence and our customer relationships within both of our business segments. We are encouraged by the gross profit improvement in both of our segments and remain confident in our ability to realize the synergies of our recent acquisitions. We expect our fourth quarter adjusted EBITDA to be in the range of $32 to $37 million which would provide a full year 2015 adjusted EBITDA of $173 to $178 million,” said Mr. Robinette.

Webcast

Ply Gem management will host a webcast today, Monday November 9, 2015 at 10:00 a.m. Eastern to discuss third quarter results. To access the webcast, visit www.plygem.com and click on Investor Relations. The webcast link will be available under “Upcoming Events” as well as “Events & Presentations”. If internet access is not available, please dial 877-201-0168, participant passcode 57349702. International participants, please dial 647-788-4901, participant passcode 57349702. A replay of the call will be available on our website through December 9th.

About Ply Gem

Ply Gem is a leading manufacturer of exterior building products in North America. Ply Gem produces a comprehensive product line of windows and patio doors, vinyl and aluminum siding and accessories, designer accents, cellular PVC trim and mouldings, vinyl fencing and railing, stone veneer, engineered slate roofing and gutterware, used in both new construction and home repair and remodeling in the United States and Canada. Ply Gem siding brands include Mastic Home Exteriors®, Variform®, NAPCO®, Mitten®, Cellwood®, Georgia-Pacific Vinyl Siding and Accessories, Durabuilt®, Ply Gem® Stone, Canyon Stone, Ply Gem® Trim and Mouldings, Ply Gem® Fence and Railing, Ply Gem® Shutters and Accents, Leaf Relief®, Leaf Logic®, and Monticello® Columns. Ply Gem windows and patio door brands include Ply Gem® Windows, Simonton® Windows, Mastic® Replacement Windows, Ply Gem® Canada, and Great Lakes® Window. The Company’s brands are sold through short-line and two-step distributors, pro dealers, home improvement dealers and big box retailers. Additionally, Ply Gem distributes a wide-variety of exterior building products including stone veneer, fencing, railing, windows, doors and architectural accents via export globally and offers installation services in western Canada under the Gienow® Renovations by Ply Gem brand. Ply Gem employs approximately 9,000 associates across North America. Visit www.plygem.com for more information.

Note: As used herein, the term “Ply Gem” refers to Ply Gem Holdings, Inc. and all its subsidiaries, including Ply Gem Industries, Inc., unless the context indicates otherwise. This term is used for convenience only and is not intended as a precise description of any of the separate corporations.

Forward-Looking Statements

This press release and oral statements made from time to time by our representatives may contain certain statements that are not historical facts, including information concerning possible or assumed future results of our operations. Those statements constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed in or implied by our forward-looking statements, including the availability and cost of raw materials and purchased components, the level of construction and remodeling activity, changes in general economic and business conditions, conditions affecting the industries we serve and our customers, the rate of sales growth, availability of labor force and efficiencies, product liability claims, our high degree of leverage and other factors discussed in the Company’s news releases, public statements and/or filings with the Securities and Exchange Commission, including the Company’s most recent Annual and Quarterly Reports on Form 10-K and Form 10-Q. Many of these factors are outside of the Company’s control and all of these factors are difficult or impossible to predict accurately. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

PLY GEM HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
For the three months ended
(Amounts in thousands, except share and per share data) October 3, 2015   September 27, 2014
 
Net sales $ 530,884 $ 437,848
Cost of products sold 396,103   339,259  
Gross profit 134,781 98,589
Operating expenses:
Selling, general and administrative expenses 66,358 51,355
Amortization of intangible assets 6,422   5,307  
Total operating expenses 72,780   56,662  
Operating earnings 62,001 41,927
Foreign currency loss (1,069 ) (766 )
Interest expense (18,840 ) (16,300 )
Interest income 21 18
Tax receivable agreement liability adjustment 1,712   (13,988 )
Income before provision (benefit) for income taxes 43,825 10,891
Provision (benefit) for income taxes 2,114   (10,514 )
Net income $ 41,711   $ 21,405  
Net income attributable to common shareholders per share:
Basic $ 0.61   $ 0.32  
Diluted $ 0.61   $ 0.32  
Weighted average shares outstanding:
Basic 68,044,674   67,844,546  
Diluted 68,184,013   67,944,470  
  For the nine months ended
(Amounts in thousands, except share and per share data) October 3, 2015   September 27, 2014
 
Net sales $ 1,409,266 $ 1,116,524
Cost of products sold 1,089,461   890,717  
Gross profit 319,805 225,807
Operating expenses:
Selling, general and administrative expenses 207,286 156,391
Amortization of intangible assets 18,904   15,841  
Total operating expenses 226,190   172,232  
Operating earnings 93,615 53,575
Foreign currency loss (2,101 ) (517 )
Interest expense (56,632 ) (52,065 )
Interest income 47 64
Tax receivable agreement liability adjustment (13,467 ) (14,419 )
Loss on modification or extinguishment of debt   (21,364 )
Income (loss) before benefit for income taxes 21,462 (34,726 )
Benefit for income taxes (1,762 ) (15,933 )
Net income (loss) $ 23,224   $ (18,793 )
 
Net income (loss) attributable to common shareholders per share:
Basic $ 0.34   $ (0.28 )
Diluted $ 0.34   $ (0.28 )
Weighted average shares outstanding:
Basic 67,971,236   67,807,801  
Diluted 68,105,555   67,807,801  

The accompanying notes are an integral part of these unaudited condensed consolidated statements of operations.

1. The accompanying unaudited condensed consolidated statements of operations of Ply Gem Holdings, Inc. (the “Company”) do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The selected balance sheet data for the periods presented in Note 5 has been derived from the December 31, 2014 audited consolidated financial statements of the Company and the unaudited condensed consolidated financial statements of the Company as of October 3, 2015, and does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The Company’s fiscal quarters are based on periods ending on the Saturday of the last week in the quarter. Therefore the financial results of certain fiscal quarters will not be exactly comparable to the prior and subsequent fiscal quarters.

2. We define adjusted EBITDA as net income (loss) plus interest expense (net of interest income), provision (benefit) for income taxes, depreciation and amortization, non-cash foreign currency gain (loss), non-cash loss (gain) on modification or extinguishment of debt, restructuring and integration expenses, acquisition costs, customer inventory buybacks, tax receivable liability adjustments, litigation settlements, and excess purchase price from acquisitions allocated to inventories. Other companies may define adjusted EBITDA differently and, as a result, our measure of adjusted EBITDA may not be directly comparable to adjusted EBITDA of other companies. Management believes that the presentation of adjusted EBITDA included in this press release provides useful information to investors regarding our results of operations because it assists both investors and management in analyzing and benchmarking the performance and value of our business. The Company has included adjusted EBITDA because it is a key financial measure used by management to (i) internally measure our operating performance and (ii) determine our incentive compensation programs. In addition, the Company’s senior secured asset-based revolving credit facility has certain covenants that apply ratios utilizing this measure of adjusted EBITDA.

Adjusted EPS represents basic and diluted net income (loss) per share attributed to common shareholders adjusted to exclude the estimated per share impact of the specifically identified items used to calculate adjusted EBITDA described above, adjusted at the statutory tax rate of 35%.

Although we use adjusted EBITDA and adjusted EPS as financial measures to assess the performance of our business, the use of adjusted EBITDA and adjusted EPS is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business. Adjusted EBITDA and adjusted EPS included in this press release should be considered in addition to, and not as a substitute for, net earnings and earnings per share in accordance with GAAP as a performance measure. You are cautioned not to place undue reliance on adjusted EBITDA or adjusted EPS.

Certain amounts in this release have been subject to rounding adjustments. Accordingly, amounts shown as totals may not be the arithmetic aggregation of the individual amounts that comprise or precede them.

 Ply Gem Holdings, Inc.
(Amounts in thousands) For the three months ended
October 3, 2015   September 27, 2014
Net income $ 41,711 $ 21,405
Interest expense, net 18,819 16,282
Provision (benefit) for income taxes 2,114 (10,514 )
Depreciation and amortization 14,911   11,378  
EBITDA 77,555 38,551
Non cash loss on foreign currency transactions 1,069 766
Acquisition costs 22 664
Customer inventory buybacks 559 306
Restructuring/integration expense 258 1,067
Non cash charge of purchase price allocated to inventories 38
Litigation settlement, net (1,194 )
Tax receivable agreement liability adjustment (1,712 ) 13,988  
Adjusted EBITDA $ 76,557   $ 55,380  
 
Ply Gem Holdings, Inc.
For the three months ended
October 3, 2015 September 27, 2014
Basic net income per share attributable to common shareholders$0.61$0.32
Non cash loss on foreign currency transactions 0.01 0.01
Acquisition costs 0.01
Customer inventory buybacks 0.01
Restructuring/integration expense 0.01
Non cash charge of purchase price allocated to inventories
Litigation settlement, net (0.01 )
Tax receivable agreement liability adjustment (0.02 ) 0.13  
Adjusted Basic EPS$0.60  $0.48  
 
Basic weighted average shares outstanding68,044,674  67,844,546  
 
Diluted net income per share attributable to common shareholders$0.61$0.32
Non cash loss on foreign currency transactions 0.01 0.01
Acquisition costs 0.01
Customer inventory buybacks 0.01
Restructuring/integration expense 0.01
Non cash charge of purchase price allocated to inventories
Litigation settlement, net (0.01 )
Tax receivable agreement liability adjustment (0.02 ) 0.13  
Adjusted Diluted EPS$0.60  $0.48  
 
Diluted weighted average shares outstanding68,184,013  67,944,470  
             Ply Gem Holdings, Inc.
(Amounts in thousands) For the nine months ended
October 3, 2015   September 27, 2014
Net income (loss) $ 23,224 $ (18,793 )
Interest expense, net 56,585 52,001
Benefit for income taxes (1,762 ) (15,933 )
Depreciation and amortization 44,308   33,916  
EBITDA 122,355 51,191
Non cash loss on foreign currency transactions 2,101 517
Acquisition costs 647 664
Customer inventory buybacks 691 788
Restructuring/integration expense 3,278 4,238
Non cash charge of purchase price allocated to inventories 54 38
Litigation settlement, net (1,194 ) 5,000
Tax receivable agreement liability adjustment 13,467 14,419
Loss on modification or extinguishment of debt   21,364  
Adjusted EBITDA $ 141,399   $ 98,219  
   
Ply Gem Holdings, Inc.
For the nine months ended
October 3, 2015 September 27, 2014
Basic and diluted net loss per share attributable to common shareholders$0.34$(0.28)
Non cash loss on foreign currency transactions 0.02
Acquisition costs 0.01 0.01
Customer inventory buybacks 0.01 0.01
Restructuring/integration expense 0.03 0.04
Non cash charge of purchase price allocated to inventories
Litigation settlement, net (0.01 ) 0.05
Tax receivable agreement liability adjustment 0.13 0.14
Loss on modification or extinguishment of debt   0.20  
Adjusted EPS$0.52$0.17
 
Basic weighted average shares outstanding67,971,23667,807,801
 
Diluted net income per share attributable to common shareholders$0.34$(0.28)
Non cash loss on foreign currency transactions 0.02
Acquisition costs 0.01 0.01
Customer inventory buybacks 0.01 0.01
Restructuring/integration expense 0.03 0.04
Non cash charge of purchase price allocated to inventories
Litigation settlement, net (0.01 ) 0.05
Tax receivable agreement liability adjustment 0.13 0.14
Loss on modification or extinguishment of debt   0.20  
Adjusted Diluted EPS$0.52  $0.17  
 
Diluted weighted average shares outstanding68,105,55567,807,801

3. Operating segment results for the three and nine months ended October 3, 2015 and September 27, 2014 are as follows:

  For the three months ended
(Amounts in thousands) October 3, 2015     September 27, 2014  
Net sales
Siding, Fencing and Stone $ 255,069 48 % $ 244,416 56 %
Windows and Doors 275,815   52 % 193,432   44 %
$ 530,884   100 % $ 437,848   100 %
Gross profit
Siding, Fencing and Stone $ 77,388 30 % $ 68,587 28 %
Windows and Doors 57,393   21 % 30,002   16 %
$ 134,781   25 % $ 98,589   23 %
 
Operating earnings (loss)
Siding, Fencing and Stone $ 51,122 20 % $ 44,756 18 %
Windows and Doors 18,798 7 % 3,773 2 %
Unallocated (7,919 ) (1 )% (6,602 ) (2 )%
$ 62,001   12 % $ 41,927   10 %
  For the nine months ended
(Amounts in thousands) October 3, 2015     September 27, 2014  
Net sales
Siding, Fencing and Stone $ 650,084 46 % $ 609,419 55 %
Windows and Doors 759,182   54 % 507,105   45 %
$ 1,409,266   100 % $ 1,116,524   100 %
Gross profit
Siding, Fencing and Stone $ 182,859 28 % $ 160,894 26 %
Windows and Doors 136,946   18 % 64,913   13 %
$ 319,805   23 % $ 225,807   20 %
 
Operating earnings (loss)
Siding, Fencing and Stone $ 106,118 16 % $ 89,484 15 %
Windows and Doors 11,960 2 % (17,793 ) (4 )%
Unallocated (24,463 ) (2 )% (18,116 ) (2 )%
$ 93,615   7 % $ 53,575   5 %

4. Long-term debt amounts in the selected balance sheets at October 3, 2015 and December 31, 2014 consisted of the following:

          October 3, 2015         December 31, 2014
(Amounts in thousands)
 
Senior secured asset based revolving credit facility $ 20,000 $
6.50% Senior notes due 2022, net of
unamortized early tender premium and
discount of $46,714 and $51,040, respectively 603,286 598,960
Term Loan due 2021, net of
unamortized early tender premium and
discount of $29,174 and $32,518, respectively 394,376   394,257  
$ 1,017,662   $ 993,217  
Less current portion of long-term debt (4,300 ) (4,300 )
$ 1,013,362   $ 988,917  

5. The following is a summary of selected balance sheet amounts at October 3, 2015 and December 31, 2014:

  October 3, 2015     December 31, 2014
(Amounts in thousands)
 
Cash and cash equivalents $ 43,278 $ 33,162
Accounts receivable, less allowances 267,995 187,679
Inventories 165,173 179,913
Prepaid expenses and other current assets 28,044 31,808
Property and equipment, net 156,017 160,967
Intangible assets, net 135,356 147,709
Goodwill 479,330 476,112
Accounts payable 93,378 84,164

Payable to related parties pursuant to tax receivable agreement-

 non-current

24,384 10,917
Long-term debt 1,013,362 988,917
Stockholders’ deficit (80,770 ) (96,668 )

Ply Gem Holdings, Inc.
Shawn Poe, 919-677-3901
investors@plygem.com