Company Quick10K Filing
Quick10K
PGT Innovations
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$14.62 58 $849
10-K 2018-12-29 Annual: 2018-12-29
10-Q 2018-09-29 Quarter: 2018-09-29
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-30 Annual: 2017-12-30
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-07-01 Quarter: 2017-07-01
10-Q 2017-04-01 Quarter: 2017-04-01
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-10-01 Quarter: 2016-10-01
10-Q 2016-07-02 Quarter: 2016-07-02
10-Q 2016-04-02 Quarter: 2016-04-02
10-K 2016-01-02 Annual: 2016-01-02
10-Q 2015-10-03 Quarter: 2015-10-03
10-Q 2015-07-04 Quarter: 2015-07-04
10-Q 2015-04-04 Quarter: 2015-04-04
10-K 2015-01-03 Annual: 2015-01-03
10-Q 2014-09-27 Quarter: 2014-09-27
10-Q 2014-06-28 Quarter: 2014-06-28
10-Q 2014-03-29 Quarter: 2014-03-29
10-K 2013-12-28 Annual: 2013-12-28
8-K 2019-03-26 Officers, Exhibits
8-K 2018-12-28 Officers, Exhibits
8-K 2018-12-20 Enter Agreement, Exhibits
8-K 2018-11-01 Earnings, Regulation FD, Exhibits
8-K 2018-09-18 Other Events
8-K 2018-09-13 Other Events, Exhibits
8-K 2018-09-11 Regulation FD, Exhibits
8-K 2018-08-10 Enter Agreement, M&A, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-08-02 Other Events, Exhibits
8-K 2018-07-31 Regulation FD, Other Events, Exhibits
8-K 2018-07-30 Earnings, Regulation FD, Exhibits
8-K 2018-07-24 Enter Agreement, Earnings, Regulation FD, Exhibits
8-K 2018-05-24 Officers
8-K 2018-05-21 Shareholder Vote
8-K 2018-04-30 Earnings, Regulation FD, Exhibits
8-K 2018-03-16 Enter Agreement, Exhibits
8-K 2018-02-20 Earnings, Regulation FD, Exhibits
BIO Bio-Rad Laboratories 8,980
ACH Aluminum Corp of China 7,220
VRNT Verint Systems 4,030
WTW Weight Watchers 1,310
FBMS First Bancshares 528
RESN Resonant 79
RSPI RespireRx Pharmaceuticals 0
LUNG Prolung 0
CLIC CLIC Technology 0
TXHD Textmunication Holdings 0
PGTI 2018-12-29
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4.Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Finacial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. 10-K Summary
EX-10.15 pgti-ex1015_442.htm
EX-21.1 pgti-ex211_12.htm
EX-23.1 pgti-ex231_10.htm
EX-31.1 pgti-ex311_11.htm
EX-31.2 pgti-ex312_7.htm
EX-32.1 pgti-ex321_8.htm
EX-32.2 pgti-ex322_6.htm

PGT Innovations Earnings 2018-12-29

PGTI 10K Annual Report

Balance SheetIncome StatementCash Flow

10-K 1 pgti-10k_20181229.htm 10-K pgti-10k_20181229.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 29, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to            

Commission File Number: 001-37971

 

PGT Innovations, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

20-0634715

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

1070 Technology Drive

North Venice, Florida

 

34275

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code:

(941) 480-1600

Former name, former address and former fiscal year, if changed since last report: PGT, Inc.

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

Title of Each Class

 

Name of Exchange on Which Registered

Common stock, par value $0.01 per share

 

New York Stock Exchange, Inc.

Securities registered pursuant to Section 12 (g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes      No 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes      No  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act     Yes      No  

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes      No  

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 29, 2018 was approximately $1,022,942,429 based on the closing price per share on that date of $20.85 as reported on the New York Stock Exchange.

The number of shares of the registrant’s common stock, par value $0.01, outstanding as of February 7, 2019, was 58,082,543.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s Proxy Statement for the Company’s 2019 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K. The Company’s Proxy Statement will be filed with the Securities and Exchange Commission pursuant to Regulation 14A.

 

 


 

PGT Innovations, Inc.

Table of Contents to Form 10-K

 

 

 

 

 

Page

 

 

PART I

 

 

 

 

 

 

 

Item 1.

 

Business

 

4

Item 1A.

 

Risk Factors

 

9

Item 1B.

 

Unresolved Staff Comments

 

15

Item 2.

 

Properties

 

16

Item 3.

 

Legal Proceedings

 

16

Item 4.

 

Mine Safety Disclosures

 

17

 

 

 

 

 

 

 

PART II

 

 

 

 

 

 

 

Item 5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

18

Item 6.

 

Selected Financial Data

 

20

Item 7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

 

39

Item 8.

 

Financial Statements and Supplementary Data

 

40

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

80

Item 9A.

 

Controls and Procedures

 

80

Item 9B.

 

Other Information

 

83

 

 

 

 

 

 

 

PART III

 

 

 

 

 

 

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

 

84

Item 11.

 

Executive Compensation

 

84

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

84

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

 

84

Item 14.

 

Principal Accountant Fees and Services

 

84

 

 

 

 

 

 

 

PART IV

 

 

 

 

 

 

 

Item 15.

 

Exhibits, Financial Statement Schedules

 

85

Item 16.

 

10-K Summary

 

87

 

 

Subsidiaries

 

 

 

 

Consent of KPMG LLP

 

 

 

 

CEO Certificate Pursuant to Section 302 of the Sarbarnes-Oxley Act of 2002

 

 

 

 

CFO Certificate Pursuant to Section 302 of the Sarbarnes-Oxley Act of 2002

 

 

 

 

CEO Certificate Pursuant to Section 906 of the Sarbarnes-Oxley Act of 2002

 

 

 

 

CFO Certificate Pursuant to Section 906 of the Sarbarnes-Oxley Act of 2002

 

 

 

- 2 -


 

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

From time to time, we have made or will make forward-looking statements within the meaning of Section 21E of the Exchange Act.  For those statements we claim the protection of the safe harbor provisions for forward-looking statements contained in such section. Forward-looking statements are not a statement of historical facts but are based on management’s current beliefs, assumptions and expectations regarding our future performance, taking into account the information currently available to management.  Forward-looking statements usually can be identified by the use of words such as “goal”, “objective”, “plan”, “expect”, “anticipate”, “intend”, “project”, “believe”, “estimate”, “may”, “could”, or other words of similar meaning. Forward-looking statements provide our current expectations or forecasts of future events, results, circumstances or aspirations. Our disclosures in this Annual Report on Form 10-K (this “Report”) contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We may also make forward-looking statements in our other documents filed or furnished with the Securities and Exchange Commission and in oral presentations. Forward-looking statements are based on assumptions and by their nature are subject to risks and uncertainties, many of which are outside of our control. Our actual results may differ materially from those set forth in our forward-looking statements. There is no assurance that any list of risks and uncertainties or risk factors is complete. Factors that could cause actual results to differ materially from those described in our forward-looking statements include, but are not limited to:

the ability to successfully integrate the operations of Western Window Systems into our existing operations and the diversion of management’s attention from ongoing business and regular business responsibilities to effect such integration;

the effects of increased expenses or unanticipated liabilities incurred as a result of, or due to activities related to, the acquisition of Western Window Systems (the “Western Window Systems Acquisition”);

the risk that the anticipated cost savings, synergies, revenue enhancement strategies and other benefits from the Western Window Systems Acquisition may not be fully realized or may take longer to realize than expected or that our actual integration costs may exceed our estimates;

disruption from the Western Window Systems Acquisition making it more difficult to maintain relationships with customers or suppliers of Western Window Systems;

our level of indebtedness, which significantly increased in connection with the Western Window Systems Acquisition;

adverse changes in new home starts and home repair and remodeling trends, especially in the state of Florida, where the substantial portion of our sales are currently generated, and in the western United States, where the substantial portion of the sales of Western Window Systems’ operations are generated, and in the U.S. generally;

macroeconomic conditions in Florida, where the substantial portion of our sales are generated, and in the Western United States, where the substantial portion of the sales of Western Window Systems are currently generated, and in the U.S. generally;

raw material prices, especially for aluminum, glass and vinyl, including, price increases due to the implementation of tariffs and other trade-related restrictions;

our dependence on a limited number of suppliers for certain of our key materials;

sales fluctuations to and changes in our relationships with key customers;

our ability to successfully integrate businesses we may acquire, or that any business we acquire in the future may not perform as we expected when we acquired it;

increases in transportation costs, including due to increases in fuel prices;

our dependence on our impact-resistant product lines and contemporary indoor/outdoor window and door systems, and on consumer preferences for those types and styles of products;

product liability and warranty claims brought against us;

federal, state and local laws and regulations, including unfavorable changes in local building codes and environmental and energy code regulations;

our dependence on our limited number of geographically concentrated manufacturing facilities;

risks associated with our information technology systems, including cybersecurity-related risks, such as unauthorized intrusions into our systems by “hackers” and theft of data and information from our systems, and the risks that our information technology systems do not function as intended or experience temporary or long-term failures to perform as intended; and,

the other risks and uncertainties discussed under “Risk Factors” in Part I, Item 1A, herein

Statements in this Report that are forward-looking statements include, without limitation, our expectations regarding: (1) demand for our products going forward, including the demand for our impact-resistant products and the products of Western Window Systems; (2) our ability to continue to leverage fixed costs in a favorable manner; (3) our ability to continue to achieve manufacturing and operational efficiencies; (4) the favorable impact that the increase in our product prices may have on our performance, and our ability to take future price increases to offset further increases in our costs; (5) the Company’s ability to continue to grow its sales and earnings going forward (6) our ability to position ourselves as a national leader in the premium window and door market, and our performance in that market; (7) our ability to identify and complete operational and strategic initiatives in the future, and the results of any such initiatives; and (8) our forecasted financial and operational performance for our 2019 fiscal year. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. Except as required by law, we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances after the date of this Report.


- 3 -


 

 

PART I

Item  1.

BUSINESS

Our Company

PGT Innovations, Inc. (“we,” “us,” “our,” “PGTI” or the “Company”) is the leading U.S. manufacturer and supplier of impact-resistant residential windows and doors, and we believe the “PGT” brand is the most recognized brand in the U.S. for these products. Having pioneered the development of these products over two decades ago, we believe our products to be the most technologically advanced impact-resistant window and door products in the industry. We manufacture complete lines of high-end, luxury, premium and mass-custom fully customizable aluminum and vinyl windows and doors and porch enclosure products, targeting both the residential repair and remodeling and new construction end markets. We market our impact-resistant products under three recognized brands: PGT® Custom Windows & Doors, CGI® Windows and Doors and WinDoor®, the last two of which we have acquired since 2014, and we believe are all positively associated with service, performance, quality, durability and energy efficiency. We recently acquired the brands and operations of Western Window Systems, as part of the Western Window Systems Acquisition. Like our legacy brands, we believe that the Western Window Systems brands are associated with innovation, quality, durability and energy efficiency in the indoor/outdoor living space markets.

 

On September 22, 2014, we acquired CGI, an innovator in impact-resistant product craftsmanship, strength and style that is recognized and respected in the architect community.

 

On February 16, 2016, we completed the acquisition of WinDoor, a provider of high-performance, impact-resistant windows and doors to five-star resorts, luxury condominiums, high-rise multi-family buildings, hotels and custom high-end single-family homes.

 

On September 6, 2016, we acquired an established fabricator of impact-resistant storefront window and door products, US Impact Systems, Inc. (“USI”), and announced the formation of CGIC, the brand and company through which we sell the former USI products.

 

On August 13, 2018, we completed the acquisition (the “WWS Acquisition”) of GEF WW Parent LLC (now known as WWS Acquisition LLC) (“Western Window Systems” or “WWS”) and its subsidiaries, an award-winning designer and manufacturer of premium contemporary doors and window systems with a focus on unifying indoor/outdoor living spaces. The Western Window Systems Acquisition has increased and diversified our product offerings, enabling us to expand beyond our current geographically focused portfolio of primarily impact-resistant products to include contemporary door and window systems that unify indoor/outdoor living for the residential, commercial and multi-family markets.

On December 14, 2016, we announced the unveiling of our new name, PGT Innovations, Inc., formerly PGT, Inc., as part of our strategy to bring together under a single identity our various go-to-market brands serving all levels of the premium impact-resistant residential window and door market, from mass custom to high-end, luxury products, as well as the light commercial market. We believe these strategic decisions have solidified our position as the leading manufacturer and supplier of impact-resistant windows and doors in the U.S. reflecting our focus in expanding into other innovative brands, including through potential acquisitions designed to diversify and broaden our product portfolio and/or the geographic markets where our products are sold.

Our products are highly engineered and technically advanced windows and doors that can withstand some of the toughest weather conditions on earth, such as hurricane-force winds. Our impact-resistant products combine heavy-duty aluminum or vinyl 28frames with laminated glass to ensure structural integrity, which provides protection from wind-driven projectiles of all sizes and other debris during a storm. Our impact-resistant products substantially reduce the likelihood of penetration by impacting projectiles, protecting people and property, while providing expansive, unblocked exterior views that other forms of protection, such as shutters or wood coverings, do not provide. Our impact-resistant products also offer many other benefits, including: (1) abatement of sound to substantially decrease outside noise, including during hurricanes; (2) protection against the damaging effects of ultra-violet light; (3) reduction of energy loss due to changing external temperatures; and (4) energy efficiency that can significantly reduce cooling and heating costs, as evidenced by the energy ratings our products have received. These impact-resistant products satisfy the nation’s most stringent building codes in hurricane-prone coastal states and provide an attractive alternative to shutters and other “active” forms of hurricane protection that require installation and removal before and after each storm. We also manufacture vinyl porch and patio enclosure products that are designed to allow air flow while protecting against inclement weather, making outdoor spaces more inviting.

The addition of WWS to our family of brands expands our portfolio of offerings and adds award-winning and innovative products that combine performance and quality with clean, functional designs. Its products are designed for strength, easy integration into a variety of spaces, smooth operation and are tested for durability.

- 4 -


 

Since 1959, WWS has manufactured moving glass walls, windows and doors that blend the indoors with the outside, including its recent offerings of contemporary products designed to unify indoor/outdoor living spaces. Its current products are highly engineered, premium, aluminum and fiberglass hybrid products that include folding and sliding door systems, windows, doors and window walls. WWS regularly develops new products, many of which are designed to satisfy some of the most stringent energy efficiency rating requirements in North America, including the strictest building energy codes in the United States, which are found in California. Inspired by contemporary living and energy conservation, WWS’s products are available in custom sizes, standardized sets, and large dimensions to provide flexibility and numerous design possibilities in residential, multi-family, and commercial applications. The energy efficient designs of WWS’s products make them suitable for both high and low temperature climates.

Our current market share in Florida, which is the largest impact-resistant window and door market in the U.S., is greater than that of any competitor. We believe our leading market position is derived from our broad and high-quality product offerings, continuous innovation, well-recognized brands, strong customer relationships, technical capabilities, customer care and extensive knowledge of and involvement in developments regarding hurricane-protection building codes and testing protocols.

WWS’s primary markets are in California, Texas, Arizona and Nevada, where there has been favorable economic and housing trends compared to the broader U.S. economy and housing markets. The addition of WWS gives us a foothold in these key markets in the West and Southwest, where evolving consumer preferences toward indoor/outdoor living and contemporary narrow site-line designs are still early in their growth are expected to provide in product areas in which WWS benefits from a first mover advantage. WWS will also now have the opportunity to expand into regions in the Southeast U.S. where our operations are already established.

With approximately 3,000 employees (as of December 29, 2018) at our various manufacturing facilities located in North Venice, Orlando and Miami, Florida, and Phoenix, Arizona, our vertically integrated manufacturing capabilities include in-house glass cutting, tempering, laminating and insulating capabilities, which provide us with a consistent source of specialized glass, shorter lead times, lower costs relative to third-party sourcing and an overall more efficient production process. Additionally, our manufacturing process relies on just-in-time delivery of raw materials and components as well as synchronous flow to promote labor efficiency and throughput, allowing us to more consistently fulfill orders on-time for our valued customers.

The geographic regions in which we currently conduct business include the Southeastern U.S., Western U.S., Gulf Coast, Coastal mid-Atlantic, the Caribbean, Central America and Canada. We distribute our products through multiple channels, including approximately 1,500 independently-owned dealers and distributors, national building supply distributors, and the in-home sales/custom order divisions of major U.S. home building and improvement supply retailers. We believe this broad distribution network provides us with the flexibility to meet demand as it shifts between the repair and remodel and residential new construction end markets.

History

PGT Innovations, Inc. is a Delaware corporation. We were formed on December 16, 2003 as PGT, Inc and operate our business through our subsidiary, PGT Industries, Inc., a Florida corporation, which was founded in 1980 as Vinyl Tech, Inc. On June 27, 2006, we became a publicly listed company on the NASDAQ Global Market (NASDAQ) under the symbol “PGTI”. We changed our name to PGT Innovations, Inc. which we announced on December 14, 2016. Effective on December 28, 2016, the listing of the Company’s common stock was transferred to the New York Stock Exchange (NYSE) and our common stock began trading on the NYSE under our existing ticker symbol of “PGTI”.

Industry Segments

We operate as one segment, the manufacture and sale of windows and doors. Additional required information is included in Item 8.

Our Products

PGT Custom Windows & Doors

WinGuard. WinGuard is an impact-resistant product line that combines heavy-duty aluminum or vinyl frames with laminated glass to provide protection from hurricane-force winds and wind-borne debris and satisfies increasingly stringent building codes. Our marketing and sales of the WinGuard product line is primarily targeted to hurricane-prone coastal states in the U.S., as well as the Caribbean and Central America. Combining the impact resistance of WinGuard with insulating glass creates energy efficient windows that can significantly reduce cooling and heating costs. Our WinGuard Vinyl line of windows and doors is designed to offer some of the highest design pressures available on impact-resistant windows and doors, in a modern profile, with larger sizes that satisfy the most stringent hurricane codes in the country. It protects against flying debris, intruders, outside noise and UV rays.

- 5 -


 

EnergyVue. EnergyVue is our non-impact vinyl window featuring energy-efficient insulating glass and multi-chambered frames that meet or exceed ENERGY STAR® standards in all climate zones to help consumers save on energy costs.  Its new design has a refined modern profile and robust construction and is offered in larger sizes and higher design pressures, multiple frame colors, and a variety of hardware finishes, glass tints, grid styles and patterns. We announced the launch of EnergyVue in the first quarter of 2015.

Aluminum. We offer a complete line of fully customizable, non-impact-resistant aluminum frame windows and doors. These products primarily target regions with warmer climates, where aluminum is often preferred due to its ability to withstand higher structural loads. Adding insulating glass creates energy-efficient windows that can significantly reduce cooling and heating costs.

Eze-Breeze. Eze-Breeze non-glass vertical and horizontal sliding panels for porch enclosures are vinyl-glazed, aluminum-framed products used for enclosing screened-in porches that provide protection from inclement weather. This line was completed with the addition of a cabana door.

CGI

CGI’s products carry the CGI® brand and carry the trademarked product names of Estate Collection, Sentinel by CGI, Estate Entrances, Commercial Series and Targa by CGI. Also, under CGI, CGIC sells the Company’s commercial storefront system.

Estate Collection. Our Estate Collection of windows and doors is CGI’s premium aluminum impact-resistant product line. These windows and doors can be found in high-end homes, resorts and hotels, and in schools and office buildings. Our Estate Collection combines protection against hurricane force damage with architectural-grade quality, handcrafted details and modern engineering. These windows and doors protect and insulate against hurricane winds and wind-driven debris, outside noise, and offer UV protection. Estate’s aluminum frames are thicker than many of our competitors’ frames, making it a preferable choice for consumers in coastal areas prone to hurricanes. In January 2019, consistent with management’s plan for this product line, we began the process of rebranding our Estate Collection as WinDoor-branded products. This rebranding aligns the Estate Collection’s status as a high-end, luxury product line, with WinDoor’s focus on the luxury market. We anticipate completion of this rebranding in the first half of 2020.

Sentinel. Sentinel is a complete line of aluminum impact-resistant windows and doors from CGI that provides quality craftsmanship, energy efficiency and durability at a lower price point than our Estate Collection. Sentinel windows and doors are designed and manufactured with the objectives of enhancing home aesthetics, while delivering protection from hurricane winds and wind-borne debris. Sentinel is custom manufactured to exact sizes within our wide range of design parameters, therefore, reducing on-site construction costs. In addition, Sentinel’s frame depth is designed for both new construction and replacement applications, resulting in faster, less intrusive installations.

Targa. Targa is CGI’s line of vinyl, energy-efficient, impact-resistant windows designed specifically to exceed the Florida impact codes, which are the most stringent impact standards in the U.S. Targa windows are designed with the objective of enhancing the aesthetics of a home, are relatively low maintenance, with long-term durability, and environmental compatibility.

Commercial Storefront System. Our Commercial Storefront window system and entry doors are engineered to provide a flexible yet economical solution for a variety of applications. Our system is designed with the goal of providing easy fabrication and assembly, while also reducing installation time and challenges.

WinDoor

WinDoor’s products carry the WinDoor® brand and carry various product names, including its 3000 and 4000 Series aluminum windows, its 6000, 7000 and 8000 Series aluminum sliding glass doors, and its 9000 Series thermally broken windows and doors.

Aluminum Doors and Windows. WinDoor produces a wide array of high-end, luxury aluminum doors and windows, including impact and non-impact sliding glass doors and terrace doors, fixed picture windows, single hung windows, and horizontal rolling windows. All of WinDoor’s aluminum windows are available in impact and non-impact versions and meet or exceed ENERGY STAR® standards in all climate zones.

Thermally Broken Doors and Windows. WinDoor produces a variety of aluminum thermally broken doors and windows. WinDoor’s thermally broken products provide the strength of aluminum with the energy ratings usually seen in only vinyl products. All of WinDoor’s thermally broken products are available in multiple shapes and sizes, have earned high performance ratings on impact and non-impact certifications, and meet or exceed ENERGY STAR® standards in all climate zones.

Western Window Systems

WWS’s products are non-impact products, both customized products for its custom sales channel, and standard products for its volume sales channel, and carry the Western Windows Systems® brand under three product categories of the Custom Line,

- 6 -


 

Performance Line, and the Simulated Steel Line, which is a thermally-broken product

Classic Line. WWS’s Classic Line is a portfolio of high-quality, disappearing glass walls and windows that combine exceptional performance with clean design. The products of the Classic Line include fixed and operating windows, as well as well as sliding, folding and hinged doors.

Performance Line. The Performance Line by WWS is a family of moving glass walls and windows engineered to satisfy its customers’ energy and structural requirements, while promoting a contemporary design.

Simulated Steel Line. The Simulated Steel Line by WWS is a portfolio of thermally-broken, aluminum moving glass walls and windows that look like steel but are far more affordable. This portfolio of products embodies WWS’s nearly 60 years of advancements in door and window design, which we believe reach new heights of luxury and refinement. The Simulated Steel Line is a top choice among architects due to its clean, narrow profiles which keeps the glass big, maximizing natural light.

Sales and Marketing

Our sales strategy primarily focuses on attracting and retaining distributors and dealers with an expectation of consistently providing exceptional customer service, leading product designs and quality, and competitive pricing all using our advanced knowledge of building code requirements and technical expertise.

Our marketing strategy is designed to reinforce the quality of our products and focuses on both coastal and inland markets. We support our customers through print and web-based advertising, consumer, dealer, and builder promotions, and selling and collateral materials. We also work with our dealers and distributors to educate architects, building officials, consumers and homebuilders on the advantages of using impact-resistant and energy-efficient products. We market our products based on our expectations of quality, building code compliance, outstanding service, shorter lead times, and on-time delivery using our fleet of trucks and trailers.

Our Customers

We have a highly diversified base of approximately 1,500 window distributors, building supply distributors, window replacement dealers and enclosure contractors. Our largest customer accounts for approximately 4% of net sales and our top ten customers account for approximately 22% of net sales. Our sales are driven by residential new construction and home repair and remodeling end markets, which represented approximately 41% and 59% of our sales, respectively, during 2018. This compares to 39% and 61%, respectively, in 2017.

We do not supply our products directly to homebuilders but believe demand for our products is also a function of our strong relationships with certain national homebuilders.

Materials, Inventory and Supplier Relationships

Our primary manufacturing materials include aluminum and vinyl extrusions, glass, ionoplast, and polyvinyl butyral. Although in many instances we have agreements with our suppliers, these agreements are generally terminable by either party on limited notice. While most of our materials are typically available from other sources, transitioning to alternative sources would require us to complete testing and certifications related to impact-resistance and for the alternative source of supply to create the customized equipment and tooling necessary to provide the materials and components to us. Therefore, our goal is to develop and maintain lasting relationships with our material suppliers.

Aluminum and vinyl extrusions accounted for approximately 41% of our material purchases during 2018. Sheet glass, which is sourced from two major national suppliers, accounted for approximately 7% of our material purchases during 2018. Sheet glass that we purchase comes in various sizes, tints, and thermal properties. From the sheet glass purchased, we produce some of our own laminated glass needs. However, in 2017 and 2016 due to some temporary capacity constraints, we purchased some of our laminated glass needs. This finished laminated glass made up approximately 18% of our material purchases in 2018. Polyvinyl butyral and ionoplast, which are both used as inner layer in laminated glass, accounted for approximately 6% of our material purchases during 2018.

On September 22, 2017, we entered into an Asset Purchase Agreement (APA) with Cardinal LG Company (Cardinal) for the sale to Cardinal of certain manufacturing equipment we used in processing glass components for PGT-branded doors for a cash purchase price of $28 million. Contemporaneously with entering into the APA, we entered into a seven-year supply agreement (SA) with Cardinal for Cardinal to supply us with glass components for PGT-branded doors. The Company determined to sell these assets and enter into the SA to allow us to heighten our focus in our core areas of window and door manufacturing and, at the same time, strengthen our supply chain for high-quality door glass from a supplier with whom we have been doing business for many years.

Our inventory consists principally of raw materials purchased for the manufacture of our products and limited finished goods inventory as the majority of our products are custom, made-to-order products. Our inventory levels are more closely aligned with our

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number of product offerings rather than our level of sales. We have maintained our inventory level to have (i) raw materials required to support new product launches; (ii) a sufficient level of safety stock on certain items to ensure an adequate supply of material in the event of a sudden increase in demand and given our short lead-times; and (iii) adequate lead times for raw materials purchased from overseas suppliers in bulk supply.

Backlog

As of December 29, 2018, our backlog was $63.7 million, which included $11.0 million relating to WWS. As of December 30, 2017, our backlog was $51.3 million. Our backlog consists of orders that we have received from customers that have not yet shipped, and we expect that a significant portion of our current backlog will be recognized as sales in the first quarter of 2019, due in part to our lead times which typically range from one to five weeks.

Intellectual Property

We own and have registered trademarks in the U.S., including several acquired with WWS. In addition, we own several patents and patent applications concerning various aspects of window assembly and related processes. We are not aware of any circumstances that would have a material adverse effect on our ability to use our trademarks and patents. If we continue to renew our trademarks when necessary, the trademark protection provided by them is perpetual.

Manufacturing

Our manufacturing facilities are in Florida, where we produce customized impact-resistant and non-impact products, and in Arizona, where we produce customized non-impact products for the custom channel of our WWS brand, and standard products for its volume channel. The manufacturing process typically begins in our glass plant where we cut, temper, laminate, and insulate sheet glass to meet specific requirements of our customers’ orders, although our Hialeah, Florida, and Orlando, Florida facilities source their glass needs from external suppliers.

Glass is transported to our window and door assembly lines in a make-to-order sequence where it is combined with an aluminum or vinyl frame. These frames are also fabricated to order. We start with a piece of extruded material which is cut and shaped into a frame that fits the customers’ specifications. Once complete, product is immediately staged for delivery and generally shipped on our trucking fleet within 48 hours of completion.

Competition

The window and door industry is highly fragmented, and the competitive landscape is based on geographic scope. The competition falls into the following categories.

Local and Regional Window and Door Manufacturers: This group of competitors consists of numerous local job shops and small manufacturing facilities that tend to focus on selling products to local or regional dealers and wholesalers. Competitors in this group typically lack marketing support and the service levels and quality controls demanded by larger customers, as well as the ability to offer a full complement of products.

National Window and Door Manufacturers: This group of competitors tends to focus on selling branded products nationally to dealers and wholesalers and has multiple locations.

The primary competitors of our WWS brand in its custom sales channel include the following aluminum window manufacturers, all based on the West Coast of the U.S.: Fleetwood Windows & Doors, Heritage Aluminum, Panda, and La Cantina. In the Corporate Builder sales channel, several competitors to Western Window Systems have been introducing low-cost competitive products, including Win-Dor California, Avanti, and Cascade. In the emerging commercial space, Western Window Systems identifies EFCO, Arcadia, and Wasau as competitors.

International Window and Door Manufacturers: This group of competitors consists of non-U.S. companies that have created entities and established manufacturing operations within Florida and have an increasing presence in the South Florida region as suppliers of windows and doors, primarily for high-rise buildings.

Active Protection: This group of competitors consists of manufacturers that produce shutters and plywood, both of which are used to actively protect openings. Our impact-resistant windows and doors represent passive protection, meaning, once installed, no activity is required to protect a home from storm related hazards.

The principal methods of competition in the window and door industry are the development of long-term relationships with window and door dealers and distributors, and the retention of customers by delivering a full range of high-quality products in a timely manner, while offering competitive pricing and flexibility in transaction processing. Trade professionals such as contractors,

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homebuilders, architects and engineers also engage in direct interaction with manufacturers and look to the manufacturer for training and education related to products and codes. We believe our leading position in the U.S. impact-resistant window and door market, and the award-winning designs and quality of our products, position us well to meet the needs of our customers.

Environmental Considerations

Although our business and facilities are subject to federal, state, and local environmental regulation, environmental regulation does not have a material impact on our operations, and we believe that our facilities are in material compliance with such laws and regulations.

Employees

As of the end of 2018, we employed approximately 3,000 people, none of whom were represented by a collective bargaining unit. We believe we have good relations with our employees.

 

AVAILABLE INFORMATION

Our Internet address is www.pgtinnovations.com. Through our Internet website under “Financial Information” in the Investors section, we make available free of charge, as soon as reasonably practical after such information has been filed with the SEC, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act. Also available through our Internet website under “Corporate Governance” in the Investors section is our Code of Business Conduct and Ethics. We are not including this or any other information on our website as a part of, nor incorporating it by reference into this Form 10-K, or any of our other SEC filings. The SEC maintains an Internet site that contains our reports, proxy and information statements, and other information that we file electronically with the SEC at www.sec.gov.

Item 1A.

RISK FACTORS

Risks Related to our Business

We are subject to regional and national economic conditions.

The window and door industry is subject to many economic factors. Changes in macroeconomic conditions in our core markets and throughout the U.S. generally could negatively impact demand for our products as it has in the past, and macroeconomic forces, such as employment rates and the availability of credit could have an adverse effect on our sales and results of operations.  In addition, the window and door industry is subject to the cyclical market pressures of the larger new construction and repair and remodeling markets. A decline in the economic environment or new home construction, as well as any other adverse changes in economic conditions, including demographic trends, employment levels, interest rates, and consumer confidence, could result in a decline in demand for, or adversely affect the pricing of, our products, which in turn could adversely affect our sales and results of operations.

We are subject to fluctuations in the prices of our raw materials, which could have an adverse effect on our results of operations.

We experience significant fluctuations in the cost of our raw materials, including aluminum extrusion, vinyl extrusion, polyvinyl butyral and glass. We anticipate that these fluctuations will continue in the future. A variety of factors over which we have no control, including global demand for aluminum, fluctuations in oil prices, speculation in commodities futures and the creation of new laminates or other products based on new technologies impact the cost of raw materials that we purchase for the manufacture of our products. These factors may also magnify the impact of economic cycles on our business. In addition, the current Presidential Administration has taken actions to impose tariffs on foreign steel and aluminum, in an effort to limit the amounts of steel and aluminum coming into the U.S. These actions have had and could continue to have a negative impact on prices our suppliers pay for their materials, which has increased the cost of steel and aluminum to us. We may not be able to minimize our risk from price fluctuations and the adverse impact of these tariffs by entering into aluminum forward contracts to hedge these fluctuations in the purchase price of aluminum extrusion we use in production. Substantial, prolonged upward trends in aluminum prices could significantly increase the cost of the unhedged portions of our aluminum needs and have an adverse impact on our sales and results of operations.

We rely on a limited number of outside suppliers for certain key components and materials.

We obtain a significant portion of our key raw materials, such as glass, aluminum and vinyl components, from a few key suppliers. If any of these suppliers is unable to meet its obligations under present or any future supply agreements, the agreements could be terminated, or we may not be able to obtain certain raw materials on commercially reasonable terms and may suffer a significant interruption in our ability to manufacture our products, including because it may be difficult to find substitute or alternate

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suppliers as the glass and aluminum and vinyl extrusions we use are customized. A supplier may also choose, subject to existing contracts, to modify its relationship due to general economic concerns or concerns relating to the supplier or us, at any time. These modifications could include requirements from our suppliers that we provide them additional security in the form of prepayments or letters of credit.

Any interruption of supply or any price increase of raw materials could have a material adverse effect on our business and results of operations. If we are required to obtain an alternate source for these materials or components, we may not be able to obtain pricing on as favorable terms or on terms comparable to our competitors. Additionally, we may be forced to pay additional transportation costs or to invest in capital projects or costly product redesigns and perform costly new product certification testing with respect to our impact-resistant products, in connection with moving to any alternate source of supply.

We could experience a delay between the increased cost to us to obtain these raw materials, and our ability to increase the price of our products. If we are unable to pass on significant cost increases to our customers, our results of operations between periods may be negatively impacted. Any significant change in the terms that we have with our key suppliers or any interruption of supply or any price increase of raw materials could materially adversely affect our financial condition and liquidity.

Our business currently is geographically concentrated in Florida.

Focusing operations into manufacturing locations in Florida optimizes manufacturing efficiencies and logistics, and we believe that a focused approach to growing our market share within our core wind-borne debris markets in Florida, from the Gulf Coast to the mid-Atlantic, and certain international markets, will maximize value and return. The inclusion in our operations of a manufacturing facility in Arizona after the consummation of the Western Window Acquisition provides some geographic diversification, however we expect that the primary concentration of our business will continue to be in Florida and another prolonged decline in the economy of the state of Florida or of certain coastal regions, a change in state and local building code requirements for hurricane protection, or any other adverse condition in the state or certain coastal regions, could cause a decline in the demand for our products, which could have an adverse impact on our sales and results of operations.

Our operating results are substantially dependent on demand for our branded impact-resistant products and contemporary indoor/outdoor window and door systems.

A majority of our net sales are derived from the sales of our branded impact-resistant products and on window and door systems for residential, commercial and multifamily markets.  Accordingly, our future operating results will depend largely on the demand for our impact-resistant products by current and future customers, including additions to this product line that are subsequently introduced, as well as demand for the contemporary indoor/outdoor window and door systems sold by Western Window Systems. If our competitors release new products that are superior to our products in performance or price, or if we fail to update our impact-resistant products with any technological advances that are developed by us or our competitors or introduce new products in a timely manner, demand for our products may decline. In addition, the window and door industry can be subject to changing trends and consumer preferences. If we do not correctly gauge consumer trends for the contemporary indoor/outdoor window and door systems sold by Western Window Systems and respond appropriately, customers may not purchase our products and our brand names may be impaired. Even if we react appropriately to changes in trends and consumer preferences, consumers may consider our brands to be outdated or associate our brands with styles that are no longer popular or trend-setting. Any of these outcomes could create significant excess inventories for some products and missed opportunities for other products, which would have a material adverse effect on our brands, our business, results of operations and financial condition. A decline in demand for our impact-resistant products or the contemporary indoor/outdoor window and door systems sold by Western Window Systems as a result of competition, technological change, changes in consumer preferences or other factors could have a material adverse effect on our ability to generate sales, which would negatively affect results of operations.

The Western Window Systems Acquisition may result in, or involve activities that cause, increased expenses or unanticipated liabilities.  

As a result of the Western Window Systems Acquisition, we have significantly more sales, assets and employees than we did prior to the transaction, which may cause our management to devote a significant amount of time, resources and attention to the contemporary indoor/outdoor window and door business of Western Window Systems, and/or away from the operations of our impact-resistant windows and doors business. These potential diversions and distractions may result in, or involve activities that cause, increased expenses and unanticipated liabilities.

If we do not realize the expected benefits, including synergies, from the Western Window Systems Acquisition, our business and results of operations will suffer.

There is no assurance that the Western Window Systems business will be successfully or cost-effectively integrated into our existing business. The process of integrating the business operations may cause an interruption of, or loss of momentum in, the activities of our historical business. If our management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, our business could suffer and its liquidity, results of operations

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and financial condition may be materially adversely impacted.  In addition, as we continue our integration activities, we may identify additional risks and uncertainties not yet known to us.

Even if we are able to successfully combine the two business operations, it may not be possible to realize the full benefits of the increased sales volume and other benefits, including the expected synergies, that are expected to result from the Western Window Systems Acquisition, or realize these benefits within the time frame that is expected. For example, the elimination of duplicative costs may not be possible or may take longer than anticipated, or the benefits from the Western Window Acquisition may be offset by costs incurred or delays in integrating the companies. Our expected cost savings, as well as any revenue or other synergies, are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are beyond our control.  If we fail to realize the benefits we anticipated from the Western Window Systems Acquisition, our liquidity, results of operations or financial condition may be adversely effected.

Our substantial level of indebtedness could adversely affect our business and financial condition and prevent us from meeting our debt obligations.

As of December 29, 2018, our total gross indebtedness was $379.1 million, and we had an additional $38.9 million available for borrowing under our existing senior secured credit facilities.

This high level of indebtedness could have important consequences, including:

 

increasing our vulnerability to adverse economic, industry, or competitive developments;

 

requiring a substantial portion of our cash flows from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flows to fund operations, capital expenditures and future business opportunities;

 

exposing us to the risk of increased interest rates to the extent of any future borrowings, including borrowings under the existing senior secured credit facilities;

 

making it more difficult for us to satisfy our obligations with respect to our indebtedness, including the existing senior secured credit facilities and the notes, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the indenture governing the notes and the agreements governing such other indebtedness;

 

restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;

 

limiting our ability to obtain additional financing for working capital, capital expenditures, product and service development, debt service requirements, acquisitions and general corporate or other purposes; and

 

limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage may prevent us from exploiting.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business, and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

Economic and credit market conditions impact our ability to collect receivables.

Economic and credit conditions can negatively impact our bad debt expense, which can adversely impact our results of operations. Some of the markets we serve, which includes dealers whose customers are second and vacation home owners in the repair and remodeling sector, are more sensitive to changes in economic and credit conditions. If economic and credit conditions deteriorate, we may experience difficulties collecting on our accounts receivable, increasing our days sales outstanding and base debts owed to us, which could adversely impact our results of operations and business.

We rely, and expect to continue to rely on third-party transportation, which subjects us to risks and costs that we cannot control, and which risks and costs may materially adversely affect our profitability.

We rely, and expect to continue to rely on, third party trucking companies to transport raw materials to the manufacturing facilities used by each of our businesses and to ship finished products to customers. These transport operations are subject to various hazards and risks, including extreme weather conditions, work stoppages and operating hazards, as well as interstate transportation regulations. In addition, the methods of transportation we utilize may be subject to additional, more stringent and more costly regulations in the future. If we are delayed or unable to ship finished products or unable to obtain raw materials as a result of any such new regulations or public policy changes related to transportation safety, or these transportation companies fail to operate properly, or if there were significant changes in the cost of these services due to new or additional regulations, or otherwise, we may not be able to

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arrange efficient alternatives and timely means to obtain raw materials or ship goods, which could result in a material adverse effect on our revenues and costs of operations. Transportation costs represent a significant part of our cost structure. If our transportation costs increased substantially, due to prolonged increases in fuel prices or otherwise, we may not be able to control them or pass the increased costs onto customers, which may materially adversely affect our profitability.

We depend on hiring an adequate number of hourly employees to operate our business and are subject to government regulations concerning these and our other employees, including wage and hour regulations.

Our workforce is comprised primarily of employees who work on an hourly basis. To grow our operations and meet the needs and expectations of our customers, we must attract, train, and retain a large number of hourly associates, while at the same time controlling labor costs. These positions have historically had high turnover rates, which can lead to increased training, retention and other costs. In certain areas where we operate, there is significant competition for employees. The lack of availability of an adequate number of hourly employees, or our inability to attract and retain them, or an increase in wages and benefits to current employees, could adversely affect our business, results of operations, cash flows and financial condition. We are subject to applicable rules and regulations relating to our relationship with our employees, including wage and hour regulations, health benefits, unemployment and payroll taxes, overtime and working conditions and immigration status. Accordingly, federal, state or locally legislated increases in the minimum wage, as well as increases in additional labor cost components such as employee benefit costs, workers’ compensation insurance rates, compliance costs and fines, would increase our labor costs, which could have a material adverse effect on our business, prospects, results of operations and financial condition.

The homebuilding industry and the home repair and remodeling sector are subjection to regulation.

The homebuilding industry and the home repair and remodeling sector are subject to various local, state, and federal statutes, ordinances, rules, and regulations concerning zoning, building design and safety, construction, and similar matters, including regulations that impose restrictive zoning and density requirements in order to limit the number of homes that can be built within the boundaries of a particular area. Increased regulatory restrictions could limit demand for new homes and home repair and remodeling products and could negatively affect our sales and results of operations.

Sales fluctuations to and changes in our relationships with key customers could have a material adverse effect on our financial condition, liquidity or results of operations.

Some of our business lines and markets are dependent on a few key customers, including dealers. We generally do not enter into written or long-term agreements with our customers. The loss, reduction, or fluctuation of sales to one of these major customers, or any adverse change in our business relationship with any one or more of them, could have a material adverse effect on our financial condition, liquidity or results of operations.

Other parties may infringe on our intellectual property rights or may allege that we have infringed on theirs.

Competitors or other third parties may infringe on or otherwise make unauthorized use of our intellectual property rights, including product designs, manufacturing practices, registered intellectual property and other rights. We rely on a variety of measures to protect our intellectual property and proprietary information. However, these measures may not prevent misappropriation or infringement of our intellectual property or proprietary information and a resulting loss of competitive advantage. If we determine that such infringement or use has occurred, legal action to enforce our rights may require us to spend significant amounts in legal costs, even if we ultimately prevail.

Conversely, given the nature of our business and product designs, competitors or other third parties may allege that we, or consultants or other third parties retained or indemnified by us, have infringed on their intellectual property rights. Even though we believe such claims and allegations of intellectual property infringement would be without merit, defending against such claims would be time consuming and expensive and could result in the diversion of time and attention of our management and employees. Given the rapidly changing and highly competitive business environment in which we operate, and the increasingly complex designs of our products and other companies’ similar products, the outcome of any contemplated intellectual property-related litigation would be difficult to predict and could cause us to lose significant revenue, to be prohibited from using the relevant designs, systems, processes, technologies or other intellectual property, to cease offering certain products or services or to incur significant license, royalty or technology development expenses.

Changes in building codes could reduce the demand for our impact-resistant windows and doors, which could have a material adverse effect on our financial condition, liquidity or results of operations.

The market for our impact-resistant windows and doors depends in large part on our ability to satisfy state and local building codes that require protection from wind-borne debris. If the standards in such building codes become more stringent, we may not be able to meet their requirements, and demand for our products could decline. Conversely, if the standards in such building codes are lowered or are not enforced in certain areas because of industry lobbying or otherwise, demand for our impact-resistant products may decrease. In addition, if states and regions that are affected by hurricanes but do not currently have such building codes fail to adopt

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and enforce hurricane protection building codes, our ability to expand our business in such markets may be limited. We are also subject to energy efficiency codes and performance standards in Colorado, California and other states where Western Window Systems operates, several of which are more stringent than those to which we have historically been subject.  Any such changes in building codes or energy efficiency codes could lower the demand for our impact-resistant windows and doors, which could have a material adverse effect on our financial condition, liquidity or results of operations.

The homebuilding industry and the home repair and remodeling sector are subject to various local, state, and federal statutes, ordinances, rules, and regulations concerning zoning, building design and safety, construction, and similar matters, including regulations that impose restrictive zoning and density requirements in order to limit the number of homes that can be built within the boundaries of a particular area. Increased regulatory restrictions could limit demand for new homes and home repair and remodeling products and could negatively affect our sales and results of operations.

The industry in which we compete is highly competitive.

The window and door industry is highly competitive. We face significant competition from numerous small, regional producers, as well as certain national producers. Any of these competitors may (i) foresee the course of market development more accurately than do we, (ii) develop products that are superior to our products, (iii) have the ability to produce similar products at a lower cost or compete more aggressively in pricing, or (iv) adapt more quickly to new technologies or evolving customer requirements than do we. Additionally, some of the competitors of our businesses are larger and have greater financial and other resources and less debt than us. Accordingly, these competitors may be better able to withstand changes in conditions within the industries and markets in which we operate and may have significantly greater operating and financial flexibility than we have. Moreover, barriers to entry are low in most product lines and new competitors may enter our industry, especially if the market for impact-resistant windows and doors continues to expand. An increase in competition from other window and door building products manufacturers or alternative building materials could cause us to lose customers and lead to decreases in net sales and profitability. To the extent we lose customers in the renovation and remodeling markets, we would likely have to market more to the new home construction market, which historically has experienced more significant fluctuations in demand.

We may be adversely affected by any disruption in our information technology systems or by unauthorized intrusions or “hacking” into those systems and theft of information from them, or other cybersecurity-related incidents.

Our operations are dependent upon our information technology systems, which encompass all of our major business functions. A disruption in our information technology systems for any prolonged period could result in delays in receiving inventory and supplies or filling customer orders and adversely affect our customer service and relationships. Various third parties, including computer hackers, who are continually becoming more aggressive and sophisticated, may attempt to penetrate our network security and, if successful, misappropriate confidential customer, employee and/or supplier information. In addition, one of our employees, contractors or other third parties with whom we do business may attempt to circumvent our security measures in order to obtain such information, or inadvertently cause a breach involving such information. While we have implemented systems and processes to protect against unauthorized access to or use of secured data and to prevent data loss and theft, there is no guarantee that these procedures are adequate to safeguard against all data security breaches or misuse of the data. The regulatory environment related to information security, data collection and use, and privacy is increasingly rigorous, with new and frequently changing requirements, and compliance with those requirements could result in additional costs. These costs associated with information security, such as increased investment in technology, the costs of compliance with privacy laws, and costs incurred to prevent or remediate information security breaches, could be substantial and adversely impact our business. A significant compromise of sensitive employee, customer or supplier information in our possession could result in legal damages and regulatory penalties. In addition, the costs of defending such actions or remediating breaches could be material. Security breaches could also harm our reputation with our customers and retail partners, potentially leading to decreased revenues, and with federal and state government agencies and bodies.

Operation on multiple Enterprise Resource Planning (“ERP”) information systems, and the conversion from multiple systems to a single system, may negatively impact our operations.

We are and will continue to remain after consummation of the Western Window Acquisition, highly dependent on our ERP information systems infrastructure in order to process orders, track inventory, ship products in a timely manner, prepare invoices to our customers, maintain regulatory compliance and otherwise carry on our business in the ordinary course. We currently operate on four ERP information systems. Since we must process and reconcile our information from multiple systems, the chance of errors is increased, and we may incur significant additional costs related thereto. Inconsistencies in the information from multiple ERP systems could adversely impact our ability to manage our business efficiently and may result in heightened risk to its ability to maintain its books and records and comply with regulatory requirements. Any of the foregoing could result in a material increase in information technology compliance or other related costs and could materially negatively impact our operations. In the future, we may transition all or a portion of its systems to one ERP system. The transition to a different ERP system involves numerous risks, including:

 

diversion of management’s attention away from normal daily business operations;

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loss of, or delays in accessing data;

 

increased demand on its operations support personnel;

 

initial dependence on unfamiliar systems while training personnel to use new systems; and

 

increased operating expenses resulting from training, conversion and transition support activities.

Any of the foregoing could result in a material increase in information technology compliance or other related costs and could materially negatively impact our operations.

We may be adversely affected by any disruptions to our manufacturing facilities or disruptions to our customer, supplier, or employee base.

All but one of our manufacturing and operating facilities are currently located in Florida, which is a hurricane-sensitive area. In 2017 and 2018, Hurricane Irma significantly impacted our customers and markets. Any disruption to our facilities resulting from hurricanes and other weather-related events, fire, acts of terrorism, or any other cause could damage a significant portion of our inventory, affect our distribution of products, and materially impair our ability to manufacture our products and to distribute our products to customers. We could incur significantly higher costs and longer lead times associated with distributing our products to our customers during the time that it takes for us to reopen or replace a damaged facility. In addition, if there are disruptions to our customer and supplier base or to our employees caused by hurricanes, our business could be temporarily adversely affected by higher costs for materials, increased shipping and storage costs, increased labor costs, increased absentee rates, and scheduling issues. Furthermore, some of our direct and indirect suppliers have unionized work forces, and strikes, work stoppages, or slowdowns experienced by these suppliers could result in slowdowns or closures of their facilities. Any interruption in the production or delivery of our supplies could reduce sales of our products and increase our costs.

The nature of our business exposes us to product liability, warranty and other claims.

We are, from time to time, involved in product liability, product warranty and other claims relating to the products we manufacture and distribute that, if adversely determined, could adversely affect our financial condition, results of operations, and cash flows. In addition, we may be exposed to potential claims arising from the conduct of homebuilders and home remodelers and their sub-contractors. Although we believe we currently maintain what to be suitable and adequate insurance in excess of our self-insured amounts, we may not be able to maintain such insurance on acceptable terms or such insurance may not provide adequate protection against potential liabilities. Product liability claims can be expensive to defend and can divert the attention of management and other personnel for significant periods, regardless of the ultimate outcome. Claims of this nature could also have a negative impact on customer confidence in our products and our company.

We conduct all of our operations through our subsidiaries and rely on payments from our subsidiaries to meet all of our obligations.

We are a holding company and derive all of our operating income from our subsidiary, PGT Industries, Inc., and its subsidiaries, CGI, WinDoor and, WWS Acquisition, LLC, doing business as Western Window Systems.  All of our assets are held by our subsidiaries, and we rely on the earnings and cash flows of our subsidiaries to meet our obligations. The ability of our subsidiaries to make payments to us will depend on their respective operating results and may be restricted by, among other things, the laws of their jurisdictions of organization (which may limit the amount of funds available for distributions to us), the terms of existing and future indebtedness and other agreements of our subsidiaries, including our credit facilities, and the covenants of any future outstanding indebtedness we or our subsidiaries incur.

We may be adversely impacted by the loss of sales or market share if we are unable to keep up with demand.

We are currently experiencing growth through higher sales volume and growth in market share. To meet the increased demand, we have been hiring and training new employees for direct and indirect support and adding to our glass capacity. However, should we be unable to find and retain quality employees to meet demand, or should there be disruptions to the increase in capacity, we may be unable to keep up with our higher sales demand. If our lag time on delivery falls behind, or we are unable to meet customer timing demands, we could lose market share to competitors.

We may evaluate and engage in asset dispositions, acquisitions, joint ventures and other transactions that may impact our results of operations, and we may not achieve the expected results from these transactions.

From time to time, and subject to the agreements governing our then existing debt or otherwise, we may enter into agreements to and engage in business combinations, purchases of assets or contractual arrangements or joint ventures, including in geographical areas outside the state of Florida, with which we do not have the level of familiarity that we have with the Florida market. In addition, some of those business acquisitions or combinations could involve a seller whose products may be different from the types of products we currently sell, and they could be products that are sold to different types of customers. Subject to the agreements governing our

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then existing debt or otherwise, some of these transactions may be financed with additional borrowings. The integration of any business we may acquire may be disruptive to us and may result in a significant diversion of management attention and operational resources. Additionally, we may suffer a loss of key employees, customers or suppliers, loss of revenues, increases in costs or other difficulties. If the expected revenue enhancement plans, strategies, goals, efficiencies and synergies from any such transactions are not fully realized, our results of operations could be adversely affected, because of the costs associated with such transactions or otherwise. Other transactions may advance future cash flows from some of our businesses, thereby yielding increased short-term liquidity, but consequently resulting in lower cash flows from these operations over the longer term. In addition, if the goodwill, indefinite-lived intangible assets, or other intangible assets that we have acquired or may acquire in the future are determined to be impaired, we may be required to record a non-cash charge to earnings during the period in which the impairment is determined, which could be significant. The failure to realize the expected long-term benefits of any one or more of these transactions could have a material adverse effect on our financial condition or results of operations.

We are subject to potential exposure to environmental liabilities and are subject to environmental regulation.

We are, and expect to be after the Western Window Acquisition, subject to various federal, state, and local environmental laws, ordinances, and regulations. Although we believe that our facilities are in material compliance with such laws, ordinances, and regulations, as owners and lessees of real property, we can be held liable for the investigation or remediation of contamination on such properties, in some circumstances, without regard to whether we knew of or were responsible for such contamination. Remediation may be required in the future as a result of spills or releases of petroleum products or hazardous substances, the discovery of unknown environmental conditions, or more stringent standards regarding existing residual contamination. More burdensome environmental regulatory requirements may increase our general and administrative costs and may increase the risk that we may incur fines or penalties or be held liable for violations of such regulatory requirements.

Despite our level of indebtedness, we and our subsidiaries will still be able to incur substantial additional amounts of debt, including secured debt, which could further exacerbate the risks associated with our substantial indebtedness.

We and our subsidiaries will still be able to incur substantial additional indebtedness in the future. Although the indenture governing the notes and the existing senior secured credit facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial.  If new debt is added to our existing debt levels, the related risks that we now face would increase.  In addition, the indenture governing the notes and the existing senior secured credit facilities will not prevent us from incurring obligations that do not constitute prohibited indebtedness thereunder.

From time to time we are subject to legal and regulatory proceedings which seek material damages from us. These proceedings may be negatively perceived by the public and materially and adversely affect our business.

We are subject to legal and regulatory proceedings from time to time which may result in material damages. Although we do not presently believe that any of our current legal or regulatory proceedings will ultimately have a material adverse impact on our financial performance or operations, we cannot assure you that we will not incur material damages or penalties in a lawsuit or other proceeding in the future and/or significant defense costs related to such lawsuits or regulatory proceedings. For example, many of our products are installed in large, multi-unit condominiums or similar developments, and we may face legal claims for breach of warranties or other claims alleging product defects on a large-scale in connection with such projects.  Also, we operate a fleet of approximately 86 delivery trucks and, in addition to the significant compliance-related costs associated with operating such a fleet, we may incur significant adverse judgments, damages and penalties related to accidents that those trucks may be involved in from time to time. Significant adverse judgments, penalties, settlement amounts, amounts needed to post a bond pending an appeal or defense costs could materially and adversely affect our liquidity and capital resources. It is also possible that, as a result of a present or future governmental or other proceeding or settlement, significant restrictions will be placed upon, or significant changes made to, our business practices, operations or methods, including pricing or similar terms. Any such restrictions or changes may adversely affect our profitability or increase our compliance costs.

Item 1B.

Unresolved Staff Comments

None.

- 15 -


 

Item 2.

Properties

We have the following properties as of December 29, 2018:

 

 

 

Manufacturing

 

 

Support

 

 

Storage

 

 

 

 

 

 

 

(in square feet)

 

 

 

 

 

Owned:

 

 

 

 

 

 

 

 

 

 

 

 

Main plant and corporate office, North Venice, FL

 

 

348,000

 

 

 

15,000

 

 

 

-

 

Glass tempering and laminating, North Venice, FL

 

 

80,000

 

 

 

5,000

 

 

 

-

 

Assembly processing facility, North Venice, FL

 

 

96,000

 

 

 

-

 

 

 

-

 

Insulated glass building, North Venice, FL

 

 

42,000

 

 

 

-

 

 

 

-

 

PGT Wellness Center, North Venice, FL

 

 

-

 

 

 

3,600

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leased:

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturing and support facility (Center Court), Venice, FL

 

 

19,600

 

 

 

15,400

 

 

 

-

 

Support facility (Endeavor Court), Nokomis, FL

 

 

-

 

 

 

12,000

 

 

 

-

 

Storage facility (Technology Park), Nokomis, FL

 

 

-

 

 

 

-

 

 

 

6,100

 

Storage facility (Sarasota warehouse), Bradenton, FL

 

 

-

 

 

 

-

 

 

 

40,000

 

Plant and administrative offices, Hialeah, FL

   (CGI and CGIC)

 

 

305,000

 

 

 

20,000

 

 

 

-

 

Plant and administrative offices, Orlando, FL (WinDoor)

 

 

300,000

 

 

 

20,000

 

 

 

-

 

Plant and administrative offices, Phoenix, AZ (WWS)

 

 

160,000

 

 

 

10,000

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total square feet

 

 

1,350,600

 

 

 

101,000

 

 

 

46,100

 

 

On August 13, 2018, we acquired WWS, an established manufacturer of non-impact windows and doors headquartered in Phoenix, AZ. WWS manufacturers its window and door products from its new approximately 170,000 square foot manufacturing and distribution facility in Phoenix, AZ. This facility is leased by WWS through the end of May 2027.

We combined the operations of CGI and CGIC, which manufactures our commercial storefront systems products and whose facility lease was set to expire by the end of 2018, into a new 325,000 square foot leased facility. This new facility is in Hialeah, Florida.

On February 16, 2016, we acquired WinDoor. WinDoor manufactures impact-resistant windows and doors from its approximately 320,000 square foot manufacturing and administrative facility in Orlando, Florida. This facility is leased by WinDoor, and it has adequate space for WinDoor’s current level of operating activity, as well as additional room for growth and expansion, if needed. This lease expires in February 2021.

We also own three parcels of undeveloped land in North Venice, Florida, available for any future construction needs we may have.

Our leases discussed above expire between February 2019 and late 2028. The leases require us to pay taxes, insurance and common area maintenance expenses associated with the properties.

All of our owned properties secure borrowings under our credit agreement (dated February 16, 2016, as amended by the first amendment thereto, dated as of February 17, 2017, the second amendment thereto, dated as of March 16, 2018 and as otherwise amended, restated, modified or supplemented, the “Credit Agreement”). All of these operating facilities are adequate in capacity and condition to service existing customer needs.

 

Item 3.

LEGAL PROCEEDINGS

We are involved in various claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in such amounts in excess of our self-insured retention as we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in respect of claims and lawsuits. We do not expect that the ultimate resolution of these matters will have a material adverse impact on our financial position, cash flows or results of operations.

- 16 -


 

Item 4.MINE SAFETY DISCLOSURES

Not Applicable

- 17 -


 

PART  II

Item 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our Common Stock trades on the New York Stock Exchange under its symbol of “PGTI”. On February 8, 2019, the closing price of our Common Stock was $16.94 as reported on the New York Stock Exchange. The approximate number of stockholders of record of our Common Stock on that date was approximately 2,800, although we believe that the number of beneficial owners of our Common Stock is substantially greater.

 

Dividends

We do not pay a regular dividend. Any determination relating to dividend policy will be made at the discretion of our Board of Directors. The terms of the agreements governing our outstanding borrowings restrict our ability to pay dividends.

Securities Authorized for Issuance under Equity Compensation Plans

The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders under the caption “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information,” which information is incorporated herein by reference.

Unregistered Sales of Equity Securities

None.

Issuer Purchases of Equity Securities

None.


- 18 -


 

Performance Graph

The following graphs compare the percentage change in PGT Innovations, Inc.’s cumulative total stockholder return on its Common Stock with the cumulative total stockholder return of the NYSE Composite Index, the SPDR S&P Homebuilders ETF, and the Standard & Poor’s Building Products Index over the period from December 30, 2013 (the first trading day of our 2014 fiscal year), to December 28, 2018 (the last trading day of our 2018 fiscal year).

COMPARISON OF 60 MONTH CUMULATIVE TOTAL RETURN

AMONG PGT INNOVATIONS, INC., THE NYSE COMPOSITE INDEX, THE SPDR S&P

HOMEBUILDERS ETF AND THE S&P 500 BUILDING PRODUCTS INDEX  

 

 

*

Graph shows returns generated as if $100 were invested on December 30, 2013 (the first trading day of our 2014 fiscal year) for 60 months ending December 28, 2018 (the last trading day of our 2018 fiscal year), in PGTI stock or in the SPDR S&P Homebuilders EFT Fund, which is an exchange-traded fund that seeks to replicate the performance of the S&P Homebuilders Select Industry Index.

**

The Company’s common stock currently trades on the NYSE. As such, the 5-year return comparison is to the NYSE Composite Index. However, prior to December 28, 2016, the Company’s common stock traded on the NASDAQ Global Market.

 

- 19 -


 

Item 6.

SELECTED FINANCIAL DATA

The following table sets forth selected historical consolidated financial information and other data as of and for the periods indicated and have been derived from our audited consolidated financial statements.

All information included in the following tables should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Item 7, and with the consolidated financial statements and related notes in Item 8. All years presented consisted of 52 weeks, except for the year ended January 3, 2015, which consisted of 53 weeks.

 

 

 

Year Ended

 

 

Year Ended

 

 

Year Ended

 

 

Year Ended

 

 

Year Ended

 

Selected Consolidated Financial Data

 

December 29,

 

 

December 30,

 

 

December 31,

 

 

January 2,

 

 

January 3,

 

(in thousands except per share data)

 

2018 (4)

 

 

2017

 

 

2016

 

 

2016

 

 

2015

 

Net sales

 

$

698,493

 

 

$

511,081

 

 

$

458,550

 

 

$

389,810

 

 

$

306,388

 

Cost of sales

 

 

455,025

 

 

 

352,097

 

 

 

318,452

 

 

 

270,678

 

 

 

213,596

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

243,468

 

 

 

158,984

 

 

 

140,098

 

 

 

119,132

 

 

 

92,792

 

Selling, general and administrative expenses

 

 

150,910

 

 

 

98,803

 

 

 

83,995

 

 

 

68,190

 

 

 

56,377

 

Gains on sales of assets under APA (1)

 

 

(2,551

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Fair value adjustment to contingent consideration (2)

 

 

-

 

 

 

-

 

 

 

(3,000

)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

95,109

 

 

 

60,181

 

 

 

59,103

 

 

 

50,942

 

 

 

36,415

 

Interest expense

 

 

26,529

 

 

 

20,279

 

 

 

20,125

 

 

 

11,705

 

 

 

5,960

 

Debt extinguishment costs

 

 

3,375

 

 

 

-

 

 

 

3,431

 

 

 

-

 

 

 

2,625

 

Other expense, net (3)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

388

 

 

 

1,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

65,205

 

 

 

39,902

 

 

 

35,547

 

 

 

38,849

 

 

 

26,080

 

Income tax expense (benefit)

 

 

11,272

 

 

 

63

 

 

 

11,800

 

 

 

15,297

 

 

 

9,675

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

53,933

 

 

$

39,839

 

 

$

23,747

 

 

$

23,552

 

 

$

16,405

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.03

 

 

$

0.80

 

 

$

0.49

 

 

$

0.49

 

 

$

0.35

 

Diluted

 

$

1.00

 

 

$

0.77

 

 

$

0.47

 

 

$

0.47

 

 

$

0.33

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

52,461

 

 

 

49,522

 

 

 

48,856

 

 

 

48,272

 

 

 

47,376

 

Diluted

 

 

54,106

 

 

 

51,728

 

 

 

50,579

 

 

 

50,368

 

 

 

49,777

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other financial data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

$

14,225

 

 

$

13,051

 

 

$

9,577

 

 

$

7,008

 

 

$

4,534

 

Amortization

 

 

10,225

 

 

 

6,477

 

 

 

6,096

 

 

 

3,413

 

 

 

1,446

 

 

 

 

As Of

 

 

As Of

 

 

As Of

 

 

As Of

 

 

As Of

 

 

 

December 29,

 

 

December 30,

 

 

December 31,

 

 

January 2,

 

 

January 3,

 

 

 

2018 (4)

 

 

2017

 

 

2016 (4)

 

 

2016

 

 

2015

 

Balance Sheet data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

52,650

 

 

$

34,029

 

 

$

39,210

 

 

$

61,493

 

 

$

42,469

 

Total assets

 

 

862,153

 

 

 

453,119

 

 

 

436,648

 

 

 

344,028

 

 

 

304,587

 

Total debt, including current portion

 

 

366,777

 

 

 

212,973

 

 

 

247,873

 

 

 

190,767

 

 

 

191,752

 

Shareholders’ equity

 

 

385,544

 

 

 

175,325

 

 

 

132,852

 

 

 

106,961

 

 

 

73,976

 

 

(1)

Represents gains on sales of assets under the APA with Cardinal. See Note 6 in Item 8.  

(2)

Relates to reversal of liability for contingent consideration.

(3)

Other expense, net, includes fair value adjustments on derivative financial instruments.

(4)

In August 2018, we acquired WWS. In February 2016, we acquired WinDoor. See Note 5 in Item 8.

- 20 -


 

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINACIAL CONDITION AND RESULTS OF OPERATIONS

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our Consolidated Financial Statements and related Notes included in Item 8. We also advise you to read the risk factors in Item 1A. Our MD&A is presented in eight sections:

 

Executive Overview;

 

Sales of Door Glass Processing Assets

 

The Tax Cuts and Jobs Act of 2017;

 

Results of Operations;

 

Liquidity and Capital Resources;

 

Disclosures of Contractual Obligations and Commercial Commitments;

 

Critical Accounting Estimates;

 

Recently Issued Accounting Standards; and

 

Forward Outlook

EXECUTIVE OVERVIEW

Sales and Operations

Our sales grew to $698.5 million in our 2018 fiscal year, a 36.7% increase when compared to 2017. This increase includes sales from our August 13, 2018 acquisition of WWS, which totaled $49.7 million, but also resulted from increases in sales of our aluminum and vinyl impact-resistant products, which grew by 28.5% and 32.3%, respectively. Driving these results were increases in the sales of our flagship WinGuard impact-resistant products, including vinyl WinGuard impact-resistant products, which grew by 35.5%, and our aluminum WinGuard impact-resistant products, which grew by 26.4%, both as compared to 2017. Since 2014, our vinyl WinGuard products have grown at a compound annual rate of nearly 35%. The growth in the sales of our vinyl impact products highlights the shift in our markets towards more energy efficient products and our ability to design attractive and innovative windows and doors to meet those needs. We also believe our sales in 2018 benefitted from the heightened awareness of impact-resistant products as the result of Hurricane Irma, which hit our primary markets in mid-September 2017, and our increased advertising following Hurricane Irma. Excluding sales of WWS, our annual sales to the repair and remodel market increased by $104.4 million, or 33.6%, in 2018, as compared to 2017, while new construction sales increased $33.3 million, or 16.6%. By region, our annual sales in Florida increased $111.7 million, or 24.3%, for 2018 compared to 2017, and sales in our out-of-state markets increased $60.0 million, or 169.9%. The increase in out-of-state sales is primarily due to the inclusion of the post-acquisition sales of WWS, which are primarily in the western and southwestern U.S. The remaining increase was related to an increase in international sales.

Gross profit was $243.5 million for our 2018 fiscal year, which increased 53.1% when compared to 2017. Our gross profit increased primarily due to higher sales volume, but also benefitted from price increases in 2018, as well as improvements in operational performance, which generated increased efficiencies, and a decrease in scrap rates. Our gross profit also benefitted from product mix. However, inflationary conditions persisted through all of 2018, including in the cost of aluminum, after increasing significantly during the second half of 2017, remained high during the first half of 2018, but then has subsided through the end of 2018. For example, the per-pound market cash price of aluminum, not including the Midwest Premium charge for delivery, began the year at $1.11, but has decreased to $0.85 at the end of the year, and is approximately $0.83 in mid-February 2019. We increased prices for our products during 2018 to cover these cost increases, but in the future, we may not always be able to offset cost increases we incur by increasing our selling prices.

Selling, general and administrative expenses were $150.9 million for our 2018 fiscal year, which increased $52.1 million compared to 2017, which includes the SG&A of WWS of $19.5 million, as well as the related acquisition costs of $3.8 million. Higher selling and distribution costs were the main driver of this increase, which is directly related to the significant increase in sales. The second most significant factor was higher personnel-related costs, including higher incentive compensation-related costs due to our improved performance, but also relating to a higher number of employees. Also, beginning in late 2017 after Hurricane Irma, we increased our investment in advertising, and maintained higher advertising levels during 2018 to further promote, in the post-Hurricane Irma environment, the benefits of our impact-resistant products. There was also an increase in depreciation expense during 2018 that contributed to the increase in selling, general and administrative expenses as compared to last year.

Interest expense increased $6.2 million in 2018, compared to 2017. During 2018, we made a total of $160.3 million in payments of long-term debt, substantially all relating to repayments of borrowings under the term loan portion of the 2016 Credit Agreement due 2022, which resulted in non-cash write-offs of deferred lenders fees and discount totaling $5.6 million as additional interest

- 21 -


 

expense. Excluding these charges, interest expense increased slightly, as the savings from prepayments of borrowings under the 2016 Credit Agreement due 2022, were more than offset by interest by the issuance of the 2018 Senior Notes due 2026, which carry a fixed interest rate of 6.75%.

Our net income in 2018 was $53.9 million, an increase of $14.1 million when compared to 2017’s net income of $39.8 million. Our net income benefitted from improved performance, including a significant increase in sales, and the addition of WWS. The comparison of 2018 net income to 2017 net income is also affected by the fact that net income in 2017 benefitted from the recognition of the effects of the Tax Cuts and Jobs Act, further described below. In December 2017, we revalued our ending net deferred tax liabilities at December 30, 2017 and recognized a $12.4 million tax benefit in the consolidated statement of operations for the year ended December 30, 2017, which was adjusted slightly by $0.2 million in tax expense in 2018.

Liquidity and Cash Flow

During 2018, we generated $100.3 million in cash flow from operations, an increase of $51.3 million over last year, which was used to fund the cash portion of the WWS Acquisition of $39.6 million, make voluntary prepayments of debt of $8.0 million, as well as fund working capital needs, and for capital expenditures of $29.8 million. Our cash flow in 2018 benefitted from proceeds received under the APA, described below, of $24.8 million, but also was reduced by payments of estimated income taxes of $19.5 million, including a federal income tax payment of $9.0 million, relating to our fourth quarter of 2017 estimated payment which was not required to be made until the end of January 2018 due to temporary relief on estimated tax payments for Florida businesses affected by Hurricane Irma.

During 2018, we executed on two major capital transactions: (1) the issuance of the 2018 Senior Notes due 2026; and (2) the 2018 Equity Issuance. The transactions provided substantial liquidity, the proceeds from which were used to acquire WWS, in the case of the 2018 Senior Notes due 2026 and used to make a prepayment of borrowings under the 2016 Credit Agreement due 2022, in the case of the 2018 Equity Issuance. See “Liquidity and Capital Resources” for a more detailed discussion of these events.

SALE OF DOOR GLASS PROCESSING ASSETS

On September 22, 2017, we entered into the APA with Cardinal for the sale to Cardinal of certain manufacturing equipment we used in processing glass components for PGT-branded doors for a cash purchase price of $28.0 million. Contemporaneously with entering into the APA, we entered into a seven-year supply agreement (SA) with Cardinal for Cardinal to supply us with glass components for PGT-branded doors. The Company determined to sell these assets and enter the SA to allow us to heighten our focus in our core areas of window and door manufacturing and, at the same time, strengthen our supply chain for high-quality door glass from a supplier with whom we have been doing business for many years.

The Company has determined that, although the APA and SA are separate agreements, they were negotiated contemporaneously. Therefore, the Company has concluded that the $28.0 million of proceeds under the APA should be bifurcated between the sale of the door glass manufacturing assets, and as payment received from a supplier for the Company’s agreement to buy glass components for PGT-branded doors from Cardinal under the SA. The bifurcation of the proceeds in excess of the stand-alone selling price of the assets acquired would be allocated to the SA and recognized as a reduction of cost of sales as glass components are purchased by PGTI. Based on the established stand-alone selling price of the assets sold, as determined by an independent appraisal, approximately $7.7 million was allocated to the sale of the assets, with the remaining $20.3 million representing consideration received from Cardinal related to the agreement to buy door glass components for PGT-branded doors from Cardinal. This consideration is being amortized over the 7-year term of the SA.

At the time we ceased using these assets in production, at which time they became available for immediate sale, their net book value was $4.7 million, and they were reclassified from property, plant and equipment, to assets held for sale within other current assets.

The APA provided for the transfer of the assets from the Company to Cardinal in two phases, with the first date in 2017, and the second date in 2018, on dates which the Company and Cardinal agree to use. Under the APA, the cash purchase price of $28.0 million was to be paid by Cardinal to the Company in three separate payments of $3 million on or about the time of the first transfer of the assets to Cardinal, $10 million on or about January 15, 2018, and $15 million at or about the time of the second transfer of assets to Cardinal.

Cardinal paid us $3.0 million in cash on November 1, 2017, $10.0 million in cash on January 16, 2018, and $14.8 million on June 8, 2018, pursuant to the APA. The total proceeds received of $27.8 million was $0.2 million less than the $28.0 million as specified in the APA as we retained certain assets that were initially identified for transfer. On December 15, 2017, machinery and equipment classified as assets held for sale with net book value of $1.5 million, and fair value of $1.9 million was transferred to Cardinal and their equipment rigger, and we recognized a gain for the difference. Substantially all of the remaining machinery and equipment was transferred to Cardinal during the second quarter of 2018, which had a net book value of $3.2 million and fair value of

- 22 -


 

$5.8 million. We recognized gains on disposals for the difference totaling $2.6 million during the year ended December 29, 2018, classified as a separate line item in the accompanying consolidated statement of operations for the year ended December 29, 2018.

The SA provides that the Company will purchase, and Cardinal will supply, all the Company’s requirements for certain glass components used in PGT-branded doors through the end of 2024. The terms of the manufacture by Cardinal and purchase by the Company of such glass components as to purchase orders, forecasts of purchases, pricing, invoicing, delivery and payment terms and other terms, are all as described in the SA. Early in the fourth quarter of 2017, we began purchasing and receiving glass components from Cardinal under the SA. At that time, we began amortizing the advance consideration received from Cardinal initially allocated to the SA, recognizing $628 thousand in the year ended December 30, 2017, and $2.8 million and in the year ended December 29, 2018, which is classified as reductions to cost of sales in the accompanying consolidated statements of operations. The remaining unamortized balance of $16.7 million is classified in the accompanying consolidated balance sheet as of December 29, 2018, as $2.8 million within accrued liabilities and $13.9 million within other liabilities.

THE TAX CUTS AND JOBS ACT OF 2017

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act includes significant changes to the U.S. corporate income tax system, including a Federal corporate rate reduction from 35% to 21%, effective January 1, 2018, limitations on the deductibility of interest expense and executive compensation, the elimination of the Section 199 domestic production activities deduction, and further restricting the deductibility of certain already restricted expenses.

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Act, the Company revalued its ending net deferred tax liabilities at December 30, 2017 and recognized a $12.4 million tax benefit in the Company’s consolidated statement of operations for the year ended December 30, 2017. Upon the filing of our Federal and state income tax return for 2017, in the third quarter of 2018, we recognized an adjustment to this gain of $0.2 million of tax expense.

The Company has recognized the tax impacts related to the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the years ended December 29, 2018 and December 30, 2017. In 2018, we experienced a benefit to our cash flow and a decrease in our overall effective tax rate as the result of the reduction of the Federal corporate income tax rate under the Tax Act, partially offset by the negative impact from the repeal of the Section 199 domestic production activities deduction. In 2018, we had no significant effect on our tax rate or obligation to pay income taxes due to the limitations on the deductions for interest expense and executive compensation.

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RESULTS OF OPERATIONS

Analysis of Selected Items from our Consolidated Statements of Operations

 

 

 

Year Ended

 

 

 

 

 

 

December 29,

 

 

December 30,

 

 

December 31,

 

 

Percent Change

 

 

 

2018

 

 

2017

 

 

2016

 

 

2018-2017

 

 

2017-2016

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

698,493

 

 

$

511,081

 

 

$

458,550

 

 

 

36.7

%

 

 

11.5

%

Cost of sales

 

 

455,025

 

 

 

352,097

 

 

 

318,452

 

 

 

29.2

%

 

 

10.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

243,468

 

 

 

158,984

 

 

 

140,098

 

 

 

53.1

%

 

 

13.5

%

Gross margin

 

 

34.9

%

 

 

31.1

%

 

 

30.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A expenses

 

 

150,910

 

 

 

98,803

 

 

 

83,995

 

 

 

52.7

%

 

 

17.6

%

SG&A expenses as a percentage of net sales

 

 

21.6

%

 

 

19.3

%

 

 

18.3

%

 

 

 

 

 

 

 

 

Gains on sales of assets under APA

 

 

(2,551

)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

Fair value adjustment to contingent consideration

 

 

-

 

 

 

-

 

 

 

(3,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

95,109

 

 

 

60,181

 

 

 

59,103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

26,529

 

 

 

20,279

 

 

 

20,125

 

 

 

 

 

 

 

 

 

Debt extinguishment costs

 

 

3,375

 

 

 

-

 

 

 

3,431

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

11,272

 

 

 

63

 

 

 

11,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

53,933

 

 

$

39,839

 

 

$

23,747

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.03

 

 

$

0.80

 

 

$

0.49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

1.00

 

 

$

0.77

 

 

$

0.47

 

 

 

 

 

 

 

 

 

 

2018 Compared with 2017

Net sales

Net sales for 2018 were $698.5 million, a $187.4 million, or 36.7%, increase in sales, from $511.1 million in the prior year.

The following table shows net sales by major product category (in millions, except percentages):

 

 

 

Year Ended

 

 

 

 

 

 

 

December 29, 2018

 

 

December 30, 2017

 

 

 

 

 

 

 

Sales

 

 

% of sales

 

 

Sales

 

 

% of sales

 

 

% change

 

Product category:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impact-resistant window and door products

 

$

561.8

 

 

 

80.4

%

 

$

433.4

 

 

 

84.8

%

 

 

29.6

%

Non-impact window and door products

 

 

136.7

 

 

 

19.6

%

 

 

77.7

 

 

 

15.2

%

 

 

76.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net sales

 

$

698.5

 

 

 

100.0

%

 

$

511.1

 

 

 

100.0

%

 

 

36.7

%

 

Net sales of our impact-resistant window and door products, which include our PGT WinGuard products, as well as all of CGI’s products and the substantial majority of WinDoor’s products, were $561.8 million in 2018, an increase of $128.4 million, or 29.6%, driven by an increase in sales of our WinGuard products, primarily our vinyl WinGuard products. Included in sales of our impact-resistant window and door products for 2018 were $391.1 million of aluminum impact sales, an increase of $86.7 million, or 28.5%, and $170.7 million of vinyl impact sales, an increase of $41.7 million, or 32.3%.  

Sales of our non-impact window and door products were $136.7 million in 2018, an increase of $59.0 million, or 76.0%. Driving this increase are the sales of WWS, our recently acquired window and door manufacturer in the western U.S., whose products

- 24 -


 

are all considered to be non-impact windows and door products. Sales of WWS included in non-impact window and door products were $49.7 million in 2018.

Our non-impact window and door products included $72.8 million of aluminum non-impact sales, an increase of $47.9 million, or 192.8%, and $63.9 million of vinyl non-impact sales, an increase of $11.1 million, or 21.1%. Included in sales of WWS’s window and door products were $43.3 million of aluminum non-impact sales, and $6.4 million of vinyl non-impact sales.

Gross profit and gross margin

Gross profit was $243.5 million in 2018, an increase of $84.5 million, or 53.1%, from $159.0 million in the prior year. The gross margin percentage was 34.9% in 2018, compared to 31.1% in the prior year, a percentage-point increase of 3.8%. Adjusting for costs relating to machinery and equipment relocations, as well as an opening balance sheet inventory adjustment relating to our acquisition of WWS, for a total of $1.2 million in 2018, and adjusting for costs relating to Hurricane Irma, WinDoor leadership and glass supply-chain transition costs, and costs relating to the start-up of our Thermal Plastic Spacer system line incurred in January and February, totaling $2.1 million in 2017, the gross margin percentage was 35.0% in 2018, compared to 31.5% in 2017, a percentage-point increase of 3.5%. There were improvements in 2018, compared to last year, relating to higher contribution margins on the increased sales volume, which benefitted gross margin by 1.2%, price increases, which benefitted gross margin by 1.5%, in scrap rates and efficiencies, which benefitted gross margin by 1.0%, a change in mix towards a higher portion of repair and remodeling sales, which benefitted gross margin by 0.7%. These increases were partially offset by decreases due to higher overall material prices, which decreased gross margin by 1.1%, and which included higher aluminum prices compared to last year, partially offset by lower glass costs as a result of our supply agreement with Cardinal Glass Industries, and by higher overhead costs, which decreased gross margin by 1.2%. The addition of WWS benefitted gross margin by 1.4%.

Selling, general and administrative expenses

Selling, general and administrative expenses for 2018 were $150.9 million, an increase of $52.1 million, or 52.7%, from $98.8 million in the prior year. SG&A in 2018 includes $3.8 million of acquisition costs relating to our recent acquisition of WWS, and in 2017 includes $2.3 million in higher costs related to Hurricane Irma, management reorganization and WinDoor transition actions. Adjusting for these costs in both periods, SG&A was $147.1 million in 2018, or 21.1% of net sales, compared to $96.5 million in 2017, or 18.9% of net sales, an increase of 2.2%. The adjusted increase in SG&A is primarily the result of the inclusion of the SG&A expenses of WWS in 2018 since the acquisition, which totaled $19.5 million, including $3.6 million in non-cash amortization of the amortizable intangible asset acquired in the acquisition. This represents 39.3% of the total sales contribution of WWS of $49.7 million in 2018. We believe that going forward, WWS will carry higher SG&A as a percentage of sales than our legacy business due to WWS’s higher transportation costs, and non-cash amortization expense, which we estimate will be approximately $9.4 million annually.

Excluding these items, SG&A of the legacy business was $127.6 million in 2018, or 19.7% of legacy business net sales, compared to $96.5 million in 2017, or 18.9%, an increase of $31.1 million. This increase in SG&A spending is consistent with the higher level of sales, including higher distribution costs, and also includes higher personnel-related costs of approximately $10.7 million, which includes higher incentive compensation reflecting the improved performance in 2018 compared to last year, an increase of $2.4 million due to our strategic investment in additional marketing and advertising initiatives during 2018, as well as an increase in stock-based compensation expenses of $1.4 million in 2018, compared to last year.

We record warranty costs as a selling expense within selling, general and administrative expenses. During 2018, we recorded warranty expense at a rate of 1.7% of sales, which decreased when compared to the rate in 2017 of 2.1% of sales. We believe the decrease in warranty expense as a percentage of sales was the result of our workforce becoming more seasoned through experience and training, as well as a change in our warranty profile on PGT-branded door glass components produced by Cardinal as part of the SA on which they provide the warranty coverage.

Gains on sales of assets under APA

On September 22, 2017, we entered into the APA with Cardinal for the sale to Cardinal of certain manufacturing equipment we used in processing glass components for PGT-branded doors. Substantially all of the remaining machinery and equipment was transferred to Cardinal during the second quarter of 2018, which had a net book value of $3.2 million and fair value of $5.8 million. We recognized gains on disposals for the difference totaling $2.6 million during 2018, classified as a separate line item in the accompanying consolidated statement of operations for the year ended December 29, 2018.

- 25 -


 

Interest expense

Interest expense was $26.5 million in 2018, an increase of $6.2 million from $20.3 million in the prior year. Interest expense in 2018 includes $5.6 million of accelerated amortization of lenders fees and discount relating to the prepayment of $152.0 million of borrowings under the term loan portion of the 2016 Credit Agreement due 2022 we made on September 18, 2018 and the voluntary prepayment of $8.0 million we made on December 19, 2018. Excluding this amount, the decrease in interest expense due to a decrease in the average level of outstanding borrowings under the term loan portion of the 2016 Credit Agreement due 2022 as the result of the prepayments made during 2018 and 2017, were offset by interest expense from the issuance of the 2018 Senior Notes due 2026, composed of $315.0 million aggregate principal amount of 6.75% unsecured senior notes due 2026. The 2018 Senior Notes due 2026 carry a higher per-annum interest rate and have a higher principal amount outstanding than borrowings under the term loan portion of the 2016 Credit Agreement due 2022.

Debt extinguishment costs

Debt extinguishment costs were $3.4 million in 2018. In connection with the Second Amendment, certain existing lenders changed their positions in or exited the 2016 Credit Agreement due 2022, which resulted in the write-offs of portions of the deferred financing costs and original issue discount allocated to these lenders. Additionally, at the time of the issuance of the 2018 Senior Notes due 2026, certain existing lenders reduced their positions in the revolving credit portion of the 2016 Credit Agreement due 2022, which resulted in the write-offs of the deferred financing costs allocated to these lenders. As such, write-offs totaling $3.4 million is classified as debt extinguishment costs in the accompanying consolidated statement of operations for the year ended December 29, 2018.

Effective on February 17, 2017, we repriced and amended our 2016 Credit Agreement due 2022 for the first time. As there were no changes in lender positions, this action did not result in any modifications or extinguishments of debt. Therefore, there was no charge for debt extinguishment costs in 2017.

Income tax expense

Income tax expense was $11.3 million for 2018, representing an effective tax rate of 17.3%. This compares to income tax expense of $63 thousand for 2017, representing an effective tax rate of 0.2%. Income tax expense in 2018, and 2017, includes excess tax benefits relating to exercises of stock options and lapses of restrictions on stock awards, treated as a discrete item of income tax, totaling $5.2 million and $1.8 million, respectively. Also, income tax expense includes a $12.4 million tax benefit in 2017 due to the revaluation of our ending net deferred tax liabilities at December 30, 2017 as the result of the Tax Act, which was reduced slightly by an adjustment of a $0.2 million tax expense in 2018.

Excluding the effects of these discrete items in income tax expense, and certain tax credits received in each period, our effective tax rate in 2018 would have been 25.7%, compared to 36.8% in 2017.

As a result of the Tax Cuts and Jobs Act, enacted effective on December 22, 2017, our Federal corporate income tax rate has been reduced from 35%, to 21%. This reduction in rate has lowered our overall effective tax rate. Additionally, the section 199 domestic manufacturing deduction was repealed. As such, our effective tax rate, excluding the discrete items discussed above, approximates our current combined statutory federal and state rate of approximately 25.5% for 2018. In 2017, the effective tax rate, excluding the effect of the discrete item discussed above, was lower than our then combined statutory federal and state tax rate of 38.8% primarily as the result of the estimated impact of the section 199 domestic manufacturing deduction.

We expect to continue to be profitable in 2019, and thus, that we will incur income tax expense at a combined Federal and state effective rate of between approximately 26% to 27%. This rate is based on the lower overall corporate income tax rate of 21% as the result of the Tax Act, plus a blended statutory state rate, taking into consideration the effect on our state rate due to our recent acquisition of WWS.

- 26 -


 

2017 Compared with 2016

Net sales

Net sales for 2017 were $511.1 million, a $52.5 million, or 11.5%, increase in sales, from $458.6 million in the prior year.

The following table shows net sales classified by major product category (in millions, except percentages):

 

 

 

Year Ended

 

 

 

 

 

 

 

December 30, 2017

 

 

December 31, 2016

 

 

 

 

 

 

 

Sales

 

 

% of sales

 

 

Sales

 

 

% of sales

 

 

% change

 

Product category:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impact-resistant window and door products

 

$

433.4

 

 

 

84.8

%

 

$

381.6

 

 

 

83.2

%

 

 

13.6

%

Non-impact window and door products

 

 

77.7

 

 

 

15.2

%