Company Quick10K Filing
Quick10K
PGT Innovations
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$15.49 58 $904
10-Q 2019-03-30 Quarter: 2019-03-30
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 2019-05-22 Officers, Shareholder Vote, Other Events, Exhibits
8-K 2019-05-02 Earnings, Regulation FD, Exhibits
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
LII Lennox 10,590
TDOC Teladoc 4,400
CCC Churchill Capital 1,420
BCBP BCB Bancorp 212
IMMP Immtech Pharmaceuticals 66
WISA Summit Wireless Technologies 31
KPAY KinerjaPay 0
PTEO Proteo 0
PCTL PCT 0
EGC Energy XXI Gulf Coast 0
PGTI 2019-03-30
Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Note 1. Basis of Presentation
Note 2. Revenue Recognition and Contracts with Customers
Note 3. Warranty
Note 4. Inventories
Note 5. Stock Based-Compensation
Note 6. Acquisition
Note 7. Net Income per Common Share
Note 8. Goodwill and Other Intangible Assets
Note 9. Long-Term Debt
Note 10. Leases
Note 11. Commitments and Contingencies
Note 12. Income Taxes
Note 13. Fair Value
Note 14. Derivatives
Note 15. Accumulated Other Comprehensive Loss
Note 16. Segments
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosure
Item 5. Other Information
Item 6. Exhibits
EX-31.1 pgti-ex311_6.htm
EX-31.2 pgti-ex312_9.htm
EX-32.1 pgti-ex321_7.htm
EX-32.2 pgti-ex322_8.htm

PGT Innovations Earnings 2019-03-30

PGTI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 pgti-10q_20190330.htm 10-Q pgti-10q_20190330.htm

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 30, 2019

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.

 

1070 Technology Drive

North Venice, FL 34275

Registrant’s telephone number: 941-480-1600

 

State of Incorporation

 

IRS Employer Identification No.

Delaware

 

20-0634715

 

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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “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 Section13(a) of the Exchange Act.

Yes No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No

Common Stock, $0.01 par value, outstanding was 58,347,213 shares, as of April 30, 2019.

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

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.01 per share

 

PGTI

 

New York Stock Exchange, Inc.

 


 


PGT INNOVATIONS, INC.

TABLE OF CONTENTS

 

Form 10-Q for the Three Months Ended March 30, 2019

 

 

 

 

 

 

 

Page

 

 

 

 

 

 

Number

Part I.

 

Financial Information

 

3

 

 

Item 1.

 

Condensed Consolidated Financial Statements (unaudited):

 

3

 

 

 

 

Condensed Consolidated Statements of Operations

 

3

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income

 

4

 

 

 

 

Condensed Consolidated Balance Sheets

 

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows

 

6

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity

 

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

Item 2.

 

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

 

25

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

33

 

 

Item 4.

 

Controls and Procedures

 

33

 

 

 

 

 

 

 

Part II.

 

Other Information

 

34

 

 

Item 1.

 

Legal Proceedings

 

34

 

 

Item 1A.

 

Risk Factors

 

34

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

34

 

 

Item 3.

 

Defaults Upon Senior Securities

 

34

 

 

Item 4.

 

Mine Safety Disclosure

 

34

 

 

Item 5.

 

Other Information

 

34

 

 

Item 6.

 

Exhibits

 

35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


2


PART I — FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

PGT INNOVATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

 

March 30,

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

Net sales

 

$

173,737

 

 

$

140,253

 

Cost of sales

 

 

112,467

 

 

 

95,480

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

61,270

 

 

 

44,773

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

44,014

 

 

 

28,657

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

17,256

 

 

 

16,116

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

6,714

 

 

 

4,043

 

Debt extinguishment costs

 

 

 

 

 

3,079

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

10,542

 

 

 

8,994

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

2,285

 

 

 

1,654

 

 

 

 

 

 

 

 

 

 

Net income

 

$

8,257

 

 

$

7,340

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.14

 

 

$

0.15

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.14

 

 

$

0.14

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

58,134

 

 

 

49,858

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

59,220

 

 

 

51,998

 

 

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

3


PGT INNOVATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 30,

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

Net income

 

$

8,257

 

 

$

7,340

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss) before tax:

 

 

 

 

 

 

 

 

Change in fair value of derivatives

 

 

595

 

 

 

(83

)

Reclassification to earnings

 

 

915

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss) before tax

 

 

1,510

 

 

 

(83

)

 

 

 

 

 

 

 

 

 

Income tax (expense) benefit related to components of other comprehensive income (loss)

 

 

(386

)

 

 

21

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax

 

 

1,124

 

 

 

(62

)

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

9,381

 

 

$

7,278

 

 

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

4


PGT INNOVATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)

 

 

 

March 30,

 

 

December 29,

 

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

44,936

 

 

$

52,650

 

Accounts receivable, net

 

 

76,035

 

 

 

80,717

 

Inventories

 

 

47,962

 

 

 

44,666

 

Contract assets, net

 

 

9,375

 

 

 

6,757

 

Prepaid expenses

 

 

5,495

 

 

 

2,863

 

Other current assets

 

 

10,317

 

 

 

7,908

 

Total current assets

 

 

194,120

 

 

 

195,561

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

120,238

 

 

 

115,707

 

Operating lease right-of-use asset, net

 

 

29,568

 

 

 

 

Intangible assets, net

 

 

267,803

 

 

 

271,818

 

Goodwill

 

 

277,827

 

 

 

277,827

 

Other assets, net

 

 

1,192

 

 

 

1,240

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

890,748

 

 

$

862,153

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

56,963

 

 

$

68,557

 

Current portion of long-term debt

 

 

87

 

 

 

163

 

Current portion of operating lease liability

 

 

7,016

 

 

 

 

Total current liabilities

 

 

64,066

 

 

 

68,720

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current portion

 

 

367,041

 

 

 

366,614

 

Operating lease liability, less current portion

 

 

25,510

 

 

 

 

Deferred income taxes

 

 

23,144

 

 

 

22,758

 

Other liabilities

 

 

15,139

 

 

 

18,517

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

494,900

 

 

 

476,609

 

 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Preferred stock; par value $.01 per share; 10,000 shares

   authorized; none outstanding

 

 

 

 

 

 

Common stock; par value $.01 per share; 200,000 shares authorized; 61,273 and

   60,729 shares issued and 58,289 and 58,082 shares outstanding at

 

 

 

 

 

 

 

 

March 30, 2019 and December 29, 2018, respectively

 

 

613

 

 

 

607

 

Additional paid-in-capital

 

 

410,578

 

 

 

409,661

 

Accumulated other comprehensive loss

 

 

(1,941

)

 

 

(3,065

)

Accumulated deficit

 

 

(643

)

 

 

(8,900

)

Shareholders' equity

 

 

408,607

 

 

 

398,303

 

Less:  Treasury stock at cost

 

 

(12,759

)

 

 

(12,759

)

Total shareholders' equity

 

 

395,848

 

 

 

385,544

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$

890,748

 

 

$

862,153

 

 

 

 

 

 

 

 

 

 

 

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

5


PGT INNOVATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Three Months Ended

 

 

 

March 30,

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

(unaudited)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

8,257

 

 

$

7,340

 

Adjustments to reconcile net income to net cash

 

 

 

 

 

 

 

 

provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

4,497

 

 

 

2,961

 

Amortization

 

 

4,015

 

 

 

1,659

 

Amortization of right-of-use asset

 

 

1,597

 

 

 

-

 

Provision for allowance for doubtful accounts

 

 

68

 

 

 

416

 

Stock-based compensation

 

 

1,198

 

 

 

514

 

Amortization and write-offs of deferred financing costs and debt discount

 

 

427

 

 

 

615

 

Debt extinguishment costs

 

 

 

 

 

3,079

 

Gains on transfers and disposals of assets

 

 

(28

)

 

 

(10

)

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(60

)

 

 

(7,921

)

Inventories

 

 

(3,651

)

 

 

(3,332

)

Contract assets, net, prepaid expenses, other current and other assets

 

 

(4,678

)

 

 

(1,034

)

Change in operating lease liability

 

 

508

 

 

 

-

 

Accounts payable, accrued and other liabilities

 

 

(11,242

)

 

 

4,591

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

 

908

 

 

 

8,878

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(8,299

)

 

 

(6,644

)

Proceeds from transfers and disposals of assets

 

 

28

 

 

 

10

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(8,271

)

 

 

(6,634

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments of long-term debt

 

 

(76

)

 

 

(72

)

Payments of financing costs

 

 

 

 

 

(1,687

)

Taxes paid relating to shares withheld on employee equity awards

 

 

(505

)

 

 

(637

)

Proceeds from exercise of stock options

 

 

213

 

 

 

173

 

Proceeds from issuance of common stock under employee

 

 

 

 

 

 

 

 

stock purchase plan (ESPP)

 

 

17

 

 

 

5

 

Other

 

 

 

 

 

(7

)

 

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

 

(351

)

 

 

(2,225

)

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

(7,714

)

 

 

19

 

Cash and cash equivalents at beginning of period

 

 

52,650

 

 

 

34,029

 

Cash and cash equivalents at end of period

 

$

44,936

 

 

$

34,048

 

 

 

 

 

 

 

 

 

 

Non-cash activity:

 

 

 

 

 

 

 

 

Establish right-of-use asset

 

$

31,165

 

 

$

 

Establish operating lease liability

 

$

(33,594

)

 

$

 

Property, plant and equipment additions in accounts payable

 

$

729

 

 

$

512

 

 

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

6


PGT INNOVATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Treasury

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Stock

 

 

Total

 

Balance at December 30, 2017

 

 

49,805,338

 

 

$

525

 

 

$

252,275

 

 

$

 

 

$

(64,716

)

 

$

(12,759

)

 

$

175,325

 

Cumulative effect of change in

   accounting principle, net of

   tax effect of $647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,883

 

 

 

 

 

 

1,883

 

Balance at December 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- as adjusted

 

 

49,805,338

 

 

 

525

 

 

 

252,275

 

 

 

 

 

 

(62,833

)

 

 

(12,759

)

 

 

177,208

 

Vesting of restricted stock

 

 

116,475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grants of restricted stock

 

 

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of treasury stock

 

 

(32,439

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(637

)

 

 

(637

)

Retirement of treasury stock

 

 

 

 

 

(1

)

 

 

(636

)

 

 

 

 

 

 

 

 

637

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

514

 

 

 

 

 

 

 

 

 

 

 

 

514

 

Exercise of stock options

 

 

86,549

 

 

 

1

 

 

 

172

 

 

 

 

 

 

 

 

 

 

 

 

173

 

Common stock issued under ESPP

 

 

373

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

5

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,340

 

 

 

 

 

 

7,340

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(62

)

 

 

 

 

 

 

 

 

(62

)

Balance at March 31, 2018

 

 

49,976,296

 

 

$

526

 

 

$

252,329

 

 

$

(62

)

 

$

(55,493

)

 

$

(12,759

)

 

$

184,541

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Treasury

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Stock

 

 

Total

 

Balance at December 29, 2018

 

 

58,081,540

 

 

$

607

 

 

$

409,661

 

 

$

(3,065

)

 

$

(8,900

)

 

$

(12,759

)

 

$

385,544

 

Vesting of restricted stock

 

 

133,770

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grants of restricted stock

 

 

 

 

 

5

 

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of treasury stock

 

 

(34,240

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(505

)

 

 

(505

)

Retirement of treasury stock

 

 

 

 

 

 

 

 

(505

)

 

 

 

 

 

 

 

 

505

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,198

 

 

 

 

 

 

 

 

 

 

 

 

1,198

 

Exercise of stock options

 

 

106,740

 

 

 

1

 

 

 

212

 

 

 

 

 

 

 

 

 

 

 

 

213

 

Common stock issued under ESPP

 

 

1,061

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

17

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,257

 

 

 

 

 

 

8,257

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

1,124

 

 

 

 

 

 

 

 

 

1,124

 

Balance at March 30, 2019

 

 

58,288,871

 

 

$

613

 

 

$

410,578

 

 

$

(1,941

)

 

$

(643

)

 

$

(12,759

)

 

$

395,848

 

 

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

7


PGT INNOVATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

NOTE 1.  BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements include the accounts of PGT Innovations, Inc. and its direct and indirect wholly-owned subsidiaries, including, PGT Industries, Inc., CGI Window and Door Holdings, Inc. (“CGI”), CGI Commercial, Inc. (“CGIC”), WinDoor, Incorporated, Coyote Acquisition Co. and WWS Acquisition LLC (formerly known as GEF WW Parent LLC) (collectively, the “Company”), after elimination of intercompany accounts and transactions.

PGT Innovations, Inc. (“PGTI”, “we,” or the “Company”), formerly named PGT, Inc., is a leading manufacturer of impact-resistant aluminum and vinyl-framed windows and doors and energy-efficient windows and doors designed to unify indoor/outdoor living spaces and offers a broad range of fully customizable window and door products. Products are sold through an authorized dealer and distributor network. The majority of our sales are to customers in the state of Florida, but we sell products to customers in many states. We also have sales in the Caribbean, Canada, and in South and Central America. With the acquisition of Western Window Systems (‘WWS’), we have an increased level of sales in the western United States. See Note 6 for a discussion of this acquisition.

We were incorporated in the state of Delaware on December 16, 2003, as JLL Window Holdings, Inc., with primary operations in North Venice, Florida. On February 15, 2006, our Company was renamed PGT, Inc. On December 14, 2016, we announced that we changed our name to PGT Innovations, Inc. and, effective on December 28, 2016, the listing of our common stock was transferred to the New York Stock Exchange (NYSE) from the NASDAQ Global Market (NASDAQ), and began trading on the NYSE under its existing ticker symbol of “PGTI”. We have four manufacturing operations in Florida, with one in North Venice, two in the greater Miami area, and one in Orlando and one in Arizona. Additionally, we have two glass tempering and laminating plants and one insulation glass plant, all located in North Venice.

All references to PGTI or our Company apply to the consolidated financial statements of PGT Innovations, Inc. unless otherwise noted.

These condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and footnotes required by United States Generally Accepted Accounting Principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim period is not necessarily indicative of the results that may be expected for the remainder of the current year or for any future periods. Each of the Company’s fiscal quarters ended March 30, 2019, and March 31, 2018, consisted of 13 weeks.

The condensed consolidated balance sheet as of December 29, 2018, is derived from the audited consolidated financial statements, but does not include all disclosures required by GAAP. The condensed consolidated balance sheet as of December 29, 2018, and the unaudited condensed consolidated financial statements as of and for the period ended March 30, 2019, should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 29, 2018, included in the Company’s most recent Annual Report on Form 10-K. Except for the adoption of the guidance relating to leases discussed below, the accounting policies used in the preparation of these unaudited condensed consolidated financial statements are consistent with the accounting policies described in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

In the three months ended March 30, 2019, we concluded that we have two reportable segments: the Southeast segment, and the Western segment. The Southeast reporting segment, which is also an operating segment, is composed of our sales in Florida, the core market of our Legacy business, as well as Alabama, Georgia, Louisiana, Mississippi, North Carolina, South Carolina and the Caribbean. The Western reporting segment, also an operating segment, is composed of sales in the rest of the United States, along with Canada and Mexico. While both of our operating segments have products, distribution methods and customers of a similar nature, we determined to not aggregate them due to the differences in their geographic markets. Therefore, our operating segments are our reportable segments. See Note 16 for segment disclosures.

8


 

Recently Adopted Accounting Pronouncements

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. ASU 2016-02 was subsequently amended by ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842”; ASU 2018-10, “Codification Improvements to Topic 842, Leases”; and ASU 2018-11, “Targeted Improvements”. The new standard requires a lessee to recognize a right-of-use asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

The new standard was effective for us on December 30, 2018 (the first day of our 2019 fiscal year), with early adoption permitted. We adopted the new standard on this date, using the required modified retrospective transition approach, applying the new standard to all leases existing on the effective date. Consequently, financial information was not updated, and the disclosures required under the new standard are and will not be provided for dates and periods prior to December 30, 2018. As of the date of adoption, all of our leases were operating leases, and we have no financing leases as of March 30, 2019.

The new standard provided a number of optional practical expedients in transition. We elected the ‘package of practical expedients’, which permitted us not to reassess under the new standard our prior conclusions about lease identification, lease classification and direct costs, and implemented internal controls and additional lease accounting and tracking procedures to enable the preparation of financial information on adoption. We did not elect the use-of-hindsight practical expedient, or the practical expedient pertaining to land easements as it was not applicable to us.

The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualified, primarily for certain vehicle and office equipment leases that are month-to-month leases. This means, for those leases, we did not recognize right-of-use assets or lease liabilities. We also elected the practical expedient to not separate lease and non-lease components for all classes of underlying assets.

This standard had a material effect on our consolidated balance sheet relating to the recognition of an operating lease right-of-use asset and operating lease liability on our balance sheet for our real estate operating leases and to providing new disclosures about our leasing activities. On adoption, we recognized an operating lease right-of-use asset of $31.2 million, and an operating lease liability of $33.6 million, based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. Calculation of the present value of the remaining minimum rental payments required the use of judgment relating to the selection of the discount rate applied to future lease payments. We used a weighted-average interest rate of 6.2%, which was based on a current trade rate for our 2018 Senior Notes due 2026. See Note 10 for additional information relating to our leases.

Leases Accounting Policy

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets, current portion of operating lease liability, and operating lease liability, less current portion on our consolidated balance sheets. Should we engage in any finance leases in the future, finance leases would be included in property and equipment, other current liabilities, and other liabilities on our consolidated balance sheets.  

Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease right-of-use asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

 


9


Recently Issued Accounting Pronouncements

Fair Value Measurement Disclosures

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) - Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”. The new guidance modifies disclosure requirements related to fair value measurement. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this ASU while delaying adoption of the additional disclosures until their effective date. The Company does not believe that the adoption of this guidance will have a significant impact on its fair value disclosures.

Financial Instruments – Credit Losses

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. ASU 2016-13 also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. Subsequently, in November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”. ASU 2018-19 clarifies the codification and corrects unintended application of the guidance. ASU’s 2016-13 and 2018-19 are effective for us for our fiscal year beginning after December 15, 2019. We are currently assessing the impact that adopting these new standards updates will have on our consolidated financial statements.

In the ordinary course of business, we extend credit to qualified dealers and distributors, generally on a non-collateralized basis. The Company maintains an allowance for doubtful accounts which is based on management’s assessments of the amount which may become uncollectible in the future and is determined through consideration of our write-off history, specific identification of uncollectible accounts based in part on the customer’s past due balance (based on contractual terms), and consideration of prevailing economic and industry conditions. Uncollectible accounts are written off after repeated attempts to collect from the customer have been unsuccessful. As of March 30, 2019, and December 29, 2018, the allowance for doubtful accounts was $2.9 million and $2.8 million, respectively.

 

 


10


NOTE 2.  REVENUE RECOGNITION AND CONTRACTS WITH CUSTOMERS

Revenue Recognition Accounting Policy

The Company is a manufacturer of fully-customized windows and doors, and manufactures products based on design specifications, measurements, colors, finishes, framing materials, glass-types, and other options selected by the customer at the point in time an order is received from the customer. The Company has an enforceable right to payment at the time an order is received and accepted at the agreed-upon sales prices contained in our agreements with our customers for all manufacturing efforts expended by the Company on behalf of its custo