- Net sales increased 6.5% to $564.7
million for the third quarter.
- Net income was $27.5 million for the
third quarter.
- Adjusted EBITDA was $77.1 million
for the third quarter.
Ply Gem Holdings, Inc. (“Ply Gem” or the “Company”)
(NYSE: PGEM), a leading manufacturer of exterior building products
in North America, today announced financial results for the quarter
ended September 30, 2017.
“During the third quarter, the unprecedented occurrence of two
major back-to-back hurricanes affected the geographically
significant markets of Texas, Florida, Georgia and South Carolina.
We continue to give our thoughts and prayers to those impacted by
these devastating natural disasters, and assist our associates and
communities in the clean-up and rebuilding efforts,” said Gary E.
Robinette, Ply Gem’s Chairman and CEO. “Due to the significant
flooding and wind damage caused by these hurricanes, Ply Gem
experienced some short-term product demand disruption which we
expect to recover over the next several quarters. In addition to
the demand disruption, Hurricane Harvey significantly impacted the
petrochemical industry in the Texas Gulf Coast which resulted in
shut downs of PVC resin manufacturers and chemical feeder stock to
these PVC resin facilities. Although Ply Gem was able to obtain an
adequate supply of PVC resin and other chemically dependent raw
materials, the market costs and associated freight costs have
significantly increased.” Robinette, continued, “Although we face
demand and cost headwinds from Hurricanes Harvey and Irma, we
expect these to be short-term followed by longer-term product
demand strength and a return to normalized margin levels within our
impacted product categories.”
Third Quarter 2017 Highlights:
- Total net sales for the third quarter
increased 6.5% to $564.7 million.
- Operating earnings decreased $6.1
million to $61.9 million compared to the third quarter of
2016.
- Net income for the third quarter
decreased $27.2 million to $27.5 million from the third quarter of
2016 primarily due to a $66.8 million income tax expense increase
due to the federal valuation allowance reversal in the third
quarter of 2016.
- Adjusted EBITDA decreased $5.4 million
to $77.1 million compared to $82.5 million for the third quarter of
2016 resulting in an LTM Adjusted EBITDA of $230.2 million.
- Basic earnings per share was $0.40 for
the third quarter of 2017 compared to $0.80 for the 2016
period.
- Adjusted basic earnings per share was
$0.41 for the third quarter of 2017 compared to $0.75 for the third
quarter of 2016.
Nine Month 2017 Highlights:
- Total net sales for the nine months
ended September 30, 2017 increased 6.2% to $1,539.4 million.
- Operating earnings increased $0.1
million to $139.8 million compared to the nine month 2016
period.
- Net income decreased $15.1 million to
$53.8 million for the nine month 2017 period from $68.8 million for
the 2016 period due to higher income tax expense partially offset
by a lower tax receivable adjustment.
- Adjusted EBITDA increased to $185.3
million or 0.6%.
- Basic earnings per share was $0.79 for
the 2017 nine month period compared to $1.01 for the 2016 nine
month period.
- Adjusted basic earnings per share was
$0.82 for the 2017 nine month period compared to $1.17 for the 2016
nine month period.
Commenting on the Company’s results, Shawn K. Poe, Ply Gem’s
Chief Financial Officer added, “We continued to see overall strong
unit demand for our products during the third quarter prior to the
impact of Hurricanes Harvey and Irma which affected both product
demand and input costs. Although Ply Gem was faced with these
demand and cost headwinds, our quarterly adjusted EBITDA of $77.1
million was the second highest third quarter adjusted EBITDA for
the Company.” Poe, continued, “As a result of our strong
performance during 2017 and the trailing twelve months, we
strengthened our balance sheet by generating in excess of $110.8
million in operating cash flow and an adjusted EBITDA of $230.2
million. We continue to focus on our debt leverage, and on November
3, 2017 made a $40.0 million voluntary payment on our Term Loan
Facility, which when combined with our previous 2016 payments total
a cumulative $200.0 million voluntary reduction in our long-term
debt, which further demonstrates Ply Gem’s ability to generate
significant and sustainable free cash flow.”
Third Quarter 2017 Financial Results
Net sales increased $34.3 million or 6.5% to $564.7 million
compared to $530.4 million for the third quarter of 2016. The net
sales increase was primarily driven by improved U.S. market demand,
higher Canadian net sales, new business wins and higher average
selling prices.
Gross profit margin was 23.4%, which represented a decrease of
240 basis points from the third quarter of 2016. The decrease in
gross profit margin resulted from higher raw material input costs
for aluminum, PVC resin, and glass that were not fully offset with
higher selling prices. In addition, our gross profit margins were
unfavorably impacted by Hurricanes Harvey and Irma as well as
higher operating and freight costs during the three months ended
September 30, 2017.
Operating earnings were $61.9 million, a decrease of $6.1
million from the third quarter of 2016 based on the gross profit
decline partially offset by lower SG&A expense as a percentage
of net sales and lower amortization expense in 2017.
Siding, Fencing and Stone
Siding, Fencing and Stone's net sales totaled $278.2 million, an
increase of $19.3 million, or 7.4%, compared to $258.9 million in
the third quarter of 2016. The net sales increase resulted
primarily from improved U.S. market conditions, new business wins,
increased market share in Canada, and higher average selling
prices. Gross profit margin for the quarter ended September 30,
2017 was 25.8%, a decrease of 540 basis points from the 31.2% for
the quarter ended October 1, 2016. The decrease in gross margin
percentage resulted from higher raw material input specifically PVC
resin and aluminum and freight costs that fully offset the 7.4% net
sales increase and 1.4% net increase in average selling prices. The
unfavorable commodity and freight costs were partially attributable
to Hurricanes Harvey and Irma.
Windows and Doors
Windows and Doors' net sales totaled $286.5 million, an increase
of $15.0 million, or 5.5%, compared to $271.5 million for the third
quarter of 2016. The net sales increase for the quarter ended
September 30, 2017 can be attributed to improved U.S. and Canadian
market demand conditions which favorably impacted our new
construction and repair and remodeling business. For the quarter
ended September 30, 2017 compared to the quarter ended October 1,
2016, our U.S. new construction business increased $6.6 million or
3.8% while our U.S. repair and remodeling business increased $0.8
million or 1.1% due primarily to higher average selling prices. Our
Canadian net sales increased $7.6 million or 29.3% for the quarter
ended September 30, 2017 relative to the quarter ended October 1,
2016.
Gross profit margin was 21.0% for the quarter ended September
30, 2017, increasing from 20.6% for the quarter ended October 1,
2016. Our gross profit increase of 40 basis points resulted from
the continued improvement in our new construction products and
Canadian business partially offset by increased commodity costs,
mainly PVC resin, aluminum and glass, increased freight costs and a
gross margin deterioration for our repair and remodeling
business.
Outlook
The Company’s 2017 annual outlook is based on a U.S. single
family housing starts market growth assumption of 6% to 8%, an
assumption of approximately 3% growth in the U.S. big ticket repair
and remodel market and the implementation of our 2x20 initiatives
which will allow us to accelerate our profitability and enhance
shareholder value.
“As the housing market in the U.S. continues to recover, we are
well positioned to drive profitable growth and generate meaningful
operating leverage, earnings and cash flow. In addition, we remain
committed to driving shareholder value, continuing to improve our
balance sheet and being opportunistic within our strategic
priorities,” said Mr. Robinette. "As we look to the fourth quarter
and consider the commodity cost headwinds associated with
Hurricanes Harvey and Irma, we expect our fourth quarter adjusted
EBITDA to be in the range of $50 to $55 million which would provide
a full year 2017 adjusted EBITDA of $235 to $240 million.”
Webcast
Ply Gem management will host a webcast today, Monday, November
6, 2017 at 10:00 a.m. Eastern to discuss third quarter results. To
access the webcast, visit www.plygem.com and click on Investor
Relations. The webcast link will be available under “Upcoming
Events” as well as "Events & Presentations". If internet access
is not available, please dial 833-227-5844, participant passcode
92530405. International participants, please dial 647-689-4701,
participant passcode 92530405. A replay of the call will be
available on our website through December 6th.
About Ply Gem
Ply Gem is a leading manufacturer of exterior building products
in North America. Ply Gem produces a comprehensive product line of
windows and patio doors, vinyl and aluminum siding and accessories,
designer accents, cellular PVC trim and mouldings, vinyl fencing
and railing, stone veneer, engineered slate and shake roofing and
gutterware, used in both new construction and home repair and
remodeling in the United States and Canada. Ply Gem siding brands
include Mastic Home Exteriors®, Variform®, NAPCO®, Mitten®,
Cellwood®, Georgia-Pacific Vinyl Siding and Accessories,
Durabuilt®, Ply Gem® Stone, Canyon Stone, Ply Gem® Trim and
Mouldings, Ply Gem® Fence and Railing, Ply Gem® Shutters and
Accents, Leaf Relief®, Leaf Logic®, and Monticello® Columns. Ply
Gem windows and patio door brands include Ply Gem® Windows,
Simonton® Windows, Mastic® Replacement Windows, Ply Gem® Canada,
and Great Lakes® Window. The Company’s brands are sold through
short-line and two-step distributors, pro dealers, home improvement
dealers and big box retailers. Additionally, Ply Gem distributes a
wide-variety of exterior building products including stone veneer,
fencing, railing, windows, doors and architectural accents via
export globally and offers installation services in western Canada
under the Gienow® Renovations by Ply Gem brand. Ply Gem employs
approximately 9,000 associates across North America. Visit
www.plygem.com for more information.
Note: As used herein, the term “Ply Gem” refers to Ply Gem
Holdings, Inc. and all its subsidiaries, including Ply Gem
Industries, Inc., unless the context indicates otherwise. This term
is used for convenience only and is not intended as a precise
description of any of the separate corporations.
Forward-Looking Statements
This press release and oral statements made from time to time by
our representatives may contain certain statements that are not
historical facts, including information concerning possible or
assumed future results of our operations. Those statements
constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements
involve known and unknown risks, uncertainties and other factors
that could cause our actual results to differ materially from the
results expressed in or implied by our forward-looking statements,
including the availability and cost of raw materials and purchased
components, the level of construction and remodeling activity,
changes in general economic and business conditions, conditions
affecting the industries we serve and our customers, the rate of
sales growth, availability of labor force and efficiencies, product
liability claims, our degree of leverage and other factors
discussed in our news releases, public statements and/or filings
with the Securities and Exchange Commission, including our most
recent Annual and Quarterly Reports on Form 10-K and Form 10-Q.
Many of these factors are outside of our control and all of these
factors are difficult or impossible to predict accurately. We
undertake no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise.
PLY GEM HOLDINGS, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
For the three months ended (Amounts in thousands, except
share and per share data) September 30, 2017 October 1, 2016
Net sales $ 564,663 $ 530,392 Cost of products sold 432,697
393,592 Gross profit 131,966 136,800 Operating
expenses: Selling, general and administrative expenses 64,724
62,362 Amortization of intangible assets 5,341 6,429
Total operating expenses 70,065 68,791 Operating
earnings 61,901 68,009 Foreign currency gain (loss) 810 (111 )
Interest expense (17,545 ) (17,815 ) Interest income 27 10 Loss on
modification or extinguishment of debt — (2,251 ) Tax receivable
agreement liability adjustment — (42,215 ) Income before
provision (benefit) for income taxes 45,193 5,627 Provision
(benefit) for income taxes 17,659 (49,128 ) Net income $
27,534 $ 54,755 Net income attributable to common
shareholders per share: Basic $ 0.40 $ 0.80 Diluted $ 0.40 $ 0.80
Weighted average shares outstanding: Basic 68,459,278 68,196,533
Diluted 68,913,421 68,389,187 For the nine months
ended (Amounts in thousands, except share and per share data)
September 30, 2017 October 1, 2016 Net sales $
1,539,445 $ 1,449,551 Cost of products sold 1,181,066
1,090,761 Gross profit 358,379 358,790 Operating expenses:
Selling, general and administrative expenses 202,610 199,745
Amortization of intangible assets 15,943 19,278 Total
operating expenses 218,553 219,023 Operating earnings
139,826 139,767 Foreign currency gain 1,582 728 Interest expense
(51,830 ) (55,041 ) Interest income 60 29 Loss on modification or
extinguishment of debt — (4,650 ) Tax receivable agreement
liability adjustment — (60,606 ) Income before provision
(benefit) for income taxes 89,638 20,227 Provision (benefit) for
income taxes 35,882 (48,597 ) Net income $ 53,756 $
68,824 Net income attributable to common shareholders per
share: Basic $ 0.79 $ 1.01 Diluted $ 0.78 $ 1.01 Weighted average
shares outstanding: Basic 68,431,494 68,161,064 Diluted 68,967,328
68,279,959
The accompanying notes are an integral part of these unaudited
condensed consolidated statements of operations.
1. The accompanying unaudited condensed consolidated statements
of operations of Ply Gem Holdings, Inc. (the “Company”) do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included.
The selected balance sheet data for the periods presented in
Note 5 has been derived from the December 31, 2016 audited
consolidated financial statements of the Company and the unaudited
condensed consolidated financial statements of the Company as of
September 30, 2017, and does not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements.
The Company’s fiscal quarters are based on periods ending on the
Saturday of the last week in the quarter. Therefore, the financial
results of certain fiscal quarters will not be exactly comparable
to the prior and subsequent fiscal quarters.
2. We define adjusted EBITDA as net income plus interest expense
(net of interest income), provision (benefit) for income taxes,
depreciation and amortization, non-cash foreign currency loss
(gain), non-cash loss on modification or extinguishment of debt,
restructuring and integration expenses, customer inventory
buybacks, litigation class action charges, and tax receivable
liability adjustments. Other companies may define adjusted EBITDA
differently and, as a result, our measure of adjusted EBITDA may
not be directly comparable to adjusted EBITDA of other companies.
Management believes that the presentation of adjusted EBITDA
included in this press release provides useful information to
investors regarding our results of operations because it assists
both investors and management in analyzing and benchmarking the
performance and value of our business. The Company has included
adjusted EBITDA because it is a key financial measure used by
management to (i) internally measure our operating performance and
(ii) determine our incentive compensation programs. In addition,
the Company's senior secured asset-based revolving credit facility
has certain covenants that apply ratios utilizing this measure of
adjusted EBITDA.
Adjusted EPS represents basic and diluted net income per share
attributed to common shareholders adjusted to exclude the estimated
per share impact of the specifically identified items used to
calculate adjusted EBITDA described above, adjusted at the
statutory tax rate of 35%.
Although we use adjusted EBITDA and adjusted EPS as financial
measures to assess the performance of our business, the use of
adjusted EBITDA and adjusted EPS is limited because it does not
include certain material costs, such as interest and taxes,
necessary to operate our business. Adjusted EBITDA and adjusted EPS
included in this press release should be considered in addition to,
and not as a substitute for, net earnings and earnings per share in
accordance with GAAP as a performance measure. You are cautioned
not to place undue reliance on adjusted EBITDA or adjusted EPS.
Certain amounts in this release have been subject to rounding
adjustments. Accordingly, amounts shown as totals may not be the
arithmetic aggregation of the individual amounts that comprise or
precede them.
Ply Gem Holdings, Inc. (Amounts in thousands) For the
three months ended September 30, 2017 October 1, 2016
Net
income $ 27,534 $ 54,755 Interest expense, net 17,518 17,805
Provision (benefit) for income taxes 17,659 (49,128 ) Depreciation
and amortization 13,237 14,123
EBITDA 75,948
37,555 Non cash loss (gain) on foreign currency transactions (810 )
111 Customer inventory buybacks 1,089 334 Restructuring/integration
expense 134 16 Litigation - class action charges, net 757 — Tax
receivable agreement liability adjustment — 42,215 Loss on
modification or extinguishment of debt — 2,251
Adjusted EBITDA $ 77,118 $ 82,482
Ply Gem Holdings, Inc. For the three months ended
September 30, 2017 October 1, 2016
Basic net income per share
attributable to common shareholders $ 0.40
$ 0.80 Release of deferred income tax valuation
allowance (1) — (0.48 ) Non cash loss (gain) on foreign currency
transactions (0.01 ) — Customer inventory buybacks 0.01 —
Restructuring/integration expense — — Litigation - class action
charges, net 0.01 — Tax receivable agreement liability adjustment —
0.40 Loss on modification or extinguishment of debt — 0.02
Adjusted Basic EPS $ 0.41
$ 0.75 Basic weighted average shares
outstanding 68,459,278 68,196,533
Diluted net income per share attributable to common
shareholders $ 0.40 $ 0.80 Release
of deferred income tax valuation allowance (1) — (0.48 ) Non cash
loss (gain) on foreign currency transactions (0.01 ) — Customer
inventory buybacks 0.01 — Restructuring/integration expense — —
Litigation - class action charges, net 0.01 — Tax receivable
agreement liability adjustment — 0.40 Loss on modification or
extinguishment of debt $ — $ 0.02
Adjusted Diluted
EPS $ 0.41 $ 0.75
Diluted weighted average shares outstanding
68,913,421 68,389,187
Ply Gem Holdings, Inc. (Amounts in thousands) For the nine
months ended September 30, 2017 October 1, 2016
Net income $ 53,756 $ 68,824 Interest expense, net 51,770
55,012 Provision (benefit) for income taxes 35,882 (48,597 )
Depreciation and amortization 39,792 42,466
EBITDA 181,200 117,705 Non cash gain on foreign currency
transactions (1,582 ) (728 ) Customer inventory buybacks 2,287
1,401 Restructuring/integration expense 1,546 513 Litigation -
class action charges, net 1,870 — Tax receivable agreement
liability adjustment — 60,606 Loss on modification or
extinguishment of debt — 4,650
Adjusted EBITDA
$ 185,321 $ 184,147
Ply Gem
Holdings, Inc. For the nine months ended September 30, 2017
October 1, 2016
Basic net income per share attributable to
common shareholders $ 0.79 $ 1.01
Release of deferred income tax valuation allowance (1) — (0.48 )
Non cash gain on foreign currency transactions (0.02 ) (0.01 )
Customer inventory buybacks 0.02 0.01 Restructuring/integration
expense 0.01 — Litigation - class action charges, net 0.02 — Tax
receivable agreement liability adjustment — 0.58 Loss on
modification or extinguishment of debt — 0.04
Adjusted Basic EPS $ 0.82 $
1.17 Basic weighted average shares
outstanding 68,431,494 68,161,064
Diluted net income per share attributable to common
shareholders $ 0.78 $ 1.01 Release
of deferred income tax valuation allowance (1) — (0.48 ) Non cash
gain on foreign currency transactions (0.01 ) (0.01 ) Customer
inventory buybacks 0.02 0.01 Restructuring/integration expense 0.01
— Litigation - class action charges, net 0.02 — Tax receivable
agreement liability adjustment — 0.58 Loss on modification or
extinguishment of debt — 0.04
Adjusted Diluted
EPS $ 0.82 $ 1.16
Diluted weighted average shares outstanding
68,967,328 68,279,959
(1) During the three and nine months ended October 1, 2016 the
Company recognized a $50.1 million release of our deferred income
tax valuation allowance. We released the valuation allowance for
federal and certain state jurisdictions as positive factors
outweighed negative evidence, specifically the Company was no
longer in a cumulative loss position as of the quarter ended
October 1, 2016. As of September 30, 2017 and October 1, 2016, the
Company remained in a full valuation allowance position for certain
state and provincial purposes.
3. Operating segment results for the three and nine months ended
September 30, 2017 and October 1, 2016 are as follows:
For the three months ended (Amounts in thousands) September
30, 2017 October 1, 2016
Net sales Siding, Fencing
and Stone $ 278,179 49 % $ 258,924 49 % Windows and Doors 286,484
51 % 271,468 51 % $ 564,663 100 % $ 530,392
100 %
Gross profit Siding, Fencing and Stone $ 71,779
26 % $ 80,760 31 % Windows and Doors 60,187 21 % 56,040
21 % $ 131,966 23 % $ 136,800 26 %
Operating earnings (loss) Siding, Fencing and Stone $ 48,127
17 % $ 54,853 21 % Windows and Doors 20,251 7 % 18,911 7 %
Unallocated (6,477 ) (1 )% (5,755 ) (1 )% $ 61,901 11 % $
68,009 13 % For the nine months ended (Amounts
in thousands)
September 30, 2017
October 1, 2016
Net sales Siding, Fencing and
Stone $ 732,609 48 % $ 679,711 47 % Windows and Doors 806,836
52 % 769,840 53 % $ 1,539,445 100 % $
1,449,551 100 %
Gross profit Siding, Fencing and
Stone $ 190,773 26 % $ 204,771 30 % Windows and Doors 167,606
21 % 154,019 20 % $ 358,379 23 % $ 358,790
25 %
Operating earnings (loss) Siding, Fencing
and Stone $ 115,529 16 % $ 126,531 19 % Windows and Doors 46,405 6
% 35,662 5 % Unallocated (22,108 ) (1 )% (22,426 ) (2 )% $ 139,826
9 % $ 139,767 10 %
4. Long-term debt amounts in the selected balance sheets at
September 30, 2017 and December 31, 2016 consisted of the
following:
(Amounts in thousands) September 30, 2017 December
31, 2016 Senior secured asset based revolving credit
facility $ — $ — 6.50% Senior notes due 2022, net of unamortized
early tender premium, discount and debt issuance costs of $43,800
and $49,935, respectively 606,200 600,065 Term Loan Facility due
2021, net of unamortized early tender premium, discount and debt
issuance costs of $13,845 and $17,854, respectively 241,105
240,321 $ 847,305 $ 840,386 Less current portion of
long-term debt (4,300 ) (4,300 ) $ 843,005 $ 836,086
5. The following is a summary of selected balance sheet amounts
at September 30, 2017 and December 31, 2016:
(Amounts in thousands) September 30, 2017 December
31, 2016 Cash and cash equivalents $ 28,397 $ 51,597
Accounts receivable, less allowances 308,582 209,919 Inventories
196,239 161,956 Prepaid expenses and other current assets 52,565
26,850 Property and equipment, net 170,874 165,556 Intangible
assets, net 89,071 104,159 Goodwill 480,726 478,514 Accounts
payable 93,874 75,398 Payable to related parties pursuant to tax
receivable agreement-current 25,383 25,383 Payable to related
parties pursuant to tax receivable agreement-non-current 54,336
54,336 Long-term debt 843,005 836,086 Stockholders' equity 65,361
4,106
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171106005170/en/
Ply Gem Holdings, Inc.Investor Relations Contact:Shawn K. Poe,
919-677-3901investors@plygem.com
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