Q2 Earnings Presentation
- 1. August 8, 2014 Ply Gem Holdings Second Quarter 2014 Results Gary E. Robinette Shawn K. Poe President & Chief Executive Officer Chief Financial Officer
- 2. LEGAL Disclaimer 1 These slides and the accompanying oral discussion may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied, including: downturns in the home repair and remodeling or the new construction end markets, or the economy or the availability of consumer credit; competition from other exterior building products manufacturers and alternative building materials; changes in the costs and availability of raw materials; consolidation and further growth of our customers; loss of, or a reduction in orders from, any of our significant customers; inclement weather conditions; increases in union organizing activity and work stoppages at our facilities or the facilities of our suppliers; our ability to employ, train and retain qualified personnel at a competitive cost; claims arising from the operations of our various businesses prior to our acquisitions; products liability claims, including class action claims, relating to the products we manufacture; loss of certain key personnel; interruptions in deliveries of raw materials or finished goods; environmental costs and liabilities; inability to realize anticipated synergies and cost savings with respect to acquisitions; manufacturing or assembly realignments; threats to, or impairments of, our intellectual property rights; increases in fuel costs; material non-cash impairment charges; our significant amount of indebtedness; covenants in the ABL Facility, the credit agreement governing our Senior Secured Term Loan Facility and the indenture governing the 6.50% Senior Notes; limitations on our net operating losses and payments under the tax receivable agreement to our current stockholders; failure to successfully consummate and integrate future acquisitions; actual or perceived security vulnerabilities or cyberattacks on our networks; failure to effectively manage labor inefficiencies associated with increased productions and new employees added to the company; failure to generate sufficient cash to service all of our indebtedness and make capital expenditures; control by the CI Partnerships; failure to maintain effective internal controls over financial reporting; and the risks set forth in the Company’s filings with the Securities and Exchange Commission. Consequently such forward-looking statements should be regarded as the Company’s current plans, estimates and beliefs. Except as required by law, the Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. In addition, these slides and the accompanying oral discussion reference non-GAAP financial measures, such as adjusted EBITDA. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure is provided in the Appendix to these slides and are included in our news release issued on August 8, 2014 and posted on www.plygem.com.
- 3. 2 41% 55% 45% 2 Second Quarter 2014 Results Today’s Presentation 90% 10% Agenda • Second-Quarter Review Gary Robinette • Financial Results Shawn Poe • Economic Outlook Gary Robinette • Questions and Answers All • Closing Remarks Gary Robinette 81% 19% 56% 44%
- 4. 3 41% 55% 45% 3 One of the Largest Manufacturers of Exterior Building and Home Improvement Products 90% 10% Company Overview Repair and Remodel Leverage to New Housing Starts New Products and Innovation Drive Share Gains M&A Opportunities Platform Built for Growth and Operating Leverage • Leading Manufacturer of Exterior Building Products • Comprehensive Product Portfolio with Strong Brand Recognition • Multi-Channel Distribution Network Servicing a Broad Customer Base • Balanced End Market Exposure Driven by Diversified Product Mix • Highly Efficient, Low Cost Operating Platform • Proven Track Record of Acquisition Integration & Cost Savings Realization • Strong Management Team with Significant Ownership US Canada 80% 20% (*) SidingWindows 54% 46% (*) (*) LTM June 28, 2014
- 5. 4 Ply Gem Results Key HighlightsSecond Quarter Results Second Quarter 2014 Highlights • Net sales increase of 11.2% was due to the acquisitions of Gienow and Mitten which occurred in the second quarter of 2013, a slight 3.5% increase in U.S. single-family housing starts and an increase in average selling prices in both of our business segments. • Gross margin expansion of 120 basis points driven by increased average selling prices and operating efficiency improvement in our U.S. windows business partially offset by integration and customer transition expenses related to the consolidation of our Western Canadian windows business. New construction 53% Home repair & remodel 47% End Market Exposure (*) ($ in Millions) Q2 2014 Q2 2013 Net Sales Y-O-Y Change $409.2 11.2% $368.1 Gross Profit Gross Profit % $87.4 21.4% $74.3 20.2% Adj. EBITDA $44.3 $41.1 (*) LTM June 28, 2014
- 6. 5 Windows& Doors(W&D) Segment Key HighlightsSecond Quarter Results Leader in Vinyl and Aluminum Windows $139.2 $127.3 $42.1 $41.6 Q2 2014 Q2 2013 Net Sales U.S. Canada $168.9$181.3 New construction 79% Home repair & remodel 21% End Market Exposure (*) • 7.3% increase in net sales due largely to higher average selling prices, improved product mix, and a slight increase from the acquisition of Gienow into our Western Canada business. • Gross margin improved by 270 basis points driven by a 470 basis point gross margin improvement in our U.S. business due to improved pricing and product mix partially offset by gross margin contraction in Western Canada due to near-term integration and restructuring costs related to the consolidation of manufacturing operations and unfavorable foreign currency exchange rates. • SG&A expense increased by 6.2% which was attributed to the increase in net sales of the segment. SG&A expense as a percentage to net sales was 13.4% which is consistent with the prior year of 13.6%. Q2 2014 Q2 2013 U.S. 12.6% 7.1% Canada 18.2% 23.6% W&D Segment 13.9% 11.2% Gross Margin % (*) For the three months ended June 28, 2014
- 7. Q2 2013 Gross Margin 11.2% U.S. W&D C.M. Improvement 4.7% Gienow Integration/Unfavorable FX -2.0% Q2 2014 Gross Margin 13.9% W&D Gross Margin Near-term integration and restructuring costs associated with consolidating operations in Western Canada and unfavorable foreign currency exchange rate partially offset by raw material sourcing cost savings & synergies. Increased freight carrier rates not yet fully offset by announced selling price increases and logistical inefficiencies associated with lower volume Less operating leverage due to sales volume decreases driven by weather and pull-back in new construction demand 6 W&D Segment Gross Margin Bridge and Historical Performance U.S. Windows improved contribution margin due to selling price increases, improved product mix and operational efficiency improvements. 20.9% 15.4% 14.0% 15.4% 13.1% 13.8% 9.7% 10.7% 1,046 622 445 471 431 535 618 621 2007 2008 2009 2010 2011 2012 2013 LTM Historical Gross Margin Performance Gross Profit % U.S. SFHS (*)
- 8. 7 Siding,Fencing &Stone(SFS) Segment Key HighlightsSecond Quarter Results Market Leader in Vinyl Siding $191.3 $186.0 $36.6 $13.2 Q2 2014 Q2 2013 Net Sales U.S. Canada $199.2 New construction 35% Home repair & remodel 65% End Market Exposure (*) • 14.4% increase in net sales due to the acquisition of Mitten which was completed on May 31, 2013. Mitten favorably impacted net sales by $20.6 million for the quarter. Organic net sales increased 4.1% due to increased sales of metal accessories and higher selling prices. • Gross margin declined by 50 basis points, driven by higher raw material costs and freight costs not yet offset by our recently announced selling price increases partially offset by cost savings/synergies experienced by Mitten. • SG&A expense increased by $4.9 million of which $4.3 million is attributed to Mitten. Excluding Mitten, SG&A expense increased 3.6% which is consistent with the net sales increase. Gross Margin % Q2 2014 Q2 2013 U.S. 27.0% 28.0% Canada 29.1% 25.6% SFS Segment 27.3% 27.8% $227.9 (*) For the three months ended June 28, 2014
- 9. Q2 2013 Gross Margin 27.8% Selling price/product mix 3.9% Freight costs -1.7% Commodity costs -3.2% Mitten margin savings/synergies 0.5% Q2 2014 Gross Margin 27.3% SFS Gross Margin Increased freight carrier rates not yet fully offset by announced selling price increases. Expected recovery through realization of full Q1 2014 price increases. 8 SFS Segment Gross Margin Bridge and Historical Performance Reflects product mix and the initial impact of the Q1 2014 price increases as a result of rising commodity and freight costs. As noted during previous price increases, the pull through of pricing changes occur over a period of 30 to 90 days. 20.4% 18.4% 25.9% 25.7% 24.8% 27.4% 26.8% 26.1% .5208 .6200 .5288 .6458 .7371 .7775 .8333 .8700 2007 2008 2009 2010 2011 2012 2013 LTM Historical Gross Margin Performance Gross Profit % PVC Resin Price (*) Mitten gross margin improvements associated with cost savings and synergies related to raw material sourcing, material improvements, and manufacturing efficiencies. Increased raw material costs, mainly PVC commodity costs, not yet fully offset by announced selling price increases. Expected recovery through realization of Q1 2014 price increases.
- 10. 9 Windows Segment The Market Innovator The Leading Brand Lean through Technology Our Future Leaders New Channels and Markets Selling Price Increases March 2014 announced price increases of 5% to 10% expected to be realized in 2nd half of year Roll-Out of Sales & Operations Planning (S&OP) System Enhanced capacity and resource planning system Expected to reduce future ramp-up costs and maximize fixed manufacturing investments System has been rolled out to our U.S. manufacturing facilities Continue to train associates on the system Integrate the tool within the business decision process, part of the culture Windows & Doors Segment Margin Initiatives Continued Implementation of Enterprise Lean Product simplification improves manufacturing flexibility Estimated annual savings of $10M when fully implemented in 2016
- 11. 10 Ply Gem Outlook The Market Innovator The Leading Brand Lean through Technology Our Future Leaders New Channels and Markets 3Q 2014 Guidance Based on the current forecast of the U.S. housing market and R&R spend, we expect EBITDA for Q3 2014 in the range of $50.0 to $55.0 million New Product Introductions Cellular PVC trim & moldings and DurataTM stone panels continue to gain traction and produce meaningful growth rates Engineered slate roofing has begun shipping into the Mid-Atlantic and Northeast markets Economic Outlook & Guidance Expect Continued Growth in U.S. Housing Starts Consensus for 2014 has come down but currently remains above 675,000 SFHS Expect continued choppiness in U.S. housing recovery Canadian housing starts expected to be flat
- 12. Q&A 11
- 14. (amounts in thousands) For the three months ended June 28, 2014 For the three months ended June 29, 2013 Net income (loss) $11,380 ($50,877) Interest expense, net 17,225 24,833 Provision (benefit) for income taxes 7,051 (731) Depreciation and amortization 11,254 11,171 Non cash loss (gain) on foreign currency transactions (477) 346 Acquisition costs - 1,025 Management fee (terminated in May 2013) - 175 Customer inventory buybacks 359 2,172 Restructuring/integration expense 1,462 1,439 Non cash charge of purchase price allocated to inventories - 883 Initial public offering costs - 23,527 Tax receivable agreement liability adjustment (3,942) 8,143 Loss on modification or extinguishment of debt - 18,948 Adjusted EBITDA $44,312 $41,054 13 Second Quarter Adjusted EBITDA Reconciliation Appendix