Ply Gem Reports Fourth Quarter and Full Year 2015 Results

March 14, 2016 7:00 AM

CARY, N.C.--(BUSINESS WIRE)-- 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 and year ended December 31, 2015.

Fourth Quarter 2015 Highlights

2015 Year End Highlights

“I am pleased with our fourth quarter financial and operating performance. Both businesses continued to make substantial contributions to adjusted EBITDA and allowed us to deliver the seventh consecutive quarterly year-over-year growth of adjusted EBITDA,” said Gary E. Robinette, Ply Gem’s Chairman and CEO. “Throughout 2015, our teams delivered profitable growth through operating performance initiatives, successful integration of acquisitions, improved product pricing and cost discipline. As a result, Ply Gem achieved a record annual adjusted EBITDA in excess of $184 million.”

Commenting on the Company’s results, Shawn K. Poe, Ply Gem’s Chief Financial Officer added, “In the fourth quarter, we continued to drive financial improvements and profitability within our business segments. Excluding the impact of acquisitions, we achieved a 490 basis point improvement in our gross profit margin and our incremental year-over-year quarterly adjusted EBITDA grew 63.7%. As a result of our strong performance during 2015, we strengthened our balance sheet by generating in excess of $139 million in cash flow from operations and we ended the year with $109 million in cash on hand and in excess of $300 million of liquidity. Furthermore, during 2015, we improved our debt leverage ratio by over 3 turns.”

Fourth Quarter 2015 Financial Results

Net sales decreased $19.7 million, or 4.4%, to $430.5 million compared to $450.1 million for the fourth quarter of 2014. The timing of our fiscal calendar resulted in four fewer ship days during the fourth quarter of 2015 compared to the fourth quarter of 2014 causing a sales decrease of $22.0 million. In addition, the net sales decrease resulted from unfavorable market conditions in Canada and unfavorable foreign currency exchange rates which negatively impacted net sales by $7.4 million, partially offset by a 5.0% net sales increase for our U.S. business.

Gross profit increased $17.9 million during the quarter ended December 31, 2015. Gross profit margin was 23.2%, which represented an increase of 500 basis points from the fourth quarter of 2014. The increase in gross profit margin was favorably impacted by improved selling prices, favorable commodity prices and our Canyon Stone acquisition which contributed a gross profit of $1.9 million for the fourth quarter of 2015. Excluding acquisitions, our gross profit would have increased $16.0 million relative to the fourth quarter of 2014.

Operating earnings were $28.9 million, an improvement of $21.0 million from the fourth quarter of 2014 from the improved gross profit margins in all of our businesses.

Adjusted EBITDA was $43.2 million compared to $26.0 million in the fourth quarter of 2014. Net income was $9.1 million compared to ($12.5) million for the fourth quarter of 2014. Our EPS for the fourth quarter of 2015 was $0.13 as compared to ($0.18) for the comparable period in 2014, and Adjusted EPS for the fourth quarter of 2015 was $0.14 as compared to ($0.29) for the comparable period in 2014.

A reconciliation of non-GAAP (adjusted) financial measures to comparable GAAP financial measures is provided in the notes to this release.

Siding, Fencing and Stone

Siding, Fencing and Stone's net sales totaled $190.0 million, a decrease of $2.1 million, or 1.1%, compared to $192.2 million in the fourth quarter of 2014. The net sales decrease for the fourth quarter of 2015 was predominantly related to the four fewer ship days in the fourth quarter of 2015 compared to 2014 and unfavorable foreign currency exchange rates partially offset by the Canyon Stone acquisition which contributed net sales of $6.9 million for the fourth quarter of 2015. Excluding Canyon Stone and the four fewer ship days, our Siding, Fencing and Stone net sales increased 5.7% for the fourth quarter of 2015 from favorable market demand for our products.

Gross profit margin for the fourth quarter of 2015 was 29.2%, an increase of 400 basis points from the 25.2% for the fourth quarter of 2014. The margin improvement primarily resulted from favorable material costs and lower freight expense partially offset by unfavorable foreign currency.

Windows and Doors

Windows and Doors' net sales totaled $240.4 million, a decrease of $17.5 million, or 6.8%, compared to $257.9 million in the fourth quarter of 2014. The net sales decrease for the fourth quarter of 2015 was primarily related to the four fewer ship days in the fourth quarter of 2015 compared to 2014, weaker demand in Western Canada and unfavorable foreign currency exchange rates. Excluding the four fewer ship days, net sales for the U.S. business increased 4.6% due to improvement in U.S. market conditions, higher average selling prices, and improved product mix.

Gross profit margin was 18.5% for the fourth quarter of 2015 increasing from 13.0% for the fourth quarter of 2014. The margin improvement primarily resulted from improved selling prices, realized acquisition synergies, favorable product mix and lower freight expense partially offset by unfavorable foreign currency.

Outlook

“As we enter 2016, we look forward to capitalizing on the momentum we’ve built over this past year,” said Mr. Robinette. “As the housing market in the U.S. continues to recover, we are well positioned to drive profitable growth and generate meaningful operating leverage and earnings. In addition, we remain committed to driving shareholder value and continuing to delever. In looking to the first quarter of 2016, and taking into account the seasonality of our business, we expect our quarterly adjusted EBITDA to be in the range of $11 to $16 million, which represents a meaningful year-over-year improvement of adjusted EBITDA.”

Webcast

Ply Gem management will host a webcast today, Monday, March 14, 2016 at 10:00 a.m. Eastern to discuss fourth quarter and full year results. To access the webcast, visit www.plygem.com and click on Investor Relations. The webcast link will be available under “Upcoming Events” as well as "Events & Presentations". If internet access is not available, please dial 877-201-0168, participant passcode 36385236. International participants, please dial 647-788-4901, participant passcode 36385236. A replay of the call will be available on our website through April 14th.

About Ply Gem

Ply Gem is a leading manufacturer of exterior building products in North America. Ply Gem produces a comprehensive product line of windows and patio doors, vinyl and aluminum siding and accessories, designer accents, cellular PVC trim and mouldings, vinyl fencing and railing, stone veneer, engineered slate roofing and gutterware, used in both new construction and home repair and remodeling in the United States and Canada. Ply Gem siding brands include Mastic Home Exteriors®, Variform®, NAPCO®, Mitten®, Cellwood®, Georgia-Pacific Vinyl Siding and Accessories, Durabuilt®, Ply Gem® Stone, Canyon Stone, Ply Gem® Trim and Mouldings, Ply Gem® Fence and Railing, Ply Gem® Shutters and Accents, Leaf Relief®, Leaf Logic®, and Monticello® Columns. Ply Gem windows and patio door brands include Ply Gem® Windows, Simonton® Windows, Mastic® Replacement Windows, Ply Gem® Canada, and Great Lakes® Window. The Company’s brands are sold through short-line and two-step distributors, pro dealers, home improvement dealers and big box retailers. Additionally, Ply Gem distributes a wide-variety of exterior building products including stone veneer, fencing, railing, windows, doors and architectural accents via export globally and offers installation services in western Canada under the Gienow® Renovations by Ply Gem brand. Ply Gem employs approximately 8,700 associates across North America. Visit www.plygem.com for more information.

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

Forward-Looking Statements

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

PLY GEM HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months ended
(Amounts in thousands, except share and per share data) December 31, 2015 December 31, 2014
Net sales $ 430,460 $ 450,119
Cost of products sold 330,553 368,125
Gross profit 99,907 81,994
Operating expenses:
Selling, general and administrative expenses 64,588 67,772
Amortization of intangible assets 6,402 6,299
Total operating expenses 70,990 74,071
Operating earnings 28,917 7,923
Foreign currency loss (1,065 ) (475 )
Interest expense (18,244 ) (19,204 )
Interest income 10 19
Tax receivable agreement liability adjustment 520 15,089
Income before provision for income taxes 10,138 3,352
Provision for income taxes 1,074 15,828
Net income (loss) $ 9,064 $ (12,476 )
Net income (loss) attributable to common shareholders per share:
Basic $ 0.13 $ (0.18 )
Diluted $ 0.13 $ (0.18 )
Weighted average shares outstanding:
Basic 68,103,816 67,851,010
Diluted 68,162,127 67,851,010
For the year ended
(Amounts in thousands, except share and per share data) December 31, 2015 December 31, 2014
Net sales $ 1,839,726 $ 1,566,643
Cost of products sold 1,420,014 1,258,842
Gross profit 419,712 307,801
Operating expenses:
Selling, general and administrative expenses 271,874 224,163
Amortization of intangible assets 25,306 22,140
Total operating expenses 297,180 246,303
Operating earnings 122,532 61,498
Foreign currency loss (3,166 ) (992 )
Interest expense (74,876 ) (71,269 )
Interest income 57 83
Tax receivable agreement liability adjustment (12,947 ) 670
Loss on modification or extinguishment of debt (21,364 )
Income (loss) before benefit for income taxes 31,600 (31,374 )
Benefit for income taxes (688 ) (105 )
Net income (loss) $ 32,288 $ (31,269 )
Net income (loss) attributable to common shareholders per share:
Basic $ 0.47 $ (0.46 )
Diluted $ 0.47 $ (0.46 )
Weighted average shares outstanding:
Basic 68,003,564 67,819,046
Diluted 68,106,493 67,819,046

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, 2015 and 2014 consolidated financial statements of the Company and does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

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

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

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

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

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

Ply Gem Holdings, Inc.
(Amounts in thousands) For the three months ended
December 31, 2015 December 31, 2014
Net income (loss) $ 9,064 $ (12,476 )
Interest expense, net 18,234 19,185
Provision for income taxes 1,074 15,828
Depreciation and amortization 14,092 14,554
EBITDA 42,464 37,091
Non cash loss on foreign currency transactions 1,065 475
Acquisition costs 9 477
Customer inventory buybacks 266 767
Restructuring/integration expense (57 ) 2,287
Tax receivable agreement liability adjustment (520 ) (15,089 )
Adjusted EBITDA $ 43,227 $ 26,008
Ply Gem Holdings, Inc.
For the three months ended
December 31, 2015 December 31, 2014
Basic net income per share attributable to common shareholders $ 0.13 $ (0.18 )
Non cash loss on foreign currency transactions 0.01
Acquisition costs
Customer inventory buybacks 0.01
Restructuring/integration expense 0.02
Tax receivable agreement liability adjustment (0.14 )
Adjusted Basic EPS $ 0.14 $ (0.29 )
Basic weighted average shares outstanding 68,103,816 67,851,010
Diluted net income per share attributable to common shareholders $ 0.13 $ (0.18 )
Non cash loss on foreign currency transactions 0.01
Acquisition costs
Customer inventory buybacks 0.01
Restructuring/integration expense 0.02
Tax receivable agreement liability adjustment (0.14 )
Adjusted Diluted EPS $ 0.14 $ (0.29 )
Diluted weighted average shares outstanding 68,162,127 67,851,010
Ply Gem Holdings, Inc.
(Amounts in thousands) For the year ended
December 31, 2015 December 31, 2014
Net income (loss) $ 32,288 $ (31,269 )
Interest expense, net 74,819 71,186
Benefit for income taxes (688 ) (105 )
Depreciation and amortization 58,400 48,463
EBITDA 164,819 88,275
Non cash loss on foreign currency transactions 3,166 992
Acquisition costs 656 1,188
Customer inventory buybacks 957 1,555
Restructuring/integration expense 3,221 6,493
Non cash charge of purchase price allocated to inventories 54 38
Litigation settlement, net (1,194 ) 5,000
Tax receivable agreement liability adjustment 12,947 (670 )
Loss on modification or extinguishment of debt 21,364
Adjusted EBITDA $ 184,626 $ 124,235
Ply Gem Holdings, Inc.
For the year ended
December 31, 2015 December 31, 2014
Basic and diluted net loss per share attributable to common shareholders $ 0.47 $ (0.46 )
Non cash loss on foreign currency transactions 0.03 0.01
Acquisition costs 0.01 0.01
Customer inventory buybacks 0.01 0.01
Restructuring/integration expense 0.03 0.06
Non cash charge of purchase price allocated to inventories
Litigation settlement, net (0.01 ) 0.05
Tax receivable agreement liability adjustment 0.12 (0.01 )
Loss on modification or extinguishment of debt 0.20
Adjusted EPS $ 0.66 $ (0.12 )
Basic weighted average shares outstanding 68,003,564 67,819,046
Diluted net income per share attributable to common shareholders $ 0.47 $ (0.46 )
Non cash loss on foreign currency transactions 0.03 0.01
Acquisition costs 0.01 0.01
Customer inventory buybacks 0.01 0.01
Restructuring/integration expense 0.03 0.06
Non cash charge of purchase price allocated to inventories
Litigation settlement, net (0.01 ) 0.05
Tax receivable agreement liability adjustment 0.12 (0.01 )
Loss on modification or extinguishment of debt 0.20
Adjusted Diluted EPS $ 0.66 $ (0.12 )
Diluted weighted average shares outstanding 68,106,493 67,819,046

3. Operating segment results for the three months and year ended December 31, 2015 and December 31, 2014 are as follows:

For the three months ended
(Amounts in thousands) December 31, 2015 December 31, 2014
Net sales
Siding, Fencing and Stone $ 190,034 44 % $ 192,182 43 %
Windows and Doors 240,426 56 % 257,937 57 %
$ 430,460 100 % $ 450,119 100 %
Gross profit
Siding, Fencing and Stone $ 55,467 29 % $ 48,394 25 %
Windows and Doors 44,440 18 % 33,600 13 %
$ 99,907 23 % $ 81,994 18 %
Operating earnings (loss)
Siding, Fencing and Stone $ 28,533 15 % $ 23,605 12 %
Windows and Doors 6,238 3 % (9,867 ) (4 )%
Unallocated (5,854 ) (1 )% (5,815 ) (1 )%
$ 28,917 7 % $ 7,923 2 %
For the year ended
(Amounts in thousands) December 31, 2015 December 31, 2014
Net sales
Siding, Fencing and Stone $ 840,118 46 % $ 801,601 51 %
Windows and Doors 999,608 54 % 765,042 49 %
$ 1,839,726 100 % $ 1,566,643 100 %
Gross profit
Siding, Fencing and Stone $ 238,326 28 % $ 209,288 26 %
Windows and Doors 181,386 18 % 98,513 13 %
$ 419,712 23 % $ 307,801 20 %
Operating earnings (loss)
Siding, Fencing and Stone $ 134,654 16 % $ 113,089 14 %
Windows and Doors 18,195 2 % (27,660 ) (4 )%
Unallocated (30,317 ) (2 )% (23,931 ) (2 )%
$ 122,532 7 % $ 61,498 4 %

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

December 31, 2015 December 31, 2014
(Amounts in thousands)
Senior secured asset based revolving credit facility $ $
6.50% Senior notes due 2022, net of
unamortized early tender premium and
discount of $45,294 and $51,040, respectively 604,706 598,960
Term Loan due 2021, net of
unamortized early tender premium and
discount of $28,018 and $32,518, respectively 394,457 394,257
$ 999,163 $ 993,217
Less current portion of long-term debt (4,300 ) (4,300 )
$ 994,863 $ 988,917

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

December 31, 2015 December 31, 2014
(Amounts in thousands)
Cash and cash equivalents $ 109,425 $ 33,162
Accounts receivable, less allowances 195,165 187,679
Inventories 150,403 179,913
Prepaid expenses and other current assets 24,647 31,808
Property and equipment, net 161,003 160,967
Intangible assets, net 128,384 147,709
Goodwill 477,739 476,112
Accounts payable 74,496 84,164
Payable to related parties pursuant to tax receivable agreement- non-current 20,811 10,917
Long-term debt 994,863 988,917
Stockholders' deficit (76,813 ) (96,668 )

Ply Gem Holdings, Inc.

Investor Relations Contact:

Shawn Poe, 919-677-3901

investors@plygem.com

Source: Ply Gem Holdings, Inc.

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