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Zelman Housing Summit

Zelman Housing Summit

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  • Brian to send Purchase price for Stone VeneerTalking points:Mention CI continual capital injections without paying dividends, etc. CI has not removed any money from investment since 2001
  • Brian to send Purchase price for Stone VeneerTalking points:Mention CI continual capital injections without paying dividends, etc. CI has not removed any money from investment since 2001

Zelman Housing Summit Presentation Transcript

  • 1. September 26th and 27th, 2013 Ply Gem Industries Zelman Housing Summit
  • 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; 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 and the indentures governing the 8.25% Senior Secured Notes and the 9.375% Senior Notes; 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; limitations on our NOLs 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; control by the CI Partnerships; compliance with certain corporate governance requirements; certain of our directors’ relationships with the CI Partnerships; lack of a prior public market for our common stock and volatility of our stock price; future sales of our common stock in the public market; substantial dilution in net tangible book value; our dividend policy; provisions in our charter and by-laws; and failure to maintain internal controls over financial reporting. 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.
  • 3. 2 REPAIR & REMODEL 2 SIDING WINDOWS NEW RESIDENTIAL CONSTRUCTION 2 59% 41% 50% 50% 2 Leading exterior building and home improvement products company in North America One of the Largest Manufacturers of Exterior Building and Home Improvement Products ~$1.41 Billion in sales ~6,000 associates U.S.93% 7% CANADA PLYGEM’s Profile 1 Pro forma for Gienow & Mitten acquisitions 2 Source: Management estimates
  • 4. AluminumAccessories WesternCanada NewConstructionVinylandAluminum Windows VinylSiding#1 #1 #2 #2 Provider of branded products sold through many channels of distribution and covering price points across the depth of the market #1 Post-recent acquisitions 3 MARKET Position Leading Manufacturer of Exterior Building Products • Mitten • Gienow
  • 5. 4 PRODUCT Categories Gable vents and accessories Gutter protection systems Vinyl and aluminum soffit Window mantles Manufactured stone Vinyl and designer accents Shutters Mounting blocks Decorative corner posts Rain removal systems Door surround systems Patio doors Windows Railing and fencing Composite rail Outdoor structures New window technology Cellular PVC trim Extensive Exterior Product Portfolio
  • 6. Ply Gem 5% 5 One, Integrated Business with Two Reportable Segments Windows and DoorsSiding, Fencing and Stone Window Market Share (All Types)Vinyl Siding Market Share Ply Gem 28% CertainTeed 31% Associated Materials 11% KP 7% Crane 4% Royal 5% Heartland 7% Other 7% Ply Gem 36% CertainTeed 27% Associated Materials 14% Royal/Crane 13% Kaycan 6% Other 4% 2008 2011 $535 $466 $374 $392 $396 $463 (20.0%) 0.0% 20.0% 40.0% $0 $200 $400 $600 $800 $1,000 2007 2008 2009 2010 2011 2012 Sales Operating earnings margin $828 $709 $577 $604 $639 $658 (20.0%) 0.0% 20.0% 40.0% $0 $200 $400 $600 $800 $1,000 2007 2008 2009 2010 2011 2012 Sales Operating earnings margin Note: 2008 operating earnings margins for both segments exclude goodwill impairments PLY GEM’s Segments Source: 2008 based upon the Principia Partners 2008 study; 2011 based upon Management's estimate utilizing VSI data Source: Management estimates 1Based on WDMA 2011 1 •Andersen •Pella •JELD-WEN •Marvin •Atrium •Associated Materials •Milgard Windows Manufacturers (all substrates)
  • 7. 6 SIDING Group • #1 vinyl siding manufacturer in North America (with approx. 36% share in the US) • Consolidated industry with 4 participants holding approx. 90% share • Strong trade brands • Multi-channel distribution network servicing both new construction and R&R • State-of-the-art automated manufacturing facilities with capacity to support planned growth Key Brands North American Market Summary Why We Win $ millions Market size: According to Principia Partners $658 Exterior Cladding Market Size Vinyl Siding… Ply Gem… Market Leader in Vinyl Siding ~$1,800 ~$5,300
  • 8. $463 Market Size Ply Gem 2012 Net Sales 7 WINDOWS Group • #2 vinyl & aluminum window manufacturer in the US • #1 window & door manufacturer in Western Canada (post-acquisitions) • Multi-channel distribution network servicing both new construction and R&R covering every price point • Highly efficient, vertically integrated production • Continued to gain market share during downturn Why We Win Key Brands North American Market Summary $ millions Market size: Company estimate – New construction and R&R Leader in Vinyl and Aluminum Windows ~$9,000
  • 9. 8 GROWTH Innovation A Key Growth Initiative Open Innovation Opportunities Furthering a Culture of Innovation • Several businesses currently active in foundation labs • Research concentration in advanced materials and physics • Each Hi-Po serves on an Innovation project team • Implemented innovation into Ply Gem’s compensation structure • Product development and innovation continues to drive new sales • Developed a collaboration platform and now measure engagement • Drive collaboration to achieve significant cross- selling potential • Improved platform for idea generation process • Managing innovation as a business process through foundation labs • Focus on supplier/partner/universities • Prime relationship with two major building products companies in developing new business opportunities Innovation Driving Exciting New Opportunities $400+mm of incremental annual sales from new products introduced since 2009 New products • Cellular PVC trim product • New Glass Technology • Composite building materials
  • 10. 9 THEDESIGNED Exterior • Provides differentiation for Ply Gem customers • Provides a single sourcing opportunity • Hits the sweet spot of an emerging trend • Features NAHB Green Approved products • Fulfills the “One Ply Gem” MISSION Alexandria, VA Designed Exterior Remodel BEFORE Three Weeks later using The Designed Exterior concept AFTER Complete Exterior Solution Offering for Customers
  • 11. Regional local one-step distributors DISTRIBUTION 10 Multi-Channel Distribution Network Servicing a Broad Customer Base New Construction Regional/local one- step distributors National one-step distributors Retailers Two-step distributors Home Repair and Remodeling • Homebuilders • Contractors • Contractors • Individuals Two-step distributors National one- step distributors Retailers Homebuilders Representative CustomersBuilding products supply chain Sells Multiple Ply Gem Products Diversity of channels and customers with limited customer concentration (Top 10 customers account for only ~46% of sales)
  • 12. END-MARKETS 11 Significant Opportunity to Capture Growth Related to Housing Market Recovery New construction 80% Home repair & remodel 20% Windows and Doors¹Siding, Fencing and Stone¹ New construction 35% Home repair & remodel 65% New construction¹ 50% Home repair & remodel¹ 50% PlyGemMixHousingOutlook Home Improvement Product Sales² Single Family Housing Starts³ $319 bn $274 bn 2012 2015E ¹ Source: Management estimates ² Source: Home Improvement Research Institute, Sep 2012 ³ Source: U.S. Census Bureau 1,719 1,474 1,036 616 442 471 434 535 0 500 1,000 1,500 2,000 2005 2006 2007 2008 2009 2010 2011 2012 2015 Ply Gem ?
  • 13. Gaining Share Throughout the Downturn, Poised for the Upturn • Broad product offering at diverse price points with new construction and R&R exposure • Strong brand recognition and cross-selling opportunities • Introduction of new products (R&R windows, cellular PVC trim and mouldings) • National window platform against highly fragmented competition • Strong relationships with industry leading customers who continue to expand their business • Lag time between starts and product placement expanding due to labor shortages Market share gains of over $350 million from 2007 to 2011¹ 2007 2012 Single Family Housing Starts 1,036 535 % change (48.4%) Ply Gem Net Sales $1,363.5 $1,121.3 % change (17.8%) 12 OUTSIZED Growth Note: Single family housing starts data from U.S. Census Bureau ¹ Source: Management estimates
  • 14. OPERATING Platform 13 Facility Overview Source: Company filings and management estimates 2012 Cost Structure (Net Sales – EBITDA) Variable 79% Fixed 21% Materials 54% Variable Manufacturing 18% Freight & Other 7% Fixed 21% Highly Efficient, Flexible, Low Cost Operating Structure… Vinyl = 20% Aluminum = 13% Other materials = 21% Window MFG Siding/Access MFG Corporate/HQ Canada Distribution Stone MFG Locations 10 6 2 3 34 1 58Total Fence + Rail MFG Gienow 1 Mitten 1
  • 15. 14 MGMT Team Gary E. Robinette President & CEO Industry experience: 35 years Shawn Poe Vice President & CFO 23 years John Wayne Executive Vice President & COO 28 years Dave Schmoll Senior Vice President, HR 24 years Lee Clark-Sellers Innovation Officer 20 years Tim Johnson General Counsel 12 years Proven Ability to Successfully Operate the Business Through Evolving Market Cycles • Significant management equity ownership of 3.7% post -IPO • Consistently outperformed the market • Deep and proven management bench Art Steinhafel President, U.S. Windows 20 years Richard Boyer President, Ply Gem Canada / Gienow 14 years John Buckley President, Siding Group 22 years Doug Rende President, Mitten, Inc. 30 years
  • 16. 15 STRATEGIC Evolution 2012 2016to A Market Leader The Market Innovator A Ply Gem Brand The Leading Brand Organic Growth (Market Share) Growth Through Strategic Acquisitions Coordinated back office Lean through Technology Executive Dev & Succession Our Future Leaders New Products and Share New Channels and Markets “Ply Gem’s Future”
  • 17. Financial Overview
  • 18. ($ in millions) 2011 Actual 2012 Actual LTM Q2-13 Actual YTD Q2-13 Actual YTD Q2-12 Actual Net Sales $1,034.9 $1,121.3 $1,200.1 $625.2 $546.5 Gross Profit 210.5 244.2 244.0 116.1 116.3 % Margin(1) 20.3% 21.8% 20.3% 18.6% 21.3% Adjusted EBITDA 114.5 127.3 123.1 53.1 60.4 % Margin 11.1% 11.4% 10.3% 8.5% 11.0% Capex 11.5 24.6 27.9 11.4 8.1 % of sales 1.1% 2.2% 2.3% 1.8% 1.5% Debt (Bonds & ABL) 961.7 964.4 827.8 Cash on hand 11.7 27.2 27.9 Net Debt $950.0 $937.2 $799.9 Leverage Ratio 8.3x 7.4x 6.5x FINANCIAL Summary Summary YTD Q2-2013 Results 17
  • 19. FINANCIAL Summary 2012 Net Sales = $1.1 Billion 18 2007 2008 2009 2010 2011 2012 Single Family Housing Starts 1,036 616 442 471 434 535 (29.7)% (40.5)% (28.2)% 6.5% (8.1)% 23.3% Ply Gem Net Sales $1,363.5 $1,175.0 $951.4 $995.9 $1,034.9 $1,121.3 (13.4)% (13.8)% (19.0)% 4.7% 3.9% 8.4% • Ply Gem continues to outperform the market • SFHS down 48% from ‘07 to ‘12, Ply Gem down 17.8% • Market share gains of over $350 million from 2007 to 2011 • Numerous new customer wins as Ply Gem is a clear industry leader • Our product breadth and geographical footprint continue to expand • Customer mix is well balanced at approx. 50%/50% $600 $800 $1,000 $1,200 $1,400 2007 2008 2009 2010 2011 2012 Ply Gem sales
  • 20. 2005 2006 2007 2008 2009 2010 2011 2012 2013 ‘05 – ’12 Avg. Q1 19.8% 20.0% 16.5% 11.9% 7.1% 18.1% 16.6% 17.9% 16.3% 16.0% Q2 24.1% 23.9% 25.0% 20.0% 24.1% 23.4% 23.5% 23.9% 20.6% 23.5% Q3 24.4% 23.6% 23.2% 19.1% 26.4% 23.2% 22.1% 23.1% 23.1% Q4 22.2% 17.1% 18.1% 14.0% 22.5% 20.8% 20.6% 21.3% 19.6% Full Year 22.8% 21.2% 20.6% 16.6% 21.2% 21.7% 21.0% 21.8% 20.9% Ply Gem has demonstrated the ability to maintain profit margins through wide swings in commodity costs 2008 Rewind – Oil prices went to $148 a barrel; gas prices went to $4.00 2009 Includes one time “take or pay” aluminum buy We demonstrated the ability to address commodity fluctuations and return to historical averages (1) 2011 & 2013 Gross Margins adjusted to exclude the impact of the one-time Home Depot buy-back FINANCIAL Summary Stable Gross Profit Margins 19 0% 5% 10% 15% 20% 25% 30% 2005 2006 2007 2008 2009 2010 2011 (1) 2012 2013 Q1 Q2 Q3 Q4 Impact of "Take or Pay" Contract
  • 21. 0% 2% 4% 6% 8% 10% 12% 14% 16% $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 2007 2008 2009 2010 2011 2012 • Superior EBITDA Margins despite historically low demand • Sales that outperformed the market including new products • Cost reduction actions have generated over $45 million in savings:  Closed 6 plants over last 5 years = approx. $30 million annual savings  Reduced headcount by approximately 50% from 2006 to 2010  Other cost reduction initiatives (Direct & Indirect) over $10 million • Market share wins of over $350 million from 2007 to 2011 • Successful acquisition integration and cost savings realization • Managed Capital Spending & Working Capital to enhance cash flow FINANCIAL Summary Adjusted EBITDA 2012 = $127.3M or 11.3% 20
  • 22. Fiscal Year Ended December 31, ($ in millions) 2007 2008 2009 2010 2011 2012 Single Family Housing Starts 1,036 616 442 471 434 535 Net Sales Siding, Fencing and Railing $828.1 $709.4 $577.4 $604.4 $639.3 $658.0 % Growth (17.4%) (14.3%) (18.6%) 4.7% 5.8% 2.9% Windows and Doors 535.4 465.6 374.0 391.5 395.6 463.3 % Growth (6.6%) (13.0%) (19.7%) 4.7% 1.0% 17.1% Total Ply Gem $1,363.5 $1,175.0 $951.4 $995.9 $1,034.9 $1,121.3 % Growth (13.4%) (13.8%) (19.0%) 4.7% 3.9% 8.4% Gross Profit Siding, Fencing and Railing $168.7 $130.6 $149.4 $155.5 $158.8 $180.2 % Margin 20.4% 18.4% 25.9% 25.7% 24.8% 27.4% Windows and Doors 111.7 64.3 52.2 60.6 51.7 64.0 % Margin 20.9% 13.8% 14.0% 15.5% 13.1% 13.8% Total Gross Profit $280.4 $194.9 $201.5 $216.0 $210.5 $244.2 % Margin 20.6% 16.6% 21.2% 21.7% 20.3% 21.8% Reported Adjusted EBITDA $176.0 $96.1 $116.2 $123.1 $114.5 $127.3 % Margin 12.9% 8.2% 12.2% 12.4% 11.1% 11.3% CapEx $20.0 $16.6 $7.8 $11.1 $11.5 $24.6 % of Sales 1.5% 1.4% 0.8% 1.1% 1.1% 2.2% FINANCIAL Summary 21 2007 PF for run-rate acquisitions > $200mm
  • 23. 22 FINANCIAL Summary Fiscal Year Ended December 31, ($ in millions) 2007 2012 Single Family Housing Starts 1,036 535 Net Sales Siding, Fencing and Railing $828.1 $658.0 % Growth (17.4%) 2.9% Windows and Doors 535.4 463.3 % Growth (6.6%) 17.1% Total Ply Gem $1,363.5 $1,121.3 % Growth (13.4%) 8.4% Gross Profit Siding, Fencing and Railing $168.7 $180.2 % Margin 20.4% 27.4% Windows and Doors 111.7 64.0 % Margin 20.9% 13.8% Total Gross Profit $280.4 $244.2 % Margin 20.6% 21.8% Reported Adjusted EBITDA $176.0 $127.3 % Margin 12.9% 11.3% CapEx $20.0 $24.6 % of Sales 1.5% 2.2% Action Taken Through the Cycle Positions Ply Gem for Expanding Profitability Increased sales from market share ($350mm) Determined action through the cycle 8 plant closures, saving $30mm annually $50mm in synergies achieved ($24mm post 2007) Mitten and Gienow acquisitions
  • 24. INVESTMENT Highlights 23 Repair and Remodel Leverage to New Housing Starts New Products and Innovation Drive Share Gains M&A Opportunities • 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 and Cost Savings Realization • Strong Management Team with Significant Ownership Key Investment Highlights Platform Built for Growth and Operating Leverage