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Pgem q3 2015 earnings slides final
1. November 9, 2015
Ply Gem Holdings
Third Quarter 2015 Results
Gary E. Robinette Shawn K. Poe
Chairman & 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 Ply Gem Holdings, Inc. (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; inability to successfully
develop new products or improve existing products; 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; product
liability claims, including class action claims, relating to the products we manufacture; litigation outside of product liability claims; 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; changes in foreign currency exchange and interest rates; 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 is included in our press release issued on November 9, 2015 and posted on www.plygem.com.
3. 2
41%
55% 45%
2
Third Quarter 2015 Results
Today’s Presentation
90%
10%
Agenda
• Third Quarter Review Gary Robinette
• Financial Results Shawn Poe
• Acquisition Synergies and Cost Savings Shawn Poe
• Margin Initiatives Gary Robinette
• Economic Outlook Gary Robinette
• Questions and Answers Gary Robinette & Shawn Poe
• Closing Remarks Gary Robinette
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
87%
Canada
13%
(*)
Siding
46%Windows
54%
(*)
(*) LTM October 3, 2015, Pro Forma for Simonton and Canyon Stone acquisitions
5. 4
Ply Gem
Results
Key Highlights
Third Quarter 2015 Highlights
• Sales increase of 21.2% was primarily due to the Simonton and
Canyon Stone acquisitions and growth within the U.S. businesses in
each segment. The growth in the U.S. was partially offset by weaker
market conditions in Canada and unfavorable foreign currency
exchange rates which negatively impacted sales by $11.4.
• Gross margin expansion of 290 basis points primarily driven by
increased average selling prices in both of our business segments,
favorable freight costs, and favorable commodity costs, partially
offset by unfavorable foreign currency impact from a weakening
Canadian dollar.
• Sixth consecutive year-over-year quarterly adjusted EBITDA
improvement. Excluding acquisitions, incremental year-over-year
quarterly adjusted EBITDA growth of 18.5%.
($ in Millions) Q3 2015 Q3 2014
Net Sales
Y-O-Y Change
$530.9
21.2%
$437.8
Gross Profit
Gross Profit %
$134.8
25.4%
$98.6
22.5%
Adj. EBITDA $76.6 $55.4
New construction
52%
Home repair &
remodel
48%
$76.6
4.2
1.4 0.5
$55.4
11.0
8.4
4.1
3.8
40.0
50.0
60.0
70.0
80.0
Q3 2014 Adj
EBITDA
Acquisitions Materials Price/Mix U.S. Volume CAD Volume F/X Other Q3 2015 Adj
EBITDA
Third Quarter Adjusted EBITDA Performance
End Market Exposure
6. 5
Windows&
Doors(W&D)
Segment
Key HighlightsThird Quarter Results
Leader in
Vinyl and Aluminum Windows
$246.4
$146.9
$29.4
$46.5
Q3 2015 Q3 2014
Net Sales
U.S. Canada
$193.4
$275.8
End Market Exposure (*)
• 42.6% increase in sales due largely to the Simonton acquisition which
accounted for $81.9 of the sales growth. Excluding Simonton, sales for the
U.S. business increased 12.6% due to higher average selling prices,
improved product mix, and improvement in U.S. market conditions.
Growth in the U.S. was partially offset by weaker market conditions in
Western Canada and unfavorable foreign currency exchange rates which
negatively impacted sales by $5.9.
• Gross margin improved by 530 basis points driven by $23.7 of Simonton
gross margin and a 200 basis point gross margin improvement in our legacy
windows businesses due to improved pricing, and product mix partially
offset by unfavorable foreign currency.
• SG&A expense increase includes $16.2 of expense attributable to Simonton.
Excluding Simonton, SG&A expense as a percent of net sales decreased
from 12.3% to 9.7%. Reduction of legal expenses accounted for 170 basis
points of the decrease. The remainder relates to reductions in one-time
restructuring and integration costs in Western Canada, and expense
reduction initiatives in response to lower market demand in Western
Canada.
Q3 2015 (**) Q3 2014
U.S. 20.7% 13.6%
Canada 21.6% 21.7%
W&D Segment 20.8% 15.5%
Gross Margin %
New
construction
67%
Home repair
& remodel
33%
(*) For the three months ended October 3, 2015
(**) Includes the impact of Simonton
7. W&D Gross
Margin
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
20.9%
15.4% 14.0% 15.4% 13.1% 13.8%
9.7%
12.9%
16.8%
1,046
622
445 471 431
535
618 648
703
2007 2008 2009 2010 2011 2012 2013 2014 LTM
Historical Gross Margin Performance
Annual Gross Profit % U.S. SFHS (*)
Note: Includes Simonton from date of acquisition
15.5%
20.8%
0.3%
3.3%
1.9%
0.4%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
22.0%
Q3 2014 Gross
Margin
Selling Price /
Product Mix
Simonton Impact Freight Costs Unfavorable FX /
Other
Q3 2015 Gross
Margin
• Selling price/product mix reflect
favorable product mix and impact of
selling price increases implemented
in January 2015.
• Simonton acquisition resulted in a
favorable impact on overall segment
gross margin for the quarter.
• Favorable freight costs due to
decline in fuel pricing partially offset
by rising driver and freight insurance
costs.
8. 7
Siding,Fencing
&Stone(SFS)
Segment
Key HighlightsThird Quarter Results
Market Leader in Vinyl Siding
$222.4
$206.0
$32.7
$38.4
Q3 2015 Q3 2014
Net Sales
U.S. Canada
$244.4
New
construction
36%
Home repair
& remodel
64%
End Market Exposure (*)
• 4.4% increase in sales due largely to the Canyon Stone acquisition which
accounted for $7.8 of the sales growth. Excluding Canyon Stone, sales
for the U.S. business increased 4.2% due to favorable market demand
and higher selling prices for our products. Growth in the U.S. was
partially offset by unfavorable foreign currency exchange rates which
negatively impacted sales by $5.5.
• Gross margin expanded by 220 basis points, driven by improved
operating leverage from the sales increase, improved selling prices,
favorable material cost pricing, and favorable freight expense, partially
offset by unfavorable foreign currency.
• SG&A expense increased $2.4 which was due largely to the Canyon
Stone acquisition which accounted for $1.3 of the SG&A expense
increase. Excluding Canyon Stone, SG&A expense as a percent of sales
increased from 8.4% to 8.7% which was mainly due to increased
incentive compensation.
Gross Margin %
Q3 2015 (**) Q3 2014
U.S. 30.2% 27.7%
Canada 31.5% 30.1%
SFS Segment 30.3% 28.1%
$255.1
(*) For the three months ended October 3, 2015
(**) Includes the impact of Canyon Stone
9. SFS Gross
Margin
8
SFS Segment Gross Margin Bridge
and Historical Performance
20.4% 18.4% 25.9% 25.7% 24.8% 27.4% 26.8% 26.1% 27.5%
.5208
.6200
.5288
.6458
.6971 .6975 .7134
.7534 .7367
2007 2008 2009 2010 2011 2012 2013 2014 LTM
Historical Gross Margin Performance
Annual Gross Profit % PVC Resin Price (*)
28.1%
30.3%
0.8%
0.9%
3.2%
0.7%
20.0%
22.0%
24.0%
26.0%
28.0%
30.0%
32.0%
Q3 2014 Gross Margin Selling Price /
Product Mix
Commodity Costs Freight Costs Unfavorable FX /
Other
Q3 2015 Gross Margin
• Selling price/product mix reflect a
higher proportion of metal based
product sold during the quarter
compared to the prior year partially
offset by the impact of selling price
increases implemented in January
2015.
• Commodity cost favorability due
mainly from PVC resin and aluminum
costs.
• Favorable freight costs due to
decline in fuel pricing partially offset
by rising driver and freight insurance
costs.
10. 9
Acquisition
Synergies
(1) Improved procurement economics as a result of increased purchasing power
(2) Freight cost maximization and improved fixed overhead as a result of various manufacturing cost reductions from rationalizations
(3) SG&A leverage scale and back office efficiencies
(4) Expand vertical integration efficiency
Impact of Expected Simonton Synergies and Cost Savings
$8 Million Original
Savings
Raw material sourcing (1)
$3.6M
Mfg. efficiencies (2)
$2.7M
Insourcing products (4)
$1.5M
SG&A (3)
$0.2M
Simonton Acquisition
Synergies and Cost Savings
$10 Million
Additional Incremental Savings
$2.0M
11. 10
Margin
Initiatives
The Market Innovator
The Leading Brand
Lean through Technology
Our Future Leaders
New Channels and Markets
Selling Price Increases
Q1 2015 announced price increases are effective for both business segments. W&D
Segment selling price increases range from 6% to 15%. SFS Segment selling price
increases range from 6% to 8%
Q1 2016 price increases have been announced in October 2015 for the W&D
Segment. Selling price increases range from 6% to 12%
Continued Implementation of Enterprise Lean and Sales & Operations Planning
(S&OP) System in U.S. Windows and Doors
Enterprise Lean provides product simplification and improves manufacturing
flexibility. Realized approximately $4.5 of benefit in 2014 and will provide for an
estimated annual savings of approximately $10.0 when fully implemented in 2016
S&OP system provides enhanced capacity and resource planning system which will
reduce future ramp-up costs and maximize fixed manufacturing investments
Ply Gem Margin Enhancement
Initiatives
Cross Selling Opportunities
Continue to integrate our extensive product categories across our legacy customer
base and acquired Simonton customer base
12. 11
Ply Gem
Outlook
The Market Innovator
The Leading Brand
Lean through Technology
Our Future Leaders
New Channels and Markets
4Q 2015 Guidance
Based on the forecasted growth of the U.S. housing market and R&R spend, the
impact of our enacted selling price increases and other margin enhancing
initiatives, the expected impact of Canyon Stone, anticipated acquisition
synergies, commodity fluctuations and a normalized weather pattern, we expect
our adjusted EBITDA for 4Q 2015, in the range of $32.0 to $37.0
Economic Outlook & Guidance
Expect Continued Steady Growth in U.S. Housing Starts
Expect continued overall moderate growth of high single digits in U.S. housing
recovery in 2015, however we expect the market to experience periods of
choppiness in the growth rate
Expect an overall moderate growth rate for big ticket R&R spend of
approximately 2% to 3% in 2015
Overall Canadian housing starts expected to moderate relative to 2014 with
lower starts in oil-producing regions of Western Canada partially offset by
higher starts in other regions
15. (amounts in thousands) For the three months ended
October 3, 2015
For the three months ended
September 27, 2014
Net income $41,711 $21,405
Interest expense, net 18,819 16,282
Provision (benefit) for income taxes 2,114 (10,514)
Depreciation and amortization 14,911 11,378
EBITDA $77,555 $38,551
Non cash loss on foreign currency transactions 1,069 766
Acquisition costs 22 664
Customer inventory buybacks 559 306
Restructuring/integration expense 258 1,067
Non cash charge of purchase price allocated to inventories - 38
Litigation settlement, net (1,194) -
Tax receivable agreement liability adjustment (1,712) 13,988
Adjusted EBITDA $76,557 $55,380
14
Third Quarter Adjusted EBITDA Reconciliation
Appendix
16. (amounts in thousands) For the nine months ended
October 3, 2015
For the nine months ended
September 27, 2014
Net income (loss) $23,224 ($18,793)
Interest expense, net 56,585 52,001
Benefit for income taxes (1,762) (15,933)
Depreciation and amortization 44,308 33,916
EBITDA $122,355 $51,191
Non cash loss on foreign currency transactions 2,101 517
Acquisition costs 647 664
Customer inventory buybacks 691 788
Restructuring/integration expense 3,278 4,238
Non cash charge of purchase price allocated to inventories 54 38
Litigation settlement, net (1,194) 5,000
Loss on modification or extinguishment of debt - 21,364
Tax receivable agreement liability adjustment 13,467 14,419
Adjusted EBITDA $141,399 $98,219
15
Nine Months Adjusted EBITDA Reconciliation
Appendix
17. (amounts in thousands) For the three months ended
October 3, 2015
For the three months ended
September 27, 2014
SFS Segment W&D Segment Total SFS Segment W&D Segment Total
Non cash loss on foreign
currency transactions
$531 $538 $1,069 $352 $414 $766
Acquisition costs 24 (2) 22 - 664 664
Customer inventory buybacks 156 403 559 306 - 306
Restructuring/integration
expense
311 (53) 258 - 1,067 1,067
Non cash charge of purchase
price allocated to inventories
- - - - 38 38
Litigation settlement, net - (1,194) (1,194) - - -
$1,022 ($308) $714 $658 $2,183 $2,841
16
Third Quarter EBITDA Adjustments By Segment(*)
Appendix
(*) Does not reflect unallocated and corporate EBITDA adjustments
18. (amounts in thousands) For the nine months ended
October 3, 2015
For the nine months ended
September 27, 2014
SFS Segment W&D Segment Total SFS Segment W&D Segment Total
Non cash loss on foreign
currency transactions
$792 $1,309 $2,101 $278 $239 $517
Acquisition costs 388 259 647 - 664 664
Customer inventory buybacks 253 438 691 665 123 788
Restructuring/integration
expense
486 2,792 3,278 34 4,204 4,238
Non cash charge of purchase
price allocated to inventories
54 - 54 - 38 38
Litigation settlement, net - (1,194) (1,194) - 5,000 5,000
$1,973 $3,604 $5,577 $977 $10,268 $11,245
17
Nine Months EBITDA Adjustments By Segment(*)
Appendix
(*) Does not reflect unallocated and corporate EBITDA adjustments