PGTI

PGT, Inc. (PGTI)

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PGT, Inc. (PGTI)

Q1 2010 Earnings Call Transcript

May 6, 2010 10:30 am ET

Executives

Brad West – Corporate Controller

Rod Hershberger – President and CEO

Jeff Jackson – EVP and CFO

Analysts

Nishu Sood – Deutsche Bank Securities

Jason Jorgensen [ph] – JPMorgan

Robert Kelly – Sidoti & Company

Presentation

Operator

Good day ladies and gentlemen and thank you for standing by, and welcome to the PGT, Incorporated first quarter 2010 earnings conference call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator instructions) As a reminder, this conference is being recorded.

I would now like to turn the program over to our speaker Mr. Brad West. Sir, please go ahead.

Brad West

Thank you. Good morning and thank you for joining us for PGT’s first quarter 2010 conference call. I am Brad West, Corporate Controller and I am joined today by Rod Hershberger, President and CEO, as well as Jeff Jackson, Executive Vice President and CFO. Rod and Jeff will represent PGT on this morning's call.

Before we begin, let me remind everyone that today's conference call may contain statements concerning the company's future prospects, business strategies, and industry trends. Such statements are considered to be forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations and are subject to risk and uncertainty.

Actual results may vary materially from those contained in the forward-looking statements. Please refer to the May 5 press release, our most recent Form 10-K, and other documents filed with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements.

A copy of our press release is posted on the Investor Relations section of our corporate Web site at www.pgtinc.com. Included in the press release are the unaudited consolidated balance sheet and statements of operations prepared in accordance with GAAP and adjusted information, which was quantitatively reconciled to GAAP. Our company uses non-GAAP measurements as key metrics for evaluating performance internally.

A detailed explanation of these non-GAAP measurements can be found in our Form 8-K filed May 5 with the SEC. These non-GAAP measurements are not intended to replace the presentation of financial results in accordance with GAAP. Rather, we believe these non-GAAP measurements provide additional information for investors to facilitate the comparison of past and present performance.

For today's call, Rod will provide an overview of our performance for the first quarter then Jeff will discuss our results in more detail. After their prepared remarks, they will take your questions.

With that, let me turn the call over to Rod Hershberger. Rod?

Rod Hershberger

Thanks Brad. Good morning, everyone. 2010 began with a brighter outlook than the past two years. Housing appears to be recovering, and for the first time in four years total starts in our core market were up 39% in the first quarter compared to last year. For the same comparable period, single-family starts were up 55%. Single-family starts also increased 30% when compared to the fourth quarter of 2009.

We welcome this increase in starts; however, we believe they were inflated somewhat by the tax incentives which motivated homebuyers to purchase new homes, particularly first-time homebuyers. Though these buyers typically buy at the lower end of the construction market, we are encouraged by the increased activity and anticipate a carryover into the broader new construction market.

Other positive signs suggesting the beginning of a recovery include a 24% increase in existing home sales compared to the prior-year quarter in our primary market of Florida and a decrease in inventory levels compared to the prior year in certain primary market cities, including 28% in Miami and 12% in Tampa.

Home prices had the first year-over-year increase since December 2006. However, housing start levels are still much lower than what we would expect in a normal cycle, and many negative conditions still remain, such as pending foreclosures, high unemployment which is still around 10% nationally and over 12% in Florida. As a result, we continue to operate in a market whose return to normalcy is still quite unpredictable.

Sales in the first quarter decreased only 2% when compared to the first quarter of 2009. This is a combination of the decline in sales into the new construction market of 26%, mostly offset by an increase in sales into our R&R market of 11%.

As a percentage of total sales for the first quarter of 2010, R&R sales accounted for 77% and new construction sales accounted for 23% of sales. This compares to the first quarter of 2009 when R&R sales accounted for 69% and new construction represented 31%. The increase in R&R sales is due mainly to the success of our non-impact vinyl replacement product, SpectraGuard launched in 2009.

Sales of those products, which represented the main driver of our growth, increased $1.9 million year over year as we increased our distribution network in targeted states outside Florida. This resulted in an increase in our other state sales of $7.8 million in the first quarter, up 32% from a year ago and represents 19% of our sales for the quarter.

In previous calls, I mentioned some new products we recently launched. At this time, I'd like to update you on those products. Sales of our new sliding glass door launched last October were $2.8 million, up from $1.3 million in the fourth quarter of 2009, and continue to exceed our expectation.

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