PGT INNOVATIONS, INC. The following discussion and analysis of our financial condition and results of
operations and quantitative and qualitative disclosures should be read in
conjunction with our unaudited condensed consolidated financial statements and
related notes and with our audited consolidated financial statements included in
our Annual Report on Form 10-K for the year ended
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains "forward looking statements" within
the meaning of the safe harbor provisions of the
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
•
the impact of the COVID-19 pandemic (the "COVID-19 pandemic" or "Pandemic") and related measures taken by governmental or regulatory authorities to combat the Pandemic, including the impact of the Pandemic and these measures on the economies and demand for our products in the states where we sell them, and on our customers, suppliers, labor force, business, operations and financial performance; • unpredictable weather and macroeconomic factors that may negatively impact the repair and remodel and new construction markets and the construction industry generally, especially in the state ofFlorida and the westernUnited States , where the substantial portion of our sales are currently generated, and in theU.S. generally; • changes in raw material prices, especially for aluminum, glass and vinyl, including price increases due to the implementation of tariffs and other trade-related restrictions, Pandemic-related supply chain interruptions, or supply-chain interruptions from the conflict inUkraine ; • our dependence on a limited number of suppliers for certain of our key materials; • our dependence on our impact-resistant product lines, which increased with the Eco Acquisition, and contemporary indoor/outdoor window and door systems, and on consumer preferences for those types and styles of products; • the effects of increased expenses or unanticipated liabilities incurred as a result of, or due to activities related to, our recent acquisitions, including Anlin, and our Eco Acquisition; • our level of indebtedness, which increased in connection with our recent acquisition, including our Eco Acquisition, and the acquisition of Anlin; • increases in credit losses from obligations owed to us by our customers in the event of a downturn in the home repair and remodel or new home construction channels in our core markets and our inability to collect such obligations from such customers; • the risks that the anticipated cost savings, synergies, revenue enhancement strategies and other benefits expected from our acquisition of Anlin, and from our Eco Acquisition may not be fully realized or may take longer to realize than expected or that our actual integration costs may exceed our estimates; • increases in transportation costs, including increases in fuel prices; • our dependence on our limited number of geographically concentrated manufacturing facilities, which increased further due to our Eco Acquisition; • sales fluctuations to and changes in our relationships with key customers; • federal, state and local laws and regulations, including unfavorable changes in local building codes and environmental and energy code regulations; • risks associated with our information technology systems, including cybersecurity-related risks, such as unauthorized intrusions into our systems by "hackers" and theft of data and information from our systems, and the risks that our - 29 -
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information technology systems do not function as intended or experience temporary or long-term failures to perform as intended; • product liability and warranty claims brought against us; • in addition to our acquisition of Anlin, and our Eco Acquisition, our ability to successfully integrate businesses we may acquire in the future, or that any business we acquire may not perform as we expected at the time we acquire it; and • the other risks and uncertainties discussed under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year endedJanuary 1, 2022 and our other filings with theSecurities and Exchange Commission .
Any forward-looking statement made by us in this Quarterly Report on Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
EXECUTIVE OVERVIEW Sales and Operations
During the first quarter of 2022, we experienced growth at both our Southeast
and Western segments, as the momentum of growth we experienced over last year
continued into 2022. Of our total net sales for the first quarter of 2022 of
Our gross profit increased to
One of the biggest events that occurred recently was the passage of Florida
House Bill 7071, signed into law in early
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Performance Summary
The following table presents financial data derived from our unaudited condensed
consolidated statements of operations as a percentage of total net sales for the
periods indicated. The three-month periods ended
Three Months Ended
April 2, April 3,
2022 2021
(unaudited)
Net sales $ 358,662 100.0 % $ 271,092 100.0 %
Cost of sales 224,069 62.5 % 177,130 65.3 %
Gross profit 134,593 37.5 % 93,962 34.7 %
Selling, general and administrative expenses 95,882 26.7 % 69,766 25.7 %
Income from operations 38,711 10.8 % 24,196 8.9 % Interest expense, net 7,080 2.0 % 7,457 2.8 % Income before income taxes 31,631 8.8 % 16,739 6.2 % Income tax expense 7,805 2.2 % 3,944 1.5 % Net income 23,826 6.6 % 12,795 4.7 % Less: Net income attributable to redeemable (657 ) (0.2)% (411 ) (0.2)%
non-controlling interest
Net income attributable to the Company 23,169 6.5 % 12,384 4.6 % Change in redemption value of redeemable (2,136 ) (0.6)% - -
non-controlling interest
Net income attributable to common shareholders
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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
The three-month periods endedApril 2, 2022 andApril 3, 2021 are composed of 13 weeks each. Net sales Three Months Ended April 2, 2022 April 3, 2021 Net Sales % of sales Net Sales % of sales % change By segment: Southeast segment$ 271.8 75.8%$ 233.6 86.2% 16.3% Western segment 86.9 24.2% 37.5 13.8% 132.0% Total net sales$ 358.7 100.0%$ 271.1 100.0% 32.3%
Net sales for the first quarter of 2022 were
During the first quarter of 2022, we experienced growth at both our Southeast
and Western segments, as the momentum of growth we experienced over last year
continued into 2022. Of our total net sales for the first quarter of 2022 of
Gross profit and gross margin
Gross profit was
Selling, general and administrative expenses
Selling, general and administrative ("SG&A") expenses were
Income from operations
Income from operations was
The increase in income from operations was related to the benefit from the leverage from higher sales in the first quarter of 2022 compared to last year's first quarter, as well as the benefits of the continued efficiency improvements at both our Southeast and Western segments, more than offsetting the rising costs for materials in aluminum and glass, including the increasing costs of distribution being passed onto us by our vendors, and the continuing costs of attracting, training and retaining an experienced labor force.
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Interest expense, net
Interest expense was
Income tax expense
We had an income tax expense of
Income tax expense in the three months ended
In
Net income attributable to redeemable non-controlling interest
Net income attributable to redeemable non-controlling interest for the three
months ended
Change in redemption value of redeemable non-controlling interest
The change in the redemption value of the redeemable non-controlling interest
for the three-month period ended
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LIQUIDITY AND CAPITAL RESOURCES
Consolidated Cash Flows
Our principal source of liquidity is cash flow generated by operations and supplemented by borrowings under our credit facilities. We expect that this cash generating capability will provide us with financial flexibility in meeting operating and investing needs, but there can be no assurance that will be the case in future periods. Our primary capital requirements are to fund working capital needs, meet required debt service payments on our credit facilities and fund capital expenditures.
The following table summarizes our cash flow results for the first three months of 2022 and 2021:
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