PGT Executives Talk Long-Term Strategy

December 10th, 2015 by Casey Flores

Florida-based PGT Inc. is celebrating its 35-year anniversary with the highest annual sales in the company’s history. According to a recent press release, its sales surpassed $372 million this week.

The Acquisition

On November 30, 2015 the company announced it entered into a definitive agreement to acquire Orlando, Fla.-based WinDoor Inc. for approximately $102 million. WinDoor’s 2015 revenues are expected to be approximately $41 million, according to the release.

“The acquisition of WinDoor is in alignment with our long-term strategy to acquire additional brands or products that have a premium position,” says Jeff Jackson, president and CEO. “The WinDoor acquisition is ideal because it immediately adds top line sales, improves EBITDA margins and ultimately will achieve synergies. For these reasons, I am confident this transaction will be good for our customers and increase shareholder value.”

The acquisition of WinDoor will immediately add to PGT’s earnings on an operational basis as its earnings before interest, tax, depreciation and amortization margins range from 20 to 22 percent. The timing of bottom-line accretion will be determined by the final cost of financing and amortization of purchase price intangibles but is expected in 12-18 month’s time.

Shifting Strategies

PGT is also in the “final phase” of a multi-year enterprise resource planning (ERP) implementation.

According to the company, this is expected “to substantially improve the management of in-process raw materials” which will include automating the company’s multi-facility functions for handling materials and streamlining business management processes and operations.

According to a chart provided by the company, ERP implementation is completed for its support departments and main glass processing, but it has a ways to go on insulating glass and assembly:

  % Functionality 
Complete
% Testing 
Complete
% Unit Volume 
Converted
 
Status
Support Departments   100 %   100 %   100 % Completed
Main Glass Processing
(Cutting/Laminating/Tempering)
  100 %   100 %   100 % Completed
Insulated Glass   100 %   100 %   70 % In Progress
Assembly
(Vinyl & Aluminum)
  100 %   100 %   45 % In Progress

Source: PGT
During the first phase of the ERP implementation, all support departments, such as accounting, were moved into the new system in advance of the three primary manufacturing areas. This happened by September 2012.

The main glass processing portion of the implementation, which includes cutting, laminating, and tempering, has been completed and fully operational since January 2015.

The insulating glass portion is responsible for supplying glass to all assembly lines, including vinyl and aluminum, in specific sequencing. All supply for vinyl assembly has been converted to the new system, and a portion of aluminum assembly has.

“The balance will be gradually converted over the next one to two quarters,” the release reads.

This implementation was not without its difficulties, which impacted third quarter operations, but they “have now been resolved.” As proof, PGT provided the following metrics in its release:

  • Prior to encountering the sequencing issue, the business produced approximately 3,500 insulating glass units per day, had a direct labor rate of approximately 11 percent, and a 99 percent on-time delivery rate to customers.
  • During the period of negative impact, production was reduced to approximately 2,100 insulating glass units per day, the direct labor rate reached a high of 14 percent, and the on-time delivery rate to customers dropped to the mid-80 percent range. The decrease in insulating glass production even resulted in the need to outsource insulated glass to a third party from September to October.
  • Production has now been restored to approximately 3,500 insulating glass units per day, the direct labor rate is averaging 11.7 percent, and the delivery rate to customers is 98 percent on-time. The company is now only using third-party resources for “limited exceptions.”

 

Chart

 

  • The assembly portion of the implementation has successfully converted 45 percent of the total unit volume to the new system which includes all of vinyl assembly and a portion of aluminum assembly. The remaining work relating to assembly consists of a conservative volume ramp up of aluminum to ensure a smooth transition.

“The vast majority of the implementation is complete, and we have established successful performance in each functional area,” says Brad West, chief financial officer. “We are confident that we can manage the remaining implementation without significant risk to the business or our results.”

The Fourth Quarter

According to the release, the company expects a year-over-year increase of 6 to 9 percent for the fourth quarter of 2015.

The company listed other key specifics to support that projection:

  • Average shipments per week is at $7.0M (up 6 percent from September);
  • Daily production of the new WinGuard Vinyl and EnergyVue lines has increased up to 350 per day;
  • They have a third laminating line up and running, increasing capacity by 50 percent; and
  • Key scrap metrics has all shown improvement over the past six weeks.

Jeff Jackson, president and chief operations officer, says the company expects fourth-quarter adjusted gross margin to be approximately 30.5 percent.

This article is from Door and Window Market [DWM] magazine's free e-newsletter that covers the latest door and window industry news. Click HERE to sign up—there is no charge. Interested in a deeper dive? Free subscriptions to [DWM] magazine in print or digital format are available. Subscribe at no charge HERE.

Tags: , ,

Leave Comment

X
This site uses cookies which allow us to give you the best browsing experience possible. Cookies are files stored in your browser and are used by most websites to help personalize your web experience. By continuing to use our website, you are agreeing to our use of cookies. To find out more, please see our Privacy Policy.