Ply Gem Operating Earnings Decrease $19 MillionMay 13th, 2014 by Editor
Cary, N.C.-based Ply Gem Holdings Inc. announced financial results for the quarter ended March 29, 2014, saying the company took a hit as a result of the winter weather.
Highlights from the report include total net sales for the first quarter increased 4.8 percent to $269.5 million. Additionally, net sales in the windows and doors segment increased 10.9 percent. Adjusted EBITDA was ($1.5) million compared to $12.1 million for the first quarter of 2013. And, debt refinancing activities expected to generate annual cash interest savings of $21.7 million.
“Our first quarter results reflect the negative impact of the unusually severe winter weather conditions on much of North America during the first quarter of 2014, which resulted in a deceleration in the new construction housing market with a 4-percent decline in single family housing starts in the first quarter of 2014 as compared to the prior year,” says Gary E. Robinette, Ply Gem’s president and CEO. “Our 2014 first quarter net sales growth demonstrate the positive contribution of our Gienow and Mitten acquisitions which were completed in April and May of 2013, respectively. Despite the slow start to the year, we remain focused on our strategic priorities for the remainder of 2014, while striving to outperform the market across all of our product categories. We remain positive about the long-term recovery for the housing industry and our ability to take advantage of the market as it improves.”
Windows and doors’ net sales totaled $132.4 million, up $13.0 million, or 10.9 percent, compared to $119.4 million in the first quarter of 2013. The net sales increase was caused by the acquisition of Gienow, which was completed on April 9, 2013. Effective January 2014, the legacy Ply Gem Canada business and Gienow were amalgamated legally into a single entity, Gienow Canada Inc., and operationally into a single location with consolidated manufacturing and sales staff. For the quarter ended March 29, 2014, the combined Western Canadian business had net sales of $27.3 million compared to legacy Western Canadian sales of $14.4 million for the quarter ended March 30, 2013, for an increase of $12.9 million reflecting the positive contribution of Gienow offset by the impact of adverse winter weather in Western Canada and the U.S. which decreased net sales year over year.
Gross profit margin was 7.4 percent for the quarter ended March 29, 2014, increasing from 6.6 percent for the quarter ended March 30, 2013, reflecting increased selling prices and operational improvements for the U.S. market offset by manufacturing inefficiencies in Western Canada associated with consolidating our operations into a single manufacturing site.
Total gross profit margin was 14.8 percent which represented a contraction of 150 basis points from the first quarter of 2013. The decrease in gross profit margin can be attributed to the organic net sales decrease in the siding, fencing and stone segment of $19.5 million or 14.2 percent resulting from the harsh 2014 winter. This sales volume decrease created less operating leverage to cover fixed manufacturing costs contributing to lower gross profit. Gross profit was also negatively impacted during the first quarter of 2014 as a result of efforts to consolidate operations in Western Canada by manufacturing inefficiencies associated with consolidating operations into a single manufacturing site which. Company officials say they anticipate it will drive cost efficiency benefits going forward. The negative gross profit factors were partially offset by improved average selling prices as the company began to see its previous price increase flow through and the elimination of certain operating inefficiencies in the windows and doors segment.
Operating earnings (loss) were $(19.6) million, a decrease of $19.0 million from the first quarter of 2013.
Adjusted EBITDA was ($1.5) million compared to $12.1 million in the first quarter of 2013. A reconciliation of non-GAAP (adjusted) financial measures to comparable GAAP financial measures is provided as an appendix to this release.
“As we look ahead and our volumes increase, we expect to generate meaningful operating leverage. Despite this near-term deceleration in the market, the long-term outlook for the U.S. housing market remains positive. The opportunity ahead of us is really about recapturing margin in our windows and doors segment as that continues to scale as volume expands, regional builders become more active in the market, and pricing discipline returns. I am pleased with the improvement that we are seeing in the operating performance of our U.S. window and doors business and the progress we are making in many areas including selling price and operational improvements. I remain confident in our ability to deliver the $15.0 to $20.0 million of cost savings and synergies from our Gienow and Mitten acquisitions as well as our overall growth prospects. Ply Gem has an attractive position in the market place and we’ll continue to strengthen our position as underlying macro trends improve and we move past these unprecedented weather conditions,” Robinette adds.