form10q1_2009.htm
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
|
R
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the quarterly period ended April 4, 2009
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OR
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£
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
For the transition period
from to
|
Commission
file number 000-52059
1070
Technology Drive
North
Venice, FL 34275
Registrant’s
telephone number: 941-480-1600
|
State
of Incorporation
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|
IRS
Employer Identification No.
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|
Delaware
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|
20-0634715
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Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes R
No £
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange
Act.
|
Large
accelerated filer o
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Accelerated
filer þ
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Non-accelerated
filer o
|
Smaller
reporting companyo
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(Do
not check if a smaller reporting company)
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|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes £ No
R
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
Common
Stock, $0.01 par value – 35,688,584 shares, as of April 30, 2009.
TABLE
OF CONTENTS
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Page
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Number
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3
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4
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5
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6
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16
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22 |
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23 |
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23 |
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23 |
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24 |
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24 |
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24 |
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24 |
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24 |
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PART I — FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in
thousands, except per share amounts)
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|
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Three
Months Ended
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April
4,
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March
29,
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|
2009
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2008
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|
|
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(unaudited)
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|
Net
sales
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$ |
41,514 |
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|
$ |
54,836 |
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|
Cost
of sales
|
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|
31,619 |
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|
38,765 |
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Gross
margin
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9,895 |
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16,071 |
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Selling,
general and administrative expenses
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|
15,011 |
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|
16,269 |
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|
|
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|
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Loss
from operations
|
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|
(5,116 |
) |
|
|
(198 |
) |
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|
|
|
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Interest
expense, net
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|
1,578 |
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|
2,727 |
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Other
expense (income), net
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6 |
|
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|
(107 |
) |
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Loss
before income taxes
|
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|
(6,700 |
) |
|
|
(2,818 |
) |
|
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|
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Income
tax benefit
|
|
|
- |
|
|
|
(1,031 |
) |
|
|
|
|
|
|
|
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Net
loss
|
|
$ |
(6,700 |
) |
|
$ |
(1,787 |
) |
|
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|
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Net
loss per common share:
|
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|
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Basic
|
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$ |
(0.19 |
) |
|
$ |
(0.06 |
) |
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Diluted
|
|
$ |
(0.19 |
) |
|
$ |
(0.06 |
) |
|
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Weighted
average shares outstanding:
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|
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Basic
|
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|
35,200 |
|
|
|
28,730 |
|
|
|
|
|
|
|
|
|
|
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Diluted
|
|
|
35,200 |
|
|
|
28,730 |
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in
thousands except per share amounts)
|
|
|
|
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|
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April
4,
|
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January
3,
|
|
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2009
|
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2009
|
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(unaudited)
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ASSETS
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Current
assets:
|
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|
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Cash
and cash equivalents
|
|
$ |
16,274 |
|
|
$ |
19,628 |
|
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Accounts
receivable, net
|
|
|
17,070 |
|
|
|
17,321 |
|
|
Inventories
|
|
|
9,493 |
|
|
|
9,441 |
|
|
Deferred
income taxes
|
|
|
331 |
|
|
|
1,158 |
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Other
current assets
|
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|
6,071 |
|
|
|
5,569 |
|
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|
|
|
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Total
current assets
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|
49,239 |
|
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53,117 |
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Property,
plant and equipment, net
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71,422 |
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|
73,505 |
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Other
intangible assets, net
|
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|
71,286 |
|
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|
72,678 |
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Other
assets, net
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|
1,227 |
|
|
|
1,317 |
|
|
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|
|
|
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Total
assets
|
|
$ |
193,174 |
|
|
$ |
200,617 |
|
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LIABILITIES
AND SHAREHOLDERS' EQUITY
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Current
liabilities:
|
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Accounts
payable and accrued liabilities
|
|
$ |
14,400 |
|
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$ |
14,582 |
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Current
portion of long-term debt
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|
564 |
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|
330 |
|
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Total
current liabilities
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|
14,964 |
|
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|
14,912 |
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Long-term
debt
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|
89,778 |
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|
90,036 |
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|
Deferred
income taxes
|
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|
17,646 |
|
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|
18,473 |
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Other
liabilities
|
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|
2,718 |
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|
3,011 |
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Total
liabilities
|
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|
125,106 |
|
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|
126,432 |
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Commitments
and contingencies (note 10)
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Shareholders'
equity:
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Preferred
stock; par value $.01 per share; 10,000 shares authorized; none
outstanding
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|
- |
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|
- |
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Common
stock; par value $.01 per share; 200,000 shares authorized; 35,689
and
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35,392
shares issued and 35,204 and 35,197 shares outstanding at
|
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April
4, 2009 and January 3, 2009, respectively
|
|
|
352 |
|
|
|
352 |
|
|
Additional
paid-in-capital
|
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|
241,341 |
|
|
|
241,177 |
|
|
Accumulated
other comprehensive loss
|
|
|
(3,547 |
) |
|
|
(3,966 |
) |
|
Accumulated
deficit
|
|
|
(170,078 |
) |
|
|
(163,378 |
) |
|
|
|
|
|
|
|
|
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|
Total
shareholders' equity
|
|
|
68,068 |
|
|
|
74,185 |
|
|
|
|
|
|
|
|
|
|
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|
Total
liabilities and shareholders' equity
|
|
$ |
193,174 |
|
|
$ |
200,617 |
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
April
4,
|
|
|
March
29,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(6,700 |
) |
|
$ |
(1,787 |
) |
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
used
in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,704 |
|
|
|
2,793 |
|
|
Amortization
|
|
|
1,392 |
|
|
|
1,392 |
|
|
Stock-based
compensation
|
|
|
170 |
|
|
|
23 |
|
|
Excess
tax benefits from stock-based compensation plans
|
|
|
- |
|
|
|
(27 |
) |
|
Amortization
of deferred financing costs
|
|
|
93 |
|
|
|
76 |
|
|
Derivative
financial instruments
|
|
|
6 |
|
|
|
(107 |
) |
|
Loss
on disposal of assets
|
|
|
95 |
|
|
|
2 |
|
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
657 |
|
|
|
(405 |
) |
|
Inventories
|
|
|
(224 |
) |
|
|
(273 |
) |
|
Prepaid
expenses and other current assets
|
|
|
(548 |
) |
|
|
(2,189 |
) |
|
Accounts
payable, accrued and other liabilities
|
|
|
(412 |
) |
|
|
134 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(2,767 |
) |
|
|
(368 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment
|
|
|
(742 |
) |
|
|
(981 |
) |
|
Proceeds
from sales of equipment
|
|
|
27 |
|
|
|
13 |
|
|
Net
change in margin account for derivative financial
instruments
|
|
|
158 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(557 |
) |
|
|
(968 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds
from exercise of stock options
|
|
|
- |
|
|
|
38 |
|
|
Adjustment
to proceeds from issuance of common stock
|
|
|
(6 |
) |
|
|
- |
|
|
Payments
of capital leases
|
|
|
(24 |
) |
|
|
- |
|
|
Excess
tax benefits from stock-based compensation plans
|
|
|
- |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash (used in) provided by financing activities
|
|
|
(30 |
) |
|
|
65 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(3,354 |
) |
|
|
(1,271 |
) |
|
Cash
and cash equivalents at beginning of period
|
|
|
19,628 |
|
|
|
19,479 |
|
|
Cash
and cash equivalents at end of period
|
|
$ |
16,274 |
|
|
$ |
18,208 |
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE
1. BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements include the
accounts of PGT, Inc. and its wholly-owned subsidiary (collectively the
“Company”) after elimination of intercompany accounts and transactions. These
statements have been prepared in accordance with the instructions to Form 10-Q
and do not include all of the information and footnotes required by United
States Generally Accepted Accounting Principles (“GAAP”) for complete financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring accruals) considered necessary for a fair presentation have
been included. All significant intercompany accounts and transactions have been
eliminated in consolidation. Operating results for the interim period are not
necessarily indicative of the results that may be expected for the remainder of
the current year or for any future periods. Each of our Company’s
fiscal quarters ended April 4, 2009 and March 29, 2008 consisted of 13
weeks.
The
condensed consolidated balance sheet as of January 3, 2009 is derived from the
audited consolidated financial statements but does not include all disclosures
required by GAAP. This condensed consolidated balance sheet as of January 3,
2009 and the unaudited condensed consolidated financial statements included
herein should be read in conjunction with the more detailed audited consolidated
financial statements for the year ended January 3, 2009 included in the
Company’s most recent annual report on Form 10-K. Accounting
policies used in the preparation of these unaudited condensed consolidated
financial statements are consistent with the accounting policies described in
the Notes to Consolidated Financial Statements included in the Company’s
Form 10-K.
NOTE
2. RESTRUCTURINGS
On
January 13, 2009 and March 11, 2009, we announced further restructurings of the
Company as a result of continued analysis of our target markets, internal
structure, projected run-rate, and efficiency. The restructurings
resulted in a decrease in our workforce of approximately 250 employees and
included employees at both our Venice, Florida and Salisbury, North
Carolina locations. As a result of the restructurings, we recorded
restructuring charges totaling $3.0 million in the first quarter of 2009, of
which $1.4 million is classified within cost of goods sold and $1.6 million is
classified within selling, general and administrative expenses in the
accompanying condensed consolidated statement of operations for the three months
ended April 4, 2009. The charges related primarily to employee
separation costs.
The total
costs incurred for the restructurings in 2008 and 2007 were $2.1 million and
$2.4 million, respectively.
The
following table provides information with respect to our accrual for
restructuring costs:
|
Accrued
Restructuring Costs
|
|
Beginning
of Period
|
|
|
Charged
to Expense
|
|
|
Disbursed
in Cash
|
|
|
End
of Period
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended April 4, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
Restructuring
|
|
$ |
332 |
|
|
$ |
- |
|
|
$ |
(332 |
) |
|
$ |
- |
|
|
2009
Restructurings
|
|
|
- |
|
|
|
3,002 |
|
|
|
(2,599 |
) |
|
|
403 |
|
|
For
the three months ended April 4, 2009
|
|
$ |
332 |
|
|
$ |
3,002 |
|
|
$ |
(2,931 |
) |
|
$ |
403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended March 29, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
Restructuring
|
|
$ |
850 |
|
|
$ |
- |
|
|
$ |
(633 |
) |
|
$ |
217 |
|
|
2008
Restructuring
|
|
|
- |
|
|
|
1,752 |
|
|
|
(1,752 |
) |
|
|
- |
|
|
For
the three months ended March 29, 2008
|
|
$ |
850 |
|
|
$ |
1,752 |
|
|
$ |
(2,385 |
) |
|
$ |
217 |
|
NOTE
3. WARRANTY
We have
warranty obligations with respect to most of our manufactured products. Warranty
periods, which vary by product component, generally range from 1 to 10 years.
However, the majority of the products sold have warranties on components which
range from 1 to 3 years. The reserve for warranties is based on management’s
assessment of the cost per service call and the number of service calls expected
to be incurred to satisfy warranty obligations on recorded net sales. The
reserve is determined after assessing our warranty history and estimating our
future warranty obligations.
The
following table provides information with respect to our warranty
accrual:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
Charged
to
|
|
|
|
|
|
|
|
|
End
of
|
|
|
Accrued
Warranty
|
|
of Period
|
|
|
Expense
|
|
|
Adjustments
|
|
|
Settlements
|
|
|
Period
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended April 4, 2009
|
|
$ |
4,224 |
|
|
$ |
830 |
|
|
$ |
(50 |
) |
|
$ |
(790 |
) |
|
$ |
4,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
ended March 29, 2008
|
|
$ |
4,986 |
|
|
$ |
1,097 |
|
|
$ |
(172 |
) |
|
$ |
(1,076 |
) |
|
$ |
4,835 |
|
NOTE
4. INVENTORIES
Inventories
consist principally of raw materials purchased for the manufacture of our
products. We have limited finished goods inventory since all products are
custom, made-to-order products. Finished goods inventory costs include direct
materials, direct labor, and overhead. All inventories are stated at the lower
of cost (first-in, first-out method) or market value. Inventories
consisted of the following at:
|
|
|
|
|
|
|
|
|
|
|
April
4,
|
|
|
January
3,
|
|
|
|
|
2009
|
|
|
2009
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
Finished
goods
|
|
$ |
1,372 |
|
|
$ |
905 |
|
|
Work
in progress
|
|
|
350 |
|
|
|
342 |
|
|
Raw
materials
|
|
|
7,771 |
|
|
|
8,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,493 |
|
|
$ |
9,441 |
|
NOTE
5. STOCK COMPENSATION EXPENSE
We
account for stock-based compensation in accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment” (SFAS
123(R)). This statement is a fair-value based approach for measuring stock-based
compensation and requires us to recognize the cost of employee and non-employee
directors’ services received in exchange for our Company’s equity instruments.
Under SFAS 123(R), we are required to record compensation expense over an
award’s vesting period based on the award’s fair value at the date of
grant. We recorded compensation expense for stock based awards of
$0.2 million for the first three months of 2009 and less than $0.1 million
for the first three months of 2008. As of April 4, 2009, there was
$0.4 million and $0.5 million of total unrecognized compensation cost related to
non-vested stock option agreements and non-vested restricted share awards,
respectively. These costs are expected to be recognized in earnings on a
straight-line basis over the weighted average remaining vesting period of 1.5
years.
NOTE
6. NET LOSS PER COMMON SHARE
Net loss
per common share (“EPS”) is calculated in accordance with SFAS No. 128, “Earnings per Share”, which
requires the presentation of basic and diluted EPS. Basic EPS is computed using
the weighted average number of common shares outstanding during the period.
Diluted EPS is computed using the weighted average number of common shares
outstanding during the period, plus the dilutive effect of common stock
equivalents. Due to the net losses in each of the first three month
periods of 2009 and 2008, the effect of compensation plans is
anti-dilutive. Basic and diluted weighted average common shares
outstanding for the first three months of 2008 has been restated to give effect
to the market value premium included in the rights offering that ended on
September 4, 2008.
The table
below presents the calculation of EPS and a reconciliation of weighted average
common shares used in the calculation of basic and diluted EPS for our
Company:
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
April
4,
|
|
|
March
29,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(6,700 |
) |
|
$ |
(1,787 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares - Basic
|
|
|
35,200 |
|
|
|
28,730 |
|
|
Add: Dilutive
effect of stock compensation plans
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares - Diluted
|
|
|
35,200 |
|
|
|
28,730 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
(0.19 |
) |
|
$ |
(0.06 |
) |
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$ |
(0.19 |
) |
|
$ |
(0.06 |
) |
NOTE
7. OTHER INTANGIBLE ASSETS
Other
intangible assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Original
|
|
|
|
|
April
4,
|
|
|
January
3,
|
|
|
Useful
Life
|
|
|
|
|
2009
|
|
|
2009
|
|
|
(in
years)
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
Other
intangible assets:
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
$ |
44,400 |
|
|
$ |
44,400 |
|
|
indefinite
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
relationships
|
|
|
55,700 |
|
|
|
55,700 |
|
|
|
10
|
|
|
Less: Accumulated
amortization
|
|
|
(28,814 |
) |
|
|
(27,422 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
26,886 |
|
|
|
28,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
intangible assets, net
|
|
$ |
71,286 |
|
|
$ |
72,678 |
|
|
|
|
|
Indefinite Lived Intangible
Asset
The
impairment evaluation for indefinite lived intangible assets, which for the
Company are its trademarks, is conducted at the end of each fiscal year, or more
frequently if events or changes in circumstances indicate that an asset might be
impaired. The determination of fair value used in the impairment evaluation is
based on discounted estimates of future projected cost savings attributable to
ownership of the trademarks. The assumptions used in the estimate of
fair value are generally consistent with past performance and are also
consistent with the projections and assumptions used in current operating
plans. Such assumptions are subject to change as a result of changing
economic and competitive conditions. The determination of fair value
is highly sensitive to changes in estimated future cash flows and changes in the
discount rate used to evaluate the fair value of the trademarks. Estimated cash
flows are sensitive to changes in the Florida housing market and changes in the
economy, among other things.
As a
result of impairment indicators related to the weakness in the housing market we
identified during the second quarter of 2008, the Company evaluated its
intangible assets with indefinite lives for impairment and compared the
estimated fair value of its trademarks to their carrying value and preliminarily
determined that there was no impairment. During the third quarter of
2008, as part of finalizing its second quarter impairment tests, the Company
made certain changes to its projections that affected the previous estimate of
fair value and, when compared to the carrying value of indefinite lived
intangibles, resulted in a $0.3 million impairment charge in the third quarter
of 2008. We performed our annual assessment of our trademarks as of
January 3, 2009. Given a further decline in housing starts and the overall
tightening of the credit markets, our revised forecasts indicated additional
impairment was present, resulting in an additional impairment charge of $17.8
million in the fourth quarter of 2008. After impairment charges totaling $18.1
million in 2008, intangible assets not subject to amortization totaled $44.4
million at April 4, 2009. We concluded that no events or changes in
circumstances occurred during the first three months of 2009 that would indicate
that our trademarks are further impaired or that an impairment test was
required.
Amortizable Intangible
Asset
As a
result of the impairment indicators described above, during the second quarter
of 2008 and again as of January 3, 2009, we tested our amortizable intangible
asset, which is our customer relationships intangible asset, for impairment by
comparing the estimated future undiscounted net cash flows expected to be
generated by the asset group containing this asset to its carrying value and
determined that there was no impairment.
NOTE
8. LONG-TERM DEBT
On
February 14, 2006, we entered into a second amended and restated
$235 million senior secured credit facility and a $115 million second
lien term loan due August 14, 2012, with a syndicate of banks. The senior
secured credit facility is composed of a $30 million revolving credit
facility and, initially, a $205 million first lien term loan. As of April
4, 2009, there was $25.2 million available under the revolving credit
facility.
On April
30, 2008, we announced that we entered into an amendment to the credit
agreement. The amendment, among other things, relaxed certain
financial covenants through the first quarter of 2010, increased the applicable
rate on loans and letters of credit, and set a LIBOR floor. The
effectiveness of the amendment was conditioned, among other things, on the
repayment of at least $30 million of loans under the credit agreement no later
than August 14, 2008, of which no more than $15 million was permitted to come
from cash on hand. In June 2008, the Company used cash generated from
operations to prepay $10 million of outstanding borrowings under the credit
agreement.
On August
1, 2008, the Company filed Amendment No. 1 to the Registration Statement on Form
S-3 filed on March 28, 2008 relating to a previously announced offering of
rights to purchase 7,082,687 shares of the Company’s common stock with an
aggregate value of approximately $30 million. The registration
statement relating to the rights offering was declared effective by the United
States Securities and Exchange Commission on August 4, 2008, and the Company
distributed to each holder of record of the Company’s common stock as of close
of business on August 4, 2008, at no charge, one non-transferable subscription
right for every four shares of common stock held by such holder under the basic
subscription privilege. Each whole subscription right entitled its
holder to purchase one share of PGT’s common stock at the subscription price of
$4.20 per share. The rights offering expired on September 4,
2008.
The
rights offering was fully subscribed resulting in the Company distributing all
7,082,687 shares of its common stock available. Net proceeds of $29.3
million from the rights offering were used to repay a portion of the outstanding
indebtedness under our amended credit agreement.
Using
proceeds from a rights offering, the Company made an additional prepayment of
$20 million on August 11, 2008, bringing total prepayments of debt at that time
to $30 million as required under the amended credit agreement. Having
made the total required prepayment and having satisfied all other conditions to
bring the amendment into effect, including the payment of the fees and expenses
of the administrative agent and a consent fee to participating lenders of 25
basis points of the then outstanding balance under the credit agreement of $100
million, the amendment became effective on August 11, 2008. Fees paid
to the administrative agent and lenders totaled $0.6 million and have been
deferred, and the unamortized balance of $0.5 million is included in other
assets on the accompanying condensed consolidated balance sheet as of April 4,
2009. Such fees are being amortized on a straight-line basis, which
approximates the effective interest method, over the remaining term of the
credit agreement.
Under the
amendment, the first lien term loan bears interest at a rate equal to an
adjusted LIBOR rate plus a margin ranging from 3.5% per annum to 5% per annum or
a base rate plus a margin ranging from 2.5% per annum to 4.0% per annum, at our
option. The margin in either case is dependent on our leverage
ratio. The loans under the revolving credit facility bear interest at
a rate equal to an adjusted LIBOR rate plus a margin depending on our leverage
ratio ranging from 3.0% per annum to 4.75% per annum or a base rate plus a
margin ranging from 2.0% per annum to 3.75% per annum, at our
option. The amendment established a floor of 3.25% for adjusted
LIBOR.
A
commitment fee equal to 0.50% per annum accrues on the average daily unused
amount of the commitment of each lender under the revolving credit facility and
such fee is payable quarterly in arrears. We are also required to pay certain
other fees with respect to the senior secured credit facility including
(i) letter of credit fees on the aggregate undrawn amount of outstanding
letters of credit plus the aggregate principal amount of all letter of credit
reimbursement obligations, (ii) a fronting fee to the letter of credit
issuing bank and (iii) administrative fees.
The first
lien term loan is secured by a perfected first priority pledge of all of the
equity interests of our subsidiary and perfected first priority security
interests in and mortgages on substantially all of our tangible and intangible
assets subject to such exceptions as are agreed. The senior secured credit
facility contains a number of covenants that, among other things, restrict our
ability and the ability of our subsidiary to (i) dispose of assets;
(ii) change our business; (iii) engage in mergers or consolidations;
(iv) make certain acquisitions; (v) pay dividends or repurchase or
redeem stock; (vi) incur indebtedness or guarantee obligations and issue
preferred and other disqualified stock; (vii) make investments and loans;
(viii) incur liens; (ix) engage in certain transactions with
affiliates; (x) enter into sale and leaseback transactions; (xi) issue
stock or stock options under certain conditions; (xii) amend or prepay
subordinated indebtedness and loans under the second lien secured credit
facility; (xiii) modify or waive material documents; or (xiv) change
our fiscal year. In addition, under the senior secured credit facility, we are
required to comply with specified financial ratios and tests, including a
minimum interest coverage ratio, a maximum leverage ratio, and maximum capital
expenditures.
Contractual
future maturities of long-term debt outstanding as of April 4, 2009 are as
follows (in thousands):
|
Remainder
of 2009
|
|
$ |
306 |
|
|
2010
|
|
|
1,033 |
|
|
2011
|
|
|
1,041 |
|
|
2012
|
|
|
87,962 |
|
|
|
|
|
|
|
|
Total
|
|
$ |
90,342 |
|
During
2008, we prepaid $40.0 million of long-term debt with cash generated from
operations and from the net proceeds of the rights offering, which totaled $29.3
million.
On an
annual basis, our Company is required to compute excess cash flow, as defined in
our credit and security agreement with the bank. In periods where there is
excess cash flow, our Company is required to make prepayments in an aggregate
principal amount determined through reference to a grid based on the leverage
ratio. No such prepayments were required for the year ended January 3, 2009. The
term note and line of credit require that our Company also maintain compliance
with certain restrictive financial covenants, the most restrictive of which
requires our Company to maintain a total leverage ratio, as defined in the
credit agreement, as amended, of not greater than certain predetermined amounts.
Our Company was in material compliance with all restrictive financial covenants
as of April 4, 2009.
NOTE
9. COMPREHENSIVE LOSS AND ACCUMULATED OTHER COMPREHENSIVE
(LOSS) INCOME
The
following table shows the components of comprehensive loss for the three month
periods ended April 4, 2009 and March 29, 2008:
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
April
4,
|
|
|
March
29,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(in
thousands)
|
|
|
Net
loss
|
|
$ |
(6,700 |
) |
|
$ |
(1,787 |
) |
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
Change
related to interest rate swap, net of
|
|
|
|
|
|
|
|
|
|
tax expense of $28 for the three months
|
|
|
|
|
|
|
|
|
|
ended March 29, 2008
|
|
|
- |
|
|
|
46 |
|
|
Change
related to forward contracts for
|
|
|
|
|
|
|
|
|
|
aluminum, net of tax expense of $0 and $390
|
|
|
|
|
|
|
|
|
|
for the three month periods ended April 4, 2009
|
|
|
|
|
|
|
|
|
|
and March 29, 2008, respectively
|
|
|
419 |
|
|
|
609 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss
|
|
$ |
(6,281 |
) |
|
$ |
(1,132 |
) |
The
following table shows the components of accumulated other comprehensive income
(loss) for the three month periods ended April 4, 2009 and March 29,
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aluminum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward
|
|
|
Valuation
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
Contracts
|
|
|
Allowance
|
|
|
Total
|
|
|
Balance
at January 3, 2009
|
|
|
|
|
$ |
(2,584 |
) |
|
$ |
(1,382 |
) |
|
$ |
(3,966 |
) |
|
Changes
in fair value
|
|
|
|
|
|
(977 |
) |
|
|
- |
|
|
|
(977 |
) |
|
Reclassification
to earnings
|
|
|
|
|
|
1,396 |
|
|
|
- |
|
|
|
1,396 |
|
|
Tax
effect
|
|
|
|
|
|
(343 |
) |
|
|
343 |
|
|
|
- |
|
|
Balance
at April 4, 2009
|
|
|
|
|
$ |
(2,508 |
) |
|
$ |
(1,039 |
) |
|
$ |
(3,547 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aluminum
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
|
|
|
Forward
|
|
|
Valuation
|
|
|
|
|
|
|
(in
thousands)
|
|
Swap
|
|
|
Contracts
|
|
|
Allowance
|
|
|
Total
|
|
|
Balance
at December 29, 2007
|
|
$ |
(46 |
) |
|
$ |
(377 |
) |
|
$ |
- |
|
|
$ |
(423 |
) |
|
Changes
in fair value
|
|
|
74 |
|
|
|
1,063 |
|
|
|
- |
|
|
|
1,137 |
|
|
Reclassification
to earnings
|
|
|
- |
|
|
|
(64 |
) |
|
|
- |
|
|
|
(64 |
) |
|
Tax
effect
|
|
|
(28 |
) |
|
|
(390 |
) |
|
|
- |
|
|
|
(418 |
) |
|
Balance
at March 29, 2008
|
|
$ |
- |
|
|
$ |
232 |
|
|
$ |
- |
|
|
$ |
232 |
|
NOTE
10. COMMITMENTS AND CONTINGENCIES
Litigation
Our
Company is a party to various legal proceedings in the ordinary course of
business. Although the ultimate disposition of those proceedings cannot be
predicted with certainty, management believes the outcome of any claim that is
pending or threatened, either individually or in the aggregate, will not have a
materially adverse effect on our operations, financial position or cash
flows.
NOTE
11. INCOME TAXES
The
Company adopted the provisions of Financial Accounting Standards Board (FASB)
Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109, Accounting for Income
Taxes”, on January 1, 2007. We did not recognize any material
liability for unrecognized tax benefits in conjunction with our FIN 48
implementation, and there were no changes to our unrecognized tax benefits
during 2008 or the first three months of 2009. However, should we accrue for
such liabilities if they arise in the future, we will recognize interest and
penalties associated with uncertain tax positions as part of our income tax
provision.
In 2008,
we established a valuation allowance to reduce our net deferred tax assets,
excluding the $17.3 million deferred tax liability related to trademarks to
zero. Driven by the goodwill and other intangible impairment charges
recorded in 2008 totaling $187.7 million, our cumulative losses over the last
three fiscal years, as well as the significant downturn in our primary industry
of home construction, we concluded that sufficient negative evidence existed
that it was deemed more likely than not future taxable income will not be
sufficient to realize the related income tax benefits. Of the $8.1
million valuation allowance at April 4, 2009, $1.0 million was allocated to
accumulated other comprehensive loss in the accompanying consolidated balance
sheet at that date to offset the tax benefit that is recorded in accumulated
other comprehensive loss.
We had an
effective tax rate of zero for the three months ended April 4, 2009 and an
effective tax rate of 36.6% for the three months ended March 29,
2008. Deferred tax assets created as a result of generating
additional net operating loss carry-forwards in the first three months of 2009
were offset by an increase in the valuation allowance for deferred tax
assets. Excluding the change in the valuation allowance, the
effective tax rate in the first three months would have been a benefit of
38.5%.
NOTE
12. DERIVATIVE FINANCIAL INSTRUMENTS
We enter
into aluminum forward contracts to hedge fluctuations in the purchase price of
aluminum extrusion we use in production. At April 4, 2009, we had 58
outstanding forward contracts for the purchase of 12.7 million pounds of
aluminum at an average price of $0.97 per pound with maturity dates of between
one month and fifteen months through June 2010. These contracts are
designated as cash flow hedges since they are highly effective in offsetting
changes in cash flow attributable to forecasted purchases of aluminum. These
aluminum hedges were in a liability position at April 4, 2009 and had a fair
value of $3.4 million. We maintain a line of credit of $0.4
million with our commodities broker to cover the liability position of open
contracts for the purchase of aluminum in the event that the price of aluminum
falls. Should the price of aluminum fall to a level which causes our
liability for open aluminum contracts to exceed $0.4 million, we must fund daily
margin calls to cover the excess. We believe this mitigates
non-performance risk as it places a limit on the amount of the liability for
open contracts such that an impact, if any, on the fair value of the liability
due to consideration of non-performance risk would not be significant. We assess
our risk of non-performance when measuring the fair value of our financial
instruments in a liability position by evaluating our current liquidity,
including cash on hand and availability under our revolving credit facility, as
compared to the maturities of the financial liabilities. In addition,
we entered into a master netting arrangement (MNA) with our commodities broker
that provides for, among other things, the close-out netting of exchange-traded
transactions in the event of the insolvency of either party to the
MNA.
As of
April 4, 2009, we had $3.5 million of cash on deposit with our commodities
broker related to funding of margin calls on open forward contracts for the
purchase of aluminum in a liability position. We net cash collateral
from payments of margin calls on deposit with our commodities broker against the
liability position of open contracts for the purchase of aluminum on a first-in,
first-out basis. The net asset position of $0.1 million on April 4,
2009 is included in other current assets in the accompanying consolidated
balance sheet as of that date. For statement of cash flows presentation, we
present net cash receipts from and payments to the margin account as investing
activities.
The fair
value of our aluminum hedges under SFAS 133, “Accounting for Derivative Instruments and Hedging
Activities” are classified in the accompanying condensed consolidated
balance sheets as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
April
4,
|
|
|
January
3,
|
|
|
|
|
|
2009
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in a liability
position
|
Balance Sheet Location
|
|
|
|
|
|
|
|
Hedging
instruments under SFAS 133:
|
|
|
|
|
|
|
|
|
Aluminum
forward contracts
|
Other
current assets
|
|
$ |
(3,355 |
) |
|
$ |
- |
|
|
Aluminum
forward contracts
|
Other
liabilities
|
|
|
- |
|
|
|
(4,236 |
) |
|
Cash
on deposit related to payments of margin calls
|
Other
current assets
|
|
|
3,478 |
|
|
|
- |
|
|
Cash
on deposit related to payments of margin calls
|
Other
liabilities
|
|
|
- |
|
|
|
4,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
hedging instruments under SFAS 133
|
|
|
$ |
123 |
|
|
$ |
(138 |
) |
Our
aluminum hedges qualify as highly effective for reporting
purposes. Effectiveness of aluminum forward contracts is determined
by comparing the change in the fair value of the forward contract to the change
in the expected cash to be paid for the hedged item. At April 4,
2009, these contracts were designated as effective. The effective portion of the
gain or loss on our aluminum forward contracts is reported as a component of
other comprehensive income and is reclassified into earnings in the same line
item in the income statement as the hedged item in the same period or periods
during which the transaction affects earnings. For the three month periods ended
April 4, 2009 and March 29, 2008, no amounts were reclassified to earnings
because it is probable that the original forecasted transactions will
occur. The ending accumulated balance for the aluminum forward contracts
included in accumulated other comprehensive loss is $3.8 million as of
April 4, 2009, of which $3.0 million is expected to be reclassified to earnings
in the next twelve months based on scheduled settlement dates of the related
contracts. The following represents the gains (losses) on derivative financial
instruments for the first three months of 2009 and 2008, and their
classifications within the accompanying condensed consolidated financial
statements (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
of Gain or (Loss) Recognized in OCI on Derivatives (Effective
Portion)
|
|
Location
of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective
Portion)
|
|
Amount
of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective
Portion)
|
|
Location
of Gain or (Loss) Recognized in Income on Derivatives (Ineffective
Portion)
|
|
Amount
of Gain or (Loss) Recognized in Income on Derivatives (Ineffective
Portion)
|
|
|
|
|
Three
Months Ended
|
|
|
|
Three
Months Ended
|
|
|
|
Three
Months Ended
|
|
|
|
|
April
4,
|
|
|
March
29,
|
|
|
|
April
4,
|
|
|
March
29,
|
|
|
|
April
4,
|
|
|
March
29,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
2009
|
|
|
2008
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in SFAS 133 Cash Flow Hedging
Relationships
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aluminum
contracts
|
|
$ |
(977 |
) |
|
$ |
673 |
|
Cost
of sales
|
|
$ |
(1,396 |
) |
|
$ |
64 |
|
Other
expense
|
|
$ |
(6 |
) |
|
$ |
107 |
|
|
Interest
rate swap
|
|
|
- |
|
|
|
46 |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(977 |
) |
|
$ |
719 |
|
|
|
$ |
(1,396 |
) |
|
$ |
64 |
|
|
|
$ |
(6 |
) |
|
$ |
107 |
|
Aluminum
forward contracts identical to those held by the Company trade on the London
Metals Exchange (“LME”). The LME provides a transparent forum and is
the world's largest center for the trading of futures contracts for non-ferrous
metals and plastics. The trading is highly liquid and, therefore, the
metals industry has a high degree of confidence that the trade pricing properly
reflects current supply and demand. The prices are used by the metals
industry worldwide as the basis for contracts for the movement of physical
material throughout the production cycle. Based on this high degree
of volume and liquidity in the LME and the transparency of the market
participants, the valuation price at any measurement date for contracts with
identical terms as to prompt date, trade date and trade price as those we hold
at any time we believe represents a contract's exit price to be used for
purposes of SFAS 157, “Fair Value
Measurements”. Trade pricing is based on valuation model
inputs that can generally be verified but which require some degree of
judgment. Therefore, we categorize these aluminum forward contracts
as being valued using Level 2 inputs as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value Measurements at Reporting Date
|
|
|
|
|
of
Asset (Liability) Using:
|
|
|
|
|
|
|
|
Quoted
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
|
Prices
in
|
|
|
Other
Observable
|
|
|
Unobservable
|
|
|
|
|
April
4,
|
|
|
Active
Markets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Description
|
|
2009
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward
contracts for aluminum
|
|
$ |
(3,355 |
) |
|
$ |
- |
|
|
$ |
(3,355 |
) |
|
$ |
- |
|
|
Cash
on deposit related to payments of margin calls
|
|
|
3,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward
contracts for aluminum, net asset
|
|
$ |
123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE
13. RECENTLY ADOPTED AND ISSUED ACCOUNTING
PRONOUNCEMENTS
In
September 2006, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 157, “Fair
Value Measurements” (SFAS 157). SFAS 157 defines fair value, establishes
a framework for measuring fair value, and expands disclosures about fair value
measurements. We partially adopted SFAS 157 on January 1, 2008, as required
for our financial assets and financial liabilities. However, the FASB deferred
the effective date of SFAS 157 for one year as it relates to fair value
measurement requirements for non-financial assets and non-financial liabilities
that are not recognized or disclosed at fair value on a recurring basis. We
adopted these remaining provisions of SFAS 157 on January 4, 2009. The
adoption of SFAS 157 did not have a material impact on our consolidated
financial statements.
SFAS 141
(revised 2007), “Business Combinations” was
issued in December 2007. SFAS 141R establishes principles and requirements
for how the acquirer of a business recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree. SFAS 141R also provides guidance
for recognizing and measuring the goodwill acquired in the business combination
and determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. SFAS 141R was effective for us in our fiscal year beginning
January 4, 2009. We will apply the provisions of SFAS 141R to future
acquisitions, if any.
In March
2008, the FASB issued SFAS 161, “Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133”. SFAS 161 requires entities that utilize derivative
instruments to provide qualitative disclosures about their objectives and
strategies for using such instruments, as well as any details of
credit-risk-related contingent features contained within
derivatives. SFAS 161 also requires entities to disclose additional
information about the amounts and location of derivatives located within the
financial statements, how the provisions of SFAS 133 have been applied, and the
impact that hedges have on an entity’s financial position, financial
performance, and cash flows. SFAS 161 is effective for fiscal years
and interim periods beginning after November 15, 2008, with early application
encouraged. We adopted SFAS 161 effective on January 4, 2009 and have
provided the required information in Note 12.
In April
2008, the FASB issued Financial Staff Position (FSP) 142-3, “Determination of the Useful Life of
Intangible Assets”, (FSP 142-3). FSP 142-3 amends the factors that should
be considered in developing renewal or extension assumptions used to determine
the useful life of a recognized intangible asset under SFAS 142, “Goodwill and Other Intangible
Assets”. FSP 142-3 is effective for fiscal years beginning after December
15, 2008. We adopted SFAS FSP 143-3 effective on January 4, 2009 with
no impact on our consolidated financial position and results of
operations.
NOTE
14. COLLABORATIVE ARRANGEMENT
In view
of the risks and costs associated with developing new products and our desire to
expand our markets by providing quality unitized curtain wall solutions to the
commercial building industry, we entered into a collaborative arrangement with
another company with extensive experience in sales, marketing, engineering and
project management of unitized curtain wall solutions and in which costs,
revenues and risks are shared. We are not the principal participant in this
arrangement. Our obligation under this arrangement is to provide manufacturing
expertise, including providing the operating entity with labor for assembly and
fabrication of the unitized curtain wall units. We earn revenues and
incur costs from this activity based on the number of hours of labor
provided. We also record a percentage of the joint operating
activity’s profit or loss as revenue, which was insignificant in the first three
months of 2009. As of April 4, 2009, each collaborators’ interest was
50 percent.
The
following table illustrates the income statement classification and amounts
attributable to transactions arising from the collaborative arrangements between
participants for each period presented:
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
April
4,
|
|
|
March
29,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
(unaudited)
|
|
|
Collaborator
share of revenues:
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
1,324 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Collaborator
share of costs:
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
$ |
797 |
|
|
$ |
- |
|
|
Selling,
general and administrative
|
|
|
134 |
|
|
|
- |
|
In
November 2007, the EITF issued EITF 07-1, “Accounting for Collaborative
Arrangements”. This Issue is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years, and must be applied retrospectively to all prior
periods presented for all collaborative arrangements existing as of the
effective date. This Issue requires that participants in a collaborative
arrangement report costs incurred and revenues generated on a gross or net basis
and in the appropriate line items in each company’s financial statements
pursuant to the guidance in EITF Issue No. 99-19, “Reporting Revenue Gross as a
Principal versus Net as an Agent.” This Issue also requires disclosure of
the nature and purpose of the participant’s collaborative arrangements, the
participant’s rights and obligations under these arrangements, the accounting
policy for collaborative arrangements, the income statement classification and
amounts attributable to transactions arising from collaboration arrangements
between participants, and the disclosure related to individually significant
collaborative arrangements. We adopted EITF 07-1 as of January 4,
2009.
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
The
following discussion of our financial condition and results of operations should
be read in conjunction with the Management’s Discussion and Analysis of
Financial Condition and Results of Operations and the consolidated financial
statements and notes thereto for the year ended January 3, 2009 included in our
most recent annual report on Form 10-K.
Special
Note Regarding Forward-Looking Statements
This
document includes forward-looking statements regarding, among other things, our
financial condition and business strategy. Forward-looking statements provide
our current expectations and projections about future events. Forward-looking
statements include statements about our expectations, beliefs, plans,
objectives, intentions, assumptions, and other statements that are not
historical facts. As a result, all statements other than statements of
historical facts included in this discussion and analysis and located elsewhere
in this document regarding the prospects of our industry and our prospects,
plans, financial position, and business strategy may constitute forward-looking
statements within the meaning of Section 21E of the Exchange Act. In addition,
forward-looking statements generally can be identified by the use of
forward-looking terminology such as “may,” “could,” “expect,” “intend,”
“estimate,” “anticipate,” “plan,” “foresee,” “believe,” or “continue,” or the
negatives of these terms or variations of them or similar terminology, but the
absence of these words does not necessarily mean that a statement is not
forward-looking.
Forward-looking
statements are subject to known and unknown risks and uncertainties and are
based on potentially inaccurate assumptions that could cause actual results to
differ materially from those expected or implied by the forward-looking
statements. Although we believe that the expectations reflected in these
forward-looking statements are reasonable, we can give no assurance that these
expectations will occur as predicted. All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by the cautionary statements included
in this document. These forward-looking statements speak only as of the date of
this report. We undertake no obligation to publicly update or revise any
forward-looking statement to reflect circumstances or events after the date of
this report or to reflect the occurrence of unanticipated events, except as may
be required by applicable securities laws.
Risks
associated with our business, an investment in our securities, and with
achieving the forward-looking statements contained in this report or in our news
releases, Web sites, public filings, investor and analyst conferences or
elsewhere, include, but are not limited to, the risk factors described in our
most recent Annual Report on Form 10-K filed with the Securities and Exchange
Commission. Any of the risk factors described therein could cause our actual
results to differ materially from expectations and could have a material adverse
effect on our business, financial condition or results of operations. We may not
succeed in addressing these challenges and risks.
Current
Operating Conditions and Outlook
In the
first three months of 2009, new housing permits in Florida decreased 50%
compared to the first three months of 2008 and were down 24% from the
fourth quarter of 2008. Also, in the third quarter of 2008, the
availability of credit decreased significantly as the mortgage crisis
widened. The federal stimulus package has injected much needed
liquidity into the economy, and we recently have seen some positive
signs which may suggest that the economy is stabilizing, such as an
increase in housing starts in April 2009 and signs of rising builder and
consumer confidence. Also, the decline in home values slowed and
stock prices surged since March 2009. However, we believe the
continued uncertainty and negative effects on consumer confidence due to the
continued rise in unemployment mean the home construction industry is still
facing a long recovery period.
In
response to the deterioration in the housing market, we have taken a number of
steps to enhance profitability and conserve capital. As
discussed in “Other Developments – Restructurings” below, we adjusted our
operating cost structure to more closely align with current
demand. In addition, we decreased our capital spending in 2008 and
have further restricted capital spending in the first three months of
2009. However, we also view this market downturn as an opportunity to
gain market share from our competitors. For instance, we increased
marketing and sales efforts in areas outside of our dominant markets, including
northern Florida, the Gulf Coast and the Carolinas and other southeastern states
resulting in incremental sales outside of Florida compared to last
year. Also, we introduced new products in early 2009 and expanded
product lines to broaden our product offering. As a result of
these actions, we continue to outperform the underlying market. However,
gross margins have declined to 23.8% in the first three months of 2009 from
29.3% in the first three months of 2008 due, mainly, to the impact of the loss
of operating leverage against fixed costs from a decline in sales and
restructuring costs.
While the
homebuilding industry is in a down cycle, we still believe the long-term outlook
for the industry is positive due to growth in the underlying demographics. At
this point, it appears as though the housing market has not yet hit bottom.
Despite these unfavorable market conditions, we still believe that, in the
long-term, we can grow organically by gaining market share and outperforming our
underlying markets. However, we believe difficult market conditions affecting
our business will continue, and the recent downturn in the economy as a
result if the mortgage crisis may further negatively effect on our
operating results and year-over-year comparisons.
Economic
conditions continued to deteriorate in the United States during the first three
months of 2009, and the housing industry, most notably in the
Company’s primary market of Florida, continues to be in a period of prolonged
deterioration. These conditions may persist and remain depressed for the
foreseeable future. Economic conditions have been negatively
impacted by slowing growth and the mortgage crisis ultimately causing
liquidity and credit concerns. Continuing adverse economic conditions in our
markets could likely negatively impact our business, which could result in
reduced demand for our products, increased price competition, increased risk in
the collectibility of cash from our customers potentially resulting in increased
reserves for doubtful accounts and write-offs of accounts receivable, and higher
operating costs. If economic conditions deteriorate further, we may
experience adverse impacts on our business, operating results and financial
condition.
Other
Developments
Restructurings
On
January 13, 2009 and March 11, 2009, we announced further restructurings of the
Company as a result of continued analysis of the Company’s target markets,
internal structure, projected run-rate, and efficiency. The
restructurings resulted in a decrease in the Company’s workforce of
approximately 250 employees and included employees at both its Venice, Florida
and Salisbury, North Carolina locations. As a result of the
restructurings, the Company recorded restructuring charges totaling $3.0 million
in the first quarter of 2009, of which $1.4 million is classified within cost of
goods sold and $1.6 million is classified within selling, general and
administrative expenses in the accompanying condensed consolidated statement of
operations for the three months ended April 4, 2009. The charges
relate primarily to employee separation costs.
Selected
Financial Data
In the
following table, we show financial data derived from our unaudited statements of
operations as a percentage of total revenues for the periods
indicated.
|
|
|
Three
Months Ended
|
|
|
|
|
April
4,
|
|
|
March
29,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
Net
sales
|
|
|
100.0% |
|
|
|
100.0% |
|
|
Cost
of sales
|
|
|
76.2% |
|
|
|
70.7% |
|
|
Gross
margin
|
|
|
23.8% |
|
|
|
29.3% |
|
|
Selling,
general and administrative expenses
|
|
|
36.2% |
|
|
|
29.7% |
|
|
Loss
from operations
|
|
|
(12.4% |
) |
|
|
(0.4% |
) |
|
Interest
expense, net
|
|
|
3.8% |
|
|
|
5.0% |
|
|
Other
expense (income), net
|
|
|
- |
|
|
|
(0.2% |
) |
|
Loss
before income taxes
|
|
|
(16.2% |
) |
|
|
(5.2% |
) |
|
Income
tax benefit
|
|
|
- |
|
|
|
(1.9% |
) |
|
Net
loss
|
|
|
(16.2% |
) |
|
|
(3.3% |
) |
RESULTS
OF OPERATIONS FOR QUARTER ENDED APRIL 4, 2009 AND MARCH 29, 2008
Net
sales
Net sales
decreased nearly $13.3 million, or 24.3%, in the first quarter of 2009, compared
to the 2008 first quarter. Net sales for the first quarter of 2009
were $41.5 million, compared with net sales of $54.8 million for the first
quarter of 2008. The following table shows net sales classified by
major product category (sales in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
April
4, 2009
|
|
|
March
29, 2008
|
|
|
|
|
|
|
|
Sales
|
|
|
%
of sales
|
|
|
Sales
|
|
|
%
of sales
|
|
|
%
change
|
|
|
Product
category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WinGuard
Windows and Doors
|
|
$ |
27.7 |
|
|
|
66.7% |
|
|
$ |
38.7 |
|
|
|
70.6% |
|
|
|
(28.4%)
|
|
|
Other
Window and Door Products
|
|
|
13.8 |
|
|
|
33.3% |
|
|
|
16.1 |
|
|
|
29.4% |
|
|
|
(14.4%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
net sales
|
|
$ |
41.5 |
|
|
|
100.0% |
|
|
$ |
54.8 |
|
|
|
100.0% |
|
|
|
(24.3%)
|
|
Net sales
of WinGuard branded products were $27.7 million for the first quarter of 2009, a
decrease of $11.0 million, or 28.4%, from $38.7 million in net sales for the
2008 first quarter. Demand for WinGuard branded products is driven
by, among other things, increased enforcement of strict building codes mandating
the use of impact-resistant products, increased consumer and homebuilder
awareness of the advantages provided by impact-resistant windows and doors over
“active” forms of hurricane protection, and our successful marketing
efforts. The decrease in sales of our WinGuard branded products was
driven mainly by the decline in new home and repair and remodeling construction
but also to some extent by the lack of storm activity during the two most recent
hurricane seasons in the coastal markets of Florida served by the
Company.
Net sales
of Other Window and Door Products were $13.8 million for the first quarter of
2009, a decrease of $2.3 million, or 14.4%, from $16.1 million in net sales for
the 2008 first quarter. The decrease was mainly due to the decline in
the housing industry, partially offset by increases due to new
product introductions, the sales related to unitized curtain wall, and increased
sales in markets outside of the state of Florida.
Gross
margin
Gross
margin was $9.9 million, or 23.8% of sales, for the first quarter of 2009, a
decrease of $6.2 million, or 38.4%, from $16.1 million, or 29.3% of sales, for
the first quarter of 2008. This decrease was largely due to lower sales volumes
of all of our products and the resulting loss of operating
leverage against fixed costs, a change in mix and slight decrease in pricing,
partially offset by spending reductions as a result of our cost savings
initiatives. There were restructuring charges in cost of goods sold
in each period of $1.4 million in the first quarter of 2009 and $1.1 million in
the first quarter of 2008. Adjusting for these charges, gross margin
was $11.3 million, or 27.1% of sales, for the first quarter of 2009, compared to
$17.2 million, or 31.3% of sales, for the first quarter of 2008, mainly due to
the loss of leverage from the decrease in sales.
Selling,
general and administrative expenses
Selling,
general and administrative expenses were $15.0 million for the first quarter of
2009, a decrease of $1.3 million, from $16.3 million for the 2008 first
quarter. There were restructuring charges in selling, general and
administrative expenses in each period of $1.6 million in the first quarter of
2009 and $0.7 million in the first quarter of 2008. Adjusting for
these charges, selling, general and administrative expenses were $13.4 million
for the first quarter of 2009, compared to $15.6 million for the first quarter
of 2008, a decrease of $2.2 million. This decrease was mainly due to a $1.9
million decrease in personnel related costs as the result of the cost saving
actions, a $0.5 million decrease in marketing and advertising costs and a $0.3
million decrease in fuel costs. These cost savings were partially
offset by a $0.4 million increase in bad debt expense. As a
percentage of sales, adjusted selling, general and administrative expenses
increased during the first quarter of 2009 to 32.2% compared to 28.5% for the
first quarter of 2008, mainly due to the loss of leverage from the decrease in
sales.
Interest
expense, net
Interest
expense, net was $1.6 million in the first quarter of 2009, a decrease of $1.1
million, from $2.7 million for the first quarter of 2008. The
decrease was due to a lower level of debt during the first quarter of 2009
compared to the first quarter of 2008 as the result of the prepayment of $40
million debt over the second and third quarters of 2008, and a lower interest
rate on our debt which was an average of 6.3% during the first quarter of 2009,
compared to an average of 8.1% during the first quarter of 2008.
Other
expense (income), net
There was
other expense of less than $0.1 million for the first quarter of 2009, compared
to other income of $0.1 million for the 2008 first quarter. The amounts in each
quarter relate to ineffective portions of aluminum hedges.
Income
tax benefit
We had an
effective tax rate of zero for the first quarter of 2009, compared to an income
tax benefit rate of 36.6% for the first quarter of 2008. In the
fourth quarter of 2008, we provided a valuation allowance on all our deferred
tax assets because their realization in this difficult economy cannot be
assured. Deferred tax assets created as a result of generating
additional net operating loss carry-forwards in the first quarter of 2009 were
equally offset by an increase in the valuation allowance.
Liquidity
and Capital Resources
Our
principal source of liquidity is cash flow generated by operations, supplemented
by borrowings under our credit facilities. This cash generating
capability provides us with financial flexibility in meeting operating and
investing needs. Our primary capital requirements are to fund working
capital needs, meet required debt payments, including debt service payments on
our credit facilities, and fund capital expenditures.
Consolidated
Cash Flows
Operating activities. Cash
used in operating activities was $2.8 million in the first three months of 2009
compared to $0.4 million in the first three months of 2008. This
increase was mainly due to lower operating profitability in the first three
months of 2009 than 2008. Direct cash flows from operations for the first three
months of 2009 and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Direct
Cash Flows
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
April
4,
|
|
|
March
29,
|
|
|
(in
millions)
|
|
2009
|
|
|
2008
|
|
|
Collections
from customers
|
|
$ |
42.0 |
|
|
$ |
55.3 |
|
|
Other
collections of cash
|
|
|
1.2 |
|
|
|
0.8 |
|
|
Disbursements
to vendors
|
|
|
(24.7 |
) |
|
|
(31.6 |
) |
|
Personnel
related disbursements
|
|
|
(19.0 |
) |
|
|
(22.2 |
) |
|
Debt
service costs
|
|
|
(1.5 |
) |
|
|
(2.7 |
) |
|
Other
cash activity, net
|
|
|
(0.8 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
used in operations
|
|
$ |
(2.8 |
) |
|
$ |
(0.4 |
) |
Other
collections of cash primarily represents scrap aluminum sales but also includes
$0.7 million of proceeds from an insurance recovery.
Days
sales outstanding (DSO), which we calculate as accounts receivable divided by
average daily sales, was 42 days at April 3, 2009, and 39 days at January 3,
2009, compared to 37 days at both March 29, 2008 and December 29,
2007.
Investing activities. Cash
used in investing activities was $0.6 million for the first three months of
2009, compared to $1.0 million for the first three months of 2008. The decrease
in cash used in investing activities was mainly due to a lower level of capital
spending in the first three months of 2009 than in 2008.
Financing activities. Cash
used in financing activities was less than $0.1 million in the first three
months of 2009, compared to cash provided by financing activities of less than
$0.1 million in the first three months of 2008. There were no
significant financing activities in either period.
Capital Resources. On
February 14, 2006, we entered into a second amended and restated
$235 million senior secured credit facility and a $115 million second
lien term loan due August 14, 2012, with a syndicate of banks. The senior
secured credit facility is composed of a $30 million revolving credit
facility and, initially, a $205 million first lien term loan. As of April
4, 2009, there was $25.2 million available under the revolving credit
facility.
On April
30, 2008, we announced that we entered into an amendment to the credit
agreement. The amendment, among other things, relaxed certain
financial covenants through the first quarter of 2010, increased the applicable
rate on loans and letters of credit, and set a LIBOR floor. The
effectiveness of the amendment was conditioned, among other things, on the
repayment of at least $30 million of loans under the credit agreement no later
than August 14, 2008, of which no more than $15 million was permitted to come
from cash on hand. In June 2008, the Company used cash generated from
operations to prepay $10 million of outstanding borrowings under the credit
agreement.
On August
1, 2008, the Company filed Amendment No. 1 to the Registration Statement on Form
S-3 filed on March 28, 2008 relating to a previously announced offering of
rights to purchase 7,082,687 shares of the Company’s common stock with an
aggregate value of approximately $30 million. The registration
statement relating to the rights offering was declared effective by the United
States Securities and Exchange Commission on August 4, 2008, and the Company
distributed to each holder of record of the Company’s common stock as of close
of business on August 4, 2008, at no charge, one non-transferable subscription
right for every four shares of common stock held by such holder under the basic
subscription privilege. Each whole subscription right entitled its
holder to purchase one share of PGT’s common stock at the subscription price of
$4.20 per share. The rights offering expired on September 4,
2008.
The
rights offering was fully subscribed resulting in the Company distributing all
7,082,687 shares of its common stock available. Net proceeds of $29.3
million from the rights offering were used to repay a portion of the outstanding
indebtedness under our amended credit agreement.
Using
proceeds from a rights offering, the Company made an additional prepayment of
$20 million on August 11, 2008, bringing total prepayments of debt at that time
to $30 million as required under the amended credit agreement. Having
made the total required prepayment and having satisfied all other conditions to
bring the amendment into effect, including the payment of the fees and expenses
of the administrative agent and a consent fee to participating lenders of 25
basis points of the then outstanding balance under the credit agreement of $100
million, the amendment became effective on August 11, 2008. Fees paid
to the administrative agent and lenders totaled $0.6 million and have been
deferred, and the unamortized balance of $0.5 million is included in other
assets on the accompanying condensed consolidated balance sheet as of April 4,
2009. Such fees are being amortized on a straight-line basis, which
approximates the effective interest method, over the remaining term of the
credit agreement.
Under the
amendment, the first lien term loan bears interest at a rate equal to an
adjusted LIBOR rate plus a margin ranging from 3.5% per annum to 5% per annum or
a base rate plus a margin ranging from 2.5% per annum to 4.0% per annum, at our
option. The margin in either case is dependent on our leverage
ratio. The loans under the revolving credit facility bear interest at
a rate equal to an adjusted LIBOR rate plus a margin depending on our leverage
ratio ranging from 3.0% per annum to 4.75% per annum or a base rate plus a
margin ranging from 2.0% per annum to 3.75% per annum, at our
option. The amendment established a floor of 3.25% for adjusted
LIBOR.
A
commitment fee equal to 0.50% per annum accrues on the average daily unused
amount of the commitment of each lender under the revolving credit facility and
such fee is payable quarterly in arrears. We are also required to pay certain
other fees with respect to the senior secured credit facility including
(i) letter of credit fees on the aggregate undrawn amount of outstanding
letters of credit plus the aggregate principal amount of all letter of credit
reimbursement obligations, (ii) a fronting fee to the letter of credit
issuing bank and (iii) administrative fees.
The first
lien term loan is secured by a perfected first priority pledge of all of the
equity interests of our subsidiary and perfected first priority security
interests in and mortgages on substantially all of our tangible and intangible
assets subject to such exceptions as are agreed. The senior secured credit
facility contains a number of covenants that, among other things, restrict our
ability and the ability of our subsidiary to (i) dispose of assets;
(ii) change our business; (iii) engage in mergers or consolidations;
(iv) make certain acquisitions; (v) pay dividends or repurchase or
redeem stock; (vi) incur indebtedness or guarantee obligations and issue
preferred and other disqualified stock; (vii) make investments and loans;
(viii) incur liens; (ix) engage in certain transactions with
affiliates; (x) enter into sale and leaseback transactions; (xi) issue
stock or stock options under certain conditions; (xii) amend or prepay
subordinated indebtedness and loans under the second lien secured credit
facility; (xiii) modify or waive material documents; or (xiv) change
our fiscal year. In addition, under the senior secured credit facility, we are
required to comply with specified financial ratios and tests, including a
minimum interest coverage ratio, a maximum leverage ratio, and maximum capital
expenditures.
Based on
our ability to generate cash flows from operations and our borrowing capacity
under the revolver under the senior secured credit facility, we believe we will
have sufficient capital to meet our short-term and long-term needs, including
our capital expenditures and our debt obligations in 2009.
Capital Expenditures. Capital
expenditures vary depending on prevailing business factors, including current
and anticipated market conditions. For the first three months of
2009, capital expenditures were $0.7 million, compared to $1.0 million for the
first three months of 2008. During 2008 and continuing into 2009, we
reduced certain discretionary capital spending to conserve cash. We
anticipate that cash flows from operations and liquidity from the revolving
credit facility will be sufficient to execute our business plans.
Hedging. We enter
into aluminum forward contracts to hedge the fluctuations in the purchase price
of aluminum extrusion we use in production. The Company enters into
these contracts by trading on the London Metals Exchange (“LME”). The
Company trades on the LME using an international commodities broker that offers
global access to all major markets. The Company maintains a $0.4
million line of credit with its commodities broker to cover the liability
position of open contracts for the purchase of aluminum in the event that the
price of aluminum falls. Should the price of aluminum fall to a level
which causes the Company’s liability for open aluminum contracts to exceed $0.4
million, the Company is required to fund daily margin calls to cover the excess.
As of April 4, 2009, the amount on deposit with our commodities broker of $3.5
million exceeded the liability position of our aluminum forward contracts by
$0.1 million. As such, the full $0.4 million line of credit was
available as of April 4, 2009.
Contractual
Obligations
There
have been no significant changes to our “Disclosures of Contractual Obligations
and Commercial Commitments” table in Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” of our
Annual Report on Form 10-K for the year ended January 3, 2009 as filed with the
Securities and Exchange Commission on March 19, 2009.
Critical
Accounting Policies and Estimates
Our
consolidated financial statements are prepared in accordance with U.S. generally
accepted accounting principles. Critical accounting policies are
those that are both important to the accurate portrayal of a Company’s financial
condition and results and require subjective or complex judgments, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain. We make estimates and assumptions that affect
the amounts reported in our financial statements and accompanying notes. Certain
estimates are particularly sensitive due to their significance to the financial
statements and the possibility that future events may be significantly different
from our expectations.
We
identified our critical accounting policies in our Annual Report on Form 10-K
for the year ended January 3, 2009 as filed with the Securities and Exchange
Commission on March 19, 2009. There have been no changes to our
critical accounting policies during the first three months of 2009.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
We
experience changes in interest expense when market interest rates change.
Changes in our debt could also increase these risks. Based on debt outstanding
at April 4, 2009, a one percentage-point increase (decrease) in interest rates
would result in approximately $0.9 million of additional (reduced) interest
costs annually. As of April 4, 2009, we had no interest rate swaps or
caps in place which means our debt is all adjustable-rate debt.
We
utilize derivative financial instruments to hedge price movements in aluminum
materials used in our manufacturing process. We entered into aluminum
hedging instruments that settle at various times through the end of 2010 and
covers approximately 73% of our anticipated needs during the remainder
of 2009 at an average price of $1.01 per pound and 46% during 2010 at
an average price of $0.94 per pound.
For
forward contracts for the purchase of aluminum at April 4, 2009, a 10% decrease
in the price of aluminum would decrease the fair value of our forward contacts
of aluminum by $0.8 million.
Disclosure Controls and Procedures.
Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed in the
Company’s reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms.
A control
system, however, no matter how well conceived and operated, can at best provide
reasonable, not absolute, assurance that the objectives of the control system
are met. Additionally, a control system reflects the fact that there are
resource constraints, and the benefits of controls must be considered relative
to costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of error or fraud, if any, within our Company have been detected,
and due to these inherent limitations, misstatements due to error or fraud may
occur and not be detected.
Our chief
executive officer and chief financial officer, with the assistance of
management, evaluated the design, operation and effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) as of the end of the period covered by this report (the
“Evaluation Date”). Based on that evaluation, our chief executive officer and
chief financial officer concluded that, as of the Evaluation Date, our
disclosure controls and procedures were effective for the purposes of ensuring
that information required to be disclosed in our reports filed under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms,
and that such information is accumulated and communicated to management,
including our chief executive officer and chief financial officer, as
appropriate to allow timely decisions regarding required
disclosure.
Changes in Internal Control over
Financial Reporting. During the period covered by this report, there have
been no changes in our internal control over financial reporting identified in
connection with the evaluation described above that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.
We are
involved in various claims and lawsuits incidental to the conduct of our
business in the ordinary course. We carry insurance coverage in such amounts in
excess of our self-insured retention as we believe to be reasonable under the
circumstances and that may or may not cover any or all of our liabilities in
respect to claims and lawsuits. We do not believe that the ultimate resolution
of these matters will have a material adverse impact on our financial position
or results of operations.
Although
our business and facilities are subject to federal, state and local
environmental regulation, environmental regulation does not have a material
impact on our operations. We believe that our facilities are in material
compliance with such laws and regulations. As owners and lessees of real
property, we can be held liable for the investigation or remediation of
contamination on such properties, in some circumstances without regard to
whether we knew of or were responsible for such contamination. Our current
expenditures with respect to environmental investigation and remediation at our
facilities are minimal, although no assurance can be provided that more
significant remediation may not be required in the future as a result of spills
or releases of petroleum products or hazardous substances or the discovery of
previously unknown environmental conditions.
In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part 1, “Item 1A. Risk Factors” in
our Annual Report on Form 10-K for the year ended January 3, 2009, which
could materially affect our business, financial condition or future results. The
risks described in our Annual Report on Form 10-K are not the only risks
facing our Company. Additional risks and uncertainties not currently
known to us or that we currently deem to be immaterial also may materially
adversely affect our business, financial condition and/or operating
results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
Unregistered
Sales of Equity Securities
None.
Use
of Proceeds
Not
applicable.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None.
None.
The
following items are attached or incorporated herein by reference:
|
31.1*
|
Certification
of chief executive officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
31.2*
|
Certification
of chief financial officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
32.1**
|
Certification
of chief executive officer and chief financial officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
____________
* Filed
herewith.
** Furnished
herewith.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
PGT, INC.
|
|
|
(Registrant)
|
|
|
|
|
Date:
May 14, 2009
|
/s/ Rodney
Hershberger
|
|
|
Rodney
Hershberger
|
|
|
President
and Chief Executive Officer
|
|
|
|
|
Date:
May 14, 2009
|
/s/ Jeffrey T.
Jackson
|
|
|
Jeffrey
T. Jackson
|
|
|
Executive
Vice President and Chief Financial
Officer
|
EXHIBIT
INDEX
|
31.1*
|
Certification
of chief executive officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
31.2*
|
Certification
of chief financial officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
32.1**
|
Certification
of chief executive officer and chief financial officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
____________
* Filed
herewith.
** Furnished
herewith.