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Zelman Housing Summit
Citation preview
September 26th and 27th, 2013
Ply Gem Industries
Zelman Housing Summit
LEGALDisclaimer
2
These slides and the accompanying oral discussion may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied, including: downturns in the home repair and remodeling or the new construction end markets, or the economy or the availability of consumer credit; competition from other exterior building products manufacturers and alternative building materials; changes in the costs and availability of raw materials; consolidation and further growth of our customers; loss of, or a reduction in orders from, any of our significant customers; inclement weather conditions; increases in union organizing activity and work stoppages at our facilities or the facilities of our suppliers; our ability to employ, train and retain qualified personnel at a competitive cost; claims arising from the operations of our various businesses prior to our acquisitions; products liability claims, including class action claims, relating to the products we manufacture; loss of certain key personnel; interruptions in deliveries of raw materials or finished goods; environmental costs and liabilities; manufacturing or assembly realignments; threats to, or impairments of, our intellectual property rights; increases in fuel costs; material non-cash impairment charges; our significant amount of indebtedness; covenants in the ABL Facility and the indentures governing the 8.25% Senior Secured Notes and the 9.375% Senior Notes; failure to effectively manage labor inefficiencies associated with increased productions and new employees added to the company; failure to generate sufficient cash to service all of our indebtedness and make capital expenditures; limitations on our NOLs and payments under the tax receivable agreement to our current stockholders; failure to successfully consummate and integrate future acquisitions; actual or perceived security vulnerabilities or cyberattacks on our networks; control by the CI Partnerships; compliance with certain corporate governance requirements; certain of our directors’ relationships with the CI Partnerships; lack of a prior public market for our common stock and volatility of our stock price; future sales of our common stock in the public market; substantial dilution in net tangible book value; our dividend policy; provisions in our charter and by-laws; and failure to maintain internal controls over financial reporting. Consequently such forward-looking statements should be regarded as the Company’s current plans, estimates and beliefs. Except as required by law, the Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
3
REPAIR & REMODEL2
SIDINGWINDOWS
NEW RESIDENTIALCONSTRUCTION
2
59%41%
50% 50%
3
Leading exterior building and home improvement products company in North America
One of the Largest Manufacturers of Exterior Building and Home Improvement Products
~$1.41 Billion in sales~6,000 associates
U.S.93%
7%
CANADA
PLY GEM’sProfile
1 Pro forma for Gienow & Mitten acquisitions
2 Source: Management estimates
Aluminum Accessories
Western Canada
New Construction Vinyl and Aluminum Windows
Vinyl Siding#1
#1
#2
#2
Provider of branded products sold through many channels of distribution and covering price points across the depth of the market
#1 Post-recentacquisitions
4
MARKET Position Leading Manufacturer of Exterior Building
Products
• Mitten• Gienow
5
PRODUCTCategories
Gable vents and accessoriesGutter protection systemsVinyl and aluminum soffit
Window mantlesManufactured stone
Vinyl and designer accentsShutters
Mounting blocksDecorative corner posts
Rain removal systemsDoor surround systems
Patio doorsWindows
Railing and fencingComposite rail
Outdoor structures
New window technologyCellular PVC trim
Extensive Exterior Product Portfolio
Ply Gem5%
6
One, Integrated Business with Two Reportable Segments
Windows and DoorsSiding, Fencing and Stone
Window Market Share (All Types)Vinyl Siding Market Share
Ply Gem28%
CertainTeed31%
Associated Materials11%
KP7%
Crane4%
Royal5%
Heartland7%
Other7%
Ply Gem36%
CertainTeed27%
Associated Materials14%
Royal/Crane13%
Kaycan6%
Other4%
2008 2011
2007 2008 2009 2010 2011 2012$0
$200
$400
$600
$800
$1,000
(20.0%)(10.0%)0.0% 10.0% 20.0% 30.0% 40.0%
$535$466
$374 $392 $396 $463
Sales Operating earnings margin2007 2008 2009 2010 2011 2012
$0
$200
$400
$600
$800
$1,000
(20.0%)(10.0%)0.0% 10.0% 20.0% 30.0% 40.0%
$828$709
$577 $604 $639 $658
Sales Operating earnings margin
Note: 2008 operating earnings margins for both segments exclude goodwill impairments
PLY GEM’sSegments
Source: 2008 based upon the Principia Partners 2008 study; 2011based upon Management's estimate utilizing VSI data
Source: Management estimates1Based on WDMA
20111
• Andersen• Pella• JELD-WEN• Marvin• Atrium• Associated Materials• Milgard
Windows Manufacturers(all substrates)
7
SIDINGGroup
• #1 vinyl siding manufacturer in North America (with approx. 36% share in the US)
• Consolidated industry with 4 participants holding approx. 90% share
• Strong trade brands
• Multi-channel distribution network servicing both new construction and R&R
• State-of-the-art automated manufacturing facilities with capacity to support planned growth
Key Brands
North American Market Summary
Why We Win
$ millions
Market size: According to Principia Partners
Exterior Cladding Market Size
Vinyl Siding Market Size
Ply Gem 2012 Net Sales
$658
Market Leader in Vinyl Siding
~$1,800
~$5,300
Market Size Ply Gem 2012 Net Sales
$463
8
WINDOWSGroup
• #2 vinyl & aluminum window manufacturer in the US
• #1 window & door manufacturer in Western Canada (post-acquisitions)
• Multi-channel distribution network servicing both new construction and R&R covering every price point
• Highly efficient, vertically integrated production
• Continued to gain market share during downturn
Why We Win Key Brands
North American Market Summary
$ millions
Market size: Company estimate – New construction and R&R
Leader in Vinyl and Aluminum Windows
~$9,000
9
GROWTHInnovation
A Key Growth Initiative
Open Innovation Opportunities
Furthering a Culture of Innovation
• Several businesses currently active in foundation labs
• Research concentration in advanced materials and physics
• Each Hi-Po serves on an Innovation project team
• Implemented innovation into Ply Gem’s compensation structure
• Product development and innovation continues to drive new sales
• Developed a collaboration platform and now measure engagement
• Drive collaboration to achieve significant cross-selling potential
• Improved platform for idea generation process
• Managing innovation as a business process through foundation labs
• Focus on supplier/partner/universities
• Prime relationship with two major building products companies in developing new business opportunities
Innovation Driving Exciting New Opportunities
$400+mm of incremental annual sales from new products introduced since 2009
New products
• Cellular PVC trim product
• New Glass Technology
• Composite building materials
10
THE DESIGNEDExterior
• Provides differentiation for Ply Gem customers• Provides a single sourcing opportunity• Hits the sweet spot of an emerging trend• Features NAHB Green Approved products• Fulfills the “One Ply Gem” MISSION
Alexandria, VA Designed Exterior Remodel
BEFORE
Three Weeks later using The Designed Exterior concept
AFTER
Complete Exterior Solution Offering for Customers
Regional local one-step
distributors
Regional local one-step
distributors
DISTRIBUTION
11
Multi-Channel Distribution Network Servicing a Broad Customer Base
New Construction
Regional/local one-step distributors
National one-stepdistributors
Retailers
Two-stepdistributors
Home Repair and Remodeling
• Homebuilders
• Contractors
• Contractors
• Individuals
Two-step distributors
Two-step distributors
National one-step distributors
National one-step distributors
RetailersRetailers
HomebuildersHomebuilders
Representative CustomersBuilding products supply chain
Sells Multiple Ply Gem Products
Diversity of channels and customers with limited customer concentration (Top 10 customers account for only ~46% of sales)
END-MARKETS
12
Significant Opportunity to Capture Growth Related to Housing Market Recovery
New construction80%
Home repair & remodel
20%
Windows and Doors¹Siding, Fencing and Stone¹
New construction35%
Home repair & remodel
65%
New construction¹50%
Home repair & remodel¹50%
Ply
Gem
Mix
Hou
sing
Out
look
Home Improvement Product Sales² Single Family Housing Starts³
$319 bn$274 bn
2012 2015E
5.3% CAGR
¹ Source: Management estimates² Source: Home Improvement Research Institute, Sep 2012³ Source: U.S. Census Bureau
2005 2006 2007 2008 2009 2010 2011 2012 20150
500
1,000
1,500
2,000 1,719
1,474
1,036
616
442 471 434 535
Ply Gem
?
Gaining Share Throughout the Downturn, Poised for the Upturn
• Broad product offering at diverse price points with new construction and R&R exposure• Strong brand recognition and cross-selling opportunities• Introduction of new products (R&R windows, cellular PVC trim and mouldings)• National window platform against highly fragmented competition• Strong relationships with industry leading customers who continue to expand their business• Lag time between starts and product placement expanding due to labor shortages
Market share gains of over $350 million from 2007 to 2011¹
2007 2012
Single Family Housing Starts 1,036 535
% change (48.4%)
Ply Gem Net Sales $1,363.5 $1,121.3
% change (17.8%)
13
OUTSIZEDGrowth
Note: Single family housing starts data from U.S. Census Bureau¹ Source: Management estimates
OPERATING Platform
14
Facility Overview
Source: Company filings and management estimates
2012 Cost Structure (Net Sales – EBITDA)
Variable79%
Fixed21%
Materials54%
Variable Manufacturing18%
Freight & Other7%
Fixed21%
Highly Efficient, Flexible, Low Cost Operating Structure…
Vinyl = 20%
Aluminum = 13%
Other materials = 21%
Window MFG
Siding/Access MFG
Corporate/HQ
Canada Distribution
Stone MFG
Locations
10
62
3
34
1
58Total
Fence + Rail MFG
Gienow 1Mitten 1
15
MGMTTeam
Gary E. RobinettePresident & CEO
Industry experience: 35 years
Shawn PoeVice President & CFO
23 years
John WayneExecutive Vice President & COO
28 years
Dave SchmollSenior Vice President, HR
24 years
Lee Clark-SellersInnovation Officer
20 years
Tim JohnsonGeneral Counsel
12 years
Proven Ability to Successfully Operate the Business Through Evolving Market Cycles
• Significant management equity ownership of 3.7% post -IPO
• Consistently outperformed the market
• Deep and proven management bench
Art SteinhafelPresident, U.S. Windows
20 years
Richard BoyerPresident, Ply Gem Canada /
Gienow14 years
John BuckleyPresident, Siding Group
22 years
Doug RendePresident, Mitten, Inc.
30 years
16
STRATEGICEvolution
2012 2016to
A Market Leader The Market Innovator
A Ply Gem Brand The Leading Brand
Organic Growth (Market Share)Growth Through Strategic Acquisitions
Coordinated back office Lean through Technology
Executive Dev & Succession Our Future Leaders
New Products and Share New Channels and Markets
“Ply Gem’s Future”
Financial Overview
($ in millions)2011
Actual 2012
Actual
LTM Q2-13 Actual
YTD Q2-13 Actual
YTD Q2-12 Actual
Net Sales $1,034.9 $1,121.3 $1,200.1 $625.2 $546.5
Gross Profit 210.5 244.2 244.0 116.1 116.3
% Margin(1) 20.3% 21.8% 20.3% 18.6% 21.3%
Adjusted EBITDA 114.5 127.3 123.1 53.1 60.4% Margin 11.1% 11.4% 10.3% 8.5% 11.0%
Capex 11.5 24.6 27.9 11.4 8.1% of sales 1.1% 2.2% 2.3% 1.8% 1.5%
Debt (Bonds & ABL) 961.7 964.4 827.8Cash on hand 11.7 27.2 27.9Net Debt $950.0 $937.2 $799.9
Leverage Ratio 8.3x 7.4x 6.5x
FINANCIALSummary Summary YTD Q2-2013 Results
18
FINANCIALSummary 2012 Net Sales = $1.1 Billion
19
2007 2008 2009 2010 2011 2012Single Family Housing Starts 1,036 616 442 471 434 535
(29.7)% (40.5)% (28.2)% 6.5% (8.1)% 23.3%
Ply Gem Net Sales $1,363.5 $1,175.0 $951.4 $995.9 $1,034.9 $1,121.3
(13.4)% (13.8)% (19.0)% 4.7% 3.9% 8.4%
• Ply Gem continues to outperform the market• SFHS down 48% from ‘07 to ‘12, Ply Gem
down 17.8%• Market share gains of over $350 million from 2007 to
2011• Numerous new customer wins as Ply Gem is a clear
industry leader• Our product breadth and geographical footprint
continue to expand• Customer mix is well balanced at approx. 50%/50% 2007 2008 2009 2010 2011 2012
$600
$800
$1,000
$1,200
$1,400 Ply Gem sales
2005 2006 2007 2008 2009 2010 2011 2012 2013 ‘05 – ’12 Avg.
Q1 19.8% 20.0% 16.5% 11.9% 7.1% 18.1% 16.6% 17.9% 16.3% 16.0%
Q2 24.1% 23.9% 25.0% 20.0% 24.1% 23.4% 23.5% 23.9% 20.6% 23.5%
Q3 24.4% 23.6% 23.2% 19.1% 26.4% 23.2% 22.1% 23.1% 23.1%
Q4 22.2% 17.1% 18.1% 14.0% 22.5% 20.8% 20.6% 21.3% 19.6%
Full Year 22.8% 21.2% 20.6% 16.6% 21.2% 21.7% 21.0% 21.8% 20.9%
Ply Gem has demonstrated the ability to maintain profit margins through wide swings in commodity costs
2008 Rewind – Oil prices went to $148 a barrel; gas prices went to $4.00
2009 Includes one time “take or pay” aluminum buy
We demonstrated the ability to address commodity fluctuations and return to historical averages
(1) 2011 & 2013 Gross Margins adjusted to exclude the impact of the one-time Home Depot buy-back
FINANCIALSummary Stable Gross Profit Margins
20
2005 2006 2007 2008 2009 2010 2011 (1) 2012 20130%
5%
10%
15%
20%
25%
30% Q1 Q2 Q3 Q4
Impact of "Take orPay" Contract
2007 2008 2009 2010 2011 2012$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
0%
2%
4%
6%
8%
10%
12%
14%
16%
• Superior EBITDA Margins despite historically low demand• Sales that outperformed the market including new products• Cost reduction actions have generated over $45 million in savings:
Closed 6 plants over last 5 years = approx. $30 million annual savings Reduced headcount by approximately 50% from 2006 to 2010 Other cost reduction initiatives (Direct & Indirect) over $10 million
• Market share wins of over $350 million from 2007 to 2011• Successful acquisition integration and cost savings realization• Managed Capital Spending & Working Capital to enhance cash flow
FINANCIALSummary Adjusted EBITDA 2012 = $127.3M or 11.3%
21
Fiscal Year Ended December 31, ($ in millions) 2007 2008 2009 2010 2011 2012Single Family Housing Starts 1,036 616 442 471 434 535 Net Sales
Siding, Fencing and Railing $828.1 $709.4 $577.4 $604.4 $639.3 $658.0 % Growth (17.4%) (14.3%) (18.6%) 4.7% 5.8% 2.9%
Windows and Doors 535.4 465.6 374.0 391.5 395.6 463.3 % Growth (6.6%) (13.0%) (19.7%) 4.7% 1.0% 17.1%
Total Ply Gem $1,363.5 $1,175.0 $951.4 $995.9 $1,034.9 $1,121.3 % Growth (13.4%) (13.8%) (19.0%) 4.7% 3.9% 8.4%
Gross ProfitSiding, Fencing and Railing $168.7 $130.6 $149.4 $155.5 $158.8 $180.2
% Margin 20.4% 18.4% 25.9% 25.7% 24.8% 27.4% Windows and Doors 111.7 64.3 52.2 60.6 51.7 64.0
% Margin 20.9% 13.8% 14.0% 15.5% 13.1% 13.8% Total Gross Profit $280.4 $194.9 $201.5 $216.0 $210.5 $244.2
% Margin 20.6% 16.6% 21.2% 21.7% 20.3% 21.8% Reported Adjusted EBITDA $176.0 $96.1 $116.2 $123.1 $114.5 $127.3
% Margin 12.9% 8.2% 12.2% 12.4% 11.1% 11.3% CapEx $20.0 $16.6 $7.8 $11.1 $11.5 $24.6
% of Sales 1.5% 1.4% 0.8% 1.1% 1.1% 2.2%
FINANCIALSummary
22
2007 PF for run-rate acquisitions > $200mm
23
FINANCIALSummary
Fiscal Year Ended December 31,
($ in millions) 2007 2012
Single Family Housing Starts 1,036 535
Net Sales
Siding, Fencing and Railing $828.1 $658.0
% Growth (17.4%) 2.9%
Windows and Doors 535.4 463.3
% Growth (6.6%) 17.1%
Total Ply Gem $1,363.5 $1,121.3
% Growth (13.4%) 8.4%
Gross Profit
Siding, Fencing and Railing $168.7 $180.2
% Margin 20.4% 27.4%
Windows and Doors 111.7 64.0
% Margin 20.9% 13.8%
Total Gross Profit $280.4 $244.2
% Margin 20.6% 21.8%
Reported Adjusted EBITDA $176.0 $127.3
% Margin 12.9% 11.3%
CapEx $20.0 $24.6
% of Sales 1.5% 2.2%
Action Taken Through the Cycle Positions Ply Gem for Expanding Profitability
Increased sales from market share
($350mm)
Determined action through the cycle
8 plant closures, saving $30mm
annually
$50mm in synergies achieved
($24mm post 2007)
Mittenand Gienowacquisitions
INVESTMENTHighlights
24
Repair and Remodel Leverage to New Housing Starts
New Products and Innovation Drive
Share GainsM&A Opportunities
• Leading Manufacturer of Exterior Building Products
• Comprehensive Product Portfolio with Strong Brand Recognition
• Multi-Channel Distribution Network Servicing a Broad Customer Base
• Balanced End Market Exposure Driven by Diversified Product Mix
• Highly Efficient, Low Cost Operating Platform
• Proven Track Record of Acquisition Integration and Cost Savings Realization
• Strong Management Team with Significant Ownership
Key Investment Highlights
Platform Built for Growth and Operating Leverage
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