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Ply gem lp (1 13-2014).pdf
- 1. Presentation to Lenders January 2014 Confidential
- 4. Today’s Agenda 1. Introduction Credit Suisse 2. Company overview Gary Robinette President & CEO, Ply Gem 3. Key credit highlights Gary Robinette President & CEO, Ply Gem 4. Financial overview Shawn Poe Vice President & CFO, Ply Gem 5. Syndication overview Credit Suisse 6. Public Q&A 3
- 5. Transaction Overview • Transaction overview Headquartered in Cary, NC, Ply Gem (“Ply Gem” or the “Company”; NYSE: PGEM) is a leading manufacturer of residential exterior building products, offering a comprehensive product line of vinyl siding and skirting, vinyl windows and doors, and aluminum windows in all 50 states and Canada − LTM 9/28/13 PF(1) net sales and PF adjusted EBITDA of $1,435mm and $152mm, respectively • Ply Gem is refinancing its existing senior secured notes and senior unsecured notes with: − $380mm first lien term loan − $550mm senior unsecured notes • PF senior secured and total net leverage of 2.5x and 6.1x, respectively, of LTM 9/28/13 PF adjusted EBITDA of $152mm (1) Gives effect for LTM impact of Gienow and Mitten acquisitions and expected 2014 cost savings. 4
- 6. Transaction Overview Transaction structure Sources & uses ($ in mm) Sources Uses First lien term loan $380.0 Refinance outstanding 8.25% senior secured notes (1) $813.5 Senior unsecured notes $550.0 Refinance outstanding 9.375% senior notes (1) $110.6 Cash on hand $11.0 Total sources (1) (2) Estimated transaction fees & ex penses $941.0 (2) $16.9 Total uses $941.0 Includes prepayment premiums and accrued interest payments pro forma for the transaction at 9/28/13. Includes OID. Pro forma capitalization ($ in mm) Actual 9/28/13 Cum. Net EBITDA (x) 9/28/13 Cum. Net EBITDA (x) Maturity $23 Cash (1) Asset-based RCF New first lien term loan 8.250% Senior secured notes due Feb-18 Total secured debt 9.375% Senior notes due Apr-17 New senior unsecured notes Total debt $12 $14 $14 Nov-18 – 380 2021 756 $770 – 4.9x $96 $2,006 LTM 9/28/13 PF Adj. EBITDA(2) $152 Current facility size of $250mm. Gives effect for LTM impact of Gienow and Mitten acquisitions and expected 2014 cost savings. Feb-18 2.5x Apr-17 $550 5.5x $1,140 Total capitalization $394 – – $866 Public equity (as of 1/10/14) (1) (2) Pro forma $944 2022 6.1x $1,140 13.0x $2,084 13.6x $152 5
- 12. Company Overview One, integrated business with two reportable segments Siding, fencing, and stone Windows and doors ($ in mm) $1,000 ($ in mm) $828 $800 $709 $577 $600 $604 $639 40.0% 30.0% 20.0% 10.0% 0.0% (10.0%) (20.0%) $712 $658 $400 $200 $0 2007 2008 2009 Sales 2010 2011 $800 $600 CertainTeed 31% $374 $392 $396 $463 $0 2007 2008 2009 Sales 2010 2011 40.0% 30.0% 20.0% 10.0% 0.0% (10.0%) (20.0%) 2012 LTM 9/28/13 Operating earnings margin Window market share (all types) 2012 Ply Gem 28% $589 $466 $200 LTM 9/28/13 Operating earnings margin 2008 Other 7% $535 $400 2012 Vinyl siding market share Heartland 7% Royal 5% Crane 4% KP 7% Associated Materials 11% $1,000 Kaycan 5% Exterior/Royal 13% Associated Materials 14% 2012 Other 4% Ply Gem 38% CertainTeed 26% Jeld Wen (includes doors) 15% Windows manufacturers (all substrates) Ply Gem 5% Marvin Atrium 8% 4% Other(1) 32% Pella 16% Andersen Pella Marvin JELD‐WEN Atrium Associated Materials Milgard Simonton Anderson 20% Source: Principia Partners 2008 study, management estimates. Note: LTM 9/28/13 figures include Gienow / Mitten from date of acquisition. 2008 operating earnings margin for both segments exclude goodwill impairments. (1) Includes Associated Materials, Milgard, Simonton, MI, Weathershield, Windsor, Harvey, Champion, Amsco, Cascade, and Kolbe. 11
- 15. Company Overview Culture of innovation drives new growth opportunities Furthering a culture of innovation A key growth initiative • Implemented innovation into Ply Gem’s • Several businesses currently active in 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 foundation labs • Research concentration in advanced materials and physics • Each Hi‐Po serves on an Innovation project team Open innovation opportunities • Focus on supplier/partner/universities • Prime relationship with two major building products companies in developing new business opportunities New products • Cellular PVC trim product • New Glass Technology • Composite building materials $400+mm of incremental annual sales from new products introduced since 2009 14
- 17. Credit Highlights 1 Market leader 8 2 Comprehensive product portfolio with strong brand recognition Proven and experienced management team 7 3 Multi-channel distribution network serving a broad customer base Substantial and sustainable free cash flow generation 6 4 Proven track record of acquisition integration and cost savings realization Favorable industry dynamics driving increased homebuilding 5 Highly efficient, flexible, low cost operating structure 16
- 21. Credit Highlights Favorable industry dynamics driving increased homebuilding Improvement across major economic indicators U.S. SFHS forecasted to increase (in thousands) 7.0% 2,073 5.4% 354 1,812 75% 338 1,513 1,342 1,147 306 1,719 73.2% 900 284 1,474 1,036 616 554 112 585 114 612 178 442 471 434 784 247 537 921 352 322 292 1,161 629 825 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E Single‐Family Sustained consistency and strength across Canada SFHS Multi‐Family Growth across healthy markets in the U.S. (in thousands) Single‐Family 227 106 228 109 211 Multi‐Family 215 191 195 97 112 131 183 118 73 121 119 2006 2007 187 105 106 149 93 76 94 83 84 78 81 2008 2009 2010 2011 2012 2013E 2014E Sources: Zillow, Census, Conference Board, NAHB, CMHC, Market Health Index. 20
- 24. Credit Highlights Proven track record of acquisition integration / cost savings realization Ply Gem purchased by CI Capital 2004 2005 2006 2007 2013 2008 ($ in mm) Cost savings Acquisitions CT Windows ($37mm) MW Windows ($331mm) Alenco Windows ($127mm) United Stone Veneer ($4mm) MHE (Alcoa) siding business ($296mm) Mitten (CAD$79mm) $55.0 $6.8 Expected $11.0 Achieved $4.0 $4.9 Expected Achieved $22.0 Expected Gienow (CAD$20mm) Achieved • Expect to realize $15‐ $20mm in cost savings for combined Gienow / Mitten acquisitions • Savings driven by facility / headcount rationalization and vertical integration Acquisitions provide incremental capabilities and growth along with significant synergy opportunities 23
- 25. Credit Highlights Proven track record of acquisition integration / cost savings realization (cont’d) Track record of efficient cost management… Workforce Reduced by 50% between 2006 and 2011 Acquisitions Cost savings of over $70mm (excluding Gienow and Mitten) Manufacturing Rationalized 8 facilities saving over $30mm annually Supply Chain Significantly consolidated window SKUs to improve efficiency Back Office Integrated back office functions … Provides leverage for further profitable growth Utilization Incremental capacity above one million SFHS without significant capital investment Lean Continued expansion of lean manufacturing and vertical integration Purchasing Further consolidation of purchases of raw materials, supplies and services Improved cost structure provides significant future operating leverage 24
- 26. Credit Highlights Substantial / sustainable free cash flow FCF: Adjusted EBITDA – capital expenditures Capital spending ($ in mm) ($ in mm) 3.2% 15.0% $156 $80 $108 $112 $103 $103 $102 10.0% $25 $25 $20 $17 $8 5.0% $11 2.4% 1.6% $11 0.8% 0.0% 2007 2008 2009 2010 2011 Adj. EBITDA ‐ capex 2012 LTM 9/28/13 0.0% 2007 2008 2009 Capex % of Sales • Modest capex ~2.2% of sales in 2012 2010 2011 2012 LTM 9/28/13 % of Sales Debt maturity post‐transaction ($ in mm) $550 • Post‐transaction net leverage of 6.1x $380 • No near‐term maturities 2017 2018 ABL 2019 2020 Term Loan 2021 2022 Senior Notes A history of strong EBITDA performance, modest capital expenditure requirements and efficient use of working capital Note: LTM 9/28/13 numbers include Gienow and Mitten from date of acquisition. 25
- 29. Financial Overview Key financial performance Net sales Gross profit ($ in mm) ($ in mm) 1600 $1,364 $1,175 1200 $1,121 $951 $996 $1,035 40% $280 $1,033 $195 $202 800 $853 $216 $211 $244 30% $187 $200 20% 400 10% 0 0% 2007 2008 2009 2010 2011 2012 9M12 9M13 Ply Gem sales 2007 2008 2009 2010 2011 2012 9M12 9M13 Single family housing starts Gross profit SG&A % of Sales Adjusted EBITDA ($ in mm) ($ in mm) 30% $156 $155 $142 $147 $130 $139 24% $107 $131 30% $176 24% 18% 12% $96 $116 $123 $115 $127 $102 $101 18% 12% 6% 0% 2007 2008 2009 2010 2011 2012 9M12 9M13 SG&A % of Sales Source: Management, U.S. Census Bureau. Note: 9M13 numbers include Gienow and Mitten from date of acquisition. 6% 0% 2007 2008 2009 2010 2011 2012 9M12 9M13 Adj. EBITDA % of Sales 28
- 30. Financial Overview Momentum building through strong 2012 performance Steady LTM sales trajectory Sustained LTM adj. EBITDA performance ($ in mm) ($ in mm) $1,301 $1,013 $1,035 $1,121 $1,139 $1,074 $1,087 $1,095 $1,200 $123 $113 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 $125 $126 $127 $124 $115 $120 $127 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Consistent seasonal adj. EBITDA performance ($ in mm) $46 $12 $7 $15 5.9% 3.3% 5.1% $44 $41 $40 $39 $41 $48 $22 $12 1Q 10 1Q 11 1Q 12 1Q 13 % of net sales $43 4.6% 2Q 10 2Q 11 2Q 12 2Q 13 15.3% 14.5% 14.4% 11.2% 3Q 10 3Q 11 3Q 12 3Q 13 14.9% 13.2% 13.3% 11.9% $24 $25 4Q 10 4Q 11 4Q 12 10.0% 9.8% 9.2% 29 Note: 2013 numbers include Gienow and Mitten from date of acquisition.
- 31. Financial Overview • • • • • • Recent developments 4Q13 challenging due to severe weather compounded by continued lag in demand for higher profit margin “big ticket” repair and remodeling products and uneven U.S. housing market recovery 4Q13 net sales expected between $330mm and $335mm with Adjusted EBITDA between $15mm to $17mm Organic sales in 4Q13 largely flat due to a pull‐back in the new construction housing market and severe winter weather Profitability suppressed by lower than expected sales, which resulted in lower operating leverage against fixed manufacturing costs, labor inefficiencies driven by the uneven recovery and an unfavorable shift in product mix. These factors are expected to be corrected by: − Continued housing market recovery and demand stability − “Enterprise lean” initiative and a significantly enhanced sales and operating planning process to be implemented early 2014 − Announced selling price increase on U.S. windows in 4Q13, benefits from which are expected in the future − We will be implementing additional selling price increases in early 2014 − Continued market penetration as demonstrated by recent customer wins for new cellular PVC trim − Expected to yield run‐rate sales of over $15mm when fully converted Gienow and Mitten integration progressing well, with combined acquisition cost savings expected to be in the $15mm to $20mm range when fully implemented Company’s outlook for the future remains positive with 2014 estimates of U.S. single family housing starts projected to increase in the range of 15% to 20% 30
- 32. Financial Overview Cost savings / one time costs – Gienow and Mitten EBITDA impact of Gienow and Mitten cost savings ($ in mm) Category (1) Raw material sourcing (2) Headcount (3) Material reformulations (4) Manufacturing efficiency improvements (5) SG&A (6) Insourcing third party products Total 1Q14 $1.6 0.8 0.3 0.4 0.1 0.6 $3.7 2Q14 $2.1 0.9 0.4 0.5 0.1 1.0 $5.0 3Q14 $2.2 1.1 0.4 0.5 0.1 1.2 $5.4 4Q14 $1.6 0.9 0.2 0.4 0.1 0.8 $3.9 2014 $7.4 3.7 1.3 1.8 0.3 3.7 $18.1 One‐time costs to achieve savings ($ in mm) Category Severance, retention and incentives Union discussions Product harmonization Marketing materials Equipment move costs Total Note: (1) (2) (3) (4) (5) (6) Note: 1Q14 $0.4 0.2 0.1 0.4 0.3 $1.5 2Q14 $0.4 – – 0.1 0.0 $0.6 3Q14 $0.3 – – – – $0.3 4Q14 $0.0 – – – – $0.0 2014 $1.2 0.2 0.1 0.6 0.3 $2.4 One‐time costs that should be added back to EBITDA as restructuring expense. Excludes capital expenditures and one-time costs incurred during 2013. Improved procurement economics as a result of increased purchasing power Headcount reductions for manufacturing facility consolidation and duplicative salary positions Improved material cost as a result of utilizing Ply Gem's formulations to Mitten Freight cost maximization and improved fixed overhead as a result of various manufacturing cost reductions from rationalizations Corresponding SG&A reduction as a result of fewer employees and facility (distribution centers) consolidation Savings from purchasing from internal Ply Gem businesses rather than third‐party suppliers Numbers may not tie due to rounding. 31
- 35. Financial Overview • • • Ply Gem less volatile than the market Reported Ply Gem sales Ply Gem continues to outperform the market SFHS down 48% from 2007 to 2012, Ply Gem down only 17.8% ($ in mm) $1,364 Market share gains of over $350mm from 2007 to 2011 $1,301 $1,175 $1,121 $996 $1,035 2010 2011 $951 • • Continued industry leadership • Balanced customer mix at approximately 55% siding / 45% windows Gienow and Mitten acquisitions contributed $108mm to 2013 LTM sales 2007 2008 2009 2012 LTM 9/28/13 ($ in mm) 2007 2008 2009 2010 2011 2012 Single family housing starts 1,036 616 442 471 434 537 629 (40.5%) (28.2%) 6.5% (8.1%) 23.7% 17.1% (29.7%) Ply Gem net sales $1,363.5 $1,175.0 (13.4%) (13.8%) $951.4 (19.0%) $995.9 4.7% $1,034.9 3.9% $1,121.3 8.4% LTM 9/28/13 $1,301.3 16.1% 34 Note: LTM 9/28/13 numbers include Gienow and Mitten from date of acquisition.
- 36. Financial Overview Stable gross profit margins 30% 20% 10% Impact of “take or pay” contract 0% 2005 2006 2007 2008 Q1 2009 Q2 (1) 2010 2011 Q3 Q4 2012 (1) 2013 Q1 2005 19.8% 2006 20.0% 2007 16.5% 2008 11.9% 2009 7.1% 2010 18.1% 2011 16.6% 2012 17.9% 2013 16.3% 2005 – 2012 Avg. 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% 21.1% 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 • The Company demonstrated the ability to address commodity fluctuations and return to historical averages (1) Note: 2011 and 2013 gross margins adjusted to exclude the impact of the one‐time Home Depot buy‐back. 2013 figures include Gienow and Mitten from date of acquisition. 35
- 38. Financial Overview Leverage profile Net debt / LTM EBITDA 10.0x 8.5x 8.3x 7.5x 8.0x 6.2x 6.1x 5.5x 6.0x 4.0x 2.0x 0.0x 2011A 2012A 3/31/13 (Pre‐IPO) 3/31/13 (Post‐IPO) 9/28/13 (Pre‐ refinancing)(1) PF 9/28/13 (Post‐ refinancing)(1) • Ply Gem’s exposure to the housing recovery and strong market position will continue to drive its ability to deleverage • On November 1, 2013, Ply Gem entered into an amended and restated ABL facility, increasing the overall size to $250mm and decreasing the applicable margin for borrowings to a range from 1.5 – 2.0% • The Company is expected to realize material cash interest savings as a result of the refinancing 37 Note: (1): Debt amounts calculated net of remaining unamortized original issue discount. Gives effect for LTM impact of Gienow and Mitten acquisitions and expected 2014 cost savings.
- 39. Conclusion 1 Market leader 8 2 Comprehensive product portfolio with strong brand recognition Proven and experienced management team 7 3 Multi-channel distribution network serving a broad customer base Substantial and sustainable free cash flow generation 6 4 Proven track record of acquisition integration and cost savings realization Favorable industry dynamics driving increased homebuilding 5 Highly efficient, flexible, low cost operating structure 38
- 42. Syndication Overview Indicative timeline January 2014 M T W T 1 2 6 7 8 9 13 14 15 16 20 21 22 23 27 28 29 30 Date: F S S Key date 3 4 5 10 11 12 17 18 19 24 25 26 31 January 13th Bank Meeting in New York City January 23rd Commitments due from lenders January 30th Close and fund 41
- 45. Appendix Adjusted EBITDA reconciliation Year ended December 31, 2010A 2011A 2012A Net income Interest expense, net Provision for income taxes Depreciation and amortization Non‐cash (gain) loss on foreign currency transactions Non‐cash (gain) loss on modification or extinguishment of debt(1) Write‐off previously capitlazed offering costs Restructuring and integration expenses Acquisitions costs Customer inventory buybacks Environmental remdediation Management fee (terminated in 2013) Non cash charge of purchase price allocated to inventories Initial public offering costs Tax receivable agreement liability adjustment Adjusted EBITDA % of sales LTM EBITDA impact of Gienow and Mitten acquisitions LTM EBITDA impact of expected 2014 cost savings(2) PF Adjusted EBITDA % margin (3) (1) (2) (3) $27.7 122.8 5.0 60.7 (0.5) (98.2) 1.6 0.9 – 0.6 – 2.5 – – – $123.0 12.4% ($84.5) 101.4 0.7 54.0 (0.5) 27.9 – 1.6 – 10.1 1.6 2.3 – – – $114.5 11.1% ($39.1) 103.0 2.8 52.3 (0.4) 3.6 – 1.7 – 0.8 – 2.5 – – – $127.3 11.3% LTM 9/28/2013 ($77.1) 94.8 2.9 45.7 0.6 18.9 – 6.5 1.5 4.8 – 0.9 2.0 23.5 1.5 $126.6 9.7% $7.8 18.1 $152.4 10.6% Nine months ended 9/29/2012 9/28/2013 ($24.0) 78.5 1.6 39.6 (0.3) 3.6 – 0.5 – 0.6 – 2.1 – – – $102.2 12.0% ($62.1) 70.2 1.7 33.0 0.8 18.9 – 5.3 1.5 4.7 – 0.4 2.0 23.5 1.5 $101.5 9.8% During the year ended December 31, 2012, the Company incurred a loss on modification or extinguishment of debt of approximately $3.6mm consisting of $1.5 mm in call premiums, $0.4 mm expense of unamortized debt issuance costs associated with the 13.125% Senior Subordinated Notes due 2014 (the “13.125% Senior Subordinated Notes”), $0.3 mm expense of unamortized discount for the 13.125% Senior Subordinated Notes, and $1.4 mm expense of third party fees for the 13.125% Senior Subordinated Notes. During the year ended December 31, 2011, the Company incurred a loss on modification or extinguishment of debt of approximately $27.9 mm consisting of $10.9 mm in tender premiums, $2.8 mm expense of unamortized debt issuance costs associated with the 11.75% Senior Secured Notes due 2013 (the “11.75% Senior Secured Notes”), $0.8 mm expense of unamortized discounts for the 11.75% Senior Secured Notes, $12.3 mm expense of third party fees for the 8.25% Senior Secured Notes due 2018 (the “8.25% Senior Secured Notes”), and $1.2 mm for the expense of unamortized debt issuance costs for the previous senior secured asset‐based revolving credit facility. During the year ended December 31, 2010, the Company recorded a non‐cash gain on extinguishment of debt of approximately $98.2 mm in connection with the redemption of the 9% Senior Subordinated Notes due 2012 (the “9% Senior Subordinated Notes”) arising from a net reacquisition price of approximately $261.8 mm versus the carrying value of the 9% Senior Subordinated Notes of $360.0 mm. Refer to slide 31 for further details on expected 2014 cost savings. EBITDA margin shown off of LTM 9/28/13 PF net sales of $1,435 million. 44